Republicans’ SCHIP Surrender

In spring 2015, Senate Republican leaders pressured their members to accept a clean, two-year reauthorization of the State Children’s Health Insurance Program (SCHIP) added as part of a larger health spending measure.

The SCHIP reauthorization added to a larger Medicare bill included none of the reforms Republicans had proposed that year, many of which attempted to turn the program’s focus back toward covering low-income families first, as the George W. Bush administration had done. But Republican leaders said that the two-year extension, rather than the four-year extension Democrats supported, would allow conservatives to fight harder for reforms in 2017.

The press has focused on the disputes over paying for the SCHIP program, which have held up final enactment of a long-term reauthorization. (The House passed its version of the bill in November; the Senate, failing to find agreement on pay-fors, has not considered the bill on the floor.) But the focus on pay-fors has ignored Republicans’ abject surrender on the policy behind the program, because the media defines “bipartisanship” as conservatives agreeing to do liberal things. That occurred in abundance on this particular bill.

So Much for Our Promises, Voters

On the underlying policy, all the groups who pledged to fight for conservative reforms vacated the field. Senate Finance Committee Chairman Orrin Hatch (R-UT), who brags about how he created the program as part of the Balanced Budget Act in 1997, cut a deal with Ranking Member Ron Wyden (D-OR) that, as detailed below, includes virtually no conservative reforms to the program—raising questions about whether Hatch was so desperate for a deal to preserve his legacy that he failed to fight for conservative reforms.

House Speaker Paul Ryan (R-WI) did not repudiate the agreement Hatch and Wyden struck, even though that agreement maintained virtually the provisions of the 2009 SCHIP reauthorization that Ryan himself, then the ranking member of the House Budget Committee, called “an entitlement train wreck.”

Republicans have thus suffered the worst of both worlds: getting blamed for inaction on a program’s reauthorization, while already having conceded virtually every element of that program, save for its funding.

Details About the SCHIP Proposals

A detailed examination of the Hatch-Wyden agreement (original version here, and slightly revised version in Sections 301-304 of the House-passed bill here) demonstrates how it extends provisions of the 2009 reauthorization passed by a Democratic Congress and signed by President Obama—which Republicans in large part opposed. Moreover, the Hatch-Wyden agreement and House-passed bill includes none of the reforms the House Energy and Commerce Committee proposed, but were not enacted into law, in 2015.

The only “reform” in the pending reauthorization consists of phasing out an enhanced match for states included in Section 2101(a) of Obamacare—one already scheduled to expire. Even though the enhanced match will end on its own in October 2019, the Hatch-Wyden agreement and the House-passed bill would extend that enhanced match by one year further, albeit at a reduced level, before phasing it out entirely.

Child Enrollment Contingency Fund: Created in Section 103 of the 2009 reauthorization. As I noted then, “Some Members may be concerned that the fund—which does not include provisions making additional payments contingent on enrolling the low-income children­ for which the program was designed—will therefore help to subsidize wealthier children in states which have expanded their programs to higher-income populations, diverting SCHIP funds from the program’s original purpose” (emphasis original). Section 301(c) of the House-passed bill would extend this fund, without any reforms.

Express Lane Eligibility: Created in Section 203 of the 2009 reauthorization, as a way of using eligibility determinations from other agencies and programs to facilitate enrollment in SCHIP. As I noted then, “Some Members may be concerned first that the streamlined verification processes outlined above will facilitate individuals who would not otherwise qualify for Medicaid or SCHIP, due either to their income or citizenship, to obtain federally-paid health benefits.” Section 301(e) of the House-passed bill would extend this option, without any reforms.

Citizenship Verification: Section 211 of the 2009 reauthorization created a new process for verifying citizenship, but not identity, to circumvent strict verification requirements included in the 2005 Deficit Reduction Act. As I wrote in 2009:

Some Members may echo the concerns of Social Security Commissioner Michael Astrue, who in a September 2007 letter stated that the verification process proposed in the bill would not keep ineligible individuals from receiving federal benefits—since many applicants would instead submit another person’s name and Social Security number to qualify. Some Members may believe the bill, by laying out a policy of ‘enroll and chase,’ will permit ineligible individuals, including illegal aliens, to obtain federally-paid health coverage for at least four months during the course of the verification process. Finally, some Members may be concerned that the bill, by not taking remedial action against states for enrolling illegal aliens—which can be waived entirely at the Secretary’s discretion—until states’ error rate exceeds 3%, effectively allows states to provide benefits to illegal aliens.

Legal Aliens: Section 214 of the 2009 reauthorization allowed states to cover legal aliens in their SCHIP programs without subjecting them to the five-year waiting period required for means-tested benefits under the 1996 welfare reform law.

As I wrote in 2009, “Some Members may be concerned that permitting states to cover legal aliens without imposing waiting periods will override the language of bipartisan welfare reform legislation passed by a Republican Congress and signed by a Democrat President, conflict with decades-long practices in other federally-sponsored entitlement health programs (i.e., Medicare), and encourage migrants to travel to the United States for the sole or primary purpose of receiving health benefits paid for by federal taxpayers.” The House-passed bill includes no provisions modifying or repealing this option.

Premium Assistance: Section 301 of the 2009 reauthorization created new options regarding premium assistance—allowing states to subsidize employer-sponsored coverage, rather than enrolling individuals in government-run plans. While that reauthorization contained some language designed to make premium assistance programs more flexible for states, it also expressly prohibited states from subsidizing health savings account (HSA) coverage through premium assistance. The House-passed bill includes no provisions modifying or repealing this prohibition on states subsidizing HSA coverage.

Health Opportunity Accounts: Section 613 of the 2009 reauthorization prohibited the Department of Health and Human Services from approving any new demonstration programs regarding Health Opportunity Accounts, a new consumer-oriented option for low-income beneficiaries created in the 2005 Deficit Reduction Act. The House-passed bill includes no provisions modifying or repealing this prohibition on states offering more consumer-oriented options.

Covering Poor Kids First: The 2015 proposed reauthorization looked to restore SCHIP’s focus on covering low-income children first, by 1) eliminating the enhanced federal match rate for states choosing to cover children in families between 250-300 percent of the federal poverty level ($61,500-$73,800 for a family of four in 2017) and 2) eliminating the federal match entirely for states choosing to cover children in families above 300 percent of poverty. These provisions were consistent with the policy of the George W. Bush administration, which in 2007 issued guidance seeking to ensure that states covered low-income families first before expanding their SCHIP programs further up the income ladder. The House-passed bill includes no such provision.

Maintenance of Effort: Section 2001(b) of Obamacare included a requirement that states could not alter eligibility standards for children enrolled in SCHIP through October 1, 2019, limiting their ability to manage their state programs. Whereas the 2015 proposed reauthorization would have repealed this requirement, effective October 1, 2015, Section 301(f) of the House-passed bill would extend this requirement, through October 1, 2022. (However, under the House-passed bill, states could alter eligibility for children in families with incomes over 300 percent of poverty, beginning in October 2019.)

Crowd-Out: The 2015 proposed reauthorization allowed states to impose a waiting period of up to 12 months for individuals who declined an offer of, or disenrolled from, employer-based coverage—a provision designed to keep families from dropping private insurance to enroll in a government program. The House-passed bill contains no such provision.

Program Name: The 2009 reauthorization sought to remove the “state” element of the “State Children’s Health Insurance Program,” renaming the program as the “Children’s Health Insurance Program.” While the 2015 proposed reauthorization looked to restore the “state” element to “SCHIP,” the House-passed bill includes no such provision.

Cave, Not a Compromise

For all the focus on paying for SCHIP, the underlying policy represents a near-total cave by Republicans, who failed to obtain any meaningful reforms to the program. Granted, Democrats likely would not agree to all the changes detailed above. But the idea that a “bipartisan” bill should include exactly none of them also seems absurd—unless Republicans threw in the towel and failed to fight for any changes.

The press spent much of 2017 focused on Republican efforts to unwind Obamacare. But the SCHIP bill represents just as consequential a story. The cave on SCHIP demonstrates how many Republicans, after spending the last eight years objecting to the Obama agenda, suddenly have little interest in rolling it back.

This post was originally published at The Federalist.

Morning Bell: Ten Ways Obamacare Isn’t Working

Obamacare is an unworkable law.

It’s obvious because the Administration keeps trying to “fix” it—to no avail. It has delayed parts of the law, ignored others, and carved out exemptions for its political allies.

1. WAIVERS: The Administration established a legally questionable program of temporary waivers when firms announced they were considering dropping coverage rather than comply with the law’s costly requirements. Even though more than half of the recipients of these waivers were members of union plans, many union leaders are still not satisfied—they want another waiver, to receive taxpayer-funded subsidies for their employer-provided coverage.

2. ILLEGAL TAXPAYER SUBSIDIES FOR CONGRESS: Last month, following heavy lobbying from leaders in both parties—and an intervention from President Obama himself—the Administration issued a rule regarding coverage for Members of Congress and their staffs, who will retain their taxpayer-funded insurance subsidies in the exchanges. Unfortunately, as previous research has documented, the Administration had no legal basis on which to make this ruling.

3. EMPLOYER MANDATE: In July, the Administration announced it would not enforce Obamacare’s employer mandate until 2015, effectively granting big business a one-year delay. This action came despite language in Section 1514(d) of the law requiring employers to act “beginning after December 31, 2013,” and despite the fact that hard-working Americans are not getting a delay from the other harmful effects of Obamacare.

4. PRE-EXISTING CONDITIONS: Immediately after Obamacare was signed, Democratic staffers admitted that under the law as written, insurers “still would be able to refuse new coverage to children because of a pre-existing medical problem.” The Department of Health and Human Services (HHS) took it upon itself to issue regulations prohibiting plans from turning down such applicants three years earlier than the law required. As a result, insurers stopped offering child-only plans in 17 states, fearing that only parents of sick children would apply for insurance coverage.

5. OUT-OF-POCKET CAPS: Section 1302(c)(1) of the law includes caps on out-of-pocket expenses and explicitly states they are to take effect “beginning in 2014.” But earlier this year, the Administration delayed these new caps from taking effect as scheduled. What’s more, as The New York Times reported, the Administration made this unilateral change not by issuing rules subject to public comment, but by posting a series of questions and answers on an obscure website.

6. BASIC HEALTH PLAN: This government-run health plan for people above the Medicaid income level was created in Section 1331 of Obamacare as a way to promote “state flexibility,” but the Administration unilaterally delayed it for one year. One Democratic Senator criticized the Administration for this move, saying it does not “live up” to the law as written.

7. TAX DISCLOSURES: Section 9002 of Obamacare requires employers to report the value of workers’ health insurance on W-2 filings, effective for all “taxable years after December 31, 2010.” But the Administration unilaterally delayed this requirement, and employers did not have to report these data until after the 2012 presidential election.

8. HONOR SYSTEM: In July, the Administration announced it was placing most Americans on the “honor system” when it came to verifying their income and access to employer-provided health coverage. As prior research has documented, this move, coupled with loopholes written into the law, gives many Americans a strong incentive to “game the system” and obtain more in taxpayer-funded insurance subsidies than they should actually receive.

9. PRIVACY: Former HHS General Counsel Michael Astrue, when serving as Commissioner of Social Security earlier this year, complained strongly within the Administration about the security risks posed by Obamacare’s new data hub. However, the Administration overrode his objections, using what Astrue called “an absurdly broad interpretation of the Privacy Act’s ‘routine use’ exemption.”

10. TOBACCO PENALTIES: Section 1201 of the law allows insurance companies to charge smokers up to 50 percent more in premiums. But due to a “computer glitch,” those penalties will be limited for “at least a year”—meaning non-smokers may have to pay more as a result.

In the end, Nancy Pelosi was wrong. Congress passed the bill, but we still don’t know what’s in it—because the Obama Administration keeps changing rules and ignoring the law. That’s why Congress should use its power of the purse and stop a single dime from being spent on this unworkable, unfair, and unpopular measure.

This post was originally published at The Daily Signal.

How Obamacare Threatens Privacy in America

A PDF of this Issue Brief is available on the Heritage Foundation website.

