Medicare Compliance & Reimbursement

Without a funding increase, 1.3 million children will lose their health insurance.

While Washington's talking heads reaffirm their commitment to extending the State Children's Health Insurance Program's (SCHIP) viability, their inaction could leave otherwise uninsured children without medical care as early as May 2007, according to a new study.
 
Projections indicate that 14 to 17 states will face SCHIP funding shortfalls before the end of 2007; legislation passed late in 2006 partially addressed those needs by reallocating a $6 billion surplus in federal funds, but that resource will run dry by May, leaving children in those states without insurance, say Urban Institute researchers Genevieve Kenney and Justin Yee.

That funding shortfall might also affect other states. "The uncertainty around the adequacy of federal funds to support SCHIP has reportedly led some states to hold off on new initiatives to expand coverage under SCHIP," Kenney and Yee write in a Health Affairs report.

President Bush's budget for the fiscal year 2008 proposed increasing SCHIP funding by $5 billion over the next five years and limiting SCHIP coverage to families at or below 200 percent of the poverty line, but these funding increases remain woefully inadequate, the report says.

Current Congressional Budget Office baseline projections place federal funding at $5 billion annually, but that number needs to increase quickly if government officials plan to sustain current programs. "If federal funding for SCHIP is frozen at that level, it will likely be impossible for state programs to maintain their current enrollment levels, let alone expand to cover more of the close to 2 million remaining uninsured children who are eligible for SCHIP," Kenney and Yee explain.

Indeed, without a bump in federal funding, total SCHIP enrollment will fall from 4.4 million in 2006 to 3.1 million in 2011, according to an estimate from the Centers for Medicare & Medicaid Services' Office of the Actuary. While the exact amount of funding needed to maintain current programs and enrollment levels remains unknown, it could be as high as an additional $12 billion from 2008 to 2012, the Congressional Research Service notes.

The need for increased funding stems in part from the various additional programs that have increasingly relied on SCHIP for funds. SCHIP primarily serves low-income uninsured children by providing them with access to quality care, but several states drew on SCHIP funds to cover pregnant women and other adults, Kenney and Yee say. In addition, some states have expanded their coverage to families above 200 percent of the poverty line; Massachusetts, for example, provides coverage through SCHIP to children living at or below 300 percent of the poverty line.

Fixing The Funding Crisis

Although the coverage extensions offered by Massachusetts and other states account for some of the funding difficulties SCHIP is experiencing, the problems also reveal a flaw in SCHIP's original funding structure.

When lawmakers organized the program in 1997, lawmakers allocated funding to states in blocks without accounting for the population fluctuations that naturally occur in any 10-year period. Thus, current funding remains a product of data now 10 years old, and as a result, some states enjoy significant surpluses while others confront serious shortfalls.

"In Massachusetts we are $1 billion, $200 million short in terms of funding," said Sen. Ted Kennedy (D-MA) in a recent statement. Sen. Kennedy contrasted his own state's fortunes with that of Texas, where SCHIP enjoys a surplus of $7 billion. Due to SCHIP's ties with the state-administered Medicaid program, funding transfers between states remain difficult.

To prevent this problem in future years, lawmakers must tie funding levels to measures that accurately reflect a state's current needs and force states to transfer unused funds more readily, say Kenney and Yee. "Tying federal allotments to historical spending patterns and allowing all states to use SCHIP funds to cover low-income children would likely reduce some of the imbalances in the current financing structure, requiring fewer reallocations of unspent resources across states in the future," they argue.

While reauthorizing SCHIP, federal lawmakers also might want to connect funding levels to state fluctuations in enrollment, Kenney and Yee suggest. Such a system would reward states seeking to extend coverage to the millions of children still uninsured while removing funds from SCHIP programs experiencing a decline in enrollment.

Currently, "SCHIP programs appear to be reaching about 66 percent of the population of uninsured children who are eligible but not covered under a private insurance plan, which is somewhat lower than the rate found among uninsured children who are eligible for Medicaid," Kenney and Yee state.

That estimate places the number of individuals eligible for SCHIP at "between 2 million and 2.8 million children nationwide," Sen. Orrin Hatch (R-UT) said in a statement. "Coverage of these children should be our top priority."

By international standards, the United States lags behind in providing health care to children who cannot afford it. "We have the highest number of children that are living in poverty, and in all the industrial nations of the world, we provide less health care coverage than any other nation of the world," Sen. Kennedy said.

Despite bipartisan support for SCHIP's reauthorization, Congress has not yet decided whether the United States can afford to expand or even maintain SCHIP. Without a swift decision on their part, thousands of children could lose their health insurance in less than two months, joining millions of the already uninsured.