California Grapples With Questions Over Kids’ Health Insurance

As Congress and President Bush wrangle over the future of the State Children’s Health Insurance Program, or SCHIP, California has adopted emergency regulations that would allow it to start waitlisting or disenrolling kids from eligible families in the immediate future.

The new rules were approved at the Nov. 5 meeting of the state’s Managed Risk Medical Insurance Board, which oversees the implementation of Healthy Families, the state program that provides coverage to most of the state’s SCHIP beneficiaries. The board is expected to consider whether to act on the emergency regulations — potentially removing eligible children from the insurance rolls as soon as possible — at its next meeting, tentatively scheduled for Dec. 5.

In California, SCHIP money helps fund insurance for more than one million children and 8,400 pregnant women through several programs. The largest number — about 830,000 children — are enrolled in Healthy Families, which covers kids from families with incomes between 100% and 250% of the federal poverty level, or between $20,650 and $51,625 for a family of four.

SCHIP funds also are used to provide insurance to another 240,000 children through programs related to Medi-Cal. The pregnant women receive coverage through a program called Access for Infants and Mothers.

The current version of SCHIP, which provides about two dollars in federal funds for every dollar spent by the states, expired in September. The impasse occurred after President Bush vetoed a long-term extension that would have expanded the program’s five-year budget by $35 billion to a total of $60 billion, much more than the $5 billion increase that he proposed.

In letters to both houses of Congress last July, Gov. Schwarzenegger (R) expressed strong support for the expansion, noting that he wanted to increase coverage to kids from families with incomes up to 300% of the poverty level.

Current levels of funding for the program — which was designed to provide coverage for kids whose families earn too much to qualify for Medicaid but too little to afford private health insurance — have been extended on a short-term basis as Congress and the president continue to negotiate SCHIP’s future.

California in a Unique Situation

While other states are starting to confront shortfalls in their SCHIP funding, California’s situation is unique, said Anthony Wright, executive director of Health Access California, an Oakland-based not-for-profit that has been active in the debate.

“California is on the leading edge of this issue,” he said. “Because we’re the biggest state and have the most children in the program, as well as a variety of demographic factors, this is hitting California harder than any other state in the country. Most states will face what California is facing, but later.”

The emergency regulations adopted by the state’s risk board, known as MRMIB, need to be reviewed by California’s Office of Administrative Law before being implemented, said Ronald Spingarn, the risk board’s deputy director for health policy, legislation and external affairs. He said OAL is likely to approve the regulations before the board’s next scheduled meeting.

“The board must manage the enrollment of the program based upon the financial resources they have,” he said. “The board would have to make a finding that they don’t have enough funding to continue with the current program rules, and they would then have to decide that they will either do nothing, institute a waiting list, begin a disenrolling process or do both of those.”

Doing the Math

In 2007, the state received $790 million in federal funding, but it would need $1.23 billion in federal funding for 2008 to fulfill obligations under the current eligibility rules, given rising health care costs and the projected caseload. The state has access to some leftover funding from previous years’ SCHIP allotments to cover part of the budget gap for the current fiscal year.

The Congressional Research Service has estimated that California would experience a total shortfall of $342 million in 2008 if the federal government continues to fund SCHIP only at current levels and the state’s eligibility rules for enrollment are not changed, although state authorities believe the shortfall would be somewhat lower at $265 million. Twenty other states face shortfalls in 2008, although none as severe as California.

Without an expansion of federal funding for the program, the options available to California range from bad to worse.

The state is projected to run out of money for the program by June 2008 if federal funding for the program remains flat. Alternately, the state could make ends meet by disenrolling an average of 66,000 children a month starting in January, for a total of almost 600,000 by the end of the federal fiscal year in September 2008.

Advocates Voice Concerns

Some health care advocates who attended the Nov. 5 MRMIB meeting asked the board not to adopt the emergency regulations and to take no action until the federal government resolves the stalemate over the program — or at least until the state Legislature is back in full session in January and can consider strategies for addressing the short-term financial issues through some sort of emergency funding mechanism. They also noted the irony of discussing reductions in services at the same time as the state was seeking to expand health insurance coverage to everyone, including all children.

Despite their concern over MRMIB’s actions, they expressed sympathy for the dilemma confronting the board.

“They’re trapped in a problem not of their own making, and they can’t resolve it on their own,” said Angela Gilliard, the legislative advocate for the Western Center on Law and Poverty. However, she questioned whether the board has the statutory authority to actually disenroll kids from Healthy Families, although she noted that MRMIB members disagreed with her assessment. She said that “it’s a little bit early” to talk about litigation to block the process.

Like other advocates, Wright of Health Access said that state lawmakers rather than regulators should be making decisions about whether to take such drastic steps to reduce costs. “If California is going to impose a waiting list and start disenrolling children, that’s a policy decision that should be in the hands of those with the purse strings,” he said.

Other Eligibility Issues Loom

The impasse over funding levels is not the only recent SCHIP-related conflict between California and the federal government. The Bush administration has long been concerned that expanding SCHIP would encourage families to drop private, employer-based insurance plans in favor of the government program.

Last August, CMS, which oversees SCHIP, informed states that they needed to meet strict new requirements, such as requiring children to be uninsured for a full year before receiving coverage under the program. The agency also imposed additional restrictions on states such as California seeking to provide SCHIP support to families earning more than 250% of the poverty level.

Gov. Schwarzenegger and Gov. Eliot Spitzer (D) of New York promptly sent a strongly worded letter of protest to Mike Leavitt, Secretary of HHS. In the letter — which was followed by another letter the following month signed by both of them along with 28 additional governors — the two men stated that the new rules would set state programs back “40 years” and pleaded with the federal government to reverse its decision.

“The recently proposed SCHIP rules will reverse longstanding agreements with the states and reduce the number of children who receive health care,” wrote Schwarzenegger and Spitzer. “The rules…would install thresholds that are impossible to meet for nearly every state and impose a one-size-fits-all solution to a dynamic and complex problem.”

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