Indian Health Service Scandal Shows Problems of Government-Run Care

As if voters didn’t have enough reasons to question government-run health care, the Wall Street Journal provided yet another last week. The paper ran a lengthy expose highlighting numerous cases of doctors previously accused of negligence receiving “second chances” in the government-run Indian Health Service (IHS), resulting in incidents wherein at least 66 patients died in IHS care.

Earlier this year, the Journal ran a separate investigative article explaining how the Indian Health Service repeatedly ignored warnings about a physician accused of sexually abusing patients, moving him from hospital to hospital. Together, these articles describe a broken culture within the Indian Health Service, demonstrating how government-run health systems provide poor-quality care, often harming rather than helping vulnerable patients.

Examples of Negligent Physicians Harming Patients

The Journal examined records from the Treasury’s Judgment Fund, which pays awards in malpractice cases wherein the federal government — in this case, the Indian Health Service — functions as the defendant. The reporters then cross-referenced the physicians involved in those cases with prior malpractice cases and disciplinary actions taken prior to the doctors joining the IHS. The results should shock patients:

  • A doctor “thrust into medical exile” after five medical malpractice settlements in five years, including a rejection by a Nevada licensing board, ended up finding work in the Indian Health Service, where the federal government had to pay an additional five malpractice claims on his behalf. The physician, who had previously left a sponge inside a patient’s breast (among other incidents) before going to work with the Indian Health Service, gashed an IHS patient’s bile duct, causing four liters of digestive fluid to leak into her abdomen and sending her into septic shock.
  • An obstetrician with a history of five malpractice settlements totaling $2.7 million, and sanctions from the California medical board stemming from a patient who bled to death following a caesarean section, found employment in the Indian Health Service. A year after his hire, a baby died in the womb because this doctor failed to treat his mother’s high blood pressure. IHS officials later concluded that the doctor’s history “forshadow[ed] the tragic events that transpired in October 2017.” The physician admitted to the Journal, “I just did not address patients’ primary medical needs in a satisfactory way.” But he still applied for and received a position with the IHS.
  • A surgeon sued for malpractice 11 times over an eight-year period while living in Pennsylvania later got a job with the Indian Health Service in New Mexico. There he “allegedly cut a tube connecting a patient’s liver to his stomach and punctured the man’s intestines during a 2008 gallbladder surgery.” The patient later died.
  • A physician disciplined in both Florida and New York for prescribing pain pills for her boyfriend — up to 1,350 oxycodone pills in a single day — was hired by the Indian Health Service because she had a “clean” medical license in Pennsylvania. While working for the IHS, she sent a patient complaining of dizziness home with a diagnosis of pink-eye. Days later, the patient suffered a stroke that has left him confined to a wheelchair and unable to speak. The federal government settled the subsequent malpractice case for $1 million because “hospital officials said in interviews that the doctor’s background made the case hard to defend.”
  • Another surgeon with nearly a dozen malpractice suits and a suspension for sexually abusing a patient during an exam received a job with the Indian Health Service. During his time as an IHS employee, the federal government paid a judgment exceeding $600,000 “over a colostomy the doctor performed that spilled fecal matter under a patient’s skin” and a $500,000 settlement for a botched hernia repair.
  • An obstetrician with at least seven reports in the National Practitioner Data Bank, including North Carolina sanctions over a potential sexual relationship with a patient, got a job with the Indian Health Service. In 2013, the doctor “struggled to deliver a baby” at an IHS facility. The baby developed an irregular heartbeat and died. The federal government paid a $900,000 malpractice claim because “a medical board reprimand later said [the doctor] should have resorted to a [caesarean] section ‘hours earlier.’”
  • A surgeon who lost his medical license in Illinois for “gross negligence” got another chance at a New Mexico IHS facility. “Two months after he arrived as the [IHS] hospital’s chief of surgery, he allegedly punctured a patient’s intestines during a surgery.” The patient ended up needing a dozen surgeries — which she wisely obtained outside the Indian Health Service — and a four-month hospital stay to recover.

Bureaucratic Nightmares

The Journal article also explained the circumstances by which all these physicians with histories of multiple malpractice claims or disciplinary actions came to work in the Indian Health Service. First, while the agency’s policies require hiring managers to consult the National Practitioner Data Bank for a physician’s history of malpractice claims or sanctions, the IHS does not monitor compliance with that requirement.

