They asked and then they received: States get more health care options

Mid-summer turned into a time of change as politicians in Washington, DC, set a new tone for state policy-makers, who usually end up taking whatever the federal government parcels out.

While the Bush administration will allow states more flexibility in how they spend health care dollars, it sent up and then hauled back what appears to be a trial balloon regarding health coverage for unborn children.

Tommy Thompson, Health and Human Services secretary debuted the new plan on Aug. 4 that he says will allow states to provide health insurance to many now-uninsured people without increasing costs to Medicaid and the state Children’s Health Insurance Program (CHIP).

The plan, the Health Insurance Flexibility and Accountability Initiative, gives states the opportunity to cut optional benefits and use that money on other ways to help the uninsured. Ideally, Mr. Thompson says, the Medicaid and CHIP money will work in tandem with private insurance coverage to create health care coverage.

In exchange for upfront flexibility, the federal government says, states will be required to set goals for reducing the number of residents without health care coverage and then document their progress toward reaching that goal.

The way to do that is through a 14-page waiver form available on-line at The program offered through the waiver, according to Centers for Medicare and Medicaid Services (CMS; formerly HCFA) spokeswoman Mary Kahn, goes into effect immediately and does not require any congressional action to make it official.

"Flexibility has been a high priority and this waiver initiative offers states the flexibility that has been requested," Vernon Smith, principal of Health Management Associates, in Lansing, MI, tells State Health Watch. "It’s a positive change and initiative for states. It’s not everything that governments and states have asked for. It’s a step toward that."

Medicaid is a niche program that serves many groups but hasn’t found its way to properly cover adults with no children, Mr. Smith says, but the new federal wrinkle would allow that.

"To expand to this population, perhaps states would tailor Medicaid benefits packages that are similar to that offered by small business. It might involve a small premium, copays, limits on benefits packages such as limited prescriptions or doctor’s services," Mr. Smith says. "Potentially, this is very significant. Watch how states use their creativity to take advantage of this."

Critics of the new initiative say that it is possible that states might try to save money by trimming benefits; that’s an option that each state would have to contemplate on its own. But flexibility in how to spend Medicaid and CHIP money is at the heart of the argument. The initiative was announced during the August National Governors Association meeting in Washington, DC, playing to a group that had requested similar changes last February. The governors then asked the federal government to find a way to allow states to find new ways to cover America’s 40 million uninsured people during a time that tax revenues are falling.

"This is similar to the National Governors Association proposals," Julie Hudman, associate director of the Kaiser Commission on Medicaid and the Uninsured in Washington, DC, tells SHW. "It gives governors a lot of flexibility, but it’s not everything they want."

What else do they want? "States would like some relaxation of budget neutrality in covering new programs," Greg Vadner, director of the Division of Medical Services for Missouri, tells SHW. "The governors’ proposal has enhanced match rates, but that would require congressional action to approve."

How long?

It will take a year to plan and implement the new waiver before Missouri takes advantage of the new initiative, Mr. Vadner adds. "We haven’t been able to study it yet, but it’s a large improvement on the process of applying for an 1115 waiver. Now when we apply for the 1115, we have no direction as to what the administration is looking for. We’re just shooting in the dark. We throw up an idea, and they agree or they don’t. Where this gives guidance, gives a target, so if we’re within parameters within the process, you’ll be OK."

In a more controversial move, the Bush administration mulled the idea of introducing legislation that would allow states to cover a fetus with CHIP funds. The idea was floated in a draft letter written by Department of Health and Human Services Director Dennis Smith. (See insert.) The letter said the fetus may be considered a "targeted low-income child" and that the rule would be proposed "in the near future" in the Federal Register. It didn’t make it that far. "The letter was withdrawn from the clearance process," Ms. Kahn says. "It is not under current consideration."

The draft letter was seen as another scuffle in the abortion battle and particularly viewed by some as a way for the Bush administration to restrict rights given under Roe vs. Wade. The White House called it a way to give prenatal care to the working poor. Abortion rights groups took the stance that this was unnecessary health care legislation and a blatantly political move.

The population they are talking about insuring — pregnant women — is already covered by Medicaid or CHIP, Laurie Rubiner, vice president of the National Partnership for Women and Families in Washington, DC, tells SHW.

"Under Medicaid, states are required to cover pregnant women up to 133% of poverty, but they can go up the income scale as high as they want. Some states go as high as 250%. . . . It sounds like prenatal care but the most telling thing is there is no mention of women anywhere [in the letter] at all. It’s bizarre."

Elizabeth Cavendish, legal director of the National Abortion and Reproductive Rights Action League, also in Washington, DC, says her group supports efforts to expand public assistance for low-income women, but not in this way. "We’ve long said that Bush is anti-choice and that there are several other events in public policy that reveal a strategy to elevate a fetus to the status of a full human being. This doesn’t surprise us. It looks like a trial balloon."