By Kim Krisberg

For the past few years, the U.S. Census Bureau has delivered the disappointing news that more and more Americans are living without health insurance. While health care advocates watch in dismay — but not surprise — as the ranks of uninsured grow by the millions, there is one small saving grace: the State Children’s Health Insurance Program.  

Commonly known as SCHIP, the federal children’s program shares credit with Medicaid for substantially curbing the numbers of children who would have otherwise been left without health coverage. SCHIP currently provides health coverage to 4 million low-income children and since its creation in 1997, has been attributed with helping to reduce the uninsured U.S. children’s rate from 23 percent to 15 percent. With 2007 marking SCHIP’s 10th birthday, the program is facing congressional reauthorization and advocates are hoping that policy-makers take it as an opportunity to strengthen SCHIP and ensure its sustainability into the future.

The State Children's Health Insurance Program provides health coverage for about 4 million low-income children nationwide. Photo courtesy iStockphoto.

Congress created SCHIP as a way to provide health insurance for children without private benefits whose families’ incomes were higher than the income eligibility requirements of Medicaid, the nation’s health care program serving low-income residents. While SCHIP and Medicaid, which covers 25 million children, have a number of similarities, the biggest difference is how each is financed. Under Medicaid, the federal government matches state funding with no pre-set limits and those enrolled in Medicaid are entitled to a defined set of services. In contrast, overall federal funding for SCHIP is pre-set and then divided — according to a formula — among the states. In other words, Medicaid is considered an “entitlement” program, whereas SCHIP is not. Under tight financial times, states can roll back SCHIP by capping enrollment or cutting services — both of which have been done in the past. But with reauthorization on the horizon, Congress can prove it’s committed to continuing SCHIP’s success, Mann told The Nation’s Health. 

“Now, we’re in the happy situation of learning that the program was very successful…and the real responsibility turns back to the federal government to live up to the promise of (SCHIP),” she said.

And the task will not be easy. If Congress continues to annually fund SCHIP at its current level of about $5 billion, the program will lose 1.6 million children during the next six years, Mann said. While states can move children into their Medicaid programs, the shift will also mean a greater financial burden for the states, as the federal government finances about 70 percent of SCHIP, but only 57 percent of Medicaid. In fact, Mann noted, it will take an additional $12 billion to $14 billion over the next five years just to keep up with the costs of covering the children currently enrolled in SCHIP. However, Congress should not be satisfied with simply staying even, as about two-thirds of currently uninsured children are now eligible for SCHIP or Medicaid coverage, she said. Federal SCHIP money varies from year to year, falling from $4.25 billion in 2000 and 2001 to $3.12 billion annually from 2002 to 2004.

SCHIP funding rules have helped many states expand their programs and others keep afloat, but times are getting much tougher. SCHIP funding is dispersed in “block grant” form — in other words, Congress sets aside a sum of money that wasn’t necessarily determined based on need and it is then divided among the states. As a result, Congress also created a way to compensate for the drawbacks of the SCHIP funding formula. States can keep their annual federal SCHIP funding for up to three years, and any remaining funds unspent after three years can be redistributed to states in need. In SCHIP’s early years, Mann said, the problem was how to get the leftover funds to the right states. Now, the problem is that there isn’t much leftover funding.

Kids who are covered by SCHIP are more likely to have a regular source of health care. Photo courtesy iStockphoto

Instead of issuing emergency funds, Congress took action in mid-December to redistribute about $270 million in leftover SCHIP funds to more than a dozen states in need. Without such federal help, states can appropriate their own funds or cut back SCHIP enrollment and services. During the past five years, eight states decided to cap SCHIP enrollment, according to the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured.

Block grant structure a funding drawback
SCHIP’s block grant funding structure is problematic because there is no funding guarantee, making it particularly hard for states to plan into the future, said Ron Pollack, executive director of Families USA, a health care consumer advocacy organization. With an entitlement system such as Medicaid, there’s a guarantee of additional money for each child that enrolls. Although advocates at Families USA would prefer the SCHIP funding formula operate like Medicaid, the issue won’t likely come up during the reauthorization process, Pollack told The Nation’s Health. The fight will be for adequate additional federal funding, and to make sure no cuts are made to the Medicaid program to offset additional money for SCHIP, he said.

