The lack of health insurance is a problem facing many families. Statistics show the number of individuals without health insurance is growing, particularly children. A recent report showed a decrease in insurance coverage for children even though more parents are working full time. The cost of family coverage through employers has been sharply rising, creating a significant burden for lower income families.
The lack of health insurance is a barrier to receiving appropriate and timely preventive, primary, and acute health care. Uninsured children are less likely than those with insurance to have a regular health care provider, to see a physician during the year, or to be fully immunized.
An estimated 663,000 children
in New York are uninsured. Almost 70 percent of these children are
eligible for current programs that provide health insurance (Medicaid
and Child Health Plus) but are not enrolled. Although the Health
Department has begun more aggressive outreach activities for these
programs, it is obvious that much more needs to be done to increase
awareness and encourage enrollment. Many families just do not know
these programs exist.
The federal Balanced Budget Act of 1997 created the State Children's Health Insurance Program (SCHIP). It provides nearly $48 billion in new block grants to states to provide health insurance coverage for low-income uninsured children over the next ten years. This federal funding will be used to match state spending for expanded child health insurance.
New York is eligible to receive
$256 million in new federal funding this year and nearly $1.5 billion
over the next six years. This funding, combined with the state's
current Child Health Plus funding, provides an extraordinary opportunity
for New York to expand the number of lower income children with
Child Health Plus (CHIP)
Even before the new federal program was created, New York had a nationally recognized Child Health Plus (CHIP) program. CHIP provides fully subsidized and partially subsidized health insurance coverage for uninsured children whose family gross income is below 222 percent of federal poverty levels (FPL) -- $36,519 for a family of four. CHIP health insurance covers basic primary, preventive care, and hospital inpatient. However, it does not cover certain vision, dental or mental health services.
When currently scheduled program
enhancements are fully implemented in 1999, CHIP is projected to
serve 250,000 children at a state cost of $207 million. This is
separate and distinct from the newly available federal funding.
The Governor, Assembly, and Children's Defense Fund have all come forward with ideas on the best way to use these funds to expand health insurance coverage for children. Senator Hannon has introduced the Governor's plan and held a hearing in December 1997 soliciting information and testimony from advocates as well as officials from other states.
The Governor has proposed a modest reduction in the required family CHIP premium contribution and an expansion in the services covered by CHIP (vision, dental and mental health). These changes are improvements to the current program. Unfortunately, the Governor's current plan leaves an estimated $650 million in available funding unspent over the next six years.
A modest increase of $100 million in state funding beginning in the fourth year and the newly available federal funding should be sufficient to enhance the program beyond what has been proposed by the Executive. This report recommends the following:
The State would pick-up the additional local costs associated with the Medicaid expansion.
In addition to the recommended
expansions, it is vital that New York embark on an aggressive marketing
and outreach campaign to alert eligible families and children of
these programs. A program expansion is a good first step, but if
the families with children that need these programs are not aware
of them, very little progress will be made.
Since the 1994 rejection of President Clinton's proposed universal health care coverage program, the problem of the uninsured has been approached in a more incremental manner. Unfortunately, the number of individuals without health insurance, particularly children, is growing. A recent report showed a decrease in insurance coverage for children even though more parents are working full time (GAO 1996). The cost of family coverage through employers has been sharply rising, creating a significant burden for lower income families.
As private coverage has decreased, Medicaid has become more important. Since 1989 there have been a number of Medicaid eligibility expansions.(1) Nevertheless, millions of children remain uninsured and approximately 30 percent of these children were eligible for Medicaid (GAO 1996).(2)
Targeting children for health care coverage is cost effective since they are relatively inexpensive to insure and can reap immense benefits, particulary in the long term. The average cost of covering children under Medicaid was $1,076 in 1996, much less than the $9,596 average annual cost of covering the elderly or the $8,179 average annual cost of covering the disabled (Mann 1997). The lack of health insurance is a barrier to receiving appropriate and timely preventive, primary, and acute health care. Uninsured children are less likely than those with insurance to have a regular health care provider, to see a physician during the year, or to be fully immunized (Families USA Foundation 1997, GAO 1997).
Nationally, there were an estimated 11.3 million uninsured children in 1996, an increase of 800,000 from the prior year (CBO 1998). An estimated 15 percent of all children are uninsured and two-thirds of the uninsured are from low-income families (CBO 1998). The Balanced Budget Act of 1997 included a ten year commitment of nearly $48 billion in new state block grants to provide health insurance coverage for low-income uninsured children.