Over the past several months, a stream of reports from government auditors and news stories has raised serious questions about the Administration’s implementation of Obamacare and its effects on the privacy of millions of Americans. The reports paint a portrait of an Administration casting aside security concerns—potentially putting Americans’ financial and health data at risk—in its push to open insurance exchanges in all 50 states by October 1. These recent developments should provide further impetus for Congress to defund the entire law before the exchanges are able to undermine personal privacy.

Security Delays, Timetables Slipping

In August, the Department of Health and Human Services (HHS) inspector general released a report highlighting many missed deadlines with respect to the security measures surrounding the Obamacare data hub.[1] The hub will provide access to government data from various government agencies—tax filings and Social Security records, for example—allowing exchanges to determine eligibility for subsidized insurance.

The inspector general’s report found that “several critical tasks remain to be completed in a short period of time” in order to ensure the data hub’s security.[2] Important elements of the security testing were delayed by two months. As a result, the official certification that the data hub is secure is not scheduled to occur until September 30, 2013—one day before the exchanges are scheduled to open for business.[3]

The inspector general’s report noted the obvious problem that this tight timetable presents: “If there are additional delays…the authorizing official may not have the full assessment of implemented security controls needed for the security authorization decision by” the time open enrollment begins.[4] In other words, government officials could face a choice about whether to open the exchanges despite the potential risk to Americans’ data security. Even if the security assessments are completed on time, there is no assurance they will work properly; the inspector general’s report “did not review the functionality of the [data] hub.”[5]

Warnings Ignored

Some government officials have warned of the privacy and security implications arising from shoddy data security—even as the Obama Administration ignored those concerns. Michael Astrue, a former general counsel of HHS, offered objections while serving as the commissioner of Social Security through February 2013. He has called the Administration’s exchange portal “an overly simplistic system without adequate privacy safeguards”:

The system’s lack of any substantial verification of the user would leave members of the public open to identity theft, lost periods of health insurance coverage, and exposure of address for victims of domestic abuse and others.[6]

Astrue dubbed the version of the portal “the most widespread violation of the Privacy Act in our history,” noting that both he and the head of the IRS “raised strong legal objections” with the Office of Management and Budget—objections that, Astrue argues, have been ignored in favor of what he calls “an absurdly broad interpretation of the Privacy Act’s ‘routine use’ exemption.”[7]

Navigators Pose a Security Risk

While the data hub creates concerns that Americans could be subjected to electronic identity fraud, Obamacare’s “navigators” could subject Americans to in-person scams.[8] HHS recently announced it was lowering by one-third—from 30 hours to 20—the minimum training time for navigators.[9] As a result, individuals can be certified as navigators with fewer than three full days’ training—and few security checks. While guidelines regarding navigators released in July permitted states to establish “minimum eligibility criteria and background checks” for navigators, it did not require them to do so.[10]

Because their job involves helping Americans figure out their insurance options, navigators will often have access to sensitive personal information—bank accounts, Social Security numbers, insurance identification, and more. Yet navigators will not be required to undergo background checks, and the process for filing complaints about unscrupulous navigators remains unclear at best. Even California’s insurance commissioner—a Democrat and strong supporter of Obamacare—raised concerns that navigators would put consumers at risk for scams: “We can have a real disaster on our hands.”[11]

Not One Dime

Federal agencies have already encountered difficulties preserving the integrity of Americans’ sensitive information. Earlier this year, a medical provider in California sued the IRS for improperly seizing 60 million records of 10 million Americans.[12] Yet under Obamacare, the IRS and other federal agencies will hold more new powers and have access to even more of Americans’ personal health and financial information.

In its mad rush to implement its unworkable law, the Obama Administration has taken a slapdash and shoddy approach to Americans’ personal security. Given these stakes, the choice for Congress could not be clearer: Congress should preserve Americans’ privacy by refusing to spend another dime implementing Obamacare.

 


[1]Gloria Jarmon, “Memorandum Report: Observations Noted During the OIG’s Review of CMS’s Implementation of the Health Insurance Exchange—Data Services Hub,” Department of Health and Human Services Inspector General Report A-18-13-30070, August 2, 2013, http://oig.hhs.gov/oas/reports/region1/181330070.pdf (accessed August 29, 2013).

[2]Ibid., p. 1.

[3]Ibid., p. 5.

[4]Ibid., p. 5.

[5]Ibid., p. 2.

[6] Michael Astrue, “Privacy Be Damned,” The Weekly Standard, August 5, 2013, http://www.weeklystandard.com/articles/privacy-be-damned_741033.html (accessed August 29, 2013).

[7]Ibid.

[8]For more information on the navigator program, see Alyene Senger, “The Cost of Educating the Public on Obamacare,” Heritage Foundation Issue Brief No. 3983, July 1, 2013, http://www.heritage.org/research/reports/2013/07/public-outreach-on-obamacare-cost-of-educating-the-public-on-health-care-reform.

[9]Amy Schatz, “Preparations for Health Exchanges on Tight Schedule,” The Wall Street Journal, August 7, 2013, http://online.wsj.com/article/SB10001424127887324170004578638100820728288.html (accessed August 29, 2013).

[10]“Department of Health and Human Services: Patient Protection and Affordable Care Act; Exchange Functions: Standards for Navigators and Non-Navigator Assistance Personnel; Consumer Assistance Tools and Programs of an Exchange and Certified Application Counselors; Final Rule,” Federal Register, Vol. 78, No. 137 (July 17, 2013), p. 42824, http://www.gpo.gov/fdsys/pkg/FR-2013-07-17/pdf/2013-17125.pdf (accessed August 29, 2013).

[11]“Fraud Fear Raised in California’s Health Exchange,” The Reporter, July 14, 2013, http://www.thereporter.com/rss/ci_23658245 (accessed August 29, 2013).

[12]Scott Gottlieb, “Suit Alleges IRS Improperly Seized 60 Million Personal Medical Records,” Forbes, May 15, 2013, http://www.forbes.com/sites/scottgottlieb/2013/05/15/the-irs-raids-60-million-personal-medical-records/ (accessed August 29, 2013).

Legislative Bulletin: Senate Amendments to H.R. 2, Children’s Health Insurance Program Reauthorization Act

Order of Business: On February 14, 2009, the Senate amendments to H.R. 2 are expected to be considered on the floor under a closed rule, requiring a majority vote for passage.  The rule is expected to waive all points of order against the bill, except those arising under clauses 10 of rule XXI (PAYGO), and provide for one hour of debate, equally divided between the Majority and the Minority.

This legislation was introduced by Representative Frank Pallone (D-NJ) on January 13, 2009, and originally passed by the House by a vote of 289-139 on January 14, 2009.  The Senate passed its version of the bill by a vote of 66-32 on January 29, 2009.

Summary of Senate Changes Made: During consideration of H.R. 2 in the Senate, several changes were made to the legislation; those changes will be voted on by the House.  Among the more important changes, the Senate bill:

  • Accelerates the phase-out of childless adults from September 30, 2010 to December 31, 2009;
  • Removes a requirement that parents provide a signature on documents allowing their children to be enrolled by “Express Lane” agencies, as outlined below.  Some Members may be concerned that removing the signature requirement would further increase the risk of fraud associated with the new “Express Lane” procedures;
  • Expands States’ ability to cover legal aliens in Medicaid and SCHIP, permitting coverage for all children under age 21, instead of permitting coverage for all children under age 19 as in the original House bill;
  • Permits States to establish dental-only supplemental “wrap-around” SCHIP coverage for children enrolled in group health insurance coverage;
  • Establishes a new Medicaid Payment and Access Commission (MACPAC), similar to the Medicare Payment Advisory Commission (MedPAC).  Some Members may be concerned that this provision first would establish a new federal bureaucracy, and second that both its membership—which will include consumer and advocacy groups—and its stated purpose—which focuses on maintaining access—will result in a primary focus on expanding the scope and reach of federal Medicaid spending, rather than restoring the program’s fiscal integrity and improving its quality of care;
  • Removes restrictions on physician-owned specialty hospitals originally contained in the House legislation; and
  • Raises the amount of the tobacco tax increase from 61 cents to 62 cents per pack (which would increase total federal tobacco taxes from 39 cents to $1.01).  Some Members may be concerned that this further increase would place additional tax burdens on working families during an economic downturn.

Summary: The State Children’s Health Insurance Program (SCHIP), established under the Balanced Budget Act (BBA) of 1997, is a state-federal partnership originally designed to provide low-income children with health insurance—specifically, those children under age 19 from families with incomes under 200 percent of the federal poverty level (FPL), or $42,400 for a family of four in 2008.  Funds are provided to states on the basis of capped allotments, and states receive an “enhanced” federal match greater than the federal Medicaid matching rate in order to enroll covered children.  SCHIP received nearly $40 billion in funding over ten years as part of BBA, and legislation passed by Congress in December 2007 (P.L. 110-173) extended the program through March 2009, while providing additional SCHIP funds for states.

H.R. 2 would reauthorize and expand the State Children’s Health Insurance Program (SCHIP), as follows:

Funding and Allotments: The bill would maintain the current capped allotment method of SCHIP financing but would increase the allotments over the four and a half year period of the reauthorization (through September 30, 2013).  Including funding for the first half of the current fiscal year (i.e. through March 30, 2009) already provided under P.L. 110-173, the bill would include total SCHIP funding of nearly $69 billion—an increase of almost $44 billion in SCHIP outlays when compared to the statutory baseline.

The bill increases funding levels for the five fiscal years covered in the program—a total of $10.6 billion in FY09, $12.5 billion in FY10, $13.5 billion in FY11, and nearly $15 billion in FY12.  For Fiscal Year 2013, the bill includes a total of $17.4 billion in funding.  However, this funding would be delivered in two installments—one appropriation of $14.55 billion in October 2012, and a second six-month appropriation of $2.85 billion in March 2013.  Some Members may be concerned that this funding “cliff”—which presumes a 66% reduction in SCHIP expenses, from $17.4 billion in FY13 to $5.7 billion in FY14—is a budgetary gimmick designed primarily to mask the true costs of an SCHIP expansion.

The bill shortens from three years to two years the amount of time states have to utilize their allotment funding and provides that unused state allotments would be redirected to states projected to have allotment shortfalls after that period.  The bill rebases state allotments every two years to reflect actual state expenditures and provides that state allotments will increase annually to reflect increases in health care expenditures and the growth of child populations within each state.  The bill language would permit states to obtain increases in their allotments to reflect planned future expansions of SCHIP coverage and would allow certain states to receive the enhanced SCHIP federal matching rate (if funds are available from the state’s allotment) for Medicaid coverage of children in families with incomes above 133% FPL ($28,196 for a family of four in 2008).

Child Enrollment Contingency Fund: The bill would establish a new contingency fund within the U.S. Treasury for states that exceed their allotments, while also increasing enrollment at a rate that exceeds the states’ child population growth by at least 1%.  The money within the contingency fund would be carved out from the SCHIP allotments described above and could not exceed 20% of overall SCHIP funding.  Some Members may be concerned that the fund—which does not include provisions making additional payments contingent on enrolling the low-income children­ for which the program was designed—will therefore help to subsidize wealthier children in states which have expanded their programs to higher-income populations, diverting SCHIP funds from the program’s original purpose.

Performance Bonus Payments: The bill creates a new performance bonus payment mechanism to offset state costs associated with enrollment outreach and retention activities.  States which increase coverage of eligible low-income children in Medicaid by at least 2% will be eligible for bonuses of up to 15% of each beneficiary’s projected costs, and states which exceed their targets for enrolling eligible children by at least 10% will become eligible for additional bonus payments of up to 62.5%.

Funding for the performance bonus system under the bill totals at least $3.3 billion, which would be increased by any allotments not obligated to the states or any state allotments not expended or redistributed to other states.  State eligibility for the performance bonuses would remain contingent on states’ use of several practices designed to increase ease of enrollment, including continuous eligibility for at least 12 months, eliminating or liberalizing asset tests associated with enrollment applications, automatic administrative renewal, presumptive eligibility for children, and participation in the “Express Lane” process outlined below.

As there are no provisions linking payment of performance bonuses to the enrollment of low-income children, some Members may be concerned that these performance bonuses may provide an inducement to instead enroll children from wealthier families, diverting the program from its original intent.  Some Members may also be concerned that the provision linking performance bonuses to the adoption of at least four so-called best practices for enrollment—including the “Express Lane” process—will provide a strong financial incentive for states not to scrutinize the eligibility of certain applicants.

