Child Health Insurance (SCHIP)
Country: USAPartner Institute: The Commonwealth Fund, New York Survey no: (1)2003
Author(s): CMWF
Health Policy Issues: Funding / Pooling, Access Current Process Stages
Featured in half-yearly report: Health Policy Developments 1/2003
1. Abstract
In response to high percent of uninsured children in the United States, the 105th Congress enacted (1997) the State Children?s Health Insurance Program (SCHIP). It was established to provide health insurance for children who fall in the gap between public and private coverage.
2. Purpose of health policy or idea
Main objectives/characteristics of policy approach or instrument:
In 1997, more than 10 million children, one in seven, were uninsured in the United States, including over 3 million already eligible for Medicaid. The number of uninsured children had risen from 8.2 million in 1987 to 10.6 million in 1996- nearly 14 percent of all children. Many of these children lived in families whose incomes were too high to qualify for Medicaid but too low to afford private coverage (75 percent of uninsured children lived in families with a parent who worked full-time). In addition, higher percentages of Hispanic and African-American children were uninsured than their white counterparts so the lack of coverage disproportionately affected minority children. In 1997, one-fourth of all the uninsured in the United States were children.
In response, the 105th Congress enacted the State Children's Health Insurance Program (SCHIP) as part of the Balanced Budget Act of 1997. It was established to provide health insurance for children who fall in the gap between public and private coverage.
SCHIP represented historic bipartisan legislation, providing $48 billion for over 10 years to create the State Children's Health Insurance Program, the largest health care investment in children since the creation of the Medicaid program in 1965. The funds cover the costs of insurance, outreach services to get children enrolled, and costs for administration. The legislation set out broad outlines for the program's structure and established a partnership between the Federal governments and the States. States were required to provide matching funds and were given broad flexibility to tailor programs to their own circumstances, and the option to create or expand their own separate insurance programs, expand Medicaid, or combine both approaches.
States were able to choose from among several private sector benchmark benefit packages, or they could use the Medicaid benefits. Within Federal guidelines, states also had flexibility on eligibility criteria regarding, income (SCHIP ws targeted at 200% of FPL but if a State had already expanded Medicaid to that level, it could go higher), resources, residency, and duration of coverage. In 2001, states were given the opportunity to expand SCHIP coverage to low
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income parents using waiver authority.
While the program has had success to date, in covering an additional 5.3 low income children, its continued efforts are critically important given that over one quarter of all poor children (defined as having family incomes below 100
percent of poverty) remain uninsured and their uninsurance rates do not appear to be dropping.
In a more recent development, in January 2003, the Bush administration announced its Medicaid reform proposal which would give states the option to continue operating their Medicaid and SCHIP programs under current rules or as block grants, "State Health Partnership Allotments". In states that opt for a block grant, the Medicaid and SCHIP funding streams would be replaced by two allotments, one for acute care and one for long term care. States would only have to provide "mandatory" services to mandatory Medicaid populations, and would not have to guarantee a certain set of benefits or adhere to cost-sharing limitations designed to ensure coverage is affordable for low income people. At risk would be optional Medicaid populations, which include some of the sickest and poorest people,
typically blind, disabled, or elderly people on very low incomes. Moreover, for states taking the block grant, the SCHIP program would be effectively eliminated, as the dedicated funds and enhanced match would no longer apply, and the block grants could be used for other purposes.The Bush Administration proposes that block grants would give Governors and states greater flexibility to use the funds and run the programs in a way that meet states' needs. (For details, see Issue #3 Medicaid System Reform-Administration Block Grant Proposal)
Type of incentives (financial, non-financial):
About 70 percent of state expenditures for SCHIP is paid by Federal funds.
In order to receive their state allocations, states are required to provide matching funds. The Federal government will match state funds at 30 percent higher than the state's Federal Medial Assistance Percentage (FMAP) which
determines the portion of Medicaid expenses the Federal government contributes. The maximum Federal match is 85 percent.
