Michael Odeh and Peter Harbage on the Debate over the State Children's Health Insurance Program (SCHIP)

This commentary describes what the State Children’s Health Insurance Program (SCHIP) provides, discusses the issues in the reauthorization debate that culminated in SCHIP’s extension through March 2009, and comments on the implications for the future of this federal-state partnership program.

The commentary explains that SCHIP is a federal-state partnership where the federal government matches state expenses for expanding children’s public health coverage. SCHIP is significant for the bipartisanship support with which it was created (SCHIP was passed by a Republican-controlled Congress and signed by a Democratic President) and for its success and popularity at the state level. One of the hallmarks of the SCHIP partnership is state flexibility, whereby states have federal support to expand children’s coverage beyond its current level as best fits their needs and resources. Another significant feature of the SCHIP partnership is the design of the federal financing arrangement. SCHIP is a block grant program that provides states with a set amount of funding that must be matched with state dollars. Within three years of the creation of SCHIP, every state had submitted plans to receive federal SCHIP funds for children’s coverage through a Medicaid expansion and/or separate SCHIP program. States have taken advantage of the program’s flexibility, and each state’s program is designed to meet the state’s unique needs with respect to structure, eligibility requirements, delivery system, provider reimbursement, and administration.

After ten years of success in expanding access to coverage for children, SCHIP, a federal-state partnership, was up for reauthorization in 2007. The reauthorization presented an opportunity to continue, improve, and expand the popular program. But what began as strong support for children’s health care eventually turned into an ideological battle over the role of government in health care in the U.S. The commentary chronicles that battle beginning with President Bush’s initial reauthorization proposal which the Democratic-led Congress found grossly inadequate and responded by passing a bill which the president found grossly excessive and promptly vetoed. The commentary details the subsequent efforts by Congress to rework the legislation which eventually led to a second veto and a failure of Congress to override that veto.

The disagreement over SCHIP reauthorization centered on the following main policy points which the commentary thoroughly explains:

• Tobacco tax financing
• Coverage of immigrant children
• SCHIP-financed adult coverage
• Coverage of moderate-income children and the crowding-out of private coverage

Although Congress and President Bush were unable to agree to the terms of a comprehensive SCHIP reauthorization, they were ultimately able to agree to an extension of SCHIP, largely in the status quo, through March 2009. But in addition, the Administration issued a directive to state SCHIP directors. The authors of this commentary state,

The new directive effectively shuts down state flexibility as it imposes new crowd out requirements for states expanding coverage to moderate-income children. …In essence, the directive creates a two-tier SCHIP program, as some rules apply only to higher income children. This presents a barrier for states seeking to expand or streamline their programs. The Bush administration has asserted that the conditions in the … directive are designed to ensure the SCHIP program would maintain its focus on the lowest-income children, as well as limit the potential crowd out of private coverage.

State officials, the advocacy and policy communities, and many lawmakers have expressed concern that the new requirements effectively limit program growth and could significantly change state operations. Concerns have also been raised that the Bush administration has not followed appropriate regulatory procedures in calling for the conditions to be implemented.”

And so SCHIP continues to be a political issue, and especially in the upcoming election, this has created uncertainty for states in planning for the future of their programs. The authors conclude:

In fact many of the issues that created the ideological divisions that resulted in the failure of the 2007 SCHIP reauthorization effort are likely to be the same issues that arise in the 2008-2009 SCHIP reauthorization effort. This is because there remains a fundamental ideological difference on government’s role in health care, which will not and cannot be resolved through SCHIP. Prospects for, and the structure of, SCHIP reauthorization, as well as health reform more generally, are ultimately dependent on the results of the election, the overall political landscape, and the economic climate to provide clear leadership on this issue.”

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