Coverage of Pregnant Women: The bill adds new language permitting states to utilize SCHIP funding to cover low-income, pregnant women.  The bill imposes several requirements on states seeking to use SCHIP funds to cover pregnant women, including a minimum eligibility threshold of at least 185% FPL (and not below the Medicaid eligibility threshold) for pregnant women only after covering all children under and 200% FPL without a waiting list or other enrollment cap to limit children’s participation in the program.  The provision provides that children born to certain low-income pregnant women participating in SCHIP will automatically be enrolled in the program for the child’s first year.

Coverage of Childless Adults: The bill prohibits the Centers for Medicare and Medicaid Services (CMS) from approving further waivers to cover childless adults under the SCHIP program and phases out SCHIP coverage of childless adults effective December 31, 2009.  The bill also allows states to apply for a Medicaid waiver to continue to cover childless adults but at the lower Medicaid matching rate instead of the enhanced SCHIP rate.  Some Members may be concerned that the bill would permit the continued coverage of childless adults within SCHIP for nearly a year—and for indefinite periods beyond that using the lower Medicaid match rate—diverting its focus from the targeted low-income children for whom it was created.

Coverage of Low-Income Parents: The bill also prohibits the issuance of new SCHIP waivers permitting the coverage of low-income parents and phases out parent coverage.  States may request an automatic two-year extension to cover low-income parents, and may continue coverage of low-income parents through the length of the authorization legislation (i.e. until October 2013), provided the state does not increase its income eligibility thresholds for parent coverage.  Some Members may be concerned that the bill would permit the continued coverage of low-income adults within SCHIP for at least five years, diverting its focus from the targeted low-income children for whom it was created.

Coverage of Higher-Income Children: The bill places certain restrictions on states’ matching rate for coverage of children in families with “effective family income” higher than 300% FPL—$63,600 for a family of four in 2008—to the lower Medicaid match rate, rather than the enhanced SCHIP federal match.  Specifically, the bill would prohibit states from using a “general exclusion of a block of income that is not determined by type of expense or type of income.”  This provision is designed to address an issue related by New Jersey’s SCHIP program, which disregards all income between 200-350% FPL for purposes of eligibility—thus making children in families with incomes up to $74,200 eligible for federal health benefits.

However, the bill expressly retains states’ ability to disregard unlimited amounts of income by type of income (i.e. salary, capital gains) or type of expense (i.e. disregard all housing-related expenses)—thus permitting states to continue to use “income disregards” effectively to ignore some or all of a family’s income for purposes of determining whether the family income falls below the 300% FPL threshold.  And the bill grandfathers in states (i.e. New Jersey) that already have programs in place using blanket income disregards.

Some Members may be concerned first that this provision does not prohibit states from expanding their Medicaid programs to families with incomes above $64,000, and second that the provisions allowing continued use of “income disregards” will only encourage states to use such mechanisms to expand their SCHIP programs to wealthier families—rather than covering poor children first.

Crowd-Out Provisions: The bill does not contain provisions to reduce “crowd-out”—that is, individuals leaving private coverage in order to join a government program—included in both versions of SCHIP legislation (H.R. 976, H.R. 3963) in 2007.  Those provisions included several studies about the extent to which crowd-out occurs within SCHIP, best practices on how to reduce crowd-out, and authority for the Secretary to reduce payments to states enrolling too many children above 300% FPL.  Some Members may be concerned that removal of these provisions will remove the last disincentive for states to enroll large numbers of children in families with incomes above $64,000—and possibly well above that threshold.

According to the Congressional Budget Office, the bill would result in 2.4 million individuals dropping private health insurance coverage to enroll in government programs—a higher level of crowd-out in both number and percentage terms than the first SCHIP bill (H.R. 976) presented to President Bush in 2007.

Outreach and Enrollment Provisions: The bill includes $100 million in new mandatory funding for grants to various entities—including states, localities, elementary and secondary schools, and other non-profit or faith-based organizations—to conduct outreach and enrollment activities, including 10% for a national enrollment campaign and an additional 10% set-aside for the Indian Health Service.  The bill also provides a minimum 75% Medicaid and SCHIP match for translation or interpretation services under the two programs.

“Express Lane” Enrollment Option: The bill permits states to use eligibility determinations from “Express Lane” agencies as a means to facilitate enrollment in Medicaid and SCHIP, including renewals and re-determinations of coverage.  Agencies—including but not limited to those which determine eligibility for Temporary Assistance to Needy Families (TANF), food stamps, federal school lunch programs, Head Start, and federal housing assistance—may not deem children ineligible for coverage based solely on an initial adverse determination with respect to income eligibility.

Under the program, states may establish an income threshold 30 percentage points above the Medicaid or SCHIP eligibility limit (i.e. if the SCHIP eligibility limit is 300% FPL, the state may establish a threshold of 330% FPL for purposes of Express Lane determinations).  States may also temporarily enroll children in SCHIP if the child in question “appears eligible” (criteria undefined) based on the Express Lane agency’s income determination, subject to a “prompt follow up” (time limit undefined) by the State as to whether or not the child actually qualifies.  The bill also allows states to “initiate and determine eligibility” for Medicaid or SCHIP “without a program application from, or on behalf of” children based on data from other sources, and only requires parental consent through “affirmation in writing, by telephone, orally, through electronic signature, or through any other means” the Secretary may provide.  Some Members may be concerned that removal of the written signature requirement in the original House bill will increase the risk of fraudulent enrollments in Medicaid and SCHIP.

The bill provides for a annual sample audit of Express Lane cases to establish whether or not the eligibility determinations made comport with eligibility determinations made using the full Medicaid review process and provides for state remedial actions (and eventually payment reductions) if the error rate for such audits exceeds 3%.  The bill sunsets the Express Lane option at the end of the authorization and includes $5 million for a report on its effectiveness.

Some Members may be concerned first that the streamlined verification processes outlined above will facilitate individuals who would not otherwise qualify for Medicaid or SCHIP, due either to their income or citizenship, to obtain federally-paid health benefits.

Citizenship Verification: Current law applies citizenship verification requirements differently to state SCHIP programs, depending upon the nature of the program.  The BBA permitted states to establish separate SCHIP programs, utilize Medicaid expansions to cover eligible populations, or some combination of the two.  The eight states and the District of Columbia that chose Medicaid expansions, along with Medicaid beneficiaries of the 24 states that chose combination programs, must comply with citizenship verification provisions enacted as part of the Deficit Reduction Act (DRA, P.L. 109-171) in 2006.  These procedures—which include verification of citizenship and nationality by presenting any of a variety of documents (e.g. birth certificate, passport, etc.)—were prompted in part by a July 2005 Inspector General report, which found that 47 states (including the District of Columbia) often relied on an applicant’s self-attestation of citizenship to determine Medicaid eligibility and that 27 of these states undertook no effort to determine whether the self-attestation was accurate.  Beneficiaries in the 18 states with separate SCHIP programs are not subject to the DRA verification requirements with respect to either citizenship or nationality.

The bill provides an alternative to the Medicaid citizenship verification process enacted in DRA—and extends this process to beneficiaries in stand-alone SCHIP programs—for children up to age 21 by allowing states to verify applicants’ citizenship through a name and Social Security number match.  If the Social Security Administration finds an invalid match, the state must make “a reasonable effort to identify and address the causes of such invalid match;” in the event the state cannot resolve the discrepancy, it must dis-enroll the individual within 120 days, during which time the individual in question has 90 days to respond and present satisfactory evidence to resolve the mis-match.

States will be required to submit data for each applicant to determine the states’ invalid match rates, but errors will only include cases where the individual has been dis-enrolled by the state after having received SCHIP benefits.  The bill provides that states with error rates above 3% will be required to pay back funds used to pay for ineligible individuals in excess of the 3% threshold—except that the Secretary may waive such a return requirement “if the state is unable to reach the allowable error rate despite a good faith effort.”

Some Members may echo the concerns of Social Security Commissioner Michael Astrue, who in a September 2007 letter stated that the verification process proposed in the bill would not keep ineligible individuals from receiving federal benefits—since many applicants would instead submit another person’s name and Social Security number to qualify.  Some Members may believe the bill, by laying out a policy of “enroll and chase,” will permit ineligible individuals, including illegal aliens, to obtain federally-paid health coverage for at least four months during the course of the verification process.  Finally, some Members may be concerned that the bill, by not taking remedial action against states for enrolling illegal aliens—which can be waived entirely at the Secretary’s discretion—until states’ error rate exceeds 3%, effectively allows states to provide benefits to illegal aliens.

Coverage of Legal Aliens: The bill would permit states to cover pregnant women and children under 21 who are legal aliens within Medicaid and SCHIP without imposing the five-year waiting period for most legal aliens to receive federal welfare benefits established as part of the welfare reform law (P.L. 104-196) signed by President Clinton in 1996.  For decades, Medicare has maintained a five-year residency requirement for legal aliens to obtain access to benefits; this waiting period was upheld by the Supreme Court in 1976, when Justice John Paul Stevens, writing for a unanimous Court in the case of Mathews v. Diaz, held that “it is obvious that Congress has no constitutional duty to provide all aliens with the welfare benefits provided to citizens.”

Some Members may be concerned that permitting states to cover legal aliens without imposing waiting periods will override the language of bipartisan welfare reform legislation passed by a Republican Congress and signed by a Democrat President, conflict with decades-long practices in other federally-sponsored entitlement health programs (i.e. Medicare), and encourage migrants to travel to the United States for the sole or primary purpose of receiving health benefits paid for by federal taxpayers.

Premium Assistance: The bill permits states to establish premium assistance programs—which provide state and federal funds to finance employer-sponsored health insurance.  The bill provides that employers must pay at least 40% of premium costs in order for the policy to qualify for premium assistance but prohibits high-deductible policies associated with Health Savings Accounts (HSAs) from qualifying under any circumstances.

The bill changes the current premium assistance criteria within SCHIP, such that rather than requiring the cost of covering the entire family through the employer policy be less than the costs to enroll a child in government-run coverage, states should instead use an “apples-to-apples” comparison of the marginal costs of covering the applicable child (or children) when compared to enrolling the child in SCHIP. The bill also permits states to “wrap-around” coverage to supplement the employer policy if the latter does not meet appropriate SCHIP benchmark standards, and to establish a purchasing pool for small employers (i.e. those with fewer than 250 employees) with low-income workers to provide workers options to utilize premium assistance to enroll their families.

The bill requires states that have created premium assistance programs to inform SCHIP applicants of the program and includes provisions regarding coordination with employer coverage and outreach to workers to inform them of premium assistance.  However, the bill does not require states to establish premium assistance programs.  Some Members may therefore be concerned that the bill does not ensure that all children with access to employer-sponsored coverage will be able to maintain their current coverage.

Quality Measures: The bill requires CMS to develop an initial set of child health quality measures for state Medicaid and SCHIP programs, including those administered by managed care organizations, and establish programs allowing states to report such measures and disseminate information to the states on best practices.  The bill includes further requirements for the Department to create a second pediatric quality measures program “to improve and strengthen the initial core child health care quality measures” and authorizes grants and contracts to develop and disseminate evidence-based quality care measures for children’s health.

The bill requires states to report annually on state-specific health quality measures adopted by their Medicaid and/or SCHIP plans and authorizes up to 10 grants for demonstration projects related to improved children’s health care and the promotion of health information technology.  The bill also authorizes (subject to appropriation) $25 million for a demonstration project to reduce childhood obesity by awarding grants to eligible local governments, educational or public health institutions, or community-based organizations.

The bill establishes a program to develop a model electronic health record for Medicaid and SCHIP beneficiaries and authorizes a study on pediatric health quality measures.  These and the other quality programs addressed above would be funded through mandatory appropriations totaling $45 million per fiscal year.

Lastly, the bill applies certain quality provisions to the managed care organizations with whom states contract to provide SCHIP benefits—including marketing restrictions, required disclosures to beneficiaries, and access and quality standards both for the managed care organizations and the state agencies overseeing them.  The bill also requires a Government Accountability Office (GAO) study on whether the rates paid to SCHIP managed care plans are actuarially sound.