This report reviews the state
of health insurance coverage for children in New York and the current
programs that provide full or partially subsidized health care services.
Next, the new federal child health insurance legislation that provides
funding for expansion of children's health insurance coverage is
explained. Various proposals put forth by the Governor, Legislature,
and advocates for expending the new federal funds are analyzed and
evaluated. Finally, specific program enhancements are recommended.
If a child does not have private
health insurance there are two major public programs in New York,
Medicaid and Child Health Plus (CHIP), that provide health care
services or health insurance. Both of these programs are means-tested,
that is, eligibility is dependent upon income. Medicaid costs are
shared by the federal, state and local governments. Until April
15, 1998, CHIP was funded entirely by the state through the Indigent
Care Pool that is funded by a surcharge on inpatient and outpatient
hospital services and services provided by diagnostic and treatment
centers, freestanding laboratories and ambulatory surgery centers.
The remaining 215,305 uninsured
children are not eligible for Medicaid or the subsidized CHIP program.
These families can participate in CHIP but they would be required
to pay the full cost of premiums, nearly $1,000 annually in 1997,
which in many cases is unaffordable.
OVERVIEW OF MEDICAID IN NEW YORK
Medicaid is an entitlement program established in 1965 to pay for medical care for the indigent. The federal government mandates certain eligibility criteria (based on income and assets) and coverage of specific medical services. The federal government reimburses states for a portion of total medicaid expenditures. The federal share is based on the wealth of each state; New York receives 50 percent reimbursement for eligible expenditures. Unlike most other states, New York requires its localities to pay a portion of Medicaid costs. In general, for each one dollar in eligible Medicaid expenditures, the federal government pays 50 cents, New York pays 25 cents, and the locality pays 25 cents. Total Medicaid program costs in New York exceeds $25 billion. The program currently covers approximately 3 million individuals, including 1.3 million children.
Although the federal government mandates certain medical services it allows states to provide other optional medical services for eligible populations and reimburses states for these services. New York has chosen to provide almost all of the optional medical services.
Medicaid coverage for children depends on family income and the age of the child. For example, children under age one are eligible if family income is at or below 185 percent of FPL and children between age 6 and 14 are eligible if family income is at or below 100 percent of FPL. Therefore, even if family income stays constant, as children get older they will lose eligibility for the Medicaid program. Thus it is possible that one sibling would be eligible for benefits while the older sibling may not be.
NEW YORK'S CHILD HEALTH PLUS (CHIP)
Child Health Plus (CHIP) was established in 1990 (Ch. 922, Ch. 923, L. of 1990) and is the largest state-subsidized health insurance program in the nation. It was intended to make health insurance more affordable for children of working poor families. CHIP is not an entitlement program; expenditures are capped at available funding so if funding is depleted, new applicants can be denied benefits. The state fully or partially subsidizes health insurance premiums for children in low-income families who are ineligible for Medicaid but unable to afford private health insurance. Many families receive fully subsidized insurance and some families are required to pay small premiums as well as co-payments. There are 25 managed care plans that the state contracts with to provide CHIP coverage.
The initial program covered only outpatient services for children under age 13. The program has been expanded since enactment to include children under the age of 18 (Ch. 731, L.1993). CHIP health insurance now covers basic primary and preventive care, and in January 1997 began to cover hospital inpatient services (Ch. 639 and 640, L. 1996). However, unlike Medicaid, the CHIP package does not include certain vision, dental, speech, and mental health services.
The NYS Health Care Reform Act of 1996 significantly expanded eligibility, coverage, and funding. Program funding is provided by a surcharge on hospital and other health care receipts and is set to increase from $73 million in 1996 to $207 million in 1999. Enrollment was projected by the Department of Health to increase from 115,000 in 1996 to 251,000 in 1999.
An evaluation of the CHIP program
found that the program "was successful in meeting its objectives.
It has provided insurance to a large number of poor children from
primarily working families, most of whom were previously uninsured
or underinsured, or who would otherwise not be able to afford private
insurance. Child Health Plus resulted in increased access to primary
care and specialty care, no substantial change in emergency department
care, and a probable reduction in hospitalizations." (University
of Rochester, 1996).
Enrollment in the CHIP program
can be initiated through the insurer, the Healthy Baby Hotline,
or through community outreach and marketing contractors. Eligibility
re-certification is performed annually.
