SCHIP Insurance Rules Get Mixed Reviews in States

Armen Hareyan's picture
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A reform implemented by President George W. Bush and the Centers for Medicaid and Medicare Services (CMS) will tighten eligibility for the federally funded State Children's Health Insurance Program (SCHIP), limiting the program to children whose family income is no more than 2.5 times the federal poverty level.

Advocates of expanding taxpayer-funded health programs oppose the restriction, saying it will leave children without needed health insurance.

Market experts, by contrast, point out the SCHIP program was intended to cover only the poor, and that states' health insurance regulatory environments are the main obstacle preventing families from being able to afford coverage without taxpayer assistance.

Income Rules Tightening

Current federal guidelines set the poverty level at $17,600 for a family of three. Under the new SCHIP directive, families with income more than 2.5 times that ($44,000 per year) will be removed from the rolls of the SCHIP program. They will be eligible to re-enroll for the subsidy one year after the state has enrolled 95 percent of its poor children in the program.

States must also make sure the number of children insured in the private market does not fall more than two percentage points over a five-year period.

New Jersey Group Complains

Under a program amendment enacted by the state legislature in 1999, New Jersey's SCHIP program currently enrolls children whose families earn incomes of up to 3.5 times the federal poverty level.

According to a study by New Jersey Policy Perspective (NJPP), released at the end of May, over the next five years the new SCHIP directive will result in 35,000 New Jersey children losing taxpayer-funded coverage. In addition, the report says, the state will lose $215 million in federal SCHIP funding because of the stricter criteria for enrollment.

"The rules make it pretty clear that a lot of people will be affected," said Jon Shure, president of New Jersey Policy Perspective. "So we are not surprised by the large number of people who will be impacted; but we did want to quantify it to see how people would react to the news. We held a briefing for people in the community, and they felt strongly that there is a need to counter these rules and that New Jersey should be able to provide services at current levels."

SCHIP Not Serving the Poor

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The NJPP report calls on Congress to enact an immediate moratorium on the CMS directive that would last until at least March 2009, and to allow states to continue to expand or maintain eligibility levels higher than 2.5 times the poverty level.

Policy experts, however, say SCHIP's current focus on those who are not low income is a large part of the problem.

"SCHIP was aimed at children from low-income families when it was enacted, and that is why Congress funded it," said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute. "That is what the program is supposed to do; yet New Jersey is failing to serve the population it was supposed to take care of. The business of expanding it and making it available to more people makes no sense."

Families Unimpressed by SCHIP

"Currently more than two-thirds of uninsured children are already eligible for the program, but don't take advantage of it," Scandlen continued. "Of those kids that are already eligible, 42 percent were enrolled in SCHIP or Medicaid last year, but didn't renew their enrollment. So it's not like they don't know about the program. They have been enrolled, but dropped out because the program is not good."

Scandlen says participants fail to re-enroll because the program is very stigmatized and bureaucratic. In addition, he cited an inability to get a doctor as a leading factor for non-participation.

"On paper the benefits are generous, like coverage for dental work, ambulance services, and prescription drugs, but it pays providers so little that you can't find anyone who takes it; so it's an empty promise," Scandlen noted. "Almost half of the people who are eligible and were on the plan left it within a year. They experienced the program and dropped out."

Regulations Are Real Problem

But opponents of the new CMS policy, such as Shure, say a lack of participation does not make it okay to reduce the program's availability, especially in a state like New Jersey with such a high cost of living. Instead, Shure says, the state should investigate why participation levels are so low and address those issues separately.

Scandlen said the state's high cost of health care is caused by too much government intervention already.

"New Jersey created its health insurance crisis by making it unaffordable for middle-income families," Scandlen said. "For those who are not poor, New Jersey has passed so many laws about private insurance that it has become too expensive to purchase. And now they want the rest of the country to bail them out?"

Aricka Flowers ([email protected]) writes from Illinois.

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