Enhanced Benefits: The bill requires state SCHIP plans to have access to dental benefits, and mandates that those dental plans resemble a) coverage provided to children under the Federal Employee Health Benefit Program (FEHBP), b) “a dental benefits plan that is offered and generally available to state employees,” or c) the largest commercially-available dental plan in the state based on the number of covered lives.  States would also be permitted to offer “wrap-around” SCHIP dental benefits packages to supplement children’s employer-sponsored coverage.

The bill includes language requiring mental health parity in state SCHIP benefits, specifically that “financial requirements and treatment limitations applicable to such…benefits” are no more restrictive than those applied to medical and surgical benefits covered by the plan and establishes a prospective payment system for federally qualified health centers receiving Medicaid reimbursements.  The bill also requires that states impose a grace period of at least 30 days on beneficiaries for non-payment of any applicable premiums due before terminating the beneficiaries’ coverage; under current law, such premiums generally only apply to individuals with family incomes above 150% FPL.

Other Provisions: The bill includes language stating that “nothing in this Act allows federal payment for individuals who are not legal residents.”  However, as noted above, the bill provisions allow states to verify SCHIP eligibility without document verification and provide no financial penalties to states enrolling illegal aliens until those errors (which in the case of “Express Lane” applications will be derived from sample audits, not scrutiny of each application) exceed 3%—and these penalties may be waived in the Secretary’s sole discretion.

The bill establishes a new Medicaid Payment and Access Commission (MACPAC), similar to the Medicare Payment Advisory Commission (MedPAC), and requires the new Commission to submit two annual reports to Congress.  The bill requires the Commission to examine both payment policies for the two programs as well as the program’s impact on “access to covered items and services,” including creation of an “early warning system” designed to draw attention to any “problems that threaten access to care” for beneficiaries.  Some Members may be concerned that this provision first would establish a new federal bureaucracy, and second that both its membership—which will include consumer and related advocacy groups—and its stated purpose on maintaining access will result in a primary focus on expanding the scope and reach of federal Medicaid spending, rather than restoring the program’s fiscal integrity and improving its quality of care.

The bill includes language prohibiting the Department of Health and Human Services from approving any new state Health Opportunity Account demonstrations under the program established in DRA.  Some Members may be concerned that the prohibition on this innovative—and entirely voluntary—program for beneficiaries may hinder beneficiaries’ ability to choose the health plan that best meets their needs.

The bill would disregard any “significantly disproportionate employer pension or insurance fund contribution” when calculating a state’s per capita income for purposes of establishing the federal Medicaid matching percentage for that state.  According to CMS, only one state would benefit from this provision—Michigan.  The bill would also increase Disproportionate Share Hospital (DSH) allotments for Tennessee and Hawaii and would clarify the treatment of a regional medical center in such a manner that the Congressional Budget Office, in its score of the bill, identified the provision as specifically benefiting the Memphis Regional Medical Center.  Some Members therefore may view these provisions as constituting authorizing earmarks.

Tobacco Tax Increase; Pay-Fors: The bill would increase by 62 cents—from 39 cents to $1.01—the federal per-pack tobacco tax and place similar increases on cigars, cigarette papers and tubes, and smokeless and pipe tobacco products.  Some Members may be concerned that an increase in the tobacco tax, which is highly regressive, would place an undue and unnecessary burden on working families during an economic downturn and could encourage the production of counterfeit cigarettes by criminal organizations and other entities.

Lastly, the bill increases the percentage of payment of certain corporate estimated taxes in the last fiscal quarter of 2013 by 0.5%, and reduces the next applicable estimated tax payment in the first fiscal quarter of 2014 by a similar amount.

Cost: A final CBO score of the Senate amendments was not available at press time.  However, according to the Congressional Budget Office, the original House-passed bill would increase direct spending by a total of $39.4 billion between Fiscal Year 2009 and Fiscal Year 2014, and $73.3 billion over the FY09-FY19 period.  Most of the spending in the first five years of the budget window ($34.3 billion) would be derived from the SCHIP expansion; and Medicaid spending in the latter five years would rise, as the score notes that children enrolled in SCHIP would be shifted to the Medicaid program upon SCHIP’s expiration.  However, both the Medicaid and SCHIP scores are contingent upon provisions in the bill cutting SCHIP spending from $17.4 billion in Fiscal Year 2013 to $5.7 billion in Fiscal Year 2014.  To the extent that Members believe this 66% reduction in SCHIP expenses will not take place, they may be concerned that the funding “cliff” is a budgetary gimmick designed to mask the true costs of the bill’s expansion of health care benefits.

The Joint Committee on Taxation estimates that the increase in tobacco taxes would generate $38.8 billion through Fiscal Year 2014, and $72 billion from Fiscal Years 2009-2018.  The bill also increases revenues by $1.6 billion through Fiscal Year 2018 as a result of individuals dropping private health insurance in order to enroll in the SCHIP program, as employees with group health insurance would have less of their income sheltered from payroll and income taxes.

The JCT score on the tobacco tax notes that the tax provisions would generate $7.2 billion in FY10 (the first full year the tax increase would take effect), but only $6.4 billion in Fiscal Year 2019—a decrease of more than 10%.  Some Members may be concerned that expansions of the SCHIP program would rely on a declining source of revenue.

Legislative Bulletin: H.R. 2, Children’s Health Insurance Program Reauthorization Act

Order of Business: On January 14, 2009, H.R. 2 is expected to be considered on the floor under a likely closed rule, requiring a majority vote for passage. The rule is expected to waive all points of order against the bill, except those arising under clauses 10 of rule XXI (PAYGO), and provide for one hour of debate, equally divided between the Majority and the Minority, with one motion to recommit. This legislation was introduced by Representative Frank Pallone (D-NJ) on January 13, 2009. The bill was referred to the House Committees on Energy and Commerce and Ways and Means, but was never considered.

Summary: The State Children’s Health Insurance Program (SCHIP), established under the Balanced Budget Act (BBA) of 1997, is a state-federal partnership originally designed to provide low-income children with health insurance—specifically, those children under age 19 from families with incomes under 200 percent of the federal poverty level (FPL), or $42,400 for a family of four in 2008. Funds are provided to states on the basis of capped allotments, and states receive an “enhanced” federal match greater than the federal Medicaid matching rate in order to enroll covered children. SCHIP received nearly $40 billion in funding over ten years as part of BBA, and legislation passed by Congress in December 2007 (P.L. 110-173) extended the program through March 2009, while providing additional SCHIP funds for states.

H.R. 2 would reauthorize and expand the State Children’s Health Insurance Program (SCHIP), as follows:

Funding and Allotments: The bill would maintain the current capped allotment method of SCHIP financing but would increase the allotments over the four and a half year period of the reauthorization (through September 30, 2013). Including funding for the first half of the current fiscal year (i.e. through March 30, 2009) already provided under P.L. 110-173, the bill would include total SCHIP funding of nearly $69 billion—an increase of almost $44 billion in SCHIP outlays when compared to the statutory baseline.

The bill increases funding levels for the five fiscal years covered in the program—a total of $10.6 billion in FY09, $12.5 billion in FY10, $13.5 billion in FY11, and nearly $15 billion in FY12. For Fiscal Year 2013, the bill includes a total of $17.4 billion in funding. However, this funding would be delivered in two installments—one appropriation of $14.4 billion in October 2012, and a second six-month appropriation of $3 billion in March 2013. Some Members may be concerned that this funding “cliff”—which presumes a 66% reduction in SCHIP expenses, from $17.4 billion in FY13 to $6 billion in FY14—is a budgetary gimmick designed primarily to mask the true costs of an SCHIP expansion.

The bill shortens from three years to two years the amount of time states have to utilize their allotment funding and provides that unused state allotments would be redirected to states projected to have allotment shortfalls after that period. The bill rebases state allotments every two years to reflect actual state expenditures and provides that state allotments will increase annually to reflect increases in health care expenditures and the growth of child populations within each state. The bill language would permit states to obtain increases in their allotments to reflect planned future expansions of SCHIP coverage and would allow certain states to receive the enhanced SCHIP federal matching rate (if funds are available from the state’s allotment) for Medicaid coverage of children in families with incomes above 133% FPL ($28,196 for a family of four in 2008).

Child Enrollment Contingency Fund: The bill would establish a new contingency fund within the U.S. Treasury for states that exceed their allotments, while also increasing enrollment at a rate that exceeds the states’ child population growth by at least 1%. The money within the contingency fund would be carved out from the SCHIP allotments described above and could not exceed 20% of overall SCHIP funding. Some Members may be concerned that the fund—which does not include provisions making additional payments contingent on enrolling the low-income children­ for which the program was designed—will therefore help to subsidize wealthier children in states which have expanded their programs to higher-income populations, diverting SCHIP funds from the program’s original purpose.

Performance Bonus Payments: The bill creates a new performance bonus payment mechanism to offset state costs associated with enrollment outreach and retention activities. States which increase coverage of eligible low-income children in Medicaid by at least 2% will be eligible for bonuses of up to 15% of each beneficiary’s projected costs, and states which exceed their targets for enrolling eligible children by at least 10% will become eligible for additional bonus payments of up to 62.5%.

Funding for the performance bonus system under the bill totals at least $3.3 billion, which would be increased by any allotments not obligated to the states or any state allotments not expended or redistributed to other states. State eligibility for the performance bonuses would remain contingent on states’ use of several practices designed to increase ease of enrollment, including continuous eligibility for at least 12 months, eliminating or liberalizing asset tests associated with enrollment applications, automatic administrative renewal, presumptive eligibility for children, and participation in the “Express Lane” process outlined below.

As there are no provisions linking payment of performance bonuses to the enrollment of low-income children, some Members may be concerned that these performance bonuses may provide an inducement to instead enroll children from wealthier families, diverting the program from its original intent. Some Members may also be concerned that the provision linking performance bonuses to the adoption of at least four so-called best practices for enrollment—including the “Express Lane” process—will provide a strong financial incentive for states not to scrutinize the eligibility of certain applicants.

Coverage of Pregnant Women: The bill adds new language permitting states to utilize SCHIP funding to cover low-income, pregnant women. The bill imposes several requirements on states seeking to use SCHIP funds to cover pregnant women, including a minimum eligibility threshold of at least 185% FPL (and not below the Medicaid eligibility threshold) for pregnant women only after covering all children under and 200% FPL without a waiting list or other enrollment cap to limit children’s participation in the program. The provision provides that children born to certain low-income pregnant women participating in SCHIP will automatically be enrolled in the program for the child’s first year.

Coverage of Childless Adults: The bill prohibits the Centers for Medicare and Medicaid Services (CMS) from approving further waivers to cover childless adults under the SCHIP program and phases out SCHIP coverage of childless adults. States requesting an extension will receive a waiver to cover childless adults for two years under SCHIP. The bill also allows states to apply for a Medicaid waiver to continue to cover childless adults but at the lower Medicaid matching rate instead of the enhanced SCHIP rate. Some Members may be concerned that the bill would permit the continued coverage of childless adults within SCHIP for at least two years—and for indefinite periods beyond that using the lower Medicaid match rate—diverting its focus from the targeted low-income children for whom it was created.

Coverage of Low-Income Parents: The bill also prohibits the issuance of new SCHIP waivers permitting the coverage of low-income parents and phases out parent coverage. States may request an automatic two-year extension to cover low-income parents, and may continue coverage of low-income parents through the length of the authorization legislation (i.e. until October 2013), provided the state does not increase its income eligibility thresholds for parent coverage. Some Members may be concerned that the bill would permit the continued coverage of low-income adults within SCHIP for at least five years, diverting its focus from the targeted low-income children for whom it was created.

Coverage of Higher-Income Children: The bill places certain restrictions on states’ matching rate for coverage of children in families with “effective family income” higher than 300% FPL—$63,600 for a family of four in 2008—to the lower Medicaid match rate, rather than the enhanced SCHIP federal match. Specifically, the bill would prohibit states from using a “general exclusion of a block of income that is not determined by type of expense or type of income.” This provision is designed to address an issue related by New Jersey’s SCHIP program, which disregards all income between 200-350% FPL for purposes of eligibility—thus making children in families with incomes up to $74,200 eligible for federal health benefits.

