What the Directive Required

Under the directive, the Centers for Medicare and Medicaid Services (CMS) imposed new conditions that states must meet in order to cover children with gross family incomes above 250 percent of the federal poverty level (FPL) with SCHIP funds. One of these conditions required that at least 95 percent of children in the state with family income below 200 percent of the FPL have coverage.

Issues to Consider

In the August 17, 2007 letter and in congressional testimony, CMS stated that the 95 percent rule would be applied to the participation of eligible children in Medicaid and SCHIP. However, CMS officials clarified in a May 7, 2008 letter that it applies to children with family income below 200 percent of the FPL who have any type of coverage, whether Medicaid, SCHIP, or private.

This new standard continues to leave open numerous questions about how CMS will apply the requirement and the extent to which states can meet it, especially in a worsening economy when private coverage continues to decline.

Reaching 95 Percent Coverage

CMS officials stated that the 95 percent coverage rate is an achievable goal. However, published data from the U.S. Census Bureau indicate that no state currently meets the 95 percent threshold. The states with the highest coverage rates are Wisconsin and Wyoming with 93 percent of low-income children covered. The national estimates indicate that, on average, 81 percent of low-income children have insurance coverage.

In addition, employer coverage remains the largest source of health care for children, and thus is a significant factor in coverage rates. Unfortunately, the number of children with employer-based coverage has been declining for years. This trend is only expected to worsen as the economy continues its downturn.

• Insurance Coverage Rates for Low-Income Children, 2006
  U.S. Census Bureau of the 2007 Current Population Survey, August 28, 2007
• The Erosion of Employment-Based Insurance
  Economic Policy Institute, November 1, 2007

No Clear Standards

Despite the fact that the Census Bureau does not show any state reaching a 95 percent coverage rate, the May 7, 2008 letter stated that CMS would work “individually with affected States on different approaches to document this assurance.” As such, it remained unclear what data or adjustments will meet CMS standards and whether there will be any objective basis for accepting or rejecting data or data adjustments. This created a potentially uneven playing field for states, in which each state could be judged based on differing criteria, as determined by CMS.

Due to the directive, a number of states’ children coverage plans had already been rolled back, delayed and/or state financed because of the directive. One state—New York—was denied approval by CMS under the terms of the directive due to the 95 percent rule.