For example, if the state's FMAP is 50 percent, the Federal government contributes 50 percent and the state must pay 50 percent of its Medicaid expenses. For SCHIP, the Federal government match will be at 65 percent (.30 X 50 % = 15 % and 50 % plus 15 % =65 %).
If a state chooses to expand Medicaid with the SCHIP funds, the state allocation for SCHIP is paid though an enhanced FMAP rate, using the calculation above. However, if the state's SCHIP funds run out, and there are still Medicaid expenses, the match reverts to the regular FMAP rate.
With respect to the recent Bush Administration proposal for block grants, under its "State Health Partnership Allotments", the main incentive for states would be increased flexibility in serving "nonmandatory Medicaid
populations, for which they would not be subject to existing Federal rules regarding the benefit package, cost-sharing, enrollment and other features of the program.
For the Federal government, the administration has presented this proposal as cost-neutral, although, although it is not clear what happens beginning in year 2014, as the block grant funding level would be lower than the current Medicaid and SCHIP funding trajectory. (For details, see Issue #3 Medicaid System Reform-Administration Block Grant Proposal)
Group(s) affected:
Families with children - SCHIP is designed to provide health insurance coverage to children in families who are unable to afford private health insurance coverage, but mak etopo much to qualify for Medicaid. While eligibility criteria vary by state, most uninsured children in families of four who earn up to $36,200 a year would qualify (set at 200 percent of poverty level in most states).
3. Characteristics of this policy
4. Political and economic background
Following the failure of the Clinton Health Plan, there was commitment from many policymakers and other stakeholders to try to address the numbers of uninsured through incremental means. Children were a priority,
representing one-fourth of all the uninsured in America, and the Clinton administration put forth a child health proposal in 1997. SCHIP was enacted in August 1997 by Congress with strong Democratic and Republican support. A
combination of healthy state fiscal environments and the availability of tobacco funds that could be used for child health programs lent further momentum to the idea.
In a recent development, the Medicaid/SCHIP reform proposal was announced by the Bush Administration on January 31, 2003. In response, a Democratic alternative, the Family Improvement Act has also been put forward.
5. Purpose and process analysis
Origins of health policy idea
Who were or are the driving forces behind this idea and why?
It had bipartisan support but was championed by Senators Rockefeller and Wellstone.
Is it an entirely new approach, does it follow earlier discussions, has it been borrowed from elsewhere?
In terms of providing health insurance coverage for low income children, SCHIP has proven to be a creative program that has allowed states to build on other poverty-related expansions initiated under Medicaid in the 1980's ( e.g the Omnibus Reconciliation Act of 1986 (OBRA) which allowed states to expand Medicaid coverage to all pregnant women, infants and children up to age five below the poverty level). It represented an incremental approach to covering the uninsured, which was seen as a new/alternative approach in the wake of the failure of major health system reform under Clinton.
Is it aimed at amending / updating a prior enactment ("reforming the reform"), and why would it have been passed?
To the extent that it expanded Medicaid coverage for low income children it could be seen as a reform of a reform. However, given that Medicaid was passed in 1965, it's really more a reform of an existing program.
Degree of Innovation traditional innovative
Degree of Controversy consensual highly controversial
Structural or Systemic Impact marginal fundamental
Public Visibility very low very high
Transferability strongly system-dependent system-neutral
Who were the main actors?
It was put forward and passed with bipartisan support in Congress.
Are there small-scale examples for this innovation (e.g. at local level, within a single institution, as pilot projects)?The SCHIP program is operating in all 50 states and the District of Columbia.
Stakeholder positions
How were or are other stakeholders/affected groups involved?
The primary groups affected are low income families with children. A large number of groups, such as, the American Academy of Pediatrics, advocacy groups like the Children's Defense Fund and Families USA, and private foundations like The Commonwealth Fund, have been actively involved in making SCHIP a success by working with State and local government to help identify and encourage low income children to enroll. In particular, the Robert Wood Johnson Foundation played a major role in funding outreach and enrollment efforts in all 50 states through its "Covering Kids" program.