However, the bill expressly retains states’ ability to disregard unlimited amounts of income by type of income (i.e. salary, capital gains) or type of expense (i.e. disregard all housing-related expenses)—thus permitting states to continue to use “income disregards” effectively to ignore some or all of a family’s income for purposes of determining whether the family income falls below the 300% FPL threshold. And the bill grandfathers in states (i.e. New Jersey) that already have programs in place using blanket income disregards.

Some Members may be concerned first that this provision does not prohibit states from expanding their Medicaid programs to families with incomes above $64,000, and second that the provisions allowing continued use of “income disregards” will only encourage states to use such mechanisms to expand their SCHIP programs to wealthier families—rather than covering poor children first.

Crowd-Out Provisions: The bill does not contain provisions to reduce “crowd-out”—that is, individuals leaving private coverage in order to join a government program—included in both versions of SCHIP legislation (H.R. 976, H.R. 3963) in 2007. Those provisions included several studies about the extent to which crowd-out occurs within SCHIP, best practices on how to reduce crowd-out, and authority for the Secretary to reduce payments to states enrolling too many children above 300% FPL. Some Members may be concerned that removal of these provisions will remove the last disincentive for states to enroll large numbers of children in families with incomes above $64,000—and possibly well above that threshold.

According to the Congressional Budget Office, the bill would result in 2.4 million individuals dropping private health insurance coverage to enroll in government programs—a higher level of crowd-out in both number and percentage terms than the first SCHIP bill (H.R. 976) presented to President Bush in 2007.

Outreach and Enrollment Provisions: The bill includes $100 million in new mandatory funding for grants to various entities—including states, localities, elementary and secondary schools, and other non-profit or faith-based organizations—to conduct outreach and enrollment activities, including 10% for a national enrollment campaign and an additional 10% set-aside for the Indian Health Service. The bill also provides a minimum 75% Medicaid and SCHIP match for translation or interpretation services under the two programs.

“Express Lane” Enrollment Option: The bill permits states to use eligibility determinations from “Express Lane” agencies as a means to facilitate enrollment in Medicaid and SCHIP, including renewals and re-determinations of coverage. Agencies—including but not limited to those which determine eligibility for Temporary Assistance to Needy Families (TANF), food stamps, federal school lunch programs, Head Start, and federal housing assistance—may not deem children ineligible for coverage based solely on an initial adverse determination with respect to income eligibility.

Under the program, states may establish an income threshold 30 percentage points above the Medicaid or SCHIP eligibility limit (i.e. if the SCHIP eligibility limit is 300% FPL, the state may establish a threshold of 330% FPL for purposes of Express Lane determinations). States may also temporarily enroll children in SCHIP if the child in question “appears eligible” (criteria undefined) based on the Express Lane agency’s income determination, subject to a “prompt follow up” (time limit undefined) by the state as to whether or not the child actually qualifies. The bill also allows states to “initiate and determine eligibility” for Medicaid or SCHIP “without a program application from, or on behalf of” children based on data from other sources.

The bill provides for a annual sample audit of Express Lane cases to establish whether or not the eligibility determinations made comport with eligibility determinations made using the full Medicaid review process and provides for state remedial actions (and eventually payment reductions) if the error rate for such audits exceeds 3%. The bill sunsets the Express Lane option at the end of the authorization and includes $5 million for a report on its effectiveness.

Some Members may be concerned first that the streamlined verification processes outlined above will facilitate individuals who would not otherwise qualify for Medicaid or SCHIP, due either to their income or citizenship, to obtain federally-paid health benefits.

Citizenship Verification: Current law applies citizenship verification requirements differently to state SCHIP programs, depending upon the nature of the program. The BBA permitted states to establish separate SCHIP programs, utilize Medicaid expansions to cover eligible populations, or some combination of the two. The eight states and the District of Columbia that chose Medicaid expansions, along with Medicaid beneficiaries of the 24 states that chose combination programs, must comply with citizenship verification provisions enacted as part of the Deficit Reduction Act (DRA, P.L. 109-171) in 2006. These procedures—which include verification of citizenship and nationality by presenting any of a variety of documents (e.g. birth certificate, passport, etc.)—were prompted in part by a July 2005 Inspector General report, which found that 47 states (including the District of Columbia) often relied on an applicant’s self-attestation of citizenship to determine Medicaid eligibility and that 27 of these states undertook no effort to determine whether the self-attestation was accurate. Beneficiaries in the 18 states with separate SCHIP programs are not subject to the DRA verification requirements with respect to either citizenship or nationality.

The bill provides an alternative to the Medicaid citizenship verification process enacted in DRA—and extends this process to beneficiaries in stand-alone SCHIP programs—for children up to age 21 by allowing states to verify applicants’ citizenship through a name and Social Security number match. If the Social Security Administration finds an invalid match, the state must make “a reasonable effort to identify and address the causes of such invalid match;” in the event the state cannot resolve the discrepancy, it must dis-enroll the individual within 120 days, during which time the individual in question has 90 days to respond and present satisfactory evidence to resolve the mis-match.

States will be required to submit data for each applicant to determine the states’ invalid match rates, but errors will only include cases where the individual has been dis-enrolled by the state after having received SCHIP benefits. The bill provides that states with error rates above 3% will be required to pay back funds used to pay for ineligible individuals in excess of the 3% threshold—except that the Secretary may waive such a return requirement “if the state is unable to reach the allowable error rate despite a good faith effort.”

Some Members may echo the concerns of Social Security Commissioner Michael Astrue, who in a September 2007 letter stated that the verification process proposed in the bill would not keep ineligible individuals from receiving federal benefits—since many applicants would instead submit another person’s name and Social Security number to qualify. Some Members may believe the bill, by laying out a policy of “enroll and chase,” will permit ineligible individuals, including illegal aliens, to obtain federally-paid health coverage for at least four months during the course of the verification process. Finally, some Members may be concerned that the bill, by not taking remedial action against states for enrolling illegal aliens—which can be waived entirely at the Secretary’s discretion—until states’ error rate exceeds 3%, effectively allows states to provide benefits to illegal aliens.

Coverage of Legal Aliens: The bill would permit states to cover legal aliens in Medicaid and SCHIP programs without imposing the five-year waiting period for most legal aliens to receive federal welfare benefits established as part of the welfare reform law (P.L. 104-196) signed by President Clinton in 1996. For decades, Medicare has maintained a five-year residency requirement for legal aliens to obtain access to benefits; this waiting period was upheld by the Supreme Court in 1976, when Justice John Paul Stevens, writing for a unanimous Court in the case of Mathews v. Diaz, held that “it is obvious that Congress has no constitutional duty to provide all aliens with the welfare benefits provided to citizens.”

Some Members may be concerned that permitting states to cover legal aliens without imposing waiting periods will override the language of bipartisan welfare reform legislation passed by a Republican Congress and signed by a Democrat President, conflict with decades-long practices in other federally-sponsored entitlement health programs (i.e. Medicare), and encourage migrants to travel to the United States for the sole or primary purpose of receiving health benefits paid for by federal taxpayers.

Premium Assistance: The bill permits states to establish premium assistance programs—which provide state and federal funds to finance employer-sponsored health insurance. The bill provides that employers must pay at least 40% of premium costs in order for the policy to qualify for premium assistance but prohibits high-deductible policies associated with Health Savings Accounts (HSAs) from qualifying under any circumstances.

The bill changes the current premium assistance criteria within SCHIP, such that rather than requiring the cost of covering the entire family through the employer policy be less than the costs to enroll a child in government-run coverage, states should instead use an “apples-to-apples” comparison of the marginal costs of covering the applicable child (or children) when compared to enrolling the child in SCHIP. The bill also permits states to “wrap-around” coverage to supplement the employer policy if the latter does not meet appropriate SCHIP benchmark standards, and to establish a purchasing pool for small employers (i.e. those with fewer than 250 employees) with low-income workers to provide workers options to utilize premium assistance to enroll their families.

The bill requires states that have created premium assistance programs to inform SCHIP applicants of the program and includes provisions regarding coordination with employer coverage and outreach to workers to inform them of premium assistance. However, the bill does not require states to establish premium assistance programs. Some Members may therefore be concerned that the bill does not ensure that all children with access to employer-sponsored coverage will be able to maintain their current coverage.

Quality Measures: The bill requires CMS to develop an initial set of child health quality measures for state Medicaid and SCHIP programs, including those administered by managed care organizations, and establish programs allowing states to report such measures and disseminate information to the states on best practices. The bill includes further requirements for the Department to create a second pediatric quality measures program “to improve and strengthen the initial core child health care quality measures” and authorizes grants and contracts to develop and disseminate evidence-based quality care measures for children’s health.

The bill requires states to report annually on state-specific health quality measures adopted by their Medicaid and/or SCHIP plans and authorizes up to 10 grants for demonstration projects related to improved children’s health care and the promotion of health information technology. The bill also authorizes (subject to appropriation) $25 million for a demonstration project to reduce childhood obesity by awarding grants to eligible local governments, educational or public health institutions, or community-based organizations.

The bill establishes a program to develop a model electronic health record for Medicaid and SCHIP beneficiaries and authorizes a study on pediatric health quality measures. These and the other quality programs addressed above would be funded through mandatory appropriations totaling $45 million per fiscal year.

Lastly, the bill applies certain quality provisions to the managed care organizations with whom states contract to provide SCHIP benefits—including marketing restrictions, required disclosures to beneficiaries, and access and quality standards both for the managed care organizations and the state agencies overseeing them. The bill also requires a Government Accountability Office (GAO) study on whether the rates paid to SCHIP managed care plans are actuarially sound.

Enhanced Benefits: The bill requires state SCHIP plans to have access to dental benefits, and mandates that those dental plans resemble a) coverage provided to children under the Federal Employee Health Benefit Program (FEHBP), b) “a dental benefits plan that is offered and generally available to state employees,” or c) the largest commercially-available dental plan in the state based on the number of covered lives.

The bill includes language requiring mental health parity in state SCHIP benefits, specifically that “financial requirements and treatment limitations applicable to such…benefits” are no more restrictive than those applied to medical and surgical benefits covered by the plan and establishes a prospective payment system for federally qualified health centers receiving Medicaid reimbursements. The bill also requires that states impose a grace period of at least 30 days on beneficiaries for non-payment of any applicable premiums due before terminating the beneficiaries’ coverage; under current law, such premiums generally only apply to individuals with family incomes above 150% FPL.

Other Provisions: The bill includes language stating that “nothing in this Act allows federal payment for individuals who are not legal residents.” However, as noted above, the bill provisions allow states to verify SCHIP eligibility without document verification and provide no financial penalties to states enrolling illegal aliens until those errors (which in the case of “Express Lane” applications will be derived from sample audits, not scrutiny of each application) exceed 3%—and these penalties may be waived in the Secretary’s sole discretion.

The bill includes language prohibiting the Department of Health and Human Services from approving any new state Health Opportunity Account demonstrations under the program established in DRA. Some Members may be concerned that the prohibition on this innovative—and entirely voluntary—program for beneficiaries may hinder beneficiaries’ ability to choose the health plan that best meets their needs.

The bill would disregard any “significantly disproportionate employer pension or insurance fund contribution” when calculating a state’s per capita income for purposes of establishing the federal Medicaid matching percentage for that state. According to CMS, only one state would benefit from this provision—Michigan. The bill would also increase Disproportionate Share Hospital (DSH) allotments for Tennessee and Hawaii and would clarify the treatment of a regional medical center in such a manner that the Congressional Budget Office, in its score of the bill, identified the provision as specifically benefiting the Memphis Regional Medical Center. Some Members therefore may view these provisions as constituting authorizing earmarks.

Tobacco Tax Increase; Pay-Fors: The bill would increase by 61 cents—from 39 cents to $1—the federal per-pack tobacco tax and place similar increases on cigars, cigarette papers and tubes, and smokeless and pipe tobacco products. Some Members may be concerned that an increase in the tobacco tax, which is highly regressive, would place an undue and unnecessary burden on working families during an economic downturn and could encourage the production of counterfeit cigarettes by criminal organizations and other entities.

