By Wesley Prater

The Affordable Care Act is most widely recognized for its expansion of affordable coverage to low-income parents and adults; however, a lesser-known feature of the ACA also helps children by aligning Medicaid coverage across families at 133% of the federal poverty level (FPL).

Today, states must cover children under the age of six in families with income of at least 133% FPL in Medicaid but older children and teens with incomes above 100% FPL may be covered in separate state Children’s Health Insurance Programs (CHIP) or Medicaid at state option. This creates “stairstep” eligibility in 21 states causing situations where different aged children in the same family are enrolled in different coverage programs with different benefits, provider networks and cost-sharing, as well as disparate enrollment and renewal procedures. The stairstep eligibility guidelines can be confusing and cumbersome for families to navigate and inefficient and costly for states to administer.

The ACA addresses the problem by requiring states to set a single standard for all kids and families that earn 133% FPL or less ($31,322 for a family of four in 2013) as of January 1, 2014.

What will this change mean for children and families?

Along with my colleague Joan Alker and the Kaiser Commission on Medicaid and the Uninsured, we recently released a report that found that aligning coverage for families in Medicaid will bring benefits for families and children — such as a better benefits package for children, stronger cost-sharing protections, and the administrative ease of covering siblings in the same program.

CHIP benefits packages are strong but vary by state. Federal law sets a definitive standard of pediatric care in Medicaid, so once the stairstep kids are moved into Medicaid, they will also be eligible for the Early Periodic Screening Diagnosis and Treatment (EPSDT) package.  ESPDT includes all medically necessary services and treatments for children including screenings, hearing, vision, dental, mental health and developmental services.

An extensive body of research indicates that when low-income families face higher premiums and cost-sharing, enrollment and the use of needed services decreases. Although cost-sharing is not allowed for preventive services or well-child visits, separate CHIP programs can impose cost-sharing up to 5% of a family’s income, while Medicaid imposes greater limits on cost-sharing for children.

How many kids will be impacted?

Our report estimates that as a result of this provision, 562,103 children will transition into Medicaid from CHIP. On average, 28% of CHIP kids will move into Medicaid in 2014 for those states required to eliminate stairstep eligibility. In a few states (Mississippi, Oregon, Utah), more than half of their children in CHIP will transition to Medicaid. In the remaining states, 13-48% of their CHIP children will move to Medicaid.

What will this change mean for states?

Due to the change in law, 21 states needed to transition some children from CHIP to Medicaid.  New York and Colorado implemented an early transition of children from CHIP to Medicaid.  Two others (New Hampshire and California) moved or are in the process of transitioning all CHIP kids to Medicaid.  The remaining 17 states are expected to transition an estimated 13% to more than half of their CHIP-eligible kids.

Some states have been worried about losing the enhanced CHIP matching rate when the stairstep children are moved into Medicaid but CMS has clarified more than once that states will continue to receive the enhanced matching rate (see here and here).

We found that aligning coverage will be more cost-effective and efficient for states by eliminating the need to transfer children from Medicaid to CHIP when they turn six.  In fact, not only does aligning coverage free up administrative resources, it promotes continuous coverage that enables states to more easily measure access to care and health outcomes.

Our report also takes a look at the lessons learned from states that have already changed their eligibility guidelines to comply with the ACA provision.  Experiences in New York and Colorado indicate that having the administrative capacity to manage the transition is essential, as some states may be overburdened and have limited resources. Both states felt that it would be important to have strong public awareness and effective communication to the families, providers and stakeholder community affected.

Want more info and state-level estimates? Read the full issue brief here.