The Children's Health Insurance Program

Past and Future

David G. Smith

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351485135
• Edition: 1
• Topic: Business
• Subtopic: Insurance
• Index: Business

The Children's Health Insurance Program was crafted in a period of intense partisan and ideological controversy over health care entitlements to provide -creditable coverage- for American children below 200 percent of the Federal Poverty Level. This objective was widely supported, though achieved only by a compromise between the structural alternatives of a block grant, similar to the Maternal and Child Health Block Grant or an entitlement resembling Medicaid. According to David G. Smith, the CHIP compromise has been a successful experiment that far exceeded expectations, both in identifying and enrolling -targeted low-income children- and in earning political capital. He argues that beyond this core mission, the reauthorization of CHIPRA (Children's Health Insurance Program Reauthorization Act of 2009) invites a larger mission: going beyond enrollment of children to include assuring access, improving quality, and containing costs of health care for them. Extending this thrust, the author notes that CHIP could be used to establish children's health as a niche--much like care for the elderly--within the larger scheme of health care insurance for all. Several areas of successful performance needed for the program to be adjudged a success as well as its limitations are discussed in the book. These areas include initial implementation, enrolling kids, federal-state relations, and the uses and misuses of waivers to modify the program. A description of changes made by the CHIPRA reauthorization and the new Patient Protection Affordable Care Act (PPACA) is also included. This is followed by a consideration of lessons learned from CHIP's evolution and recommendations for future development. In short, this is a valuable and readable account for those interested in the current and future trends of health care for the young.

1

Origins and Legislation

Origins

The remote origins of the CHIP program can be traced to state “crippled children’s” programs and “mothers’ pensions,” the Sheppard-Towner Act of 1921, and the Social Security Acts of 1935 and 1950. These developments were important in focusing attention on “dependent children,” initiating federal grants relating specifically to child health, and developing legislative strategies to begin and then to increase categorical benefits.¹ These origins are not cited to confer legitimacy upon CHIP, but it may improve perspective to be aware that federal grants-in-aid for children’s health have been around for almost a century and that strategic incrementalism applied to various titles of the Social Security Act goes back to 1950.²

The Early and Periodic Screening, Diagnosis, and Treatment Program (EPSDT)—a major component of Medicaid—provides an illustration of this kind of growth. It began as a relatively small Title V program for Crippled Children’s Services that President Lyndon B. Johnson slated for inclusion in his child health initiative—prompted by his concern over the high numbers of draftees being rejected because of physical and mental deficiencies. The program was then extended as part of the Social Security Amendments of 1967 to include children covered by Medicaid, but was ignored or resisted by most states and enforcement was lax. During another imbroglio over national health insurance, the Carter administration pushed a Child Health Assessment Program (later the Child Health Assurance Program) that provided for enforcement of EPSDT with a higher match rate and the inclusion of other, non-Medicaid poor children. This bill was eventually defeated, largely because it was seen as part of a larger campaign for universal health coverage. After that, it was passed twice by the House though defeated in the Senate. It died in 1980, but was a precedent for CHIP.

During the first Reagan administration, the prospects for any “stand alone” health care legislation were remote at best. But the way around this reluctant administration was another incremental strategy—in this instance taking advantage of the budget reconciliation process.³ The reconciliation process was often used for health care legislation and was most effective from 1984 on through the Clinton administration for extending eligibility and for small legislative modifications of Medicaid, especially those that included children.

The customary maneuver, sometimes referred to as a “Waxman two-step,” was, year by year, to offer states the option of extending eligibility for children and pregnant women in progressively higher income levels and following this offer, as it was adopted broadly, with a federal mandate requiring all states to provide the extended coverage. This strategy was helped by pre-negotiation with the House Budget Committee and with the Senate Finance Committee⁴ to supply the offsetting revenue. This same process could be applied to other categories, such as elderly persons with disabilities, and for other “germane”⁵ substantive legislation, such as nursing home standards (Omnibus Budget Reconciliation Act of 1987, OBRA ’87) or EPSDT enforcement (OBRA ’89). This melding of incrementalism with the budget reconciliation process proved remarkably effective for expanding and equalizing eligibility, eventually setting in 1991 a goal of coverage of all children through the age of 18 and below 100 percent of the FPL, achieved on schedule in 2003. Another important objective, signified by the consistent use of the Federal Poverty Level rather than welfare status, was to erode and eventually sever he linkage of welfare and medical assistance. This separation finally received legislative sanction in SOBRA ’86.⁶