Who opposes / opposed this idea or policy and why?
The major controversies associated with SCHIP from the beginning have been about the size of the overall allotment and the formula used to allocate funds across the states. The key stakeholders were Governors and state health officials. The issue of whether it would be part of Medicaid or a stand alone program, an entitlement or a capped grant were also part of the original discussion.
One concern was that states that had already expanded their Medicaid coverage to include children with family incomes up to 200 percent of poverty, before SCHIP, would have difficulty using their full Federal allotments. To address that, states already at 200 percent of FPL, could set eligibility criteria higher. Expansion of SCHIP eligibility levels to 200 percent of poverty (FPL) and the introduction of waivers to allow states to cover parents in low income families, has increased states' ability to take advantage of their allotments of Federal SCHIP funds.
Another objection raised was that federal dollars were allocated to states based on data from the Current Population Survey, which is recognied to be inaccurate in its estimates of the uninsured, particularly for low population states.
Has the idea or policy been accepted by relevant actors; or was it abandoned?
This policy initiative was overwhelmingly accepted and implemented by 50 states.
Who held the leadership role in bringing forward this idea or policy?
TK- Congressional sponsors of the bill.
Were there alliances between stakeholders in support of the idea or new policy?
Support for this policy initiative came from Congress, Governors, American Academy of Pediatrics, and all major advocacy groups working on behalf of children and the uninsured.
Who mediated conflicts of interest between stakeholders?
Conflicts were addressed through the legislative process by Congress.
Influences in policy making and legislation
Did or will the development of this idea or health policy lead to a formal piece of legislation?
It became Title XXI of the Social Security Act, the State Childrens' Health Insurance Program and was enacted as part of the Balanced Budget Act of 1997
In how far has the original proposal been changed or modified in the process?In 2001, the Clinton
administration expended the program by allowing states to file for SCHIP waivers in order to offer health insurance coverage to parents of children, in effect, enabling coverage of low income families whose incomes exceed traditional
Medicaid levels but are not high enough to afford private insurance coverage. Waivers were initially approved for New Jersey, Rhode Island and Wisconsin, and subsequently for TK other states.
In August 2001, the Bush administration announced its Health Insurance Flexibility and Accountability Demonstration, to encourage states to apply for Medicaid and CHIP waivers to expand coverage for the uninsured. The
demonstration would allow states to reduce coverage and increase cost-sharing for Medicaid and CHIP enrollees as a way to free up funds to expand enrolment. Advocacy organizations voiced opposition to this potential cut in coverage and increase in cost-sharing for low income families as a way to expand coverage to more children.
In 2002, the Bush administration expanded the SCHIP program to allow states to offer health care coverage for prenatal care and delivery to low income expectant mothers and their unborn children. The new regulation allows states to provide the benefit regardless of the mother's immigration status.
In January 2003, the Bush administration announced its Medicaid reform proposal which would give states the option to continue operating their Medicaid and SCHIP programs under current rules or as block grants. In states that opt for a block grant, the Medicaid and SCHIP funding streams would be replaced by two allotments, one for acute care and one for long term care. States would only have to provide "mandatory" services to mandatory Medicaid populations, and would not have to guarantee a certain set of benefits or adhere to cost-sharing limitations designed to ensure coverage is affordable for low income people. The Bush Administration maintains that block grants would give Governors and states greater flexibility to use the funds and run the programs in a way that meet states' needs. However, for states taking the block grant, the SCHIP program would be effectively eliminated, as the dedicated funds and enhanced match would no longer apply, and the block grants could be used for other purposes.
Legislative outcome
Adoption and implementation
Which actors and stakeholders were, are, or will be involved in the adoption process towards implementation?
U.S. Department of Health and Human Services/Centers for Medicare and Medicaid Services, Governors, State Medicaid Offices, State Health Departments, State Welfare Offices, Community Health Centers, Hospitals, Managed Care Plans, Child Advocacy Organizations, American Academy of Pediatrics, Schools
Which means are necessary?
