POLICY: While Politicians Battle Over Expanding SCHIP, Children Are Dropped From the Program by Maggie Mahar

At the moment, nearly everyone interested in the S-CHIP debate is focusing on October 18,  the
day the US House of Representatives will try to override the President’s veto of an expanded State Children’s Health Insurance Program (SCHIP).

Unlike many of the critics, I favor the expanded program.  Briefly, here are a few things to
keep in mind: 

First, under the proposal, 70%  to 80% of children in the program would be from
families earning less than twice the poverty level ($20,650 for a family
of four).   

Granted families
of four earning  up to $60,000 a year would qualify for the program
in most states. But given the fact that the average annual premium for
family coverage is now pushing $13,000, it is not at all unreasonable
to suggest that families earning $$60,000 before taxes cannot
afford private insurance.

In theory,
maybe these families could buy private insurance just for their children,
but it’s hard enough to buy individual coverage (when you don’t
belong to a group) –try finding individual insurance that covers
children only.

As for the
notion that families who now have coverage from their employer will
take their children off private insurance and put them on SCHIP—this
ignores the fact that when you have coverage in your workplace, the
additional amount that you pay for your children is quite small. Insuring
kids is cheap. So many people would probably keep their kids on their
employers’ insurance and avoid the administrative hassles of enrolling
in S-CHIP. 

Finally, critics
of the expansion point out that New York State want to expand coverage
to families earning up to $82,000 a year (but only if the Health and
Human Services Department approves a waiver). To someone living in Mississippi
$82,000 no doubt sounds like a handsome sum. But anyone living in the
greater NYC area knows how hard it is to house, feed and clothe a family
of four on $82,000—before paying federal, state and NYC taxes. Moreover,
SCHIP is not free. Families must pay co-premiums.   

With these facts in mind, I hope the House can override the President’s

But even if it the veto stands, this does not mean that Congress has
to give up on insuring poor children. Below, an excerpt from I piece
that I wrote for The Guardian’s “Comment is Free.” It was published on
September 27, and focuses on how easy it is to bump children from SCHIP
and Medicaid. If we can’t expand Schip, at least we should do everything
we can to keep kids who are already in these programs enrolled. 

In July, Health
Affairs published an article explaining "Why millions
of children eligible for Medicaid and S-Chip are uninsured"
.    The author, Benjamin
Sommers, a resident in internal medicine and primary care at Brigham
and Women’s Hospital in Boston also has a Ph.D. in health policy, and
has published widely in medical journals.

Sommers estimates
that, in 2005, 74% of all uninsured children were eligible for public
coverage, but were not enrolled. Many people assume that this is because
parents didn’t know about the programs, or just didn’t bother to sign
up. But the truth is that even if you enroll, it’s easy to be dropped
from the program.

"If families
do not complete the eligibility renewal process, which occurs once or
twice annually depending on the state, then their children ‘disenroll’
– a loss of coverage that is often completely unintentional," Sommers

The study found
that 34.1% of children insured under Medicaid or S-Chip lost their coverage
by the following year, despite remaining eligible. During that time,
"states took steps that intentionally or unintentionally exacerbated
dropout", Sommers reports. 

For one, "the
majority of states have established separate S-Chip programs rather
than using S-Chip funds to expand their existing Medicaid programs.
… Running a separate program – a more complex administrative structure
– has been linked to significantly higher dropout rates. Furthermore,
several states have responded to budget difficulties by making the renewal
process more cumbersome or by increasing S-Chip premiums, both of which
may exacerbate dropout."

The trend is
likely to accelerate, Sommers says, because of a 2006 federal regulation
requiring increased citizenship documentation for Medicaid renewal.

The solution?
Simplify the renewal process, requiring renewal only once a year, and
use the same application forms for both S-Chip and Medicaid. Another
option is "passive enrollment, in which families are required to
submit paperwork only if their circumstances have greatly changed in
the previous year. Otherwise, children are assumed to still be eligible
as long as parents continue paying premiums. A similar approach for
children in Medicaid is to send preprinted forms completed with the
prior year’s information, which parents can simply sign and return,
as long as their circumstances have remained the same."

While the expansion of S-Chip to include even more children may not be possible, given Bush’s
intransigence, legislators should not give up on the issue. Helping
those who are already eligible from being stripped of coverage would
be a good place to start.