Skillful incremental tactics within Congress kept the children’s health cause moving forward and served to publicize it nationally. Two other developments helped to turn it into a national campaign. One was the increasing visibility of a new type of advocacy group, such as the Children’s Defense Fund (CDF), that went beyond lobbying within the Washington Beltway to build a national movement. Picking up on the issue of infant mortality, the CDF began a national campaign for an updated version of the Children’s Health Assurance Program concentrating on pregnant women and infant care. Meanwhile, a similar initiative developed in the South among a number of progressive governors (and their wives) who wanted to help their states’ Medicaid population more broadly, but thought that reducing infant mortality and infant care would be easier to sell politically. As an interesting footnote to history, the provision in SOBRA ’86 came directly from a Task Force on Infant Mortality that included such notable southern ladies as Honey Alexander, Hillary Clinton, and Lynda Bird Johnson Robb.

The defeat of the Clinton administration’s efforts to pass a health care reform bill, and the subsequent loss of both houses of Congress to the Republican Party in the election of 1994, were defining health policy events for the 1990s. Republicans in Congress, and especially the House, took this election as a mandate to complete the “Reagan Revolution,” including the dismantling of entitlements such as Public Welfare, Medicare, and Medicaid. As for the Democrats, defending the entitlements came first. Beyond that, the strategy announced by President Bill Clinton and shared generally among health care liberals was to move incrementally on targets of opportunity—doing what they could in individual cases but also moving gradually toward universal coverage—a policy that increased both the strategic and ideological significance of children’s health insurance.

Welfare reform or the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193) had considerable indirect impact upon children’s health policy. Most important, with families cycling off welfare, it raised the issue of children’s insurance and how to track individual recipients and ensure that they did not needlessly lose coverage—and that led to case-finding and tracking as well as furthering the loosening of eligibility restrictions to cover parents and some of the working poor (Sec. 1931).⁷ The Act made legal immigrants ineligible for Medicaid benefits for five years after entering the United States, a provision that carried over to SCHIP and laid up a large store of trouble. PRWORA was also politically unpopular with Democrats and that led President Clinton to seek ways to redeem himself with them, which was another reason for looking with favor upon a child health initiative.

Several background events helped make the passage of SCHIP possible. The election of 1996 changed the congressional seat count little, but it vindicated President Clinton’s policies somewhat and put him in a stronger position. It also sent a message that the electorate was tiring of partisan bickering and rancor and would like some constructive legislation. That year, the economic indicators were favorable with the deficit declining for a fourth year and both Medicare and Medicaid spending lower than expected. Moreover, reconciliation bills had failed in both 1995 and 1996 so that an omnibus reconciliation bill would be good not only to negotiate the budget and further reduce the deficit but as well as to update and modify regulations, subsidies, and taxes.

A striking aspect of this reconciliation (The Balanced Budget Act of 1997; P.L. 105-33) was the extent to which it was pre-negotiated by the White House and the Congress, especially the Senate, to set some parameters for savings, include key items such as a children’s health program, and move some politically “hot” items “off the table,” especially a Medicaid block grant. This pre-negotiation did not entirely dispel the distrust between the president and the Republican Congress nor eliminate hard bargaining—and twice the budget reconciliation process almost shut down⁸—but it structured debate, set some parameters, and excluded a number of intensely partisan issues.

Children’s health was a popular issue in Congress that year and a number of bills were introduced, mostly in the Senate. What survived for the conference were a block grant proposal from the Commerce Committee⁹ and a Chafee-Rockefeller bill from the Senate, which was a Medicaid-only expansion. The grand compromise was to allow states to opt for a Medicaid extension, an SCHIP separate program, or a combination of the two with a “screen and enroll” provision to ensure that Medicaid eligible children would not be enrolled in SCHIP.¹⁰ Other details were decided in the conference with staff from House Commerce and Senate Finance sitting before the side-by-side computerized screen of the House Legislative Counsel and devising reasonable language that would be agreeable to their principals and to the White House.¹¹

The Legislative Design

SCHIP has been described as a noteworthy example of bipartisanship, a description that invites comment. A favorable political environment helped to make compromises possible, but they did not come easily. On the contrary, the major compromises over SCHIP were contested fiercely, with the result that they represented closely what the opposing sides had to have or what they could not accept. Therefore the resulting bargains marked boundaries and could be compared to treaties that would likely lead to a fight if transgressed but could also promote peace and cooperation.