The federal Balanced Budget Act of 1997 provided funding to expand health insurance for low-income children by creating the State Children's Health Insurance Program (SCHIP) as part of Title XXI of the Social Security Act. It provides $48 billion in funding over the next ten years. This federal funding will be used to match state spending for expanded child health insurance. State participation is voluntary. The goals of the new federal program are:
States can choose to provide health insurance coverage to low-income children through Medicaid or a separate state health insurance program, or a combination of both. Federal funds match state spending at enhanced Medicaid match rates. The enhanced rate is the state's regular Medicaid matching rate plus 30 percent of the difference between its regular matching rate and 100 percent. New York's regular Medicaid matching rate is 50 percent; therefore, federal funds can provide 65 percent of total New York program costs. The remaining 35 percent must come from state funds. A maintenance of effort requirement equal to 1996 spending levels is imposed in states that had existing CHIP programs -- New York, Florida, and Pennsylvania. In addition, at a minimum, Medicaid's program coverage and eligibility must remain intact as they existed in June 1997. These requirements were intended to discourage states from using the newly available funds to supplant existing state spending.
If a state has elected to expand Medicaid eligibility it will continue to receive federal matching funds at the regular match rate if the state has expended all of the available federal SCHIP block grant allocation. On the other hand, if a state chooses to use SCHIP block grant allocation to fund a separate program, no federal funding beyond the annual block grant allocation is available. If state funding is depleted under the Medicaid option, states can restrict eligibility (but not beyond federal guidelines), scale back benefits, or reduce provider rates; however, it cannot stop enrolling children and place new applicants on waiting lists which is allowed if states choose to implement a state health insurance program.
A state running a child health insurance program, as opposed to expanding Medicaid eligibility, must provide at least the benefits covered by certain specified, commercial insurance plans (Blue Cross/Blue Shield for federal employees, a state employee health plan, or the largest HMO in the state). Three states with existing state-only health insurance programs, including New York, were statutorily deemed to have met these comprehensive state-based coverage requirements.
For the first three years, the funding allocated to each state is based primarily on the number of uninsured children residing in families with income below 200 percent of FPL as measured by the Census Bureau's Current Population Survey (CPS). For the first three years, New York is eligible to receive up to $256 million annually in federal funding. After the first three years, the funding allocated to states is also dependent on the total number of low-income children. Contingent upon approval of a state plan, funding was available beginning October 1, 1997. States are allowed to rollover any unspent federal funding for two additional years. After two years, the funding will be re-allocated to other states. After three years, funding allocations are gradually reduced. Up to 10 percent of program costs may be allocated to administration and outreach.
The federal funding is generally available for children in families with incomes less than 200 percent of FPL. However, states with Medicaid eligibility at or above 150 percent of FPL, as of June 1997, are allowed to extend eligibility to families with income 50 percentage points above the state's Medicaid income limit.
The use of income disregards can legitimately be used to effectively extend eligibility to households with income greater than 200 percent of FPL. The state can choose to disregard certain amounts and types of income for purposes of determining income. For example, New York's current CHIP program statutory income guidelines are 185 percent of FPL, however, after accounting for income disregards, the effective income cutoff is 222 percent of FPL. Connecticut, Missouri and Vermont plan to extend eligibility to children in families with income up to 300 percent of FPL using this same approach.
The federal SCHIP program does not provide funding for a child who:
The federal program permits the imposition of co-payments which may reduce the stigma of public assistance programs and control costs. However, the SCHIP program limits co-payments so that they are not so high that they detract appropriate use of services. The SCHIP program also included limitations on cost-sharing. Families with incomes at or below 150 percent of FPL cannot be charged any more than the minimal amounts allowed under Medicaid. Families with income greater than 150 percent of FPL can be charged family contributions, but in no case may they exceed 5 percent of total income. For all children, well-baby care, immunizations, and well-child care are exempt from any cost sharing requirements.
New York's spending on CHIP is set to increase to $207 million by 1998. The current funding levels exceed the $138 million in matching funds required to obtain the full federal fund allocation (SCHIP requires that the state pay at least 35 percent of total program costs). The source of the state funds and whether they meet other federal requirements has been in dispute with the federal government since 1991.(5)
The new federal law also includes provisions designed to increase children's health care coverage through Medicaid. These provisions are largely independent of whether a state elects to use a separate program or expands Medicaid for uninsured children. These provisions include:
The Governor submitted a plan to the federal government on November 3, 1997. The only significant change he proposed to the current CHIP program was a modest decrease in the required premium contributions. He did not propose any expansion in the number of children eligible for CHIP or the health services covered.