The bill would impose additional restrictions on so-called specialty hospitals by limiting the “whole hospital” exemption against physician self-referral. Specifically, the bill would only extend the exemption to facilities with a Medicare reimbursement arrangement in place as of January 1, 2009, such that any new specialty hospital—including those currently under development or construction—would not be eligible for the self-referral exemption. The bill would also place restrictions on the expansion of current specialty hospitals’ capacity, such that any existing specialty hospital would be unable to expand its facilities, except under limited circumstances. Given the advances which several specialty hospitals have made in increasing quality of care and decreasing patient infection rates, some Members may be concerned that these additional restrictions may impede the development of new innovations within the health care industry.

Lastly, the bill increases the percentage of payment of certain corporate estimated taxes in the last fiscal quarter of 2013 by 1%, and reduces the next applicable estimated tax payment in the first fiscal quarter of 2014 by a similar amount.

Cost: According to the Congressional Budget Office, the bill would increase direct spending by a total of $39.4 billion between Fiscal Year 2009 and Fiscal Year 2014, and $73.3 billion over the FY09-FY19 period. Most of the spending in the first five years of the budget window ($34.3 billion) would be derived from the SCHIP expansion; and Medicaid spending in the latter five years would rise, as the score notes that children enrolled in SCHIP would be shifted to the Medicaid program upon SCHIP’s expiration. However, both the Medicaid and SCHIP scores are contingent upon provisions in the bill cutting SCHIP spending from $17.4 billion in Fiscal Year 2013 to $6 billion in Fiscal Year 2014. To the extent that Members believe this 66% reduction in SCHIP expenses will not take place, they may be concerned that the funding “cliff” is a budgetary gimmick designed to mask the true costs of the bill’s expansion of health care benefits.

The Joint Committee on Taxation estimates that the increase in tobacco taxes would generate $38.8 billion through Fiscal Year 2014, and $72 billion from Fiscal Years 2009-2018. The bill also increases revenues by $1.6 billion through Fiscal Year 2018 as a result of individuals dropping private health insurance in order to enroll in the SCHIP program, as employees with group health insurance would have less of their income sheltered from payroll and income taxes.

The JCT score on the tobacco tax notes that the tax provisions would generate $7.2 billion in FY10 (the first full year the tax increase would take effect), but only $6.4 billion in Fiscal Year 2019—a decrease of more than 10%. Some Members may be concerned that expansions of the SCHIP program would rely on a declining source of revenue.

Health Care for Undocumented Immigrants

Background:  Data from this year’s Census Bureau report on the uninsured indicate that more than one-fifth—over 9.7 million—of the uninsured are foreign-born residents of the United States lacking American citizenship.  This category—which includes both legal residents not yet citizens as well as undocumented aliens—contains the highest percentage of uninsured Americans (43.8%) of any age, race, income, or other cohort included in the Census survey.[1]

While the Census Bureau reports do not contain specific data on the uninsurance rate among illegal immigrants, a 2005 study using data from the Los Angeles area provides some insight regarding this population.[2]  Extrapolating the 68% uninsured rate for aliens found in the Los Angeles study to a nationwide undocumented population of 12 million would yield approximately eight million uninsured—about one-sixth of the total number of uninsured Americans—who are illegally present.

Impact on Federal Programs:  In general, provisions in Title IV of the 1996 welfare reform law (P.L. 104-193) prohibit the provision of health care or other services to aliens illegally present in the United States.[3]  However, federal health care programs address the issue of verifying identity and nationality as a condition of providing care in various ways, while other programs attempt indirectly to offset the impact of uncompensated care for illegal aliens on health care providers.  The most important of these include:

Medicare:  Under Title XVIII of the Social Security Act, Medicare benefits are available to eligible citizens, as well as to legal aliens continually resident in the United States for at least five years prior to application for benefits.[4]  The five-year residency requirement was challenged on due process grounds, and eventually upheld by the Supreme Court in June 1976; Justice John Paul Stevens, writing for a unanimous Court, stated “it is obvious that Congress has no constitutional duty to provide all aliens with the welfare benefits provided to citizens.”[5]

The Social Security Administration (SSA) determines eligibility for Medicare benefits, including the process of verifying an applicant’s identity and citizenship (or legal resident status).  The standards used by SSA are found in federal regulations, and include evidence of age (e.g. birth certificate or hospital record), identity (e.g. driver’s license, school record, or other documents identifying an individual), and citizenship (e.g. birth certificate, passport, or certificate of naturalization).[6]

Medicaid:  Under the provisions of the welfare reform law, states may only receive federal Medicaid matching funds for legal U.S. citizens or qualified aliens (subject to a five-year waiting period in most cases.[7]  However, while the Medicaid statute has required since 1986 that applicants declare their nationality under penalty of perjury, until recently most states relied on self-attestation to verify citizenship status.[8]  A 2005 report by the Department of Health and Human Services Inspector General found that 40 states (including the District of Columbia) allowed self-declaration, with an additional seven states sometimes permitting self-declaration of citizenship status; of these 47 states, 27 did not verify the accuracy of the citizenship attestation.[9]

As a result of this report, Congress in the Deficit Reduction Act (DRA, P.L. 109-171) eliminated the ability of state Medicaid programs to rely on self-declarations by beneficiaries as the sole means of citizenship verification.  Specifically, Section 6036 of the Act requires states receiving federal Medicaid funds to verify participants’ identity and citizenship on the basis of appropriate documentation (e.g. passport, birth certificate, etc.).  The verification provisions do not apply to dual eligible (i.e. enrolled in both Medicare and Medicaid) beneficiaries, or to Medicaid beneficiaries receiving SSI benefits, as the Social Security Administration verifies the identities of these beneficiaries, as outlined above.

Shortly after the DRA provisions took effect, the Centers for Medicare and Medicaid Services (CMS) issued an interim final rule on July 12, 2006, using discretionary authority included in the DRA to expand the list of eligible documents that could be used to verify citizenship and/or identity, in order to ease the transition to the new verification regime.[10]  In addition, the Tax Relief and Health Care Act of 2006 (P.L. 109-432) exempted children in foster care from the DRA documentation provisions.  While the verification requirements were sharply criticized by some organizations at the time of their enactment, many conservatives may note the relative lack of controversy surrounding Medicaid verification two years after the provisions took effect as proof that citizenship verification can be implemented in an effective manner that ensures aliens do not have access to federal benefits while preserving existing programs for eligible individuals.

SCHIP:  Because of the hybrid nature of the State Children’s Health Insurance Program (SCHIP), only some children undergo citizenship verification as part of the application process.  The Balanced Budget Act of 1997 (P.L. 105-33), which created SCHIP, gave states the option to use SCHIP funds to expand their Medicaid programs, create a new program for SCHIP beneficiaries, or some combination of the two approaches.  The eight states (and the District of Columbia) which chose Medicaid expansion programs—as well as Medicaid participants in the 24 states with combination programs—are subject to the citizenship verification requirements enacted as part of DRA.[11]  However, the 18 states with separate SCHIP programs currently have no requirement to verify the identity and nationality of individuals before enrolling beneficiaries.

EMTALA:  Enacted in 1986 as part of the Combined Omnibus Budget Reconciliation Act (P.L. 99-272), the Emergency Medical Treatment and Active Labor Act (EMTALA) imposes requirements on hospitals accepting Medicare payments to treat patients in emergency conditions.  The Act’s requirements apply to all patients, regardless of their Medicare eligibility status, ability to pay, or immigration status.[12]  The Act also includes significant penalties: violations of EMTALA can result in fines of up to $50,000 and exclusion from the Medicare program in repeated or egregious cases, as well as lawsuits by patients adversely harmed by an EMTALA violation.

In recognition of the rising costs to providers associated with the EMTALA unfunded mandate, particularly as it relates to care for illegal aliens, Section 1011 of the Medicare Modernization Act (P.L. 108-173) provided a total of $1 billion in grants directly to providers (though on the basis of state-based formulae) for uncompensated emergency care given to illegal aliens—$250 million for each of Fiscal Years 2005 through 2008.

Community Health Centers:  Under the Public Health Service Act, the federal government provides competitive grants to federally qualified health centers, including migrant health centers.  In 2007, health centers treated 16.3 million patients, while the health centers grant program received $2.065 billion in the Fiscal Year 2008 omnibus appropriations bill (P.L. 110-161).[13]  Subsequent legislation passed in the House (H.R. 1343) and Senate (S. 901) would increase health center authorization levels to $15 billion over the FY09-FY13 period.

The statute authorizing the health centers grant program requires that care not be denied to patients based on an inability to pay for services.[14]  In addition, the Congressional Research Service reports that grant recipients are not required to verify the citizenship status of their patients.  Given that the authorizing statute is silent with respect to enforcing the prohibition against federal benefits being provided to illegal immigrants, some conservatives therefore may be concerned that federal tax dollars are being used to provide aliens with health care services.

Disproportionate Share Hospital (DSH) Payments:  While not providing care to illegal aliens, the section of the Medicaid statute related to DSH payments implicitly recognizes the impact this population can have on providers.  In particular, the statute deems hospitals with a low-income utilization rate of 25% as qualifying for DSH payments, without limiting the low-income population to citizens normally eligible for federally-funded care.[15]  As a result, states may allocate portions of their Medicaid DSH payments—estimated to total $8.8 billion in Fiscal Year 2008—to offset care provided by hospitals to illegal aliens.[16]

Legislative Proposals:  Much of the debate surrounding health care for aliens during the 110th Congress has focused on SCHIP reauthorization.  While many Democrats have attempted to use reauthorization as a vehicle to limit or repeal the Medicaid citizenship verification provisions enacted in DRA, many conservatives believe that a reauthorized SCHIP program should incorporate the Medicaid documentation requirements to improve the integrity of the program.

More specifically, H.R. 3162, passed by the House in July 2007, would make Medicaid citizenship verification a state option for children under 21, retroactive to the July 2006 effective date of the DRA provisions.  In addition, Section 112 of the bill would also establish “Express Lane” agencies to enroll beneficiaries in Medicaid and SCHIP, without including citizenship verification or documentation requirements; Section 136 would require states to conduct audits on a sample caseload to ensure that federal Medicaid and SCHIP funds “are not unlawfully spent” on illegal aliens.  Some conservatives may be concerned that the removal of the mandatory Medicaid verification language for children, along with the “Express Lane” provisions, would effectively undermine the important reforms enacted as part of DRA, and that sample audits would not be sufficient to ensure compliance with provisions of the 1996 welfare law cited above stating that no illegal alien may receive federal health or welfare benefits.

H.R. 3963, vetoed by the President in October 2007, would extend citizenship verification requirements to both the SCHIP program has a whole and the “Express Lane” mechanism outlined in H.R. 3162 above.  However, the bill would provide an alternative verification process to the DRA provisions that would instead rely upon name and Social Security number validation—a process which, according to a September 2007 letter from Social Security Administration Commissioner Michael Astrue, would not keep an applicant from fraudulently receiving coverage under Medicaid or SCHIP (if they claimed they were someone they were not).  Some conservatives may therefore be concerned that this provision—coupled with the incentive to states provided by a greatly enhanced federal match to establish this more lenient verification system—would weaken the process put in place by the Deficit Reduction Act.

Conversely, several proposed Republican SCHIP alternatives (H.R. 3176, H.R. 3888, and S. 2193) would apply the Medicaid citizenship verification requirements, as created by the DRA, to the SCHIP program, with an enhanced federal match for administrative costs.  Some conservatives would support the extension of the reasonable Medicaid DRA provisions to the SCHIP program, along with an enhanced administrative match to reimburse states for any increase in overhead costs associated with citizenship verification.

More recently, press reports indicate that the Democratic “Tri-Caucus” of Hispanic, Black, and Asian Members have written to Speaker Pelosi asking her to include provisions repealing the five-year waiting period for qualified aliens to become eligible for Medicaid or SCHIP coverage as part of any SCHIP bill considered by the House this fall.[17]  This change would alter provisions in the 1996 welfare reform law—which also prohibited illegal aliens from receiving federal benefits—that limited access to benefits for most “qualified aliens” for five years.[18]  Some conservatives may be concerned that this provision would increase costs while encouraging would-be immigrants to file claims for asylum in order to obtain federal health care coverage.