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10 replies »

  1. “Peter- not in favor of the bill”
    Thought so. So the funding issue is just your red herring for outright opposition.
    “I think some kind of support for those with the fewest reources–”
    Define “fewest”
    “reduced regulation”
    What government regulations prevent families from affording healthcare for their children?
    “more insurance options”
    From who, the insurance industry? Where are they?
    “tax code changes… would be beneficial for us all.”
    Ah yes tax changes, code for tax reduction, funny how that always comes up to solve problems. Yes that would be beneficial to “us all” or to “me all”?
    Maybe you could give us of some “tax changes” that would allow parents of SCHIP children from not needing SCHIP? Could this be more of funding solutions by way of cutting taxes for the wealthy? Hell, we can run a war with deficit financing why can’t we fund children’s healthcare from the same. Isn’t it Republicans that have been saying the debt is the best it’s been against %GDP so this concern for deficit financing is nothing but liberal chicken little speak?

  2. Peter- not in favor of the bill– point is, it cannot be ‘adequatey funded’… and be passable by either party in Congress.
    I think some kind of support for those with the fewest reources– reduced regulation, more insurance options, tax code changes… would be beneficial for us all.

  3. Good reasoned answers Maggie despite the grenade launching by Eric.
    Eric, it still sounds like you are FOR the new SCHIP bill but against it being inadequately funded. Is this correct? Tell us how you see it funded.
    Liz, I’m not surprized at your story. I have found that disability insurance in the private sector is also largely worthless. Insurance companies may pay for about a year then cut you off arbitrarily and drive you into the financial ground to make you go away. Time is always on their side. Your story is another example of what I have been saying, in this so called democracy, selfish money drives selfish politics drives selfish policy.

  4. Maggie- thank you for your forthright response…
    that said—
    your response implies that the ends justifies the means. If democrats are ‘pro-child health’, why would they ‘muddy the waters’ with vague pork that even Pete Stark cannot defend?
    Are you side-stepping the question of the lack of honesty about budgeting for the expansion? Your response to me suggests your next THCB piece should be an expose on the ACTUAL cost of the passed (yet vetoed) bill over the next 10-20 years— with the justification that all that spending ought to prevent more spending at some point in the future…
    Accepting intellectual (budget scoring) and actual (paying off favored hospitals) corruption seems a quite cynical approach to promoting health policy, be it in the name of ‘the children’ or any other group.

  5. Maggie,
    I appreciate the data about both the cost of living in upstate NY and the cost of health insurance under NY’s community rating system. I certainly agree that family coverage is basically unaffordable in NY for all but the upper middle class and the wealthy. It also highlights what a poor perceived value health insurance is for young, healthy people under a community rating approach, but any system will have both winners and losers.
    The real source of my frustration, not just with respect to the SCHIP debate, but in trying to get to universal coverage generally is the unwillingness to attack costs (utilization) in a meaningful way. I also have a problem with politicians who try to create the impression that nobody needs to be inconvenienced on the way to universal coverage except for a small sliver of high income people who will have to pay much higher taxes. If there were an honest effort to develop strategies to safely drive down utilization and reduce medical cost growth to a lower and more sustainable level, we could probably afford to cover all of the currently uninsured, not just the uninsured kids. Of course, if politicians are afraid to be honest about what it will really take to reform the system because they think the voters will reject them, that’s our fault. In other words, perhaps, we’ve met the enemy and it’s us!