In one case, the CEO of a hospital who fired a surgeon for negligence said she “encourag[ed] him to consider another field of medicine than surgery.” However, the CEO didn’t know the surgeon had ended up practicing at an IHS facility until the Journal contacted her — because IHS apparently failed to investigate the surgeon’s history before hiring him.

Second, the federal government covers physicians’ malpractice claims through the Treasury’s Judgment Fund (the way the Journal reporters researched the hysicians’ history). Because IHS doctors don’t need to pay for malpractice insurance themselves — what one survey of IHS physicians considered the top benefit of working at the agency — it has become an effective “dumping ground” for physicians whose history of prior malpractice claims means they cannot obtain insurance on their own. IHS patients and federal taxpayers often end up paying the price, both literally and figuratively.

Poor Reimbursements Equal Poor Care

One former IHS official admitted that hiring managers have to make compromises when hiring physicians: “You get three candidates who come through and they all seem not great. But what you do is choose the lesser of three evils.” Hiring those “lesser evils” led to disastrous and often fatal consequences for dozens upon dozens of Indian Health Service patients.

Sen. Elizabeth Warren, D-Mass., says she wants to extend government-run health care to the rest of the United States. But rather than apologizing to Native Americans for DNA tests, she should instead apologize for the horrid conditions within the Indian Health Service, promise to replace that broken system with something that works, and vow not to wreak on the rest of the American health-care system the kind of havoc Native populations have faced for years.

This post was originally published at The Federalist.

Who’s Responsible for the Shutdown?

All around the country, Americans are asking one question: Who’s responsible for the shutdown? And no, we’re not talking about the government slowdown—we’re talking about the Obamacare shutdown.

All claims to the contrary, Obamacare has been effectively shut down—people are running into roadblocks and error messages when trying to enroll in plans. And the New York Times this morning explains that one of the major problems in getting exchanges to work has been a database created by the federal government:

One bottleneck identified by state officials on Wednesday seemed to be occurring when state-run exchanges communicate with the federal data “hub” to verify a person’s citizenship, identity and income through agencies like the Internal Revenue Service and the Department of Homeland Security.

About 18,000 people had created accounts on Nevada’s exchange by midafternoon Wednesday, said C. J. Bawden, a spokesman. But he said processing was slowed by trouble communicating with the federal system to establish their identity and eligibility, one of the last steps in the process. Minnesota officials also reported problems with the identity checking process. “We have it corrected as of now, but it was a federal-side problem,” Mr. Bawden said.

In other words, both state-based and federally run exchanges can’t function properly, because the federal government dropped the ball in creating a technically competent database.

The data hub brings with it other concerns, over and above the current inability for applicants to enroll in plans. Because the hub links to many government databases containing Social Security, tax, and other sensitive personal data, a breach of the hub could lead to identity theft and other frauds.

Given the rushed implementation process, and the federal government’s poor track record when it comes to cybersecurity, many Americans should be worried that the data hub’s initial problems may represent the tip of the iceberg.

Despite the fact that Obamacare seems to be doing a good job of collapsing under its own weight, Congress should still act to prevent any more federal taxpayer dollars from being used to implement this inherently unworkable law—and to keep taxpayers’ information safe.

This post was originally published at The Daily Signal.

Obamacare: Written in Secret, Implemented in Secret

A feature article in yesterday’s New York Times profiled Obama Administration efforts to create a federal Obamacare exchange.  The article explores the massive secrecy behind the federal Exchange, and contrasts the transparency requirements imposed on state-based Exchanges with the non-transparency of HHS officials creating a federal Exchange:

Mr. Hash, the director of the federal Office of Health Reform, said the federal exchanges “will operate essentially in the same manner as the state-based exchanges.”  However, they differ in a significant way.  States have done their work in public, but planning for the federal exchanges has been done almost entirely behind closed doors….

The 2010 health care law says that if a state runs its own exchange, it must “consult with stakeholders,” including consumers and small businesses.  Subsequent rules go further, requiring states to consult health care providers, insurers, agents and brokers.  Kathleen Sebelius, the secretary of health and human services, has repeatedly emphasized that “states have to meet a standard of transparency and accountability.”  A state exchange must have “a clearly defined governing board,” and the board must hold regular public meetings.

States as diverse as California, Minnesota, Mississippi and Nevada have Web sites where they post documents laying the groundwork for exchanges.  The documents include minutes of public meetings, cost estimates and information about contracts for goods and services.

