Medicare Compliance & Reimbursement

Centers for Medicare & Medicaid Services Acting Administrator Kerry Weems has a message for state health officials regarding the State Children's Health Insurance Program: SCHIP is for those children who need it most, and we're sorry about the confusion.

In a May 7 press release, CMS answered questions prompted by an August 2007 letter the agency sent to states explaining its review policy for SCHIP. CMS has sent a new letter to health officials to clarify the review policy and to confirm that SCHIP should apply to the country's poorest children.

"We have to ensure that children with the lowest incomes and without health insurance are helped first," Weems says in the release. CMS also emphasizes that SCHIP policies should prevent the dropping of private health insurance in favor of government insurance.

The August 2007 letter said that CMS' review strategy would prevent "crowd-out," or the substitution of SCHIP for private coverage.

Crowd-out can occur when a state raises SCHIP eligibility levels to include children in families with incomes above 250 percent of the federal poverty level, or $53,000 for a family of four in 2008, CMS says.

Weems says he is worried that states may use SCHIP to cover children from higher-income families without ensuring that children from lower-income families have coverage.

The release says that states were unclear about two crowd-out-prevention safeguards that were outlined in the 2007 letter:

• a one-year waiting period for SCHIP coverage; and

• assurance that higher-income children were not enrolled until at least 95 percent of children in families with incomes below 200 percent of the federal poverty level had SCHIP, Medicaid or private insurance. (Two hundred percent of the federal poverty level for a family of four in 2008 is $42,400.)

States need not apply the 2007 policies to current enrollees, the new letter says, and any child who maintains continuous SCHIP enrollment is "grandfathered" into the program and will not be subject to any restrictions or changes in cost-sharing or coverage.

CMS' 12-month waiting period and cost-sharing requirements do not apply to children in families with incomes at or less than 250 percent of the federal poverty level, or to unborn children eligible for SCHIP, the letter points out.

CMS welcomes suggestions from state officials to prevent crowd-out, citing the example of state alternatives to the one-year waiting period.

"CMS has worked and will continue to work cooperatively with states to cover children and avoid substitution of existing coverage," Weems says. "The August 2007 letter was intended as policy guidance that would be applied on an individualized state-by-state basis."

The letter to state health officials is online at http://www.cms.hhs.gov/smdl/downloads/SHO050708.pdf.