  6. Eric & Barry–
    Eric– I hate to disappoint you, but your questoins don’t admit to yes or no answers.
    First the “pork” in the bill (favoring certain hospitals) has aboslutely nothing to do with SCHIP or SCHIP payments. This provision affects how much these hospitals will be paid for Medicare patients, and was tucked into the SCHIP bill in hopes that it might pass through unnoticed.
    Since there has probably never been a spending bill in the history of Congress that hasn’t contained some pork (often unrelated to the main bill), this really doesn’t have anything to do with the merits of SCHIP.
    But let’s look at the pork anyway. You ask “should” hospitals outiside of Chicago be reimbursed as if they were located in Chicago (where works’ cost of living and wages are presumably higher)? My answer is I don’t know. I’d have to look at each of the hospitals individually, see how high cost-of living is in the area where it is located, whether it has to import nurses and doctors from larger citiies, etc. But in general, I can say “no” I’m not in favor of pork.
    As for the fact that taxpayers and their children may wind up paying for SCHIP if it is inadequately funded, that’s an easier question. If children don’t get healthcare when they need it, taxpayers, and future generations, will wind up paying a lot more to provide them with healthcare, disability payments, etc., down the road. Healthcare delayed is very expensive care.
    An employer who redesigns his health plan to exclude his employees’ children is going to be Very Unpopular with his employees. Most people feel that children should be covered first, and few parents want the hassle of signing up for a separate state-run program for their kids. (And it is a hassle). Nor do they want their kids to be limited in what doctors they can see. (Not all doctors will take SCHIP patients just as many don’t take Medicaid patients.)
    From the employer’s point of view, the reason to offer healthcare insurance is to attract and keep the best employees. Bumping their kids from the plan won’t cut it. They might better just phase out insurance for new employees.
    Secondly, regarding eligibility in New York, you’re speculating on cost of living upstate without providing any evidence. I’ve lived upstate, and I tell you it’s definitely more expensive than Mississippi–but not as expensive as NYC.
    What’s certain is that health insurance is much more expensive throughout New York State than in most of the nation because we have community rating–insurers cannot refuse to insure someone because of pre-exiting conditions or becaue of age, and they cannot charge people with pre-existing conditions exorbitant rates. Thus we all pay to cover the person with cancer–and as a result, our premiums are significantly higher than in other states.
    Secondly, many fewer employers provide insurance in New YOrkthan in other states (presumably because it is more expensive here, perhaps becuase NYS income taxes make it more expensive to do business here than in some other places.)
    Finally, a quick Google search shows that the median price of a home in the greater Rochester area is $220,00 and on that home, a person could expect to pay property taxes of $8,000 a year. (In New YOrk City, one would pay property taxes of $8,000 a year only on a condo worth somewhere between $2 million and $3 million.)
    Property taxes in New YOrk are the fourth highest of any state in the nation–and typically four times as high as property taxes in the South. (Schools are also generally quite a bit better than they are in Mississippi.)
    So cost-of-living in upstate is not as cheap as you seem to assume. If a family of four earning $80,000 (before federal and state taxes) that needs three bedrooms (one boy, one girl) is keeping up with mortgage payments and property taxes on, say, a $180,000 (well below median) house, and paying the high fuel costs that come with the territory, he would very likely have a hard time coming up with the $15,000 or so needed to insure a family (assuming the employer does not provide coverage).
    The $15,000 figure is based on the fact that, in the invidual market, insurance for one person (with a $2,000 deductible) averages $6,000 and in the employer-sponsored group market, average premiums for a family are well over $12,000.
    Meanwhile, a family earning $80,000, paying $18,000 to $20,000 in state and federal taxes, and $6,000 in property taxes is left with an after-tax income of
    $54,000 to $56,000 to cover the mortage, food, utilities, clothing, transportation to work, necessary repairs on house, savings for college education, savings for retirement etc, without any frills (vacations, entertainment, new furniture, etc.). Where would they find $16,000 for health insurance?

  7. Maggie-
    1. should the bill include the hundreds of millions for ‘favored’ hospitals by pretending they exist in locations they don’t? (see NY Times– http://www.nytimes.com/2007/08/12/washington/12health.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1187007504-taEXH3Pp0kQ5dhe5iqdRUA) ?
    2. Is it ‘fair’ to the taxpayers and their children (who will be paying the deficits) to promote legislation that is intentionally inadequately funded (http://www.highlighthealth.com/wp-content/uploads/2007/08/schip_spending.gif) ?
    in the end, your answer needs to be ‘yes’ or ‘no’…

  8. With respect to the issue of S-CHIP crowding out private insurance, I don’t think parents will ask to shift their kids from employer coverage to taxpayer coverage for the reason you cited. My understanding, however, is that Medicaid’s spending per child is approximately $1,400-$1,500 per year which is not nothing. I think that, at the margin, employers would have an incentive to redesign their health insurance offering to cover adults only if they knew that children could be covered at taxpayer expense below, say, $80,000 of income. Higher income employees could be required to pay the full cost of covering children themselves. While most children are, indeed, cheap to insure, many premature babies incur huge medical expenses as do children who are severely hurt in accidents or contract cancer or other serious diseases. If I’m an employer, especially in the small business sector, and I have a chance to shift the coverage burden to taxpayers, I’ll probably try to do it.
    Regarding the high cost of living in New York City, it is not typical of the state overall. I suspect that the cost of living in cities like Syracuse, Rochester and Buffalo is closer to Mississippi’s than to NYC’s. Living costs in the state’s vast rural areas are also comparatively low. If New York thinks it’s such a great idea to cover kids from families with up to $80,000+ of income, they should look to state taxpayers instead of national taxpayers to cover the cost between a lower federal limit and what New York wants. It also shouldn’t be spending limited resources covering adults except for low income pregnant women.
    Finally, on the issue of more streamlined eligibility determination and reaffirmation, as a taxpayer, I would like to see all of us have a robust, tamper proof ID card, drivers license, passport or whatever to make it easier for authorities to verify that we are who we say we are when we apply for benefits (including middle class benefits like social security, Medicare, VA benefits, etc.) that taxpayers pay for and that we are not in the country illegally.