By contrast, federal officials have disclosed little about their plans, are vague about the financing of the federal exchanges and have refused even to divulge the “request for proposals” circulated to advertising agencies.  The federal government requires a state exchange to develop a budget, with “expected operating costs, revenues and expenditures.”  States must explain how the revenue will be generated and how the exchange will address “any financial deficits.”  Administration officials have not set forth a budget for the federal exchanges.  They said they intended to charge “user fees” to the participating health insurance plans, but it is unclear whether the fees are subject to approval by Congress or whether insurers could pass the costs on to consumers.

Because the Obama Administration is once again using a “Do as I Say, Not as I Do” mentality with respect to transparency – imposing requirements on states that the federal government itself refuses to follow – business owners told the Times that “nobody has any idea what the federal exchange will look like.”  This lack of transparency increases uncertainty for businesses, states, and individuals, which will only make the law that much less effective.

Candidate Obama said he would televise all health care negotiations on C-SPAN, but the process leading up to Obamacare was plagued with notorious backroom deals.  Unfortunately, yesterday’s New York Times story highlights how, after using backroom deals to create Obamacare, the Administration is once again retreating behind closed doors to implement the 2700-page law.

Waiver Wire: Over Half of Obamacare Waiver Recipients Union Members

Late Friday afternoon the Administration engaged in another “document dump,” announcing the approval of another 221 waivers of annual and lifetime limit requirements included in the health care law, bringing the total to 1,372. (A full list is available here.)  The plans newly approved for waivers cover more than 160,000 people, bringing to nearly 3.1 million the number of individuals in plans exempted from the health law’s requirements.  Of the participants receiving waivers, more than half – over 1.55 million – are in union plans, raising questions of why such a disproportionate share of union members are receiving waivers from the law’s requirementsThe percentage of participants receiving waivers that come from unions also continues to rise – the number was 48% in April, and 45% in March.

On a related note, the Administration also granted waivers to New Hampshire and Nevada regarding the medical loss ratio requirements in the health care law, on top of the waiver already granted to Maine.  Another eight states still have their own waiver applications pending before HHS. (Just to clarify, the medical loss ratio waivers are separate and distinct from the annual and lifetime limit waivers – it is however confusing to keep all of Obamacare’s various waiver programs straight.)

Both these developments again raise the question:  If the law is so popular, and the “consumer protections” so beneficial, then why do plans need to be exempted from them in the first place?

What You Missed Over the Break…

In case you were out for some or all of the recess, I’ve compiled a “Dirty Dozen” list of important stories you may have missed since the Senate adjourned at the end of September:

Health Care Law an Election Loser for Democrats:  This month’s Kaiser Family Foundation tracking poll found that a 56% majority of actual voters in the midterm elections supported full or partial repeal of the health care law – an advantage of 20 points over those who want the legislation maintained or strengthened (total of 36%).  Last week House Majority Whip Jim Clyburn admitted the Democrats “got in the place that we’re in” – the smallest number of Democrat House Members in over 60 years – because of the health care law.  However, President Obama in a post-election news conference said he did not want to “re-litigate arguments made over the last two years” despite the law’s continued unpopularity, and the self-described “shellacking” his party received.

Florida Lawsuit Moves Forward:  In Florida, federal district judge Roger Vinson rejected the government’s motion to dismiss the multi-state lawsuit; numerous parties moved to file amicus curiae briefs last week, and arguments on the merits are expected to take place before year’s end.  Vinson’s ruling explicitly rejected the notion of the individual mandate penalty as a tax, citing a textual analysis of the legislation; he rejected the “Alice in Wonderland” reasoning that would allow the mandate to be enforced by a “penalty” at the time the legislation was being voted on, only to retrospectively be characterized as a tax.  This same issue prompted a Virginia judge in a separate lawsuit to question whether Democrats were “trying to deceive the people” by claiming both sides of the argument.  A New York Times  editorial however endorsed the mandate as constitutional under the taxing power – despite the President’s September 2009 comments “absolutely” rejecting the mandate as a tax increase – under the apparent belief that politicians’ claims “in the heat of political battle” can mislead the public.