On February 10, 1998 the Governor modified his plan to expand CHIP services to include certain vision, dental, and mental health services. However, no changes in the current eligibility thresholds were proposed. According to the Department of Health, this modification is estimated to increase the monthly cost per enrollee by $16. This change would serve to provide a more comprehensive package of services to all children enrolled in CHIP.
On April 1, 1998, the federal government approved the state plan submitted by the Governor in 1997, effective April 15, 1998. New York had requested retroactive federal funding to October 1, 1997. That request was rejected by the federal government primarily due to cost sharing provisions that did not comply with federal law. The federal block grant allocation for the first six months of the federal fiscal year (October 1, 1997 through April 15, 1998) will rollover for use in future years. Many of the provisions included in the state plan submitted by the Governor and approved by the federal government require statutory changes.
The Assembly plan was passed
on May 18, 1998 and proposes a combination of Medicaid and CHIP
program enhancements.(7) CHIP coverage
would be expanded to include certain vision, dental and mental health
services. The number of children that could receive subsidized premiums
for CHIP would be increased by raising the family income eligibility
guidelines from 222 percent of FPL to 300 percent of FPL. Medicaid
eligibility would be expanded to 185 percent of FPL for all children.
Children's Defense Fund Proposal
The Children's Defense Fund proposes expanding both the current Medicaid and CHIP programs. Medicaid eligibility would be expanded to 200 percent of FPL for all children. This would eliminate some of the arbitrary income eligibility breaks in the current Medicaid program as children age, and improve the continuity of care. CHIP eligibility would be expanded to cover children in families with income between 200 and 300 percent of FPL and monthly family contributions of $10 per child would be required. CHIP coverage would be expanded to include vision, dental, and mental health services.
All of these proposals allow children of families with income that exceed eligibility thresholds to participate in CHIP if they pay the full health insurance premium. The CHIP premium is generally less than the average widely available premium cost.
All of these proposals include: $2 co payments for physician visits (except well-baby and immunizations); $3 co payments for prescriptions; 60 days presumptive eligibility for the program; and guaranteed continuous Medicaid coverage of 12 months.
The following table compares the components of each of the above proposals:
OF CURRENT CHILD HEALTH INSURANCE PROGRAMS AND PROPOSED ALTERNATIVES
Source: Office of the State
Comptroller, June 3, 1998.
Estimated spending and the number of beneficiaries served under these alternative proposals are a function of program eligibility limits, cost of benefit package, participation rates, family premium requirements, co-payments, and administrative costs.
OSC calculations indicate that
the plan originally submitted by the Governor to the federal government
left unspent almost $1 billion in federal and state funds over the
next six years. Even after adjusting the estimates of unspent funding
to reflect the expanded benefit package in the Governor's revised
plan, there would still be over $650 million in state and federal
funding unspent. If federal funds are not used in the two years
following the year the allocation was made, the federal government
will re-allocate those funds to other states. The state funds are
special revenue funds that are earmarked for this purpose, however,
legislative action could re-direct these funds for other uses. OSC
projections differ from the Department of Health (DOH) in the following
Past Medicaid expansions have experienced participation rates of up to 70 percent.
The Congressional Budget Office is assuming a 55 percent participation rate.
OSC believes the Department's assumed CHIP participation rates are unrealistic, at least in the near future. Thus, the Department's projected CHIP enrollment is overstated.
The importance of this issue and its popularity, combined with available funding, should provide the impetus for policymakers to consider further expansion of services or eligibility this legislative session. Clearly, this issue has been a priority in previous years since the state has a history of consistently expanding the program and funding. The various choices, their costs, and implications, include:
The following summary table
outlines the some of the advantages and disadvantages associated
with each of these choices.
UNIVERSAL ISSUES AND CHALLENGES
New York's already planned expansion of the CHIP program called for enrollment of 251,000 children by 1999 at a cost of $207 million. The newly available federal funding of $256 million more than doubles the planned resources available to the state to provide necessary health care to uninsured children. If these resources are fully utilized, assuming annual costs ranging from $1,200 to $1,400, New York should be able to provide insurance to 166,000 to 193,000 more children than planned. OSC estimates that a modest increase of $100 million in state funding beginning in the fourth year of the program and the newly available federal funding are able to support the following program enhancements:
These program improvements result in 122,000 more children eligible for CHIP and Medicaid than the Governor's proposal. Given the unlikelihood of reaching the DOH high participation rates, it allows the State to reach more children and provide better services given existing resources.
