Forget Massachusetts! Do your own CHIP thing: Expand Medicaid eligibility without waivers

An increasing number of states are searching for ways to provide insurance coverage to uninsured parents whose children can qualify for the new Children’s Health Insurance Program (CHIP) or Medicaid, and many state program directors are erroneously assuming modeling their own program after Massachusetts’ is the best way to go. Thus far, only Massachusetts has an approved plan to expand coverage to parents, which it is accomplishing through a combination of CHIP funds and a Medicaid expansion through an 1115 waiver.

"Massachusetts officials present [at meetings] and everybody drools, but they can’t do what Massachusetts is doing," said Trish Riley, executive director of the National Academy for State Health Policy. "They’ve invested in the infrastructure for the uninsured for a long time with state funds and they have a waiver. Massachusetts is doing fascinating stuff, but it’s just not replicable."

But there are other options open to states, which can take several forms other than waivers or CHIP, according to Cindy Mann, a senior fellow at the Center on Budget and Policy Priorities in Washington, D.C. These options spring from the fact that the welfare reform laws of 1996, which severed cash assistance from Medicaid, expanded states’ options to set Medicaid income eligibility requirements.

"Medicaid actually has much greater potential for covering parents than CHIP does," Ms. Mann said. "CHIP was intended to be almost exclusively for children, with one narrow exception—if you could prove it was cheaper to get a family policy than to cover just the kids."

Under welfare reform, enacted through the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, states had to provide Medicaid coverage to parents who met the Aid to Families With Dependent Children (AFDC) requirements in effect in that state as of July 16, 1996. "But those are minimum standards," Ms. Mann pointed out. "States can go up the income scale and cover more parents."

For example, states can disregard, or not count, more of a family’s income toward eligibility standards. By law, states must subtract at least $90 per month in transportation costs from a worker’s income when determining what counts toward eligibility. A state can choose to boost that to $180, according to Ms. Mann. An increased "disregard" income amount also could be used to make parents eligible for transitional Medicaid benefits for a longer period than is required under current law, she added.

Pennsylvania has a 50% disregard for people applying for Temporary Assistance to Needy Families as well as those seeking Medicaid benefits. New York disregards as much of a Medicaid recipient’s earnings as is necessary for him or her to remain eligible for Medicaid, until income reaches the poverty line. The federal poverty level is an income of $1, 137 a month for a family of three.

States also can eliminate the "asset test," under which the family usually had to have less than $1,000 in assets. Previously, states could only eliminate the asset requirement when determining whether children were eligible for Medicaid. Now they can do away with it for all members of a family. They also are able to offer Medicaid to two-parent working families, not just those with a single parent.

North Carolina, for example, has loosened asset requirements in two ways. It disregards the first $2,000 of countable assets, effectively raising the standard to $3,000. It also allows $5,000 in fair market value for a car.

Another way of expanding eligibility may be available to states that have had AFDC waivers approved as of July 1, 1997. Some of these waivers may have been designed to change work requirements, or set time limits on the provision of benefits. Regardless of the purpose of the waiver, a state can choose to stick with only the provisions of the waiver that addressed income and resource and family composition rules for the purposes of determining Medicaid eligibility.

The final and "least significant" way to expand eligibility, according to Ms. Mann, is to invoke the right, provided by federal law, to raise income and resources standards "by as much as the increase in the consumer price index" since July 1996. This might not result in much of a bump, but taken with other measures, could help ensure eligibility standards keep pace with inflation.

States that have expanded coverage include Rhode Island, which plans to cover uninsured parents/caregivers of children in Medicaid managed care plans and under the fee-for-service system, whose incomes are up to 185% of the poverty level. As of Oct. 1, the District of Columbia also increased its Medicaid eligibility to all parents of children under age 19 with incomes at 200% of the federal poverty level. While both Rhode Island and Washington, D.C., have 1115 waivers, those states did not have to invoke their waiver authority to make these changes.

State must contact employers

In Massachusetts’ case, the program to cover working parents will be fairly labor-intensive, and time will tell if it can be administered effectively. The state will have to contact every employer whose employee may quality for coverage to determine if benefits, cost sharing, and other features are comparable to what is required under CHIP. Only then would the state be able to contribute 50% or more of the employee portion of the premium, not to exceed $30 per month, the amount specified in Massachusetts’ Medicaid expansion plan.

Some states and policy experts are awaiting further guidance from the Health Care Financing Administration (HCFA) on CHIP, particularly the "Family Coverage Variance" provision, but HCFA officials have been silent about when the regulation will be released, saying they’re busy enough approving plans and plan amendments.

While states may avail themselves of expanding eligibility through Medicaid, some still are going to find CHIP alluring, Ms. Riley said. "Medicaid is seen as an entitlement, and states are fearful of a recession," she said. With CHIP, "they can put a limit on their financial liability."

The intensive outreach that is supposed to accompany CHIP is likely to turn up a significant number of Medicaid-eligible children, Ms. Riley said, boosting state costs and making governors less likely to feel generous with their Medicaid money.

However, Ms. Mann pointed out that states could roll back or freeze Medicaid expansion if that were to become financially necessary, just as they could impose waiting lists for CHIP eligibles.

Contact Ms. Mann at 202-408-1080 and Ms. Riley at 207-874-6524.