More News on Higher Premiums:  Stories about higher premiums continued to proliferate.  One consulting firm found an average 8 percent increase this year, while in the Atlanta area, premium increases will hit a five-year high, as rates “are projected to spike 8.7 percent in 2011, compared with a 5.7 percent increase this year.”  One large Atlanta employer found that the law “is expected to add about $25 million to the 1800-employee company’s health care costs by 2014”—an increase of nearly $3500 per employee per year.  Another customer in Washington state complained his “rates went through the roof” as a result of the law after receiving notice of a near-tripling of his premiums.  Meanwhile, an Administration official claimed that “If you have a premium increase of less than 5 percent, I don’t think that’s really a significant increase in premiums,” even though President Obama promised to lower premiums by $2,500 for an average family during his campaign.

More News on Job Losses:  In Pennsylvania, the CEO of Mercy Hospital claimed on television that his organization was putting up their three hospital facilities for sale and that the new health law “absolutely” played a role in the decision.  In Indiana, Memorial Hospital in South Bend announced it would be cutting about fifty jobs due to the health care overhaul, and specifically the low reimbursement rates included in the law’s Medicaid expansion.  Over and above these direct job losses as a result of the legislation, the President of the New York Fed was quoted as saying the health law will cause “uncertainty” which will cause “people to be more cautious in terms of their behavior” – further dragging down a struggling economy.

Medicare Advantage Benefits to be Cut – Despite Administration’s Misinformation:  Medicare actuary Rick Foster released a letter requested by Senate Republicans outlining the cuts to extra benefits in Medicare Advantage as a result of the health care law.  The actuary predicted that for seniors in MA plans, out-of-pocket expenses will rise as a result of the law by $346 this year, and $873 in 2019.  The analysis came shortly after CMS released data confirming that 1.2 million seniors will have to find a new Medicare Advantage or Part D plan for the coming year.  Despite these facts, HHS Secretary Sebelius at first claimed – wrongly – that seniors will have more choices among Medicare Advantage plans this year; however, she was later forced to retract her statement following an inquiry from Sen. Grassley about alleged “misinformation” by the Administration.

Will Employers Drop Coverage?  Outgoing Tennessee Governor Phil Bredesen, a Democrat, sparked controversy with a Wall Street Journal op-ed in which he argued that many employers would drop coverage once federal Exchanges and insurance subsidies are up and running – greatly raising the expected federal spending on the health care law.  His article was followed by Associated Press has a story noting that “corporate number crunchers are looking at options that could lead to major changes” in health insurance plans for workers; one consultant was quoted in the AP piece as saying that “if the intent was to find an exit strategy for providing benefits…the bill as written provides the mechanism.”  At the same time, the HR Policy Association released a survey in which nearly one in five (19%) chief HR officers said their firms were not likely to offer coverage in 2020, with another 47% unsure about their company’s continued involvement in health insurance.

Berwick to Testify – Finally:  Finance Committee Chairman Baucus last week announced a hearing featuring Dr. Donald Berwick scheduled for this coming Wednesday – the first appearance for Berwick before Congress since President Obama gave him a controversial recess appointment to head the Centers for Medicare and Medicaid Services back in July.  While for months House and Senate Republicans have sent Democrats numerous letters requesting Dr. Berwick’s testimony, the majority decided not to allow Dr. Berwick to appear before Congress until after the midterm elections.

Rationing within Medicare?  The Washington Post included an article about an “unusual review to determine whether the government should pay for an expensive new vaccine for treating prostate cancer, rekindling debate over whether some therapies are too costly.”  The review revolves around the life-extending drug Provenge, which some argue does not extend life long enough to be worth its cost.  Several of the quotes in the story – explaining that the drug is effective in treating disease, but “too expensive” for Medicare to fund – closely resemble the arguments made by Britain’s National Health Service, whose rationing body last week rejected coverage of the cancer drug Avastin on cost grounds.  (The FDA is still considering its own separate review of Avastin for treating breast cancer here in the States; a previous Washington Post article noted that the review should not consider cost issues – but if the FDA revokes its approval, Medicare will stop paying for the drug.)

AARP Employees to Have Buyer’s Remorse over Health Law?  The Associated Press reported on how the health care overhaul will impact AARP’s employees – by raising their co-payments and deductibles.  Specifically, AARP noted in an e-mail to employees that “plan changes were necessary…to ensure that AARP’s plans fall below the threshold for high-cost group plans under health care reform.”  The organization also noted that “AARP intends to make similar changes as necessary in the future to avoid the [Cadillac] tax.”  Some may question why the organization needed to protect its employees from the Cadillac tax on platinum insurance plans to begin with, and ask whether poor seniors are paying “kickbacks” to AARP so its employees can receive extravagant health benefits that seniors themselves cannot obtain through traditional Medicare.