Implications for Comprehensive Health Reform:  In light of reports suggesting that illegal immigrants represent a significant—and fast-growing—component of the uninsured in America, some conservatives may focus on two elements necessary to address this issue in any comprehensive health care bill that may be considered.  First, consistent with the debate surrounding SCHIP legislation during this Congress, many conservatives may believe that any reform package must include provisions similar to those in the DRA that impose verification requirements for all applicants to preserve the integrity of federal programs and avoid providing incentives for illegal immigration.  For instance, while the Healthy Americans Act (S. 334) by Sen. Ron Wyden (D-OR) excludes access to new state-based health plans for illegal immigrants, it contains no enforcement or verification provisions to implement this restriction.

Secondly, some conservatives may be concerned about the impact which uncompensated care given to illegal immigrants may impose on providers, particularly hospitals.  The unfunded mandate created by EMTALA has a significant impact on providers treating illegal immigrants, who are less likely to have the health insurance necessary to pay catastrophic expenses.  The combination of DSH payments and the $1 billion uncompensated care fund created by MMA, scheduled to sunset at the end of the fiscal year, only partially defer the uncompensated care cost paid by providers who treat illegal aliens.

Consistent with the conservative concerns about uncompensated care is the relatively new phenomenon of lawsuits against hospitals initiated by illegal immigrants.  The New York Times recently reported on a case from Florida where a hospital, having provided $1.5 million in uncompensated care to a Guatemalan alien, asked for and obtained a court order to return the immigrant to Guatemala; no nursing home in the United States would accept an alien patient without insurance and ineligible for Medicaid, while the hospital could not release a patient with brain injuries into the general population without arranging post-discharge care.[19]  In a case with potentially far-reaching implications, relatives for the alien had the Florida court order reversed after deportation—and subsequently filed suit against the hospital for false imprisonment.

Though tragic on multiple levels, the Florida case highlights a reality a growing number of providers may face—offer virtually unlimited care to illegal aliens, even when an inability to pay is glaringly apparent, or face legal action initiated by the aliens or their caretakers.  Therefore, some conservatives may support actions designed to ensure that providers offering reasonable emergency care to illegal aliens need not be subjected to additional and costly lawsuits.

Conclusion:  The Census data breaking down the uninsured by citizenship and national origin, while not widely publicized, illustrate one reason why the concept of universal health insurance coverage may prove ineffective.  Democrat proposals for an individual mandate to purchase coverage would prove ineffective for this population, who by their very presence have already violated United States law.  Although the uninsured population is not limited to undocumented aliens, many conservatives may believe that a truly comprehensive solution to this health care issue must address the significant demands on the health care system placed by illegal immigrants in a way that preserves the fiscal integrity of existing entitlement programs while protecting providers from liability imposed upon them by aliens illegally present.

 

[1] “Income, Poverty, and Health Insurance Coverage in the United States: 2007” (Washington, Census Bureau, August 2008), available online at http://www.census.gov/prod/2008pubs/p60-235.pdf (accessed August 26, 2008), Table 6, p. 30.

[2] Dana Goldman, James Smith, and Neeraj Sood, “Legal Status and Health Insurance among Immigrants,” Health Affairs 24:6 (November/December 2005), 1640-1653.

[3] Illegal aliens are eligible for emergency care (as defined by the EMTALA statute discussed below) provided under Medicaid, and for public health assistance with respect to immunization for, and treatment of, communicable diseases.  Some groups of qualified aliens—excluding those illegally present—are eligible for other federal benefits, as discussed below.

[4] Available at 42 U.S.C. 1395o.

[5] Mathews v. Diaz, 426 U.S. 82 (1976).

[6] Some examples of documentation can be found at 20 CFR 422.107.  In addition, SSA’s Program Operations Manual System (POMS) includes guidelines for workers in SSA field offices; the section of the manual relating to citizenship, alien status, and residency can be found online at https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0200303000 (accessed August 25, 2008).

[7] According to the Kaiser Family Foundation, 17 states provide benefits funded solely by state dollars to illegal aliens and/or aliens subject to the waiting period.  See “Health Insurance Coverage and Access to Care for Low-Income Non-Citizen Adults,” (Washington, Kaiser Policy Brief #7651, June 2007), available online at http://www.kff.org/uninsured/upload/7651.pdf (accessed August 26, 2008), p. 3.

[8] The requirement is in Section 1137 of the Social Security Act, available at 42 U.S.C. 1320b-7(d)(1)(A).

[9] Daniel Levinson, “Self-Declaration of U.S. Citizenship for Medicaid,” (Washington, DC, HHS Office of the Inspector General, Report OEI-02-03-00190, July 2005), available online at http://oig.hhs.gov/oei/reports/oei-02-03-00190.pdf (accessed August 20, 2008), pp. 16-18.

[10] A final rule incorporating comments to the July 12, 2006 interim final rule was published in the Federal Register on July 13, 2007 and can be found online at http://edocket.access.gpo.gov/2007/pdf/07-3291.pdf (accessed August 20, 2008).

[11] A state-by-state breakdown of SCHIP program status can be found in Congressional Research Service, The State Children’s Health Insurance Program (SCHIP): An Overview, Report RL 30473, available online at http://www.congress.gov/erp/rl/pdf/RL30473.pdf (accessed August 21, 2008), Table 1, Column 1, pp. 18-21.

[12] The full EMTALA statute can be found at 42 U.S.C. 1395dd.

[13] Fiscal Year 2009 HHS Budget in Brief, available online at http://www.hhs.gov/budget/09budget/2009BudgetInBrief.pdf (accessed August 20, 2008), pp. 21-25.

[14] The statutory language is available at 42 U.S.C. 254b(k)(3)(G)(iii)(I).

[15] The definitions of Medicaid DSH institutions can be found at 42 U.S.C. 1396r-4(b).

[16] March 2008 CBO Medicaid baseline, available online at http://www.cbo.gov/budget/factsheets/2008b/medicaidBaseline.pdf (accessed August 20, 2008).

[17] Mike Soraghan, “Minority Caucuses to Press for Two SCHIP Provisions,” The Hill August 13, 2008, available online at http://thehill.com/leading-the-news/minority-caucuses-to-press-for-two-schip-provisions-2008-08-12.html (accessed August 21, 2008).

[18] Title IV of P.L. 104-193 did contain some exceptions to the “qualified alien” waiting period—most notably for legal permanent residents with a substantial work history (i.e. 40 qualifying quarters of Social Security coverage) and for those with a military connection (i.e. veterans, active-duty servicemen, and their spouses and dependents).

[19] Deborah Sontag, “Immigrants Facing Deportation by U.S. Hospitals,” New York Times August 3, 2008, available online at http://www.nytimes.com/2008/08/03/us/03deport.html?_r=1&sq=jimenez&st=cse&adxnnl=1&oref=slogin&scp=10&adxnnlx=1219331895-evIAEOYXEq2SKfB7dLGcEg&pagewanted=print (accessed August 21, 2008).

Question and Answer: SCHIP Legislation

The House will soon be faced with a vote to override the President’s veto on H.R. 3963, the Children’s Health Insurance Program Reauthorization Act of 2007, legislation which would reauthorize and expand the State Children’s Health Insurance Program (SCHIP), with several tax increases designed to partially offset the bill’s costs.

Does H.R. 3963 increase the scope of the SCHIP program?

Yes.  Under current law, states can cover families earning up to 200% of the Federal Poverty Level (FPL) or $41,300 for a family of four in 2007 or those at 50% above Medicaid eligibility.  As of 2010, H.R. 3963 increases the eligibility limit to 300% of FPL or $61,950 for a family of four while continuing the current authority for states to define and disregard (i.e. ignore) income.  As a result, H.R. 3963 places no practical limit on SCHIP eligibility since states can always manipulate the definition of income to expand coverage.  In addition, Section 116(g) of the bill overturns CMS’s current policy of requiring states to ensure that 95% of the eligible children in their state below 250% of FPL are enrolled before expanding coverage to higher incomes.

Does H.R. 3963’s increased spending violate the spirit of PAYGO?

Yes.  H.R. 3963 provides $35.4 billion over five years and $71.5 billion over ten years in new mandatory spending.  This new spending is only partially offset by tax increases on cigarettes of 61 cents to $1 per pack, and a cigar tax up to $3 per cigar, supposedly (see below) generating $35.5 billion over five years and $71.7 billion over ten years.  However, this CBO score overlooks a major gimmick which the bill employs to lower its costs.  The bill dramatically lowers the SCHIP funding in the fifth year by 80%, from $13.75 billion in the first six months to $1.75 billion.  In all likelihood, such a reduction will never take effect, which would make this an effort to generate unrealistic savings in order to artificially comply with PAYGO rules.

Does H.R. 3963 raise taxes?

Yes.  H.R. 3963 increases the cigarette tax by 61 cents to $1 per pack, and the cigar tax up to $3 per cigar.  Some conservatives may be concerned that the bill increases taxes on low-income individuals in order to pay for the expansion of SCHIP, which is designed to assist low-income families.  In addition, this revenue source is constantly declining as fewer and fewer individuals begin to smoke, since placing a tax on cigarettes will likely deter sales, leading some to question the efficacy of the offset.  According a study by the Heritage Foundation, “To produce the revenues that Congress needs to fund SCHIP expansion through such a tax would require 22.4 million new smokers by 2017.”

Will H.R. 3963 decrease private insurance participation in the market?

Yes.  Expanding SCHIP will generate a substantial shift away from the private health insurance market, by encouraging more and more children to obtain health care coverage from the federal government.  According to CBO, under H.R. 3963, two million children will shift from receiving private health insurance to government health insurance.  This means that they may get worse health care service and become increasingly dependent on the federal government.  In addition, as H.R. 3963 begins to reduce SCHIP funding in 2012, some note that states may shift these children who would be newly eligible for a government program into Medicaid.

Would H.R. 3963 bar illegal immigrants from receiving benefits?

No.  While H.R. 3963 states that “nothing in this Act allows Federal payment for individuals who are not legal residents,” the bill actually weakens existing law by removing the documentation requests under the Deficit Reduction Act (DRA), specifically the burden that citizens and nationals provide documentation proving their citizenship in order to be covered under Medicaid and SCHIP.  Instead, the bill would require that a name and Social Security number be provided as documentation of legal status to acquire coverage and that those names and Social Security numbers be submitted to the Secretary to be checked for validity.    It is unclear what substantive changes were made to the original bill the President vetoed (HR 976) beyond the cosmetic with regard to citizenship certification.  Some conservatives may remain concerned that a Social Security number and name are not sufficient for proof of citizenship.  For instance, according to a recent letter from Social Security Administration Commissioner Michael Astrue, a Social Security number would not keep someone from fraudulently receiving coverage under Medicaid or SCHIP (if they claimed they were someone they were not).

Does H.R. 3963 contain earmarks?

Yes.  H.R. 3963 contains at least three authorizing earmarks.  First, the bill disregards “extraordinary employer pensions” as income.  According to CMS, only one state would fall into this category—Michigan, due to the presence of many auto manufacturers.  In addition, the bill sets the disproportionate share hospital (DSH) allotments for Tennessee at $30 million a year beginning in FY 2008, and sets the DSH allotment increases for Hawaii beginning in FY 2009 and thereafter as the allotments for low DSH states.

Would H.R. 3963 encourage additional SCHIP spending?

Yes.  H.R. 3963 shortens from three to two years the amount of time a state has to spend its annual SCHIP allotment.  Under current law, states are given three years to spend each year’s original allotment, and at the end of the three-year period, any unused funds are redistributed to states that have exhausted their allotment or created a “shortfall,” i.e. commitments beyond the funding available.  In addition, the bill establishes a process through which any unspent funds would be redistributed to any states with a shortfall.  Some conservatives may be concerned that this process provides incentives both for states to spend their allotment quickly and to extend their programs beyond their regular allotments into shortfall, so as to be relieved by the unspent funds of other states.

Do conservatives support the SCHIP program?

Most conservatives support enrollment and funding of the SCHIP program for the populations for whom the SCHIP program was created.  That is why in December the House passed, by a 411—3 vote, legislation reauthorizing and extending the SCHIP program through March 2009.  That legislation included an additional $800 million in funding for states to ensure that all currently eligible children will continue to have access to state-based SCHIP coverage.

