Events conspire against states striving for health care program expansion

States working to expand health coverage for low-income, uninsured individuals — especially children — are running into a proverbial perfect storm of federal barriers.

First, states were counting on a strong SCHIP reauthorization bill, but that did not happen. Instead, President George Bush vetoed two bills he said would expand the program too much and then signed a measure that essentially extended it in place, with no expansion in eligibility. The temporary extension will run until the end of March 2009.

Next, the Centers for Medicare & Medicaid Services (CMS) issued an Aug. 17, 2007, federal directive restricting states' ability to use SCHIP funds to cover children in families with gross incomes above 250% of the federal poverty line. And CMS also has issued new regulations curtailing Medicaid funding, including one eliminating administrative funding for outreach and enrollment activities conducted by school personnel.

Also, implementation of the Medicaid citizenship documentation requirement under the Deficit Reduction Act enacted in 2006 has resulted in U.S. citizens having their Medicaid benefits delayed, denied, or terminated due to the requirement that new applicants and current enrollees provide original documents to prove citizenship and identity.

The above findings come from a recent report by the Kaiser Commission on Medicaid and the Uninsured. The report includes a 50-state update on eligibility rules, enrollment and renewal procedures, and cost-sharing in Medicaid and SCHIP. The federal developments are impeding states' efforts to cover children made eligible through newly authorized expansions, as well as their efforts to enroll children who are already eligible for coverage but who remain uninsured, according to Kaiser Commission policy analysts Robin Rudowitz and Caryn Marks.

"States are trying to meet the problems of the uninsured," Ms. Rudowitz tells State Health Watch. "The problem of the uninsured is getting worse because people can't afford employer coverage or other private coverage and states are trying to meet that need, especially for children."

She says in addition to the issues described in the state survey, states are being hindered by tightening state economies. During the last economic downturn several years ago, Ms. Rudowitzsays, kids remained a priority. But state Medicaid directors are now saying there are some things they were able to do in the past, such as cutting provider payments and controlling drug spending, they no longer can pursue because there's not much maneuvering room left. Ms. Rudowitz and Ms. Marks say over the next year, children's health coverage in 23 states will be hurt by the August 2007 directive. The 23 affected states include 10 that passed eligibility expansions but had not obtained federal approval before the directive was issued and 14 states that had implemented coverage expansions above the level but will have to comply with the directive by this coming August. (Washington is counted in both categories.) In response to the directive, several states have scaled back or postponed their expansion plans or have decided to absorb the full cost of covering children from families with income above the CMS limit. As a result, they say, thousands of children already have lost the opportunity to obtain health coverage and many more may be adversely affected as states make decisions about going forward.

Asked what can be done about the CMS August 2007 directive, Ms. Rudowitz says the two SCHIP reauthorization bills the president vetoed contained provisions to overturn the directive and Congress could adopt separate legislation to do so. "There's still some legislative effort," she says, "but it's unclear where it will go without a larger SCHIP reauthorization." She notes several states have filed federal court suits challenging the directive.

"Several elements are critical if states are to realize the advances achieved in 2007," Ms. Rudowitz and Ms. Marks say. "SCHIP reauthorization that provides support from the federal government to undergird states' efforts to furnish health coverage for children is essential to continued progress in reducing the number of uninsured children. The concern that federal action will curtail longstanding federal financial support for children's health coverage and states' flexibility to design and operate their programs has created considerable tension at the state level. In addition, emerging state budget deficits and potential pressure to cut state spending is placing the hard-won progress on children's health coverage at further risk. These conditions present new hurdles for states and will make it even more challenging to identify steps to maintain and promote coverage, especially if the economy and state revenue situation worsens."

CMS directive very restrictive

Looking in depth at the new CMS directive, Ms. Rudowitz and Ms. Marks say it restricts states from using SCHIP funds to cover children in families with gross incomes above 250% of the federal poverty line. To obtain approval for such an expansion, states would have to demonstrate they have already enrolled 95% of children under 200% of poverty who are eligible for SCHIP or Medicaid and that private employer-based coverage for lower-income children has not declined by more than two percentage points over the past five years. States that meet those requirements still would have to impose specific cost-sharing policies and would have to require children to be uninsured for at least 12 months before being allowed to enroll.

"Having to meet the Aug. 17 conditions impedes the ability of states to proceed with new expansions and hinders the viability of previously approved expansions," they say. "Indiana, Louisiana, and Oklahoma have decided to expand to only 250% of the federal poverty line and New York and Wisconsin have decided to use state funds to pay the full cost of covering children above the CMS limit. Other states with new expansions, and states that expanded prior to the directive, have not yet determined how they will proceed. As a result of the directive, thousands of children already have lost the opportunity to obtain health coverage and many more may be adversely affected as states make decisions about going forward."

