States face a welcome dilemma: How to best spend $24 billion to cover nations uninsured children
Uninsured Kids
August 31, 1997
Estimated State Allocations for Children’s Health Insurance
EARLY GRANT (per year) 5-YEAR TOTAL
STATE (1998-2000) (1998-2002)
Alabama $85,634,397 $398,860,045
Alaska $5,152,005 $26,335,898
Arizona $112,965,830 $518,369,446
Arkansas $46,860,505 $218,689,584
California $855,208,654 $3,969,181,386
Colorado $43,219,361 $206,077,579
Connecticut $36,017,176 $174,685,412
Delaware $8,436,772 $40,792,844
District of Columbia$14,372,424 $69,107,613
Florida $279,202,492 $1,304,075,073
Georgia $126,783,707 $593,692,703
Hawaii $10,992,634 $56,705,333
Idaho $15,694,892 $76,610,121
Illinois $128,782,081 $640,384,030
Indiana $73,093,951 $354,904,721
Iowa $32,987,149 $156,573,446
Kansas $31,433,507 $152,505,401
Kentucky $50,701,096 $246,807,956
Louisiana $101,768,262 $472,855,637
Maine $12,724,728 $61,534,777
Maryland $61,706,349 $296,556,514
Massachusetts $45,229,971 $227,638,908
Michigan $92,045,047 $467,287,706
Minnesota $27,022,565 $142,314,026
Mississippi $55,654,715 $260,977,536
Missouri $59,268,396 $288,234,289
Montana $9,739,680 $47,019,685
Nebraska $15,448,224 $76,181,442
Nevada $32,550,586 $149,726,677
New Hampshire $10,910,006 $51,976,292
New Jersey $91,592,766 $434,504,171
New Mexico $56,753,577 $256,539,339
New York $265,835,633 $1,291,959,275
North Carolina $79,741,341 $385,769,381
North Dakota $5,202,463 $26,118,262
Ohio $114,442,019 $571,215,061
Oklahoma $79,467,777 $360,183,605
Oregon $41,881,622 $202,638,993
Pennsylvania $123,329,744 $607,039,872
Rhode Island $10,673,243 $51,037,602
South Carolina $65,234,386 $314,707,881
South Dakota $7,522,023 $37,932,903
Tennessee $66,618,662 $330,731,571
Texas $558,774,867 $2,523,604,663
Utah $25,053,748 $124,222,997
Vermont $3,959,814 $20,744,831
Virginia $71,424,313 $345,875,137
Washington $47,351,081 $230,930,528
West Virginia $23,053,013 $111,158,963
Wisconsin $37,300,536 $190,993,635
Wyoming $7,492,707 $34,804,248
Source: General Accounting Office initial estimates, Aug. 4, 1997. (Subject to revision.)
Facing the ultimate test of devolution, states are scrambling to tap into the single largest expansion of health care by the federal government since Medicare 32 years ago.
The State Children’s Health Insurance Program, signed into law Aug. 5, gives states enormous flexibility in how they spend the $24 billion in federal funds that will be invested in children’s health coverage over five years, according to Stan Dorn, health division director for Children’s Defense Fund (CDF).
The $4.3 billion that will become available to states Oct. 1 is enough to provide Medicaid coverage to 4.3 million uninsured children whose families have incomes below 200% of the federal poverty level (FPL), according to a detailed analysis by CDF. This means the program could potentially reduce the number of uninsured children in the United States by more than 40%. States have three years to spend the first-year allotment.
At press time, most state officials contacted said it was too early to say whether their states were likely to spend the money on Medicaid expansions, on special insurance programs such as those developed in New York, Pennsylvania and Florida, or on other approaches.
"There seems to be a lot of enthusiasm in many states to expand Medicaid initially and take the time to develop a second plan, and then switch over to it," says Dr. Burton Edelstein, a Robert Wood Johnson health policy fellow working with U.S. Sen. Tom Daschle. Dr. Edelstein spoke about the program at a National Conference of State Legislatures meeting in Philadelphia Aug. 6.
States are still searching for answers to questions about what kind of child health insurance programs meet the requirements of the law. Another key question is what states can count as part of the matching funds they must raise to participate in the program. States must contribute 70% of their matching rate under the Medicaid program to access the money. For example, a state that contributes 50% under the Medicaid program would be required to contribute 35%.
