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SCHIP – State Children’s Health Insurance Program

So it seems there’s a lot in the news lately about the State Children’s Health Insurance Program SCHIP (pronounced S-CHIP, also known as CHIP), the government program that provides affordable health insurance for 6.6 million children. An additional 9.2 million children in the United States remain uninsured.

What is SCHIP?

Currently there is a lot of back-and-forth between Congress and the White House over the future of the program and what it means for children in the United States.

Federal legislation authorizing SCHIP was created in 1997 to help poor families gain access to government health care coverage for their children through the states. The program offers premiums and co-payments lower than typical insurance prices. SCHIP set the eligibility cut-off for family income at 200% of (twice) the Federal Poverty Level (FPL): $34,340 per year for a family of three or $41,300 for a family of four.

SIDEBAR: Federal Poverty Level Cut-Offs Based on Annual Income and Family Size (2007)
Family Size
100% = Poverty
133% of poverty or less than:
150% of poverty or less than:
185% of poverty or less than:
2 $13,690 $18,207.70 $20,535 $25,326.50
3 $17,170 $22,836.10 $25,755 $31,764.50
4 $20,650 $27,464.50 $30,975 $38,202.50
5 $24,130 $32,092.90 $36,195 $44,640.50
6 $27,610 $36,721.30 $41,415 $51,078.50
7 $31,090 $41,349.70 $46,635 $57,516.50
8 $34,570 $45,978.10 $51,855 $63,954.50
Family Size
200% of poverty or less than:
250% of poverty or less than:
300% of poverty or less than:
350% of poverty or less than:
2 $27,380 $34,225 $41,070 $47,915
3 $34,340 $42,925 $51,510 $60,095
4 $41,300 $51,625 $61,950 $72,275
5 $48,260 $60,325 $72,390 $84,455
6 $55,220 $69,025 $82,830 $96,635
7 $62,180 $77,725 $93,270 $108,815
8 $69,140 $86,425 $103,710 $120,995

The SCHIP legislation also allowed the states to design their own programs with the approval of the Federal Secretary of Health and Human Services, and a number of states have raised the income cut-offs to reflect regional cost of living expenses. Between January 2006 and August 2007, more than half of all states have sought to expand their public health coverage programs for children by adopting new efforts to reach already eligible uninsured children, or to expand eligibility for child health coverage, or both strategies. Of note:

  • California, North Carolina, and Wisconsin want to increase income eligibility to 300% of the poverty level.
  • Hawaii, Indiana, Louisiana, Massachusetts, North Carolina, Ohio, Oklahoma, Pennsylvania, Washington, West Virginia and Washington D.C. have raised the limit to 300%.
  • New Jersey has had a limit of 350% for more than five years.
  • New York has raised the limit to 400%
  • Illinois has removed all income limits.

For income eligibility for SCHIP by state as of 2006, go to http://www.statehealthfacts.org or here.

Why is SCHIP in the News Now?

SCHIP was set to expire on September 30, 2007. In his State of the Union address in February 2007, President Bush announced his intention to reauthorize the program for $5.4 billion in Fiscal Year 2008, a 4% decrease from FY2007, thus removing coverage from hundreds of thousands of children. He proposed an increase of an additional $5 billion to SCHIP’s current five-year funding of $25 billion, to total $30 billion in five years. Since then, various senators and representatives, both Republican and Democrat, have offered various versions of a reauthorization bill with much higher funding levels. The one that gained the most traction and finally passed in the House in August 2007 called for increased funding of the program of $160 billion over 10 years in order to increase enrollment. The bill also included provisions requiring increased oversight of and reduced subsidies to Medicare Advantage, the privatized Medicare plans run by insurance companies with tax dollars. Later that month, President Bush presented new SCHIP “rules” to block increases to income eligibility under SCHIP already authorized by the federal government in at least 19 states. He also announced he would veto any SCHIP bill that included language limiting Medicare Advantage.

A bipartisan group of senators and governors have consistently opposed Bush’s attempts to limit SCHIP. In September 2007, Arnold Schwarzenegger (R-CA) and Eliot Spitzer (NY-D), as governors of the two largest states, in which a total of 1.4 million children and pregnant women are covered through SCHIP – nearly 25% of all enrollees – had written to Bush when he announced his intention to veto the pending SCHIP bill, requesting he change course. In the same month, Senators Edward Kennedy (D-MA), John Rockefeller (D-WV), Gordon Smith (R-OR) and Olympia Snowe (R-ME) introduced legislation to prevent the implementation of Bush’s new SCHIP rules.

The Senate and the House reached a bipartisan compromise bill based on a Senate version that had no language on Medicare in early October 2007. This bill would have expanded coverage to more children with increased funds of $35 billion over five years for a total cost of $60 billion (as opposed to Bush’s 25 billion). The bill was approved by both chambers of Congress in September. The nonpartisan Congressional Budget Office (CBO) estimated that this bill would have increased enrollment of children in SCHIP and Medicaid by 5.8 million by 2012.

President Bush

President Bush’s preferred policy is to provide families with tax deductions to help pay for private insurance.

