SCHIP changes delayed, fight with GAO defused
Implementation of six SCHIP changes included in an Aug. 17, 2007, letter from the Centers for Medicare & Medicaid Services (CMS) to state Medicaid directors has been delayed for one year. The House and Senate included the moratorium in an Iraq war funding bill signed by President Bush.
The moratorium eliminates for now the possibility of a fight over a Government Accountability Office (GAO) report that said the CMS changes to the SCHIP program are a rule and must be submitted to Congress and the Comptroller General before they can take effect. The ruling had been sought by Sens. John Rockefeller (D-WV) and Olympia Snowe (R-ME).
In its Aug. 17 letter, GAO says, CMS "purports to clarify the statutory and regulatory requirements concerning prevention of crowd-out for states wishing to provide SCHIP coverage to children with effective family incomes in excess of 250% of the federal poverty level and identifies a number of particular measures that these states should adopt. The letter indicates that CMS will apply the measures to states' proposals to cover such children, as well as to states that already cover them. According to the letter, CMS may take corrective action against states that fail to adopt the identified measures within 12 months."
The definition of a "rule," for purpose of the Administrative Procedure Act and thus also the Review Act, which adopted the Administrative Procedure Act definition, includes three elements that are relevant in this context, GAO says. An agency statement is a rule if it is of general applicability, of future effect, and designed to implement, interpret, or prescribe law or policy.
"On its face," GAO declared, "the Aug. 17 letter meets these criteria. The letter is of general, rather than particular, applicability since it extends to all states that seek to enroll children with effective family incomes exceeding 250% of the federal poverty level in their SCHIP program, as well as to all states that already have enrolled such children. In addition, it is prospective in nature since it is concerned with policy considerations for the future rather than the evaluation of past or present conduct. And finally, it purports to clarify and explain the manner in which CMS applies statutory and regulatory requirements to states that want to extend coverage under their SCHIP programs to children with effective family incomes above 250% of the federal poverty level and seeks to promote the implementation of statutory requirements applicable to state plans. Accordingly, it is designed to implement, interpret, or prescribe law or policy."
GAO also found that the history of the regulatory provision regarding substitution of coverage discussed in the letter lends support to the view that the letter is a rule. The letter is a marked departure from the agency's settled interpretation of the governing regulation, GAO says, and case law indicates that such a change may be made only by a rule.
Keeping Congress informed
The Review Act is intended to keep Congress informed about the rulemaking activities of federal agencies and to allow for congressional review of rules. It provides that before a rule can take effect, the agency promulgating the rule must submit to the House and Senate and the Comptroller General a report containing a copy of the rule, a concise statement concerning the rule, and the proposed effective date. There is a procedure in the Review Act for congressional disapproval of agency rules, specifically a joint resolution of disapproval effective upon being signed by the president.
GAO says the legislative history of the Review Act confirms it is intended to include within its purview almost all rules an agency issues and is not limited to those rules that must be promulgated according to notice and comment requirements.
Although CMS has referred to the letter as a "general statement of policy," GAO says that is not a correct description. It notes that courts have begun such determinations with the language of the document itself and an agency's own characterization of the pronouncement. In general, it says, if the language indicates that the agency's views are tentative or simply a guide as to how the agency may exercise its authority, and the agency does not treat the statement as a binding norm, then the document may be a policy statement. But if the document, either by its terms or as applied by the agency, imposes requirements or obligations, it would not be considered a general statement of policy.
"The Aug. 17 letter evidences little, if any, language of tentativeness or inconclusiveness," GAO says. "The specific measures (for combating crowd-out) are not characterized as 'proposals' or measures that are under development or to be implemented or adopted by later action. On the contrary, the letter sets forth specific strategies that states seeking to expand their SCHIP populations should implement as 'reasonable procedures' to prevent substitution of coverage... There is no indication that the strategies are only guidelines that may or may not be applied in subsequent proceedings. In addition, the letter contains no express mention that exceptions will be considered in particular instances. Finally, the time frame specified in the letter for states to conform to the CMS review strategy evidences the agency's intention to give the letter present and binding effect."
The analysis says if the letter were genuinely tentative in nature, there would be no need to establish a deadline by which states would have the implement the measures or face the possibility of agency corrective action. The inference to be drawn from the letter, it says, is that states that do not conform to or adopt the measures described in the letter will likely be found to be not in compliance with SCHIP requirements.
CMS spokesman Jeff Nelligan said the GAO opinion does not change the department's conclusion that the letter still is in effect. CMS had told GAO any comment on the letter and the question of whether it is a rule would be inappropriate because of pending litigation over it.
After receiving the GAO report, Mr. Rockefeller called on the administration to withdraw the letter, saying it was a "boldfaced attempt to subvert the law and prevent states from implementing their plans to provide health insurance to millions of uninsured children nationwide."
CMS tried to clarify
Meanwhile, before the moratorium was approved, CMS issued a clarification to some of the new requirements it wanted to implement, but the clarification produced little additional support and lawsuits against the changes continue.
The Aug. 17 letter focused on the government's desire to minimize substitution of SCHIP coverage for private coverage (crowd-out) at higher income levels and set forth procedures for states to follow when expanding eligibility to effective family income levels above 250% of the federal poverty level. States also were asked to assure that nearly all lower-income children were covered before moving into coverage for those in families at higher income levels.
The CMS clarification letter reiterates that any changes made to a state's crowd-out procedures in response to the Aug. 17 letter need not be applied to prior enrollees.
CMS also indicated that crowd-out control procedures such as requiring 12 months of uninsurance and cost-sharing within one percentage point of family income when compared to the cost of private coverage in the group market need not be applied to enrollees with effective family incomes at or below 250% of the federal poverty level. States, however, have the option to apply those procedures to enrollees with family incomes at or below 250% of the federal poverty level as part of their efforts to ensure that SCHIP coverage does not substitute for private coverage. States do not have to use crowd-out procedures when covering children at any income level solely with their own funds.
Because of the unique importance of timely prenatal care, CMS says, it does not expect states to apply crowd-out procedures to SCHIP coverage for unborn children.
Alternatives can be considered
While CMS intended to use the 12-month period of uninsurance as the standard by which states will be evaluated, it will review state alternative proposals and the justification for them. It also will consider exceptions for categories of individual enrollees, based on particular circumstances, if states furnish justifications and data demonstrating a low substitution risk.
CMS says the assurance that at least 95% of children in the state with family incomes below 200% of the poverty level have coverage can be supported by data demonstrating Medicaid, SCHIP, or private coverage. "This is an achievable goal and based on conversations with states, we are convinced that a number of states have already reached this goal," the clarification says. "We will continue to work with affected states on different approaches to document this assurance, including the use of state-specific survey data or other data sources to refine the underlying Current Population Survey data."
Download the GAO analysis at http://www.gao.gov/decisions/other/316048.pdf.
Implementation of six SCHIP changes included in an Aug. 17, 2007, letter from the Centers for Medicare & Medicaid Services (CMS) to state Medicaid directors has been delayed for one year. The House and Senate included the moratorium in an Iraq war funding bill signed by President Bush.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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