Strategic Compromises

Some of the most important provisions in the original legislation were “strategic compromises” important for final passage for SCHIP but also in helping the program to avoid or manage conflict in dealing with politically charged health policy issues such as the status and extent of entitlement, the boundaries of the public and private sectors, and federal-state relations. There were five of these “strategic compromises”: (1) entitlement status vs. the block grant; (2) state choice of options; (3) required benefits covered; (4) privatization; and (5) coverage of targeted low-income children vs. other categories.

The most important compromise was over structure: whether the children’s program was to be a federally mandated entitlement or a state-oriented block grant. There was money to be had and a will to do something about children, but no consensus about the structure. Initially, the widest support was for a block grant, with well-developed versions in both the House and the Senate.¹² There was also strong opposition to block-granting children’s health which found expression in the Senate with a proposal to extend Medicaid rather than create a new block grant. This met with resolute opposition and was abandoned after the National Governors Association categorically rejected this alternative. A hybrid combining a block grant and an entitlement was created not by intent, but because of intransigent opposition to the further extension of either.

A measure that encouraged state participation was to allow each state to choose from three options: to use its allotment for Medicaid expansion, for SCHIP alone, or for both. This would allow each state to enter on terms most acceptable or advantageous to it—and also experiment and change over time. This compromise differed from the Senate version, which would have required states to choose one of the other, in part to avoid confusion, but also to prevent encroachment upon state Medicaid programs. This concession to the states was balanced by a “screen and enroll” proviso that children before being enrolled in SCHIP had to be screened for Medicaid eligibility and enrolled in Medicaid if found to be eligible.¹³

Another strategic compromise, and one that helped promote federal-state harmony, dealt with the benefits covered by SCHIP. The House bill required a showing in the SCHIP state plans that children would get “creditable coverage.” and a description of ways in which their SCHIP program would cooperate with other agencies to increase that coverage, but left other details to the states. The Senate bill, which would cover children by expanding Medicaid, required full Medicaid coverage. The compromise pushed by the Senate was “Benchmark Benefit Packages” (Sec. 2103(b)) that would cover an array of basic services and had to be “actuarily equivalent” to one or several widely adopted private plans, such as the standard Blue-Cross/Blue-Shield preferred provider option (PPO) offered by the Federal Employees Health Benefits Plan (FEHBP). This resolution was not entirely satisfying to children’s advocates who protested that commercial plans were written for adults and did not address many needs of children. But this compromise did invite states to experiment, provided a path for “mainstreaming” many of the beneficiaries, and opened the program more widely to commercial insurance.

A divisive issue was “privatization” or, more precisely, the amount of emphasis upon public control versus devolution to private entities or reliance upon “the market.” At the national level,¹⁴ this was a topic infused with ideology, highly charged politically, and often debated in terms of whether you or a government bureaucrat was going to control your decisions about health care. The benchmark benefit plans were in part a way to appease private sector advocates, since they would rely upon commercial insurance standards. A related issue was premium support to help pay for private employer-sponsored insurance (ESI). The SCHIP statute contained a small window for “family support” with premium support primarily in mind¹⁵ and strong emphasis upon preventing substitution of public for private insurance. There was also some language in the conference report encouraging states “to consider such innovative means as vouchers and tax credits” but no mention of these in the statute.¹⁶ In sum, the statute implicitly acknowledged the privatization issue, moved closer to the private market both symbolically and practically, and authorized waivers to provide premium support for families. Beyond that, the perplexing and potentially intractable public-private issue was left to the waiver process. This resolution—or avoidance—of the privatization issue might be described as sanctioning an entering wedge, cooling out the issue, or some of each. Perhaps most important, the privatization issue occasioned little controversy during the ten-year history of SCHIP.

The statute provided an enhanced match for covering “targeted low-income children,” with “low income” specified as above a state’s existing Medicaid level¹⁷ and at or below 200 percent of the Federal Poverty Level. This was line-drawing with major strategic importan...