Federal SCHIP changes 'have no basis in law'
A "friend-of-the-court" brief filed with a federal district court on behalf of more than 25 prominent health policy and child health experts says Department of Health and Human Services changes to the State Children's Health Insurance Program (SCHIP) "have no basis in evidence or the law."
The brief, filed by the national law and consulting firm of Manatt, Phelps, says the changes in the Centers for Medicare & Medicaid Services (CMS) August 2007 policy directive were announced as intending to prevent crowd-out, but are poorly designed for that goal.
With no advance notice or opportunity for public comment, the directive prohibits states from providing health coverage to uninsured children in families earning more than 250% of the federal poverty level unless states can prove they have enrolled 95% of children at or below 200% of the poverty level. States also would have to demonstrate that private health insurance enrollment had not declined more than two percentage points among SCHIP-eligible children in the last five years. And the directive specifies that even if states can meet these requirements, they must force children who previously had private health coverage to be uninsured for 12 months before enrolling in SCHIP.
The scholars say the "harsh strategies mandated in the directive, which are utterly disconnected from research and experience relating to crowd-out, and which are poorly designed to actually reduce crowd-out, would at the same time significantly increase the number of children who lack health coverage. In short, the specific strategies imposed by the directive threaten the primary statutory objective of SCHIPto provide coverage to low-income uninsured children and thereby increase children's access to health carewithout any evidence that they would effectively advance the policy goals stated in the directive."
The brief argues that the 95% standard is unattainable and will thus act as a de facto bar to coverage; that references to private insurance coverage levels, which are largely beyond state control, are arbitrary when viewed against the directive's stated purpose; and that the 12-month waiting period mandated by the directive will have substantial adverse health effects on the nation's youth.
"These new requirements represent a fundamental threat to the health of children," said George Washington University School of Public Health and Health Services Hirsh Professor of Health Law and Policy Sara Rosenbaum, one of those who signed the brief. "This brief underscores how irrational the standards would have been shown to be, had the directive been published as a proposed rule, as required by law," she adds.
Supporting New Jersey's lawsuit
The brief supports a lawsuit filed by the State of New Jersey Oct. 1, 2007, to challenge the directive's validity on procedural and substantive grounds. The state claims, among other things, that the federal government's failure to provide a public notice and comment period before issuing such significant policy changes violated the law. The brief is intended to document the extensive research on public health insurance programs that would have been presented during a notice and comment period.
"These prescribed policies reflect a fundamental shift in federal SCHIP policy and would have the effect of elevating the prevention of health insurance crowd-out over the provision of health coverage to uninsured low-income children," the brief asserts. "More important...is that the harsh strategies mandated in the directive, which are utterly disconnected from research and experience relating to crowd-out, and which are poorly designed actually to reduce crowd-out, would significantly increase the number of children who lack health coverage.
"In short, the specific strategies imposed by the directive threaten the primary statutory objective of SCHIPto provide coverage to low-income children and thereby increase children's access to health carewithout any evidence that they would effectively advance the policy goals stated in the directive."
The experts complain that CMS issued the requirements by means of a 2½-page directive without an opportunity for comment from experts, affected stakeholders, or the public.
According to the experts, the 95% requirement would do nothing to ensure any greater coverage of the lowest-income children. They say a review of research on enrollment into means-tested public health insurance programs and other voluntary enrollment arrangements shows such a standard has never been met and is virtually unachievable in the absence of an automatic enrollment process, which federal law prohibits Medicaid and SCHIP from using.
They say the mandated 12-month waiting period has no basis in the extensive literature analyzing the impact of waiting periods on crowd-out, nor in the real-life experience of states that have been moving in recent years to reduce their waiting periods, with federal approval.
The requirement that insurance not cover those above 250% of the poverty line unless the state can demonstrate that the number of children insured through private employers has not decreased by more than 2% over the prior five years "fails to take into account extensive research on the principal causes and extent of the nationwide decline in employer-sponsored insurance and fails to recognize that state programs have negligible effects on this decline, thereby linking SCHIP coverage to unrelated events," the brief says.
Meanwhile, at the same time the brief was being filed, the Congressional Budget Office (CBO) was testifying before a Senate subcommittee on the value of SCHIP. "SCHIP has significantly reduced the number of low-income children who lack health insurance," said CBO director Peter Orszag. "According to CBO estimates, the portion of children in families with income between 100% and 200% of the poverty level who were uninsured fell by about 25% between 1996 [the year before SCHIP was enacted] and 2006. In contrast, the uninsurance rate among higher-income children remained relatively stable during that period. The difference probably reflects the impact of the SCHIP program."
Mr. Orszag said state outreach efforts and simplified enrollment processes for SCHIP appear to have increased the share of eligible children who participate in Medicaid and contributed to a decline in the percentage of children below the poverty level who are uninsured.
Crowd-out documented
CBO recognizes that crowd-out does occur as a result of SCHIP, he said. On the basis of a literature review, CBO concluded that for every 100 children who gained coverage as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children.
Looking at the CMS directive intended to prevent crowd-out, Mr. Orszag said CBO's analysis suggests the directive's impact on enrollment is likely to be modest under current law, given the way the administration appears to implement it and, more importantly, given the funding levels assumed in the baseline. "The directive could have a substantially larger impact on enrollment in SCHIP if the Congress expanded the program significantly," he said.
According to program and survey data, Mr. Orszag said, about 80% of enrollment in SCHIP in all states is by families with income below 200% of the federal poverty line, about 15% of enrollment between 200% and 250% of poverty, and less than 5% over 250% of poverty. Consistent with those overall findings, he said, administrative data suggest that fewer than 20 states provide SCHIP coverage for families with income above 250% of the poverty level. Even in those states, the majority of those covered children are from families with income below 200% of the poverty level. (CBO acknowledges, however, that some states had planned to expand their coverage to families with income above 250% of poverty but dropped such plans after the directive came out.)
"Given the way that the administration appears to be implementing the directive, the provision most likely to affect enrollment is the requirement that states impose at least a one-year waiting period between private coverage and enrollment in SCHIP for children in families with income above 250% of the poverty level," Mr. Orszag testified. "Only two states currently have a waiting period as long as one year; many require no waiting period, and the majority of states with waiting periods set them at only three or six months. The requirement for a one-year waiting period would therefore mean that a number of children who currently could obtain coverage either immediately or three to six months after leaving private coverage would have their enrollment delayed or might never enroll in SCHIP, if they obtained private coverage during the waiting period. On the basis of an analysis of current waiting periods, CBO estimates that, under current law, enrollment in SCHIP would be reduced by 0.1% as a result of the administration's action."
However, he noted, if Congress substantially increased SCHIP funding, as it has been trying to do, additional states would probably wish to expand their programs to children in families with income above 250% of the poverty level. In that case, Mr. Orszag added, the directive would be a more significant constraint on enrollment.
A "friend-of-the-court" brief filed with a federal district court on behalf of more than 25 prominent health policy and child health experts says Department of Health and Human Services changes to the State Children's Health Insurance Program (SCHIP) "have no basis in evidence or the law."You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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