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POLICY: Underfunded? By Eric Novack

Governors from around the country are in Washington D.C.this week for the annual meeting of the National Governors Association. One of
the main bones of contention at this years’ meetings has been the expansion of
federal funding for state SCHIP programs. The governors want more, and lots of it. THCB’s own Eric Novack has been following this story like a hawk. And, as usual, he’s got a question.

The State Children’s Health Insurance Program was designed
by Congress to help states have money to provide Medicaid services to, well,
kids. The intent of Congress was clear,
given the “C” in the program’s name. Now
governors are screaming that SCHIP funding proposals by the federal government
are woefully inadequate.

Except for one thing—many states use SCHIP dollars to pay
for Medicaid for adults! Using 2005 data: In Minnesota, 87% of total SCHIP
enrollees in 2005 were adults, and 66% in Wisconsin. In Arizona, 56% of those enrolled
in SCHIP were adults.

Perhaps the states ought to use the funds for what they were
intended before complaining that they are being underfunded. If a child spent his ‘snack bar’ allowance on going to the movies, and then complained he was short, we would be likely to
require guarantees that the money would be spent properly in the future before
handing over the cash.

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14 replies »

  1. First, I must say I don’t agree with your budget point. When SCHIP was created, the funding stream was ridiculous — way too much early (as there were billions in surpluses early, the SCHIP dip in 2002 to hit Balanced Budget Act deficit targets) and then flat funding late. States have been spending more money than their allotments in SCHIP since 2002 and 80% of states exceeded their 1997 arbitrarily established allotments ten years later (in 2006).
    The formula is also ludicrious and the rationale for the dollar amount has no bearing in reality.
    If Wal-Mart were to decide today what it will spend on health care for its employees in 2017, then it would be equally insane and they undoubtedly would be nowhere close to whatever arbitrary figure was set today. But, that is exactly what happened with SCHIP.
    So, I have to say that I don’t agree with your “snack bar allowance” analogy at all. Instead, it would be like a parent deciding now that they would give their child $20,000 a year for college when he/she turns 18 ten years from now, but then criticizing them when it really costs $35,000 for them to attend college. The parent would be to blame for never revising that estimate and that is exactly what Congress has never done.
    What is being lost in this whole debate is that the President promised in his last campaign to do everything it takes to enroll the 6 million eigible but unenrolled children into Medicaid/SCHIP below 200% of poverty.
    So, what did children get in the Admin’s budget? Absolutely nothing. They completely eliminated their own proposal and promise to the needs of children.
    For kids’ groups, it seems like yet another in the long list of examples of politicians pandering to kids in election years for photo-ops and then abandoning them when it counts.
    SCHIP is such an opportunity and our hope is to see a stepping up to the plate here by adults rather than the backing away we saw from the President’s budget, which doesn’t even fund SCHIP current services.
    Note there are 9 million kids without health insurance and virtually no seniors without health insurance. Kids are no less deserving than seniors, so it is ironic so much is made of the expense of reauthorizing SCHIP when $1 trillion will be spent on Medicare Part D benefit. America’s priorities and investment decisions seem a great deal backward here.

  2. Just to clarify some issues related to coverage of adults using SCHIP dollars.
    To quote a witness from yesterday’s House Energy and Commerce hearing:
    …”the Bush Administration announced in 2001 its Health Insurance Flexibility and Accountability (HIFA) waiver initiative which explicitly encouraged states to apply for waivers to expand coverage to low income populations. Since the overwhelming majority of low-income children were already eligible for existing programs, the target populatoin for HIFA was adults.”
    Remember, any approval to use SCHIP dollars was given by CMS in a waiver rule introduced by the current Administration.
    Also, strong evidence indicates that when you insure the parent, the child gets insured as well. It’s one way to reach the eligible but uninsured children population. Refer to this lit review: http://www.cbpp.org/10-20-06health.htm
    In terms of enrollment, remember, states like Minnesota and Wisconsin are “qualifying states” who had expanded Medicaid prior to the enanctment of SCHIP in 1997. Therefore, the population of children usually covered by SCHIP dollars in other states was already being covered by Medicaid in Minnesota.

  3. I wonder in this quibble about the use of SCHIP funds for medicaid adults takes into consideration that the health of the parents DOES impact the children and their well being. As Susan said bandaid fixes do nothing for the overall problem. They just allow policians to go home for the weekend (after having taken bribes all week) feeling good about looking like they care about needy kids.