New policies and procedures in 50 states were necessary to implement SCHIP, which required considerable coordination between government departments and programs. A great example of this is the joint Medicaid and SCHIP applications that were developed to streamline the application process. In addition statewide media and outreach campaigns were necessary to reach eligible children. Some public/private partnerships were also established between states and managed care plans.
Who moderates the process? Were or are these actors and stakeholders actively participating in the process?Implementation issues would be negotiated between states and the Department of Health and Human
Services/Centers for Medicare and Medicaid Services.
Who else is or will be directly or indirectly affected by this implementation?
Many groups affiliated with children's health and children's causes, lent support to SCHIP and efforts to identify and enroll eligible children.
How successful was implementation or, in your opinion, what are the chances of implementation?
On some measures highly successful. Although participation in SCHIP is voluntary, all 50 states and the District of Columbia have implemented some version of the program.
Over 5.3 million children have been enrolled in the program since it was implemented, and the percentage of children without health insurance has dropped from almost 14 percent in 1997 to 10.8 percent in 2001. Unfortunately,
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Identification and enrollment of eligible children was challenging from the beginning. Key factors that have been responsible for the underenrollment are:
Lack of knowledge- in the early years of the program, studies found that as many as 32 percent of parents of low income children surveyed did not know about the program or were confused about eligibility criteria Confusion about eligibility- parents did not understand that they could qualify for SCHIP if they were not on welfare
Bureaucratic obstacles and complicated application forms
A significant number of parents of low income children, typically those with the healthiest children, did not see a need for Medicaid or SCHIP coverage or did not want public insurance
A number of states originally set their SCHIP eligibility levels at too low a level for many children to qualify A few states charged low incoming working families unaffordable premiums.
Some state welfare offices made it particularly burdensome for people to apply in an effort to divert them.
What incentives would facilitate the implementation of this policy, in addition to, or instead of the incentives provided?
A number of incentives or initiatives were implemented in response to the initially low CHIP enrollment:
In 1999, the Federal government was concerned about finding ways to identify and enroll eligible children for SCHIP. President Clinton and the National Governors Association launched Insure Kids Now, an outreach campaign offering a website with state-by-state SCHIP information, and a toll-free number connecting callers directly to their state agency.
States invested unprecedented resources in outreach - using statewide media campaigns to raise public awareness and community-based marketing and outreach efforts to reach and enroll eligible children. The Robert Wood Johnson Foundation launched a major program, "Covering Kids", to identify and enroll eligible children in all 50 states.
In 2000 President Clinton signed legislation allowing states to share information from school lunch applications with Medicaid and SCHIP agencies for the purpose of identifying and enrolling eligible children. By September, 2000, 2.5 million children were enrolled, a 50 percent increase in less than a year.
Many states that had had restrictive eligibility requirements, raised the levels, although eligibility rules still pose barriers, particularly where SCHIP is an extension of the Medicaid program and eligibility differs for children depending on their ages.
Some states reduced burdensome application procedures by creating a joint SCHIP and Medicaid application and/or simplifying and paring down the application itself
Some states implemented presumptive eligibility to enable parents to complete a short application and get benefits for their child, while the full SCIP application was being processed
Other states tried innovations, such as school outreach programs to enroll children, guaranteed 12 month eligibility, automatic notification to families when its time to re-enroll.
Monitoring and evaluation
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tanks, and academics
Have precautions been taken to minimize the undesirable effects of the reform?
A key undesirable effect has been that, when originally designed, there were concerns that states would not participate without strong incentives. To ensure the program's uptake, SCHIP provided for reimbursing states at a higher rate for low income children than it does for those on Medicaid. Consequently, in some states there are two classes of care for low income/poor children, as SCHIP can afford to pay higher rates than Medicaid to providers and health plans.
