Advocates Fight Coming Reductions In Insurance Program for Poor Children
In Fiscal 2002 federal funds for the State Children’s Health Insurance Program (SCHIP) decreased by 26 percent, from $4.275 billion to $3.15 billion. Funding will remain at that level in Fiscal 2003 and 2004, unless there is congressional action to rescind the cuts.
Congress authorized SCHIP in the Balanced Budget Act of 1997 as a block grant to states to provide $40 billion over 10 years to expand health coverage to uninsured children in low-income families.
SCHIP generally is targeted to children in families with incomes below 200 percent of the federal poverty level. This year, that equates to $36,200 for a family of four.
States could set up freestanding SCHIPs, expand their existing Medicaid programs, or combine the two approaches.
Budgets Balanced on Children’s Backs?
Now, however, advocates fear that uninsured children will begin to pay a price for a budget decision made five years ago, when SCHIP was authorized.
Congress allocated almost $4.3 billion for each of the first four years of the program, but then decreased funding to $3.15 billion for Fiscal 2002-04. The reduction was part of an effort to ensure that the overall federal budget would be balanced by 2002.
Using data and analysis from the U.S. Office of Management and Budget (OMB), Edwin Park, Leighton Ku, and Matthew Broaddus considered the effect of the funding reductions on enrollment in a paper issued by the Center on Budget and Policy Priorities (CBPP).
OMB projects that national SCHIP enrollment will decline by 900,000 children between 2003 and 2006. This estimate is considerably more dire than that made in 2001, when the OMB projected a decline of only 400,000 children for the same period.
Lois Talbot Flaherty, M.D., chair of APA’s Council on Children, Adolescents, and their Families, told Psychiatric News, “The likely impact of the cut is particularly distressing because recent reports show that SCHIP had begun to live up to its potential for bringing health care opportunities to children who were falling through the cracks.
“Demand for mental health services for children will continue to increase as we learn more about the prevalence of disorders among children. And, in light of declining tax revenues, states will be unable to fill the gaps caused by decreased SCHIP funding” (see story above).
Where the Money Goes
Analysis of enrollment trends and funding needs is complicated because states moved with varying degrees of speed to implement SCHIP and because the law permits reallocation of funds.
The total amount of SCHIP funds available each year is divided among the states according to a formula in the legislation. States have three years to use the SCHIP allotment they receive for a particular year.
If a state is unable to use its allotment during that period, its unused funds can be reallocated to other states. Those reallocated funds must be used within a limited time or they will revert to the U.S. Treasury.
As of press time, there were $11 billion in unspent SCHIP funds available. Of those funds, $1.2 billion of unspent SCHIP funds were expected to revert to the U.S. Treasury on September 30, and an additional $1.6 billion was expected to revert on September 30, 2003.
According to CBPP, the $11 billion does not represent “excess” funds. States will need those funds to offset the effects of the funding reduction. The enrollment reduction of 900,000 children nationwide would take place even if those funds are available.
The impact of the cuts will be felt unevenly throughout the country. CBPP projects that by Fiscal 2006, 12 states will need twice their anticipated federal allocation to sustain enrollment. By Fiscal 2007, in more than one out of three states the federal funds needed to sustain enrollment will exceed the amount available.
The plight of the children might be further threatened by the impact of Health Insurance Flexibility and Accountability (HIFA) waivers, which allow states flexibility in their use of unexpended SCHIP funds. A July report from the Government Accounting Office, “Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise Concerns,” criticized the Bush administration for granting Arizona a waiver to spend SCHIP funds on coverage for childless adults.
Sens. Max Baucus (D-Mont.) and Charles E. Grassley (R-Iowa) wrote Tommy Thompson, secretary of Health and Human Services, charging that Arizona’s waiver violated congressional intent because the SCHIP program was established to serve children (Psychiatric News, September 20).
Senators Propose a Fix
On August 1 Sen. John D. Rockefeller III (D-W.V.) introduced legislation (S 2860) that would extend the availability of expiring SCHIP funds and target them to the states where they are most needed. The bill would also restore federal funding levels for 2003 and 2004 to the levels provided for Fiscal 1998 through 2001.
Sens. Lincoln Chafee (R-R.I.), Edward Kennedy (D-Mass.), Paul Wellstone (D-Minn.), and Orrin Hatch (R-Utah) cosponsored the bill, which was referred to the Senate Finance Committee.
APA joined 70 other advocacy groups in a letter of support for the legislation.
Jay Cutler, J.D., director of APA’s Division of Government Relations, told Psychiatric News, “We take the threat of SCHIP budget cuts very seriously, particularly in light of cuts to Medicaid programs. My staff and I held more than 20 meetings with congressional staff during August and September about SCHIP and increasing the federal payment level to states for Medicaid. Our work about these issues will continue in the next congressional session.”
The report from the Center on Budget and Policy Priorities is posted on the Web at www.cbpp.org/7-15-02health.htm. ▪
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Published online: 18 October 2002
Published in print: October 18, 2002
Notes
The children’s health insurance program known as SCHIP has earned accolades for its success in enhancing access to health care for low-income children. APA is trying to ensure that budget cuts do not undo that progress.
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