What the new SCHIP will look like

June 1, 2009

President Obama has increased funding for SCHIP: how will that translate into increased health care for children?

Just two weeks into his presidency, President Obama signed the reauthorization of the State Child Health Insurance Program, or SCHIP.

The goal of the new version of the law is to expand coverage in both SCHIP and Medicaid, and add four million children over 4 ½ years. Currently, seven million children are under SCHIP.

But experts on the 12-year-old law say that individual states will largely determine how it plays out. Alan Weil, JD, director of the National Academy for State Health Policy, said in a recent Kaiser Network briefing that the SCHIP reauthorization, along with the new financing in the bill and the stimulus package, "really puts states on a very good path going forward."

Eligibility levels

To envision potential expansions, it's important to understand that states have never been able to find and enroll all children eligible for SCHIP or Medicaid. Indeed, between 60% and 75% of children who are uninsured are actually eligible for one or the other of the programs, a 2006 Health Affairs report said.

In light of that, several of the new legislation's provisions are aimed at encouraging states to insure lower-income children prior to increasing eligibility to include higher-income children, an issue that was of major concern as reauthorization ground to a halt in recent years.

The goal of SCHIP is to take over where Medicaid leaves off in terms of income eligibility. However, each state determines its own maximum SCHIP eligibility level. As with Medicaid, the federal government matches states' SCHIP funding. In 2008, it paid each state between 65% and 83% of the program's expenses.

Last year, according to a Congressional Research Service Report, 23 states set the maximum income level at 200% of poverty, 20 states set it above 200%, and seven states set it below. The federal poverty level is currently $22,050 for a family of four, but is somewhat higher in Alaska and Hawaii.

It's possible a number of states may now move to increase income levels. However, from this point forward, states that put eligibility above 300% of poverty will only get a federal match rate for those higher-income children at the Medicaid matching levels. Those rates, an average of 57% last year, are lower than the SCHIP match rate of 70%.

Another factor that may encourage some states to expand eligibility is President Obama's reversal of the "August 17" (2007) directive, which mandated that before a state could cover children at the 250% level, it must have already enrolled 95% of children below 200%. Some states had argued that social programs rarely reach such a high enrollment level, and that campaigns to bring in higher-income children actually help bring in lower-income children also.

In other new measures to keep a focus on lower-income children, the federal government will provide performance bonuses to states if they increase the percentages of Medicaid children enrolled, and if they implement five of eight specific outreach and enrollment activities. Those policies include having a year of continuous eligibility for Medicaid and SCHIP children, using a joint application for Medicaid and SCHIP, eliminating the in-person interview for application, eliminating the assets test for Medicaid and SCHIP, and using certain options to ease the renewal process.

Beyond this, the new legislation provides $100 million for outreach and enrollment efforts. But despite all the political bickering during reauthorization, said Weil, "There really is a broad understanding at the state level in a bipartisan way that the core purpose of the program is to reach the lowest-income children in need."