California has estimated that it will need $300 million for its state match, according to Kathryn Lowell, assistant secretary for the state’s Health and Welfare Agency. Raising that amount of money is a concern, she says. The state is investigating whether some of the services it currently provides to children who are below 200% of the poverty level could count as state matching funds.
In Pennsylvania, which has an established children’s health insurance program, the state is evaluating whether it should expand the Children’s Health Insurance Plan (CHIP) or expand Medicaid, says Melia Belonus, a senior policy analyst for the governor. "With or without federal changes, we were at a point of debating administrative issues around CHIP," such as purchasing and management, she says.
In Oregon, officials are hoping the funds can be used for a new subsidy program that was just approved by the legislature and is expected to take effect next spring. Under the Family Health Insurance Assistance Program (FHIAP), vouchers will be provided to qualified residents for purchasing employer-sponsored coverage, if available. If not available, the vouchers can be used for individual coverage. Residents generally must be uninsured for 12 months prior to making application. The state also is looking at the possibility of a further expansion of its Medicaid program. Oregon is already poised to cover children through age 11 with family incomes up to 175% beginning in January. Currently , they are covered up to 133% of FPL.
Scott Leitz, economist for the Minnesota Department of Health, says Minnesota already covers children up to 275% of the FPL. As a result, "our generosity has come back to bite us," says Mr. Leitz, who does not believe the state will be able to access much of the money. While states can get money to expand their covered population by another 50% of the FPL, at 325% of FPL "we would be reaching into the private market," which, as a policy, the state does not want to do.
Dr. Edelstein, the RWJ fellow from Sen. Daschle’s office, says lawmakers sought to address concerns that the program could lead to a further decline in employment-based insurance by setting a limit of 200% of FPL, and by requiring states to explain how they will handle the "crowding out" problem.
In Oregon, officials are hoping the funds can be used for a new subsidy program that was just approved by the legislature and is expected to take effect next spring.
States already have preliminary estimates of what their share of the money will be. The General Accounting Office released estimates of allocations Aug. 4 (see chart on page 6). The formula used to distribute the money attempts to balance the concerns both of states that have a high number of uninsured children under 200% FPL and those that have been aggressive in covering this population. The latter protest that they stand to be penalized for "doing the right thing" if they can’t access federal money.
Blended Formula
For the first three years, the allocation formula gives the largest share of money to states with the highest number of uninsured children. Over the following two years, the formula is based on the number of uninsured children and the number of children below 200% of the poverty level, shifting more money to states that have already made an aggressive effort to reduce the number of uninsured children. In 2001, for example, the formula would allocate 75% of the money based on uninsured children and 25% based on the number of low-income children, shifting to a 50-50 split in 2002.
One of the most important lessons states have learned over the past few years is that jumping into a poorly constructed new health plan can be a serious mistake. CDF is advising states to "use these dollars to immediately expand existing children health coverage programs as an interim measure." In most states, the only immediate option for states is an expansion of Medicaid.
According to Dr. Edelstein, states have "tremendous latitude in developing not only eligiblity, but also benefits." If states decide not to go the route of a Medicaid expansion, they can choose from among several benchmark insurance plans, all of which offer a fairly extensive set of benefits. Some coverage of prescription drugs, mental health services, vision and dental care will be required if covered under the benchmark plan.
Once a state develops a long-term plan, it "can file a state plan amendment under the new child health law and reconfigure its program, shifting children from existing to new programs, if need be," CDF says. A state may amend its plan at any time, effectively immediately, even before it has been submitted to HHS.
State plans must include a description of the procedures to screen for eligibility, coordinate coverage with Medicaid and other insurance programs, and avoid substitution of private coverage.
To gather data on how these programs work, Congress has required that states submit evaluations, by March 31, 2000, on the effectiveness of the program in increasing coverage; the characteristics of children and families covered; and coordination with Medicaid and other programs such as maternal and child health services.
Contact Mr. Dorn at 202-628-8787 or Dr. Edelstein at 202-224-2321
States face a welcome dilemma: How to best spend $24 billion to cover nations uninsured children
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