“It doesn’t make sense to hurt the poorest of the poor to add coverage to others, so we’re hoping there won’t be any kind of trade-off,” Pollack said. “(Getting more funds for SCHIP) is not going to be a cakewalk by any stretch of the imagination.”

SCHIP’s funding formula needs to be re-examined, however, to factor in current needs and future growth, said Linda Nablo, director of the Division of Maternal and Child Health within the Virginia Department of Medical Assistance Services and the state’s SCHIP director. Even if enrollment numbers don’t grow, health care costs will, she said.

“It’s very difficult to plan and run a growing program when your funding formula varies like that,” Nablo said.

Thankfully, Virginia hasn’t faced SCHIP budget problems yet. The state’s program grew very slowly in its first few years and it was able to carry over its SCHIP funding from past fiscal years, “building a bit of a war chest,” Nablo noted. Now, though, Virginia is outspending its SCHIP funding. If the state had to rely on only its current allotment of funds and had none remaining from years past, Virginia would be one of the states with a shortfall, she told The Nation’s Health. Even if Virginia’s federal funding remains level next year, at $94 million, the state can expect a shortfall by 2008 or 2009, Nablo reported.

“If we get closer to a shortfall, we’re going to have to ask ourselves questions like ‘can we continue to spend money to encourage people to apply (for SCHIP)?’” she said. “I hope we never have to go there.”

Virginia made some significant changes to its SCHIP program in 2002, and since then enrollment has been booming, Nablo noted. Among the changes was making it easier for families to enroll by creating different ways for them to apply — a change Nablo called the “no-wrong-door policy.” Families can apply at their local department of social services, via phone or online. They can also jointly apply for Medicaid and SCHIP, as there’s a very small difference in income eligibility. About 79,000 Virginia kids now have regular access to health care because of SCHIP and a total of 420,000 Virginia kids are covered via SCHIP and Medicaid together. And if anything, the need for  SCHIP has only grown in the past decade, Nablo said, adding that if it weren’t for SCHIP and Medicaid, there’s no reason to believe that children’s uninsurance rates wouldn’t be growing just as fast as adults.

“The fact that we’ve kept our finger in the dam for children is actually quite a success story,” Nablo said.        

Nablo said she often hears from parents about what a difference having health insurance for their children has had. From an asthmatic child who receives proper treatment and misses fewer school days to a child getting a needed surgery, the stories have been numerous. In fact, funding children’s health care and ensuring the quality of children’s SCHIP and Medicaid services is an investment in the future, said APHA President Deborah Klein Walker, EdD, who worked in the Massachusetts Department of Public Health when the state was implementing its SCHIP program.

“What you do to improve kids’ health, you’re doing to improve adult health,” Walker said.

During SCHIP’s congressional reauthorization, Walker said she hopes policy-makers strengthen the program’s monitoring and quality assurance activities. Such activities have been “almost non-existent” on the national level during the past four years, she said, noting that there should be a set of performance standards tracked in all states that measure the quality of services SCHIP kids receive, how to improve those services and how to reduce medical errors. Financing is only one piece of the program, Walker said, and it takes many pieces to create a quality health care system.

“I think (SCHIP) is the one guiding hope we have toward getting universal coverage for another sub-population of America,” Walker said. “We already have a universal single-payer system for older Americans and creating a similar program for people younger than 21 could be the next significant step toward universal coverage for all Americans.”

The upcoming SCHIP reauthorization and funding process will likely begin in February when President Bush releases his fiscal year 2008 federal budget proposal, which will include recommended funding levels for SCHIP.

For more on SCHIP and its upcoming reauthorization, visit www.cms.hhs.gov/schip or www.familiesusa.org.