NAIC Finishes MLR Recommendations; Employers to Get Waivers – For Now:  The National Association of Insurance Commissioners submitted its recommendations regarding medical loss ratios to HHS.  In its recommendations, the full NAIC left unchanged earlier determinations requiring carriers to meet MLR thresholds on a state-by-state basis, including broker fees as an administrative expense, and leaving intact a narrower flexibility adjustment for smaller insurers.  HHS has not yet released its “certification” of the NAIC recommendations, but guidance released last week indicates that, in response to press reports that McDonald’s and other employers may drop their limited benefit coverage offerings next year absent an MLR waiver, HHS will consider requests for exemptions favorably – but will re-evaluate this policy after only one year, leaving open the question of whether these plans can continue after 2011.  Also of note: Former NAIC Chair Sandy Praeger told Politico that as a result of the regulations, “There will be some companies that I think will decide, they have a very small book of business in a state and they’ll decide maybe it’s not worthwhile to stay in the state.”

Democrat Concerns about Medicaid Expansion:  Last week, Montana’s Democrat Governor Brian Schweitzer made public his concerns about the health care law’s impact in his state, noting that “there are only three states that will increase the number of people on Medicaid at a faster rate than Montana, thanks to the new health care bill” and that he wanted to make sure his state would “not be like 48 other states – broke.”  His comments came after Rory Reid – son of Majority Leader Harry Reid – noted in a Nevada gubernatorial debate that “there is potential for [the law] to put significant pressure on states because Medicaid rates could go up significantly” – at a time when many states, including Nevada, are struggling to maintain their existing Medicaid programs.  Those ongoing fiscal pressures, which the health care law is likely to increase, have prompted reports that Texas may consider dropping out of the Medicaid program entirely.

Democrat Disarray on 1099 Reporting:  Finance Committee Chairman Baucus announced late last week he would be introducing legislation providing for a full repeal of the new 1099 small business paperwork mandate included in the health care law; bill text has not been released, nor details regarding whether the repeal bill will be paid for by other new tax increases elsewhere.  Most Senate Democrats had previously argued that the new paperwork mandate should be scaled back but not eliminated entirely.  Separately, Speaker Pelosi claimed in a post-election interview that the 1099 paperwork mandate “was a Senate provision.  We didn’t like it in the House” – even though she included a verbatim version of the mandate in Section 553 of the House-passed health care bill (H.R. 3962).

HHS Corrects the Record on Medicare Advantage; Reid vs. Reid on Medicaid

To follow up on Senator Grassley’s letter to Secretary Sebelius yesterday, Politico reports this morning that the Department of Health and Human Services has corrected its website account of the Secretary’s speech to AARP last week.  Instead of stating that “there will be more Medicare Advantage plans to choose from” – a factually incorrect statement, given CMS’ efforts to reduce the number of plans for 2011 – the website was amended to read that “there will be more meaningful choices.”  The revision comes nearly a month after the Secretary wrote to insurers objecting to their “misinformation” regarding premium increases as a result of the health law.

Separately, The Hill noted that in last night’s Nevada gubernatorial debate, Rory Reid – son of Majority Leader Harry Reid – expressed his own concerns about the health care law’s impact on Nevada.  Specifically, the junior Reid noted that “there is potential for [the law] to put significant pressure on states because Medicaid rates could go up significantly” – at a time when many states, including Nevada, are struggling to maintain their existing Medicaid programs.

Higher Premiums — And the Reasons for Them

The Wall Street Journal has a front-page article this morning outlining insurers’ plans to raise premiums as a specific consequence of the health law’s passage.  While Democrats have trumpeted the various consumer benefits taking effect on September 23, the article notes that insurance companies have informed state regulators “it is those very provisions that are forcing them to increase rates.”  For instance, Aetna attributed increases of 5-7% in California and Nevada to the extra benefits, and “in Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.”