The program has just passed the 5 year mark of its 10 year authorization. Over 5.3 million children have been enrolled in the program since it was implemented, and the percentage of children without health insurance has dropped from 13.9 percent in 1997 to 10.8 percent in 2001.
All 50 states and the District of Columbia have implemented some version of the program. While SCHIP program benefits vary across states, most cover immunizations, regular checkups, prescription drugs, eyeglasses, doctor visits, and hospital care.
Ultimately, its success will be judged by not only how many children benefit from health insurance coverage under SCHIP, but by the impact that has on their health and well-being. It is expected that future evaluations of the program will examine the extent to which eligible children have gained access to high quality care and their health outcomes as a result of SCHIP.
6. Expected outcome
SCHIP has been somewhat successful but has not realized its potential. At the end of 2002, 5.3 million children were provided health insurance under SCHIP but more than 5 million children remain uninsured. Low income children constitute 64 percent of all uninsured children.
What might be its unexpected or undesirable effects?
Due to three factors: a reduction in Federal monies for SCHIP for 2002-04, the reversion of almost $3 billion of
unspent SCHIP funds from the states to the Treasury, and the current depths of the states' budget crises, the Office of Management and Budget projects that enrollment in SCHIP will decline by 900,000 between 2003 and 2006.
In authorizing the SCHIP program, Congress provided for 10 year-funding, but not allocated evenly across years. Funding was approved at $4.27 billion for 1999-2001, $3.15 billion for 2001-04, and then $4 billion in 2005. Given that schedule, the states will now face 3 years of reduced funding at a time when many programs are growing.
SCHIP was designed so that if states do not spend all of their SCHIP funds from a given allotment in the timeframe allowed, the monies revert to the Treasury. At the end of FY 2002, $1.2 billion in unspent SCHIP funds reverted to the US Treasury and was lost to the SCHIP program and $1.5 billion will at the end of FY 2003. (Congress is now debating a proposal as part of the omnibus spending bill, that would allow states to keep the $2.7 billion. The President's FY 2004 budget would allow states to keep $830 million of SCHIP funds that were scheduled to revert to the Treasury at the end of FY 2003).
States are now facing the biggest shortfalls in their budgets since World War II and will be forced to cut spending. In 2002, 40 states reported budget shortfalls of $40 billion, and are under tremendous pressure to reduce costs including for health care programs.
The increasing pressure to reduce costs comes at a time when, because of the downturn in the economy, the loss of jobs and employer-sponsored health insurance; and rising health care costs, more families will need to enrol in SCHIP in order to get child health care coverage.
If, as President Bush's proposal would allow, states opt to have Medicaid/SCHIP block grants, it can be expected that many thousands more children will lose coverage. States facing extreme budget crises will have no choice but to make budget cuts and without SCHIP as a separate funding source, the targeted focus on covering uninsured low income children would be lost.
What are or will be the effects on costs, quality, equity etc.?
Reliable insurance coverage is vital to a child's overall health. Low income children who lack health insurance are more likely to have preventable diseases like conjunctivitis and ear infections, and less likely to have regular check ups, get immunizations, vision and hearing tests, and preventive care. Uninsured children are also more likely to miss school. Long term uninsured children receive less than half then doctors visits that insured children receive.
In terms of costs, uninsured children often rely on hospital emergency rooms for primary care, which is more costly and a poor quality substitute for a regular doctor, or they are left to go without timely care resulting in poor health, more treatment for medical complications, and more avoidable hospitalizations.
One study showed that after enrollment in SCHIP for one year, the percentage of children reporting an unmet health care need or delayed health care fell 56 percent to just 16 percent, findings which suggest both cost benefits nd important gains in quality of care.
By expanding health insurance coverage to 5.3 million low income children, SCHIP, which is only 5 years into its 10 year authorization, has proven itself to be an important policy initiative for improving access to health care for low income children.
Author/s and/or contributors to this survey
CMWF
Suggested citation for this online article
CMWF. "Child Health Insurance (SCHIP)". Health Policy Monitor, February 2003. Available at