Of course, all estimates have
their limitations and are only as accurate as the assumptions that
feed into them. Participation rates may be higher or lower and premium
costs can grow faster or slower than projected. However, even if
actual expenditures were to exceed projections, the state has the
option of increasing spending. Or, the benefit package could be
scaled back and waiting lists for the CHIP program could be put
in place to ensure that spending does not exceed plan. In either
case, strong management accompanied with a commitment to serve as
many children as possible with the highest quality services is the
key to future program success.
Bliley, Tom. (1997). House Committee on Commerce, "State children's health insurance program (S-CHIP): implementation guide," November 1997.
Congressional Budget Office (1998), "Expanding health insurance coverage for children under Title XXI of the Social Security Act."
English, Abagail. (1997). National Center for Youth Law, "Expanding Health Insurance for Children and Adolescents: Medicaid or Block Grants?" July 1997.
Families USA foundation. (1997). "Unmet Needs: The Differences in Health Care Between Uninsured and Insured Children." Washington, DC.
Families USA Foundation. (1997). "What is Crowd Out and Why Should Children's Health Advocates Care?" Washington, D.C.
Kaiser Family Policy Brief. (1998). "Choices Under the New State Child Health Insurance Program: What Factors Shape Cost and Coverage?"
Mann, Cindy. (1997). "Why Not Medicaid? Using Child Health Funds to Expand Coverage through the Medicaid Program." Center on Budget and Policy Priorities.
Mann, Cindy and Guyer, Jocelyn. (1998). "Overview of the New Child Health Block Grant." Center on Budget and Policy Priorities.
New York State Assembly. (1998) "Assembly Democrats Unveil Expanded Children's Health Plan," press release, February 2, 1998.
New York State Comptroller. (1998). "Department of Health: Management of Child Health Plus Program," (Report 97-S-10).
United States General Accounting Office. (1996)."Health Insurance for Children: Private insurance coverage continues to deteriorate." (GAO/HEHS-96-129).
Pataki, George. "State Child Health Plan Under Title XXI of the Social Security Act State Children's Health Insurance Program." Submitted to the federal Health Care Financing Agency on November 3, 1997.
Storey, Jeff. (1998). "Lip Service: Getting Out the Word on Public Health Programs." Empire State Report.
Ullman, Frank, et. al. (1998). "The State Children's Health Insurance Program: A Look at the Numbers." Urban Institute.
United States General Accounting Office. (1995)."Health Insurance for Children: Many Remain Uninsured Despite Medicaid Expansion." (GAO/HEHS-95-175).
United States General Accounting Office. (1996). "Health Insurance for Children: State and Private Programs Create New Strategies to Insure Children." (GAO/HEHS-96-35).
United States General Accounting Office. (1997)."Health Insurance Coverage Leads to Increased health Care Access for Children." (GAO/HEHS-98-14).
United States Health Care Financing Administration. (1998). "Frequently Asked Questions: Children's Health Insurance Program," updated on an ongoing basis.
University of Rochester. (1996). "Evaluation of Child Health Plus in New York State." The Rochester Child Health Studies Group.
1. Under provisions of the Omnibus Budget Reconciliation Act of 1989, all states are required to provide Medicaid coverage for children under age 6 living in families whose income is below 133 percent of the poverty level. That mandate was followed by another in 1990, requiring states to cover all children under age 19 who live income families with income below the poverty level and who were born after September 30, 1983. This phase-in in coverage will be completed in October 2002.
5. This is the subject of a current court case. Provisions contained in the Balance Budget Act of 1997 that would have effectively rendered New York's method of funding acceptable were vetoed by the President.
6. For more information on the presumptive eligibility option, see Donna Cohen Ross, "Presumptive Eligibility for Children: A Promising New Strategy for Enrolling Uninsured Children in Medicaid", Center on Budget and Policy Priorities, Revised October 1997.
8. A recent audit done by the New York State Comptroller (Report 97-S-10) found that an estimated 63,000 children currently enrolled in the CHIP program are likely eligible for Medicaid. Therefore, all cost estimates for the various alternative proposals adjust for this finding.
9. This figure excludes the 63,000 CHIP enrolled children that appear to be eligible for Medicaid since this transfer would have to occur under the new federal law regardless of what other program changes or enhancements are made.