A detailed look at last week’s Kaiser Family Foundation study of employer-provided health insurance offered in 2010 gives some indication as to why the law would raise premiums.  Compiled data on employer plans shows that many firms will not meet all of the health law’s new requirements, and could be forced to offer richer benefits at a higher cost:

  • Eight percent of covered workers face a waiting period of four or more months (Exhibit 3.8, p. 53), but employers must shorten waiting periods to no more than 90 days (i.e. three months);
  • More than four in five firms (88%) do not cover all dependents through age 26, but all firms will be required to do so under the new law (Exhibit 3.11, p. 56);
  • One in ten (10%) covered workers – and one in five (20%) covered workers in small firms – have single deductibles of $2,000 or more, which will be prohibited under the law (Exhibit 7.6, p. 109; while family plan deductibles are capped at $4,000 in the law, there were no comparable data in the Kaiser study indicating how many family policies currently exceed the new cap);
  • Depending on plan type, between 4-13% of covered workers must first meet a deductible before their preventive services are covered, while under the health law, all cost-sharing for preventive services will be prohibited (Exhibit 7.16, p. 119); and
  • More than one in ten (12%) covered workers are subject to an annual limit on benefits, which will be prohibited under the law (Exhibit 13.11, p. 222).

The above data from the Kaiser study are just some of the examples of the new benefit mandates included in the law, and their impact on insurance coverage.  There are more mandates in the law for which the Kaiser study didn’t have data, and the Kaiser study refers only to employer-provided insurance.  The impact on individual insurance will likely be even greater, as individuals generally select less comprehensive coverage when they aren’t getting a significant subsidy from their employers – and a tax break from the federal government – to purchase their plan.

To be sure, the benefits above, and the other mandates included in the law, may be helpful or desirable to some individuals.  But the idea that employers and insurers can offer more than a dozen new mandated benefits at the same or lower premium prices is inconsistent with basic economic principles.  And unsurprisingly, some insurers are concluding that the many new mandates included in the health care law will raise premiums by more than the 1-2% the Administration alleges the mandated benefits will cost.

During his presidential campaign, candidate Obama promised to reduce family premiums by up to $2,500 “by the end of my first term as President.”  But, as millions of Americans may soon find out, you can’t promise lower premiums at the same time you’re raising benefits – because, in health care as in life, there’s no such thing as a free lunch.

Obama Administration vs. Harry Reid on Payments to Hospitals

While the Administration’s new report out today focuses on how the health care law will make Medicare “strong and solvent,” some in the majority in Congress are already expressing their concerns about the impact the law’s provisions will have on beneficiary access.  Here’s what today’s report claims about the hundreds of billions of dollars in reductions to Medicare hospital payments:

CMS has already begun to implement these provisions, which will ensure that providers keep an eye towards efficiency while maintaining high-quality care.

But as the Centers for Medicare and Medicaid Services (CMS) implements reductions in hospital payments for 2011, Majority Leader Reid sent a letter on July 21 claiming that reductions in reimbursements would have a negative effect on beneficiary access:

I am writing today regarding the proposed Medicare Inpatient Prospective Payment System regulation.  I am very concerned that this proposal will result in a net reduction in payment to Nevada’s hospitals at a time when they are unable to absorb such a cut….I am very concerned about the potential effects on beneficiary access if this regulation is finalized without adjustment.

The letter of course comes months after all 60 Senate Democrats voted to enact legislation that would further reduce hospital payments by hundreds of billions of dollars.  The Medicare actuaries found that those provisions “are unlikely to be sustainable on a permanent annual basis,” as about 15 percent of hospitals and related Medicare providers could become unprofitable within ten years, “possibly jeopardizing access to care for beneficiaries.”  And based on his recent letter, one may reasonably ask whether Sen. Reid now agrees with that assessment that beneficiary access will be harmed as a result of a law he and the Democratic majority voted to enact.

SCHIP Enrollment

Background:  The State Children’s Health Insurance Program, 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 approximately $40,000 for a family of four.  States may implement SCHIP by expanding Medicaid and/or creating a new state SCHIP program.  In addition, states may expand eligibility requirements by submitting state plan amendments and/or Section 1115 waiver requests to the Centers for Medicare and Medicaid Services (CMS).[1]  SCHIP received nearly $40 billion in funding over ten years as part of BBA, and legislation recently passed by Congress in December (P.L. 110-173) extended the program through March 2009, while providing additional SCHIP funds for states.

One concern of many conservatives regarding the SCHIP program relates to crowd-out—a phenomenon whereby individuals who had previously held private health insurance drop that coverage in order to enroll in a public program.  The Congressional Budget Office (CBO) analysis of H.R. 3963, a five-year SCHIP reauthorization which the President vetoed (and the House failed to override), found that of the 5.8 million children who would obtain Medicaid or SCHIP coverage under the legislation, more than one-third, or 2 million, would do so by dropping private health insurance coverage.