On October 3, President Bush vetoed the compromise SCHIP bill. He alleged that the bill encouraged states to increase the income limits to 400% of poverty levels, or $83,000 for a family of 4 – a request made recently by one state – New York, to compensate for the state’s very high cost of living, which Bush’s Secretary Mike Leavitt had rejected in August. (It takes a $70,000 income in Manhattan to buy the same goods and services that $30,000 can buy in Omaha.) No other state has suggested this amount.

He has also vowed to veto any future bill that funds S-CHIP enrollment through a cigarette tax hike.

Bush has maintained that the attempt to increase the number of children SCHIP covers is part of an effort by Democrats to expand government health programs at the expense of private insurance.

Senator Orrin G. Hatch (R-UT) who helped write the original bill in 1997 and more recent versions said in response, “About 92% of the kids [enrolled in SCHIP] will be under 200% of the poverty level.” The compromise bill passed by Congress would not have forbade states from setting the income limit at $82,600, but would have set very strict new standards for such coverage, tightly limiting both the numbers of enrollees who could qualify at that level and the amount of funding those states would receive.

“Crowd-Out”

President Bush and other Republicans have repeatedly cited the phenomenon of “crowd-out”- the portion of new SCHIP enrollees trading in private coverage for public coverage – as a reason to not support the new SCHIP bill’s higher income eligibility.

  • The Congressional Budget Office has pegged crowd out at 34% on average, concluding that “for every 100 children who enroll as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children. The CBO suggests that the bulk of the reduction in private coverage occurs because parents choose to forego private coverage and enroll their children in SCHIP (because of better benefits, lower costs, or some combination thereof), rather than employers deciding to drop coverage for such children.”
  • However, a recent study of 10 states conducted by the Department of Health and Human Services finds that 72% of SCHIP enrollees were not covered by private coverage six months prior to enrollment in the public program.
  • Of the 28% who were, half reported losing coverage involuntarily (because of job loss, their employer’s decision to stop offering health insurance or due to divorce or death).
  • This means the remainder, only 14% of total SCHIP enrollees, could have held on to private coverage, and more than half of these cases (8%) cited an inability to afford private coverage as the reason for shifting over to SCHIP.
  • Other analysts have put the frequency of crowd-out at 2% and 6-14%. The administration has put the portion of SCHIP enrollees effected by crowd-out at 60%.

Recent Developments

On October 18, the House voted 273 to 156 against Bush’s veto of the compromise SCHIP bill, 13 votes short of the 286 votes needed (normally 290 if all 435 are present and voting) for a 2/3 majority to override the veto.

Those in favor of expanding government health care programs for children had hoped to gain more support in the two weeks between Bush’s veto and the vote scheduled to try to override it and had converted six of the Democrat “no” votes against the bill to “yes”s. Yet 147 House Republicans had signed a pledge to support Bush’s veto and in fact 154 Republicans did so on October 18.

Since the veto, leading Republican and Democratic S-CHIP backers had hoped to broker a deal before Thanksgiving to pass a reauthorization bill for the program that could override a second Bush veto. This no longer seems feasible despite (or perhaps because of) compromises made in a failed bid to attract Republican support: reducing the number of eligible children through family income caps and disallowing deductions, stronger measures to continue to prevent enrollment of illegal immigrant children, halving the time allowed to eliminate all non-pregnant adults from enrollment, and requiring state incentives to limit crowd-out. The bill’s additional price tag remained $35 billion and passed in the House in November with fewer votes on each side than previous. Some analysts say success on achieving a passable and veto-proof rewrite is now being limited by poor politicking and haggling over technical details.

UPDATE: On December 12, 2007, President Bush again vetoed Congress’ bipartisan SCHIP bill (HR 3693) citing it as too similar to the first bill he vetoed – too costly, too inclusive of middle income adults and children, and reliant on an increased cigarette tax, which he opposes. The legislation would have expanded the program to cover 10 million children in families with annual incomes below 300% of the federal poverty level, necessitating increased spending on the program by $35 billion over five years, to be funded with a 61-cent-per-pack increase in the federal cigarette tax. House Democrats scheduled a veto override vote for Jan. 23, 2008. The House of Representatives voted 260-152 to override President Bush’s veto, falling 15 votes short of the two-third majority required. Congress has passed a temporary extension of the original legislation through the end of March 2008.

Because the SCHIP bill expired in September it had been operating under a continuing resolution (CR) until December 14. While this resolution has now been extended it does not contain enough funding to maintain current enrollment for long: more and more states are fearing they will run short of SCHIP money and have to cut kids. A recent Georgetown University analysis found that due to the Bush Administration’s August 2007 policy directive forbidding federal government subsidies of SCHIP coverage to children in families above 250% of poverty, thousands of such children have lost out on coverage in the 14 states that do provide SCHIP at these levels. These states will likely be forced to roll back their enrollment even further by August 2008 or have to assume the costs with limited resources. (For a PBS special on how SCHIP cutbacks are affecting families with sick children, go here.) As of October 3, five states – Illinois, Maryland, New York, and Washington — had announced their plans to sue President Bush over his proposal to lower income eligibility requirements below levels already approved for these states. Arizona, California and New Hampshire will file documents in support of the other five states. New Jersey has filed its own similar lawsuit.

For a history of children’s health coverage in the US, check out http://www.kff.org/medicaid/childrenshealth_timeline.cfm

Article written by Emily Cleath.

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