Many of the states would have to make significant adjustments to be able to comply with the new directive. Of the 23 affected states, all but the District of Columbia and Hawaii now impose cost-sharing for children under their expansion or plan to do so if their expansions are allowed to proceed. But it appears to the analysts that none of the states plan to charge amounts as high as those required by the directive.

Also, while all of the affected states except the District of Columbia, Hawaii, and Rhode Island require or plan to require children to be uninsured for a period of time before enrolling for SCHIP, they would not be mandating that children be uninsured for a full year, as the directive requires. And while Illinois, Louisiana, and West Virginia would impose 12-month waiting periods, they also would allow some exceptions, such as when the cost-sharing for the private plan exceeds a certain percentage of family income, and these exceptions may not comply with the directive.

Simplifying enrollment, renewal

Nine states took steps to simplify enrollment and renewal procedures for children. While some states adopted basic simplified strategies such as disregarding assets in determining eligibility, allowing enrollment and renewal without an in-person interview, and limiting renewal to once a year, simplification advancements mainly focused on other strategies. Thus, Tennessee and Texas adopted 12-month continuous eligibility for children in their separate SCHIP programs and New York, Tennessee, and Wisconsin no longer require families to present documentation of their income when they are enrolling or renewing Medicaid or SCHIP coverage for their child. Under such administrative verification and renewal procedures, states generally consult state databases or available case records to verify income.

Five states—Colorado, Kansas, Louisiana, New York, and Wisconsin—adopted the presumptive eligibility option, which allows "qualified entities" such as clinics, hospitals, schools, WIC agencies, Head Start programs, and the agencies that determine eligibility for some public benefits to temporarily enroll children who appear eligible while the family completes the process for ongoing eligibility.

Although Georgia retracted its administrative verification and now requires families to provide proof of income when applying for SCHIP, state officials say the program's integrity was not compromised when they did use the simplification procedure.

Enrollment sensitive to changes

Ms. Rudowitz and Ms. Marks say when states impose restrictive procedures, enrollment declines in the same way it would if states tightened eligibility. While a cut in income limits would make some potential applicants ineligible, procedural barriers often result in individuals being denied or losing coverage even though they are eligible.

The experience in a number of states shows that enrollment is sensitive to changes in procedures. In Washington, the children's health coverage program saw a sharp drop in enrollment when the state replaced 12-month continuous eligibility with a requirement that children renew coverage every six months. And enrollment went back up when the state returned to its original policy.

Enrollment in Connecticut's program fluctuated when the state removed and then reinstated several simplification procedures, including administrative verification of income.

In Mississippi, the state in 2005 dropped its mail-in application process and required families to report and renew their coverage in person. In 2006, 62,000 fewer children and adults were enrolled in Medicaid and SCHIP as compared with 2004. A report from the Mississippi Center for Justice and Mississippi Health Advocates says Medicaid offices are inaccessible and some 80% of Medicaid outstations are open one day a week or less, with some open only one day a month, sometimes for only a few hours, making it quite difficult for working families and those without transportation. Data show that nearly 60% of individuals due for renewal do not appear for their face-to-face meeting and nearly 90% of "new" approved applications are for children or adults whose coverage has lapsed.

Citizenship requirement problems

The survey of states found the Medicaid citizenship documentation requirement continues to impede state efforts to simplify their enrollment procedures. Adverse effects have persisted even when states have tried to employ strategies to minimize loss of coverage, the investigators found. At least 39 states say they now conduct data matching with their vital records agencies to obtain birth records.

While many states have found such data matching helpful, others report that database constraints and technological challenges limit its effectiveness. And an overriding problem reported by many states is that securing birth records for individuals born in other states is difficult, if not impossible. When individuals attempt to secure out-of-state records of their own, they find it requires considerable time and expense.

At least 12 states allow use of affidavits in which parents attest to the identity of their children younger than age 16, but that doesn't cover everyone affected by the requirement and the analysts say identity documentation remains a significant barrier. Wisconsin reports it has birth records but not identity documentation for the majority of people who have been denied coverage, showing they are citizens but have been unable to comply with the requirement. Under the federal requirement, states are not allowed to provide Medicaid benefits to applicants who otherwise appear eligible until they provide the required documents. The only mechanism under which states can do this is presumptive eligibility, and some states have adopted that approach as a way to ease the negative consequences of the citizenship documentation requirement.

Download the report at Contact Ms. Rudowitz and Ms. Marks at (202) 347-5270.