  4. > Thank you, for your thoughtful reply.
    I am not here to inflame wrath, so I try to be thoughtful. But I have failed spectacularly now and again.
    > In fact I feel I am the party responsible to pay.
    Most Medicare beneficiaries don’t: you probably have a Libertarian streak. I don’t think Medicare will go out of business, but if Congress isn’t careful docs will quit taking assignment, and thereby increase hassles for (and prices paid by) the beneficiaries. Its unclear to me whether they’d blame Congress or the docs. It would have to get pretty bad for them to stop participating altogether.
    Shopping for a doctor is exactly the right thing to do. For today’s Medicare FFS beneficiaries, its really all that’s necessary (not that its easy). The doc can point you to a good Medigap carrier if you need one.
    t

  5. t-
    A soft answer turns away wrath, and consider my wrath (just a fit of pique, really) turned away. Thank you, for your thoughtful reply.
    “Precisely that your insurance for catastrophic expenses depends on others in the plan, and most especially on the creators and administrators of the plan, and that this dependency almost certainly constrains your feasible choices.”
    Yes, that’s what I had in mind. . . but your comment is much clearer than my response (“no”) was.
    “I had understood you to mean that you have not recognized this — that you think your insurer is obligated to pay for any treatment you choose.”
    In fact I feel I am the party responsible to pay. I buy insurance to help me pay for expenses I might possibly have that no one except Warren Buffet or Barbara Walters or Serena Williams could pay for. So when I use the term “responsible” I do actually mean that I take responsibility for accepting any specific treatment, and for paying its cost where my insurance does not pay. Above that point, I recognize that my expenses are and must be shared with others in the insurance pool – and that my premiums go to pay for others’ expenses if I remain one of the fortunate healthy ones and they don’t.
    “we must make sure our insurers are as trustworthy as our doctors. Or at least close.”
    I agree 100% and that’s the hard part, isn’t it? There’s a lot of talk about shopping for health care but I don’t do that. I shopped for a doctor. I didn’t shop for insurance because I got what my former employer offered and now I have Medicare which I don’t even trust to stay in business. Oh well. But I trust my doc.
    Be well, t –

  6. ERIC:
    If the Governors are as desparate for money as you indicate (in my state the SCHIPS is an emergency) they should be delighted with.. the undrlying concept of the Bush Health Plan for recurring state and local funding for health care. I think you noted elsewhere that the health benefit tax exclusion was valued at $180 Billion in 2004 which probably exceeds $200. This amount would be taxable by states and local government. See my analysis posted February 25 under the BHP thread-it is too long to copy here – and it is posted on another thread as well.
    Jim Newcomer

  7. > you took THAT remark seriously
    Oh, I see. Sarcasm does not come across very well in written remarks. I apologize for being insufficiently intelligent to detect it in your writing. And I trust you will not take THAT seriously.
    > Am I saying I don’t understand that my insurance for
    > castrophic expenses doesn’t depend on others in the
    > plan? No.
    > So what exactly is your point? I dont get it.
    Precisely that your insurance for catastrophic expenses depends on others in the plan, and most especially on the creators and administrators of the plan, and that this dependency almost certainly constrains your feasible choices.
    Everyone else in the group gets a say in which risks will be mutually insured, and what the payout methodologies and limits are. They “help” you make your choices. When Barry or Mr. gjjudd speaks of “we” with respect to your medical care, this is what they’re talking about. I had understood you to mean that you have not recognized this — that you think your insurer is obligated to pay for any treatment you choose. I don’t know of any contracts like this. Health insurance contracts are in my view poorly specified, and if you have not understood the implication of a contract between yourself and an insurer, this may be the root of the misunderstanding.
    I learned in a Business Law a long time ago it’s far more important to be sure you are dealing with an honest man than it is to write the most airtight contract humanly possible because even this can’t be airtight enough to cover every eventuality. So we must make sure our insurers are as trustworthy as our doctors. Or at least close. And this opens another can of worms. There is as much a “we” between you and your insurer as there is between you and your doctor, and when I say “insurer” I also include everyone else who bought a policy. Doctors don’t like this very much and you probably don’t either, but I think we’re basically stuck with each other once we get beyond routine, inexpensive services.
    In a way you are right though: you can always choose to accept a course of treatment howsoever expensive that your insurer won’t pay for. The choice is yours. But you should probably expect to pay the doc and hospital up front for their services.
    t