Legislative Bulletin: H.R. 3963, Children’s Health Insurnace Program Reauthorization Act

Order of Business:  Today the House will consider the President’s second veto of SCHIP legislation, H.R. 3963.  This bill passed the House by a vote of 265-142 on October 25, 2007, and was vetoed by President Bush on December 12, 2007.  On December 12, 2007, the House by a 211-180 vote postponed consideration of the President’s veto until today.

An earlier version of SCHIP legislation, H.R. 976, was vetoed by President Bush on October 3, 2007.  This bill was originally passed in the House by a vote of 265-159 on September 25, 2007.  On October 18, 2007, the House sustained the President’s veto of H.R. 976 by a vote of 273–156 (needing 2/3 to override a veto).

On December 19, 2007, the House passed by a 411—3 margin S. 2499, which was signed into law by President Bush on December 29, 2007.  This legislation reauthorized the SCHIP program through March 2009, and included $800 million in additional funding to ensure that all states would have sufficient funds to cover existing populations through the 18 months of the authorization.

Summary:  H.R. 3963 reauthorizes and significantly expands the State Children’s Health Insurance Program (SCHIP), while increasing cigarette taxes to supposedly offset the bill’s costs.  The legislation follows closely the recently-vetoed version of SCHIP reauthorization.  Highlights of the revised legislation are as follows:

Cost:  H.R. 3963 provides $35.4 billion over five years and $71.5 billion over ten years in new mandatory spending—this spending is on top of the $25 billion over five years that would result from a straight extension of the program.

The new spending is partially offset by increasing taxes on tobacco products (see below).  However, this CBO score overlooks a major gimmick which the bill employs to lower its costs.  The bill dramatically lowers the SCHIP funding in the fifth year by 84%, from $13.75 billion in the first six months to $1.15 billion.  In all likelihood, such a reduction would not actually take effect, which would make this a gimmick to generate unrealistic savings in order to comply with PAYGO rules.  To that end, H.R. 976 is technically compliant with PAYGO.

Block Grant:  Under current law, a federal block grant is awarded to states, and from the total annual appropriation, every state is allotted a portion for the year according to a statutory formula.  The bill extends the SCHIP block grants from FY 2008-12.  In addition, the bill also creates a new Child Enrollment Contingency Fund capped at 20% of the total annual appropriation, for states that exhaust their allotment by expanding coverage, and Performance Bonus Payments comprised of a $3 million lump sum in FY 2008 plus unspent SCHIP funds in future years.

Expansion to Higher Incomes:  Under current law, states can cover families earning up to 200% of the Federal Poverty Level (FPL) or $41,300 for a family of four in 2007 or those at 50% above Medicaid eligibility.  However, states have been able to “disregard” income with regard to eligibility for the program, meaning they can purposefully ignore various types of income in an effort to expand eligibility.  For instance, New Jersey covers up to 350% of FPL by disregarding any income from 200-350%, allowing them to cover beyond 200% with the enhanced federal matching funds that SCHIP provides.

H.R. 3963 increases the eligibility limit to 300% of FPL or $61,950 for a family of four but also continues the current authority for states to define and disregard income.  States which extend coverage beyond 300% of FPL would receive the lower Medicaid match rate.  The bill limits states from expanding their programs above 300% of FPL through an income disregard whereby they block “income that is not determined by type or expense or type of income.”  However, a state could get around this restriction in a host of ways by disregarding specific types of income, such as income paid for rent or transportation or food.  Practically speaking, H.R. 3963 still places no limit on SCHIP eligibility since states can still manipulate the definition of income to expand coverage, and CMS is limited in its ability to reject such determinations. [New Jersey would be grandfathered from this limitation until 2010, but they would then have to ensure that they are in the top ten of states with the highest coverage rate for low-income children.]

Furthermore, Section 116 overturns CMS’ current policy of requiring states to ensure that 95% of the eligible children in their state below 250% of FPL are enrolled before expanding coverage to higher incomes.  As a result, some conservatives may be concerned that this does not adequately ensure that SCHIP funding targets truly low-income children.

Unlike past legislation, the bill would not grandfather New York’s proposed plan (seeking to cover 400% of FPL or $82,600 for a family of four).  However, New York could merely use specific income disregards to effectively cover up to 400% of FPL.  Some conservatives may be concerned that a family with an income of $82,600 will still potentially be eligible for SCHIP funding after this bill is enacted.

Childless Adults:  The earlier bill phased adults off of the program within two years.  H.R. 3963 would remove childless adults from the program (all would be off by 2009), while allowing parents of eligible SCHIP kids to continue receiving healthcare under SCHIP.  According to CBO estimates, there will still be approximately 700,000 (roughly 10% of total SCHIP enrollees) adults (parents of eligible kids and pregnant women) enrolled in SCHIP by 2012.

H.R. 3963 states that no new waivers for non-pregnant childless adults will be granted to states, and any currently existing waivers will be extended through FY 2008 (terminating such waivers at the end of FY 2008).  H.R. 3963 states that any current state waiver for non-pregnant childless adults which expires before January 1, 2009 may be extended until December 31, 2008 to retain all currently covered non-pregnant childless adults on the program until the end of FY 2008.  The bill extends enhanced FMAP to apply to such waivers through December 31, 2008.

H.R. 3963 grants states the opportunity to apply for a Medicaid waiver for non-pregnant childless adults by September 30, 2008, for those whose SCHIP coverage will end December 31, 2008, and requires that the Secretary approve such waivers within 90 days or the application is automatically deemed approved.

Parents:  The bill provides a two year transition period and automatic extension at the state’s discretion through FY 2009 for the currently covered parents of SCHIP eligible/covered kids, and states that no new waivers be granted or renewed to states to cover the parents of SCHIP kids if such waivers do not currently exist.  Similar to what would be done with non-pregnant childless adults, H.R. 3963 states that any current state waiver for parents of SCHIP kids which expires before October 1, 2009 may be extended until September 30, 2009 to retain all currently covered parents on the program until the end of FY 2009.  The bill states that the enhanced FMAP shall apply to these expenditures under an existing waiver for parents of eligible SCHIP kids during FY 2008 and 2009.

H.R. 3963 requires that any state which provides coverage under a currently existing waiver for a parent of an SCHIP child may continue to provide such coverage through FY 2010, 2011, or 2012, but such coverage must be paid for by a block grant funded from the state allotment.  If the state makes the decision to continue the coverage of parents through 2012, the Secretary may set aside for the state for each fiscal year an amount equivalent to the federal share of 110% of the state’s projected expenditures under currently existing waivers.  The Secretary will then pay out such funds quarterly to the state.  States that enhanced FMAP only applies in fiscal year 2010 for states with “significant child outreach or that achieve child coverage benchmarks.”

In addition, H.R. 3963 retains the statement from H.R. 976 that states there shall be no increase in income eligibility level for covered parents (i.e. no expenditures for providing child health assistance or health benefits coverage to a parent of a “targeted low-income child” whose family income exceeds the income eligibility level applied under the applicable existing waiver).

Private Insurance Crowd-Out:  According to CBO, under H.R. 3963, 2 million children will still shift from receiving private health insurance to government health insurance.  This means that they may get worse health care service and become increasingly dependent on the federal government.  In addition, as H.R. 3963 begins to reduce SCHIP funding in 2012 (if such a reduction is actually intended, see above), some have noted that states may shift these children made newly eligible for a government program into Medicaid.  This phenomenon takes place despite a provision in H.R. 3963 to offer a premium assistance subsidy under SCHIP for employer-sponsored coverage.  A qualifying employer-sponsored plan would have to contribute at least 40 percent of the cost of any premium toward coverage.  The bill includes new language requiring the Secretary, in consultation with the states, to measure crowd-out and to develop best practices designed to limit it.  States would then be required to limit SCHIP crowd-out and incorporate those best practices.  However, many conservatives are likely to be concerned that this language is not enough of protection when CBO maintains that two million will lose their health insurance under this bill.

Legal Immigrants and Citizenship Certification:  H.R. 3963 states that “nothing in this Act allows Federal payment for individuals who are not legal residents.”  However, the bill weakens existing law by removing the documentation requests under the Deficit Reduction Act (DRA), specifically the burden that citizens and nationals provide documentation proving their citizenship in order to be covered under Medicaid and SCHIP.  Instead, the bill would require that a name and Social Security number be provided as documentation of legal status to acquire coverage and that those names and Social Security numbers be submitted to the Secretary to be checked for validity.  If a state is notified that a name and Social Security number do not match, the state must contact the individual and request that within 90 days the individual present satisfactory documentation to prove legal status.  During this time, coverage for the individual continues.  If the individual does not provide documentation within 90 days, he is “disenrolled” from the program but maintains coverage for another 30 days (after the 90 days given to come up with proper documentation), giving the individual up to four months of coverage on a false identity.

It is unclear what substantive changes were made to the vetoed bill beyond the cosmetic, with regard to citizenship certification.  Some conservatives may be concerned that a Social Security number and name are not enough for a proof of citizenship and that more documents should be required to determine eligibility.  For instance, according to a recent letter from Social Security Administration Commissioner Michael Astrue, a Social Security number would not keep someone from fraudulently receiving coverage under Medicaid or SCHIP (if they claimed they were someone they were not).  Thus, this bill may allow illegal aliens the opportunity to enroll falsely in Medicaid or SCHIP and retain coverage for an undetermined amount of time before they are disenrolled for lack of proper identification.

Tax Increase:  H.R. 3963 increases the cigarette tax by 61 cents to $1 per pack, and the cigar tax up to $3 per cigar, supposedly generating $35.5 billion over five years and $71.1 billion over ten years.  It is important to note that this is a substantial tax increase on low-income individuals in order to pay for an expansion of SCHIP to higher income levels, which it was not initially designed for.  In addition, this revenue source is constantly declining as fewer and fewer individuals smoke, and since placing a tax on cigarettes will likely deter sales, some have questioned the efficacy of the offset.  According to a study by the Heritage Foundation, “To produce the revenues that Congress needs to fund SCHIP expansion through such a tax would require 22.4 million new smokers by 2017.”  The bill also changes the timing for some corporate estimate tax payments.

Encourages Spending:  H.R. 3963 shortens from three to two years the amount of time a state has to spend its annual SCHIP allotment.  Under current law, states are given three years to spend each year’s original allotment, and at the end of the three-year period, any unused funds are redistributed to states that have exhausted their allotment or created a “shortfall,” i.e. making commitments beyond the funding it has available.  In addition, the bill establishes a process through which any unspent funds would be redistributed to any states with a shortfall.  Some conservatives may be concerned that this process provides incentives both for states to spend their allotment quickly and to extend their programs beyond their regular allotments into shortfall, so as to be relieved by the unspent funds of other states or the new Contingency Fund.

Other Provisions:

  • Disregarding of Pension Contributions as Income.  The bill disregards “extraordinary employer pensions” as income.  According to CMS, only one state would fall into this category—Michigan, due to the auto manufacturers.  Some conservatives may view this as an authorizing earmark.
  •  Name Change.  H.R. 3963 renames the program the “Children’s Health Insurance Program.”
     
  • Medicaid Disproportionate Share Hospital (DSH) Allotment for TN and HI.  The bill sets the DSH allotments for Tennessee at $30 million a year beginning in FY 2008, and sets the DSH allotment increases for Hawaii, beginning in FY 2009 and thereafter, as the allotments for low DSH states.  Some conservatives may view these provisions as authorizing earmarks.
  • Premium Assistance and Health Savings Accounts.  The bill streamlines procedures for states to provide premium assistance subsidies for children eligible to enroll in employer-sponsored coverage, rather than placing such children in a state-sponsored SCHIP program.  However, all high-deductible health insurance plans and Health Savings Accounts (HSAs) would be ineligible for premium assistance, even if employers and/or states chose to make cash contributions to the HSA up to the full amount of the plan’s high deductible.  Some conservatives may be concerned that these restrictions would undermine the recent growth of HSAs and consumer-driven health care plans.

Does the Bill Expand the Size and Scope of the Federal Government?:  Yes, the bill would expand the SCHIP program by $35 billion over five years and loosen the program’s eligibility requirements.

Does the Bill Contain Any New State-Government, Local-Government, or Private-Sector Mandates?:  A detailed CBO cost estimate with such information is not available.