Budget cutters haven’t taken aim at SCHIP

While states have been scrambling for places to save money, especially in Medicaid and other health care services, so far most governors and legislatures have shied away from doing major damage to the State Children’s Health Insurance Program (SCHIP), according to an analysis released by Harriette Fox and Stephanie Limb of the Maternal and Child Health Policy Research Center.

The two say SCHIP seems to retain its popularity because of the coverage it provides to a significant segment of children (6 million covered in 2003, up from 3 million in 2000) and because of the federal matching funds it attracts.

"As a result," say Ms. Fox and Ms. Limb in their report, "virtually all states have protected their SCHIP programs from reductions in eligibility levels, although there are some that have moved to restrict benefits or control enrollment, and many that are requiring greater financial contributions by families. At the same time, however, there are several states that have expanded their SCHIP programs through changes in eligibility, enrollment, or benefits."

The analysis found 20 states in which some form of cost-cutting measure was instituted. (See chart below.) Only two states revised their SCHIP eligibility policies, with one lowering it and another raising it, so the total number of states setting eligibility at 200% of poverty remains the same at 39. Alaska, which is experiencing the largest state budget shortfall, lowered the eligibility level to 175% of poverty, while Illinois increased its eligibility level from 185% of poverty to 200%.

According to the report, four states (Alabama, Colorado, Florida, and Maryland) froze SCHIP enrollment and two (Montana and Utah) expanded their existing enrollment.

Among the 36 states operating separate SCHIP programs, only three turned to benefit reductions as a means of cutting costs, and two actually added benefits. Texas made the most drastic changes, eliminating coverage completely for chiropractic services, dental services, vision services, skilled nursing facility care services, hospice care, and tobacco-cessation programs and reducing its previously generous mental health and substance abuse benefits to reflect more typical SCHIP behavior health benefits. Wyoming changed its SCHIP program from a Medicaid look-alike to one with more limited benefits, eliminating coverage for personal care, hearing aids, and its EPSDT provision and placing limits on inpatient mental health coverage. Florida capped dental coverage, and Nebraska revised its Medicaid dental benefit relating to orthodontia.

Utah and Virginia expanded their benefits. Utah added restorative dental services, and Virginia added community-based mental health services.

Cost-sharing changes strategy

According to the authors, compared to eligibility, enrollment, and benefit changes, increased cost-sharing requirements were a far more common strategy used by states to control costs. Seventeen of the 20 cost-cutting states chose this approach because, according to SCHIP directors, it not only offsets some of the states’ costs but also brings SCHIP programs more in line with commercial coverage. Thus, 12 states introduced or increased premiums, two states introduced or increased copayments, and three states introduced or increased requirements for both types of cost-sharing. No state reported reducing existing cost-sharing requirements.

"Unless states’ budget situations improve," Ms. Fox and Ms. Limb say in their report, "and forecasts for FY 2005 are that they will not, more SCHIP program cuts are likely. Five states reportedly are considering increasing cost-sharing obligations, one may reduce eligibility levels, and another might cap enrollment, but these changes are not certainties."

They report Florida already has approved legislation to restrict program enrollment by limiting enrollment to twice a year and allowing the governor to disenroll children if the program has future budget deficits. Idaho will increase its SCHIP eligibility level from 150% of poverty to 185% effective July 1. Children in families with incomes below 150% will remain in the state’s Medicaid SCHIP program, while those in the higher income group will enroll in a newly created separate program that will charge monthly premiums and copayments for emergency department services and prescription drugs.

The authors say it remains to be seen what effect the most common cost-saving strategy of requiring greater cost-sharing will have on program costs and also on program enrollment. "It may be," they say, "that premium increases, even moderate ones, will deter families from enrolling in SCHIP, choosing instead either to spend down to the medically needy eligibility level and obtain Medicaid or simply go without coverage."

[Contact Ms. Fox and Ms. Limb at (202) 223-1500. Download the report from www.mchpolicy.org.]