  8. “I cannot fathom why you think that being obligated to think is a horrible drawback. Has your abhorrence for thought prevented you considering how your future medical needs, or the needs of those around you might be financed?”
    Great f’ng SCOTT!! Of all things, you took THAT remark seriously? And other posts of yours show such high intelligence. Gads.
    I deliberately selected an insurance plan that costs me fewer dollars because – and precisely because – I assume more of the cost myself for routine services. I do not expect or want gjudd, or you, or anyone else to decide for me what treatment I will have. That is the sense in which I say, there is no we”.
    Am I saying I don’t listen to my doctor? No. I listen to my doctor. But in the end, I alone am responsible for the decision. Gads, there it is – that word – “responsible”. Please don’t let that word strike fear into your very heart.
    Am I saying I don’t understand that my insurance for catastrophic expenses doesn’t depend on others in the plan? No.
    So what exactly is your point? I dont get it.

  9. My dear Stella,
    God forbid your health status might require anything more than routine, inexpensive services, but if it ever does there most certainly is a “we” — although Mr. gjjudd may not be included therein. Should you lose at an inopportune moment the health plan you have selected, there is a “we”. And once you turn 65 years old, there is again a “we” which includes us all. Whether you are insured by contract or socially, there is a “we” to consider.
    I cannot fathom why you think that being obligated to think is a horrible drawback. Has your abhorrence for thought prevented you considering how your future medical needs, or the needs of those around you might be financed?
    t

  10. Susan, I see. You forgot to include cost reduction, but agree it’s necessary. OK. As to government behaviors, I think there are similarities across space and time but you don’t agree. OK, so we don’t agree on that one.
    gjjudd, you suggest that “cost reduction . . . implies we’re able to treat all things paid for as equally valuable, thus a simple matter to “cut” costs here & there.”
    Sir it implies no such thing.
    You continue “How do we figure “value for dollars invested in health” into the mix?”
    When I make decisions about my health care, you are not there to advise me, nor do I expect you to be. Thus there is no “we”. Thank you very much. The health plan I selected obliges me to share a meaningful amount of the cost for routine, inexpensive services but protects me quite well from catastrophic costs. True, my plan obliges me to think about routine treatments but even so – I mean, despite that horrible drawback – it’s a good plan.

  11. “cost reduction” is a laudable objective I suppose, but it implies we’re able to treat all things paid for as equally valuable, thus a simple matter to “cut” costs here & there. Compounding the challenge is the implication that we’ll be cutting costs on ‘wasteful’ treatment of illness/injury (care for sickness, rather than investment in health). Allow me to let you go first in making up that list of items….
    How do we figure “value for dollars invested in health” into the mix?

  12. No Stella, that’s not what I meant at all. I meant that what we should be doing is figuring out how to reduce costs and redesign the system so that all citizens can be covered. I don’t think the SCHIP program has anything to do with evaluating a tax-funded universal plan, it shows why picking around the edges of the problem and not addressing costs, delivery model, etc. is doing nothing to solve the larger problem.

  13. “the real task at hand–to figure out a viable way to make sure that all U.S. citizens can, at the very leasat, secure the healthcare they need in a way that does not constitute an insurmountable financial burden.”
    If health care costs were half of what they are today would that help? Are you suggesting that the real task at hand can be solved without figuring out a viable way to reduce the present costs of health care? Should the public take the behavior of states regarding SCHIP funds as evidence that further expansion in governmental financing of health care is viable?

  14. I think this is a great example of why band-aid programs will not solve the healtcare coverage problem in this country. The states that are having the biggest funding problems right now are the ones who used SCHIP as a jumping off point to create programs that cover both kids and their families (these are the adults who get SCHIP money in some states–the parents/guardians of eligible kids), and at sliding scale levels that can go quite high. In theory these programs are a generous attempt to help more of the people who fall into the increasingly wide chasm between Medicaid and the ability to afford private premiums. In practice, there are so many of these people now that using the SCHIP program as a quasi-proxy for universal coverage does not work–there is not enough money in the coffers, and that means a lot of kids who should be eligible are still not getting covered. Regardless of one’s stance on tax-funded universal healthcare, it is clear that “band-aid” programs are just diverting our efforts from the real task at hand–to figure out a viable way to make sure that all U.S. citizens can, at the very leasat, secure the healthcare they need in a way that does not constitute an insurmountable financial burden.

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