States Prepare for SCHIP Reductions As Congress Moves to Fill Shortfalls

Congress has vowed to fix a budgetary deficit that has left 14 states without enough money to cover shortfalls in their respective State Children's Health Insurance Programs, or SCHIPs, but it may not act in time to prevent some of those states from making cuts in the programs that could leave thousands of children and adults without health insurance.

"Congress will fix the SCHIP shortfall this year -- everybody believes that is going to happen," said Julius Hobson, Jr., senior policy advisor for Powell Goldstein, a Washington law firm that tracks and lobbies on health care and other legislation. "But it has to happen quickly because of the shortfalls in the 14 states."

Georgia became the first state to make SCHIP reductions, freezing enrollment in the PeachCare for Kids program, the state's version of SCHIP, on March 11. The state now is shifting money from its Medicaid program to cover the SCHIP shortfall.

New Jersey, Mississippi and Iowa soon may follow Georgia's lead -- all three states are projected to run out of SCHIP funding by this summer. The other states facing SCHIP shortfalls this year are Alaska, Illinois, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, Rhode Island and Wisconsin.

"The program is not an open-ended entitlement," said Sara Rosenbaum, chair of the Department of Health Policy at George Washington University Medical Center's School of Public Health and Health Services. "As need rises and costs go up, medical inflation is going to eat away the allotment, even if states are not adding any more children."

The House Appropriations Committee attempted to address the SCHIP shortfall on March 15, when it passed a $124 billion supplemental spending bill (PDF file: 5 pages/66 KB. More about PDFs.) that includes $750 million in emergency funding for SCHIP. However, the measure primarily is intended to provide funding for American troops in Afghanistan and Iraq and contains provisions for the withdrawal of American troops from Iraq by August 2008 if the Iraqi government does not meet certain benchmarks, a prospect virtually guaranteed to draw President Bush's veto. Thus, a compromise between House Democrats and Republicans is needed for the bill to move forward and have a hope of presidential approval, say observers. But that compromise process could take time.

"I am sure that whatever compromise is developed, there will be money for SCHIP, but we may go for awhile without any money," said Rosenbaum.

Nevertheless, there is general agreement in the House that the SCHIP shortfall should be addressed without further delay. In the Senate, fixing the shortfall could become more contentious, slowing down the approval of additional funds. Some senators may want to look at why certain states are running out of SCHIP funds. They also may propose a partial funding solution for the shortfall, approving enough money to cover only families at 200 percent of the federal poverty level, for example.

Initially launched in 1997, SCHIP is set to expire on September 30 without congressional reauthorization. Most House and Senate Democrats and some Republicans look at SCHIP reauthorization as an opportunity to renew and greatly expand the program during the next five years.

"There is some support for an expenditure amount that would actually expand the current definition of who is eligible under SCHIP," said Rosenbaum.

An SCHIP expansion could provide health insurance to many uninsured individuals, said Daniel Hawkins Jr., vice president for federal, state and public affairs for the National Association of Community Health Centers. Community health centers provide health care services to about 6.5 million uninsured people in the United States; about 2 million of those are under the age of 20, said Hawkins. "An expansion of SCHIP would undoubtedly bring many of them into coverage," he said.

Rep. John Dingell, D-Mich., and Sen. Hillary Rodham Clinton, D-N.Y., have introduced companion bills in the House and Senate that would provide significant funding increases for SCHIP, encouraging states to cover all children with incomes up to 400 percent of the federal poverty level. The legislation, known as the "Children's Health First Act," also would allow families ineligible for SCHIP to buy into the program, providing subsidies to employers in states that expand eligibility to the levels outlined in the bill. The bill's intent is to extend health insurance to the estimated 9 million children without it. As chairman of the House Energy and Commerce Committee, Dingell is responsible for writing the SCHIP reauthorization bill in the House.

President Bush wants to rein in funding for SCHIP by toughening eligibility requirements for children and eliminating coverage for adults through the program. The president has proposed about $30 billion for SCHIP during the next five years, about $45 billion less than amounts proposed by congressional Democrats.