In order to prevent policies that encourage crowd-out, and ensure that SCHIP funds are more effectively allocated to the low-income beneficiaries for whom the program was created, CMS on August 17, 2007 issued guidance to state health officials about the way it would evaluate waiver proposals by states to expand their SCHIP programs.  Among other provisions, the letter stated that CMS would require states seeking to expand coverage to children with family incomes above 250% of FPL must first enroll 95% of eligible children below 200% of FPL, consistent with the original design and intent of the SCHIP program.  Congressional Democrats have introduced both a bill (H.R. 5998) and a joint resolution of disapproval under the Congressional Review Act (S. J. Res. 44) designed to repeal the Administration’s guidance.

Enrollment of Wealthier Children:  An analysis performed by the Congressional Research Service (CRS), using data provided by the Centers for Medicare and Medicaid Services (CMS), provides some indication of the extent to which states are focusing their efforts on enrolling poor children first before expanding their SCHIP programs up the income ladder.  Comparison of Fiscal Year 2006 and 2007 data reveal that in FY06, an estimated 586,117 children from families with incomes above 200% of the federal poverty level—approximately $41,000 for a family of four—were covered under SCHIP by a total of 15 states.

By contrast, in FY07, a total of 17 states and the District of Columbia covered an estimated 612,439 children in their SCHIP programs—an increase of nearly 30,000 children from wealthier families.  Much of this increase stems in part from decisions by three states—Maryland, Missouri, and Pennsylvania—along with the District of Columbia to extend SCHIP coverage to children with family incomes up to 300% of FPL during calendar year 2007, just prior to the release of the Administration’s SCHIP guidance.  In short, the data show no discernable trend by states to target their energies on enrolling lower-income children first before expanding SCHIP up the income scale—a key concern of many conservatives during the debate on children’s health legislation last year.

Enrollment of Adults in Children’s Program:  The CRS report also analyzes the coverage of adults—pregnant women, parents, and childless adults—in the SCHIP program.  The CRS data do indicate that the total number of adults decreased from FY06 to FY07, and the number of childless adults on the SCHIP rolls halved.  However, the number of states covering adults increased, and several states saw expansion of the number of adults, and childless adults, covered under the program:

  • Eight states—Arkansas, Colorado, Idaho, Illinois, Nevada, New Jersey, New Mexico, Oregon, and Virginia—saw overall adult populations in SCHIP increase;
  • Three states—Idaho, New Mexico, and Oregon—saw increased enrollment in the number of childless adults;
  • Seven states— Arizona, Arkansas, Idaho, Illinois, Nevada, New Jersey, New Mexico, and Oregon—saw increased enrollment in the number of parents covered;
  • Three states—Colorado, Nevada, and Rhode Island—increased SCHIP enrollment for pregnant women.

While many conservatives may support the overall reduction in adults enrolled in a children’s health insurance program, some may still be concerned by the persistence of adult coverage—particularly given decisions by both Arkansas and Nevada to expand coverage to adults during FY07.  In addition, the fact that nearly 75% of the reduction in adult SCHIP enrollment from FY06 to FY07 came from one state’s (Arizona) decision to remove childless adults from the program rolls may lead some conservatives to question whether this welcome development was a one-year anomaly or part of a larger trend.

Conclusion:  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.

However, many conservatives retain concerns about actions by states or the federal government that would reduce private health insurance coverage while increasing reliance on a government-funded program.  To that end, data proving that many states have expanded coverage to wealthier populations without first ensuring that low-income children are enrolled in SCHIP, and that states have in recent months expanded coverage under a children’s health insurance program to adult populations, suggest that some states continue to expand government-funded health insurance, at significant cost to state and federal taxpayers, in a manner that may encourage individuals to drop private coverage.

Particularly given these developments, conservatives may believe that the Administration’s guidance to states remains consistent with the goal of ensuring that SCHIP remains targeted toward the low-income populations for which it was designed.  Therefore, many conservatives will support the reasonable attempts by CMS to bolster the integrity of the SCHIP program while retaining state plans’ flexibility, and question efforts by Congressional Democrats to encourage further expansion of government-funded health insurance financed by federal taxpayers.


[1] In general, state plan amendments can expand eligibility to higher income brackets, or otherwise modify state plans, while Section 1115 waivers by definition require the Secretary of Health and Human Services to waive statutory requirements under demonstration authority.  For more information, see CRS Report RL 30473, available online at (accessed September 8, 2008).