States Press Congress for S-CHIP Fix

Georgia predicts that 260,000 of its children will lose health insurance in early March, when the PeachCare program that covers them runs out of money. Congress tried last month to keep such programs going, but as many as 14 states could find themselves short of cash by October if the states don’t receive additional funding for children’s health coverage.

Georgia, Illinois, Maryland, Massachusetts, New Jersey and Rhode Island are projected to run out of federal money for the State Children’s Health Insurance Program by May, and they want Congress to fix the problem quickly. But states also want a long-term solution so they won’t have to ask Congress to retool S-CHIP’s funding formulas every year.

S-CHIP serves as a companion to Medicaid, the state-federal venture that provides health insurance for the poor. The program covers 4 million children nationwide and cost billion in 2004.

It’s aimed at families who make too much money for Medicaid but still can’t afford health benefits. Like Medicaid, S-CHIP is paid for by both state and federal governments. But the feds pick up a bigger share of the children’s program. States have more leeway in S-CHIP to decide what benefits to offer and how much to charge enrollees for premiums or co-payments.

Many states combined their Medicaid and S-CHIP programs but others, such as Georgia, keep them separate.

Covering uninsured children is a politically popular goal. Gov. Arnold Schwarzenegger of California and Gov. Tim Pawlenty of Minnesota, both Republicans, and New York Gov. Eliot Spitzer, a Democrat, recently called for universal coverage of children. Illinois enacted a plan to offer insurance to all children in 2005, and Pennsylvania plans to follow suit this year.

Most of those plans use S-CHIP as a major building block on the way to universal coverage. Generally, states can use the program to cover kids in families making less than twice the federal poverty level (,000 for a family of four). But in some cases, the benefits are even more generous: they can apply to kids in families with higher incomes or to the parents of eligible children.

States can also supplement Medicaid and S-CHIP with programs that don’t rely on federal funding. The state-only programs, for example, can cover illegal immigrant children or those in families making too much money to qualify for Medicaid or S-CHIP.

Both Democrats and Republicans in Congress have started gearing up for a rewrite of S-CHIP, which expires this year, with hearings and preliminary proposals. But it remains unclear how quickly they’ll address either the broad reauthorization or the pending shortfalls.

The Democratic majorities that assumed control of both the House and Senate this month are focused, at least initially, on other issues. And more stringent budget rules instituted by the Democrats make finding more money for S-CHIP even more difficult.

Last month, Congress tried to keep the program going for all states through May by redirecting million already in the budget. But in many states that won’t be enough. All told, the federal government will be short .6 million for S-CHIP by October.

Estimates by the Congressional Research Service show that Georgia would only get .2 million in extra money from the deal – barely enough to keep PeachCare running for a single day. The Centers for Medicare and Medicaid Services, the federal agency that oversees Medicaid, are making the final calculations. Still, Georgia officials aren’t optimistic.

“I am going forward with what I have, which is nothing,” said Dr. Rhonda Medows, who oversees PeachCare as the commissioner of the Georgia Department of Community Health.

She said the only way Georgia could keep PeachCare running is if it put off paying doctors, hospitals and other providers until it got federal money. But Medows said providers “would never come back” if they weren’t paid, which would also harm the state’s Medicaid and state employee health insurance programs.

In other states, the impact would be less drastic. Illinois and Maryland, for example, plan to dip into their own pockets, using state dollars to cover the shortfall. (Georgia can’t because of a state law there.) Massachusetts, New Jersey and Rhode Island are all expected to run out of federal money by May if Congress doesn’t act.

The Congressional Research Service predicts Georgia’s program can keep going until May 7, the same date the other five states would run out of money. And another eight states would run short by the end of September.

In December, Congress siphoned off money designated for 13 states and the District of Columbia to help plug the gap for that long. The states that lost money weren’t expected to spend their full share of S-CHIP money. Florida, Tennessee, Texas and Washington all gave up at least million under that arrangement.

S-CHIP, which began in 1997, must be reauthorized this year in order to continue. That gives Congress a chance to make big changes.

But the program has become a victim of its own success. The premise for S-CHIP is that states get flexibility and, in return, the federal government limits the amount of money it would spend. But the program has grown so fast in recent years that Congress has had to find more money to keep it going.

There are caps on the amount of money each state is supposed to receive. Those caps haven’t had much practical effect, however, because Congress regularly redistributed money from states that weren’t using their full share to states that spent too much.

As S-CHIP programs have grown, there’s less money to reallocate. So Congress must decide whether it wants to spend even more money on the program or whether it wants to restrict how states spend that money. Neither is attractive, because capped federal spending and flexibility for states are two hallmarks of the program.

But some states, especially those that chronically overspend their allotment, complain about the program’s funding formulas.

Those rules benefit states that added coverage to children after S-CHIP was passed and slights states that previously offered kids insurance. Another concern is a mechanism that gives states more money for higher rates of uninsured kids. This means states that expand coverage actually get less money from the federal government.

The most common concern, though, is that the formulas are unpredictable. State funding depends on congressional action nearly every year.

“I really need Congress to bite the bullet, look at the formula, make a decision whether we’re really trying to help uninsured kids,” said Medows, the Georgia commissioner.

If lawmakers are serious about covering the children, they need to pay for the kids currently in the system and for those who aren’t yet covered, she said, noting that 100,000 kids in Georgia are eligible for PeachCare but aren’t insured because of limited funds.

And Connecticut’s David Parella, the longest-serving state Medicaid director, said Congress could avoid the yearly “panic” over funding revisions by simply making S-CHIP an entitlement like Medicaid.

“If the process is not adding value, why are you doing it? We’re spending the money anyway,” he said.

Some advocates want to expand S-CHIP to cover parents nationwide. Six states already do cover parents. Research shows kids are more likely to be signed up if their parents can get insurance, too.

But others question whether the federal government should pay extra to cover parents before all children are insured.