Perspectives on Health Reform January 2009 Expanding SCHIP: A Downpayment on Health Reform While the process of reforming the nation's health care system will likely be a long and difficult one, we can soon make an important downpayment on reform. In reau- thorizing the State Children's Health Insurance Program (SCHIP), Congress could encourage states to ensure universal coverage for children—a change that could serve By Sherry Glied, as the foundation for more comprehensive health system reforms later on. Ph.D. The Obama administration is committed to changing the nation’s health care sys- tem, but much needs to be done and there are many plausible directions forward. Progress on meaningful health care reform, therefore, is likely to come slowly. By exploiting opportunities to take early and rapid action, the new president, together with the new Congress, can help build a foundation for reforms that may take longer to accomplish. An excellent such opportunity is the upcoming reauthorization of the State Children’s Health Insurance Program (SCHIP), legislation that could be modified to incentivize the states to make coverage for children universal. Enhancing the Program The SCHIP program, which provides insurance coverage to about 4.4 million American children—typically in families with incomes below 200 percent of the federal poverty level (FPL)—is set to expire on March 31, 2009.1 Legislative efforts in the 110th Congress to extend the program to families with incomes up to 300 percent FPL2 were vetoed by President Bush, and Congress was unable to override the veto. But the 111th Congress is now eager to pass this legislation, which would enable states to expand coverage to more children, and Barack Obama has indicated that he would be pleased to sign such a bill. SCHIP reauthorization could do much more, however, than is currently under consideration. Instead of simply expanding SCHIP, Congress could offer states the option of receiving an enhanced, countercyclical payment—one that To download this publication and learn about others as they become available, visit us online at www.commonwealthfund.org and register to receive Fund e-Alerts. Commonwealth Fund pub. 1222 Vol. 1 2 T he  C ommonwealth F und promises them an infusion of money in bad budgetary In its current form, the SCHIP reauthorization times—if they developed and implemented plans to would provide a substantial state-specific federal match secure the universal coverage of children. for state dollars used to cover children with family Under such legislation, the federal government incomes up to 300 percent FPL. Currently, 23 states would require that state plans include insurance pur- set their income eligibility levels for Medicaid and chasing arrangements—exchanges, connectors, or pub- SCHIP at 200 percent FPL, while seven states have lic program options—whereby all children, those in lower income limits and 21 states (including the District Medicaid and SCHIP and all others, could obtain cov- of Columbia) have higher income limits (Figure 2). All erage. The plans would need to include mechanisms told, about 1.1 million uninsured children have for effective enforcement of a mandate, on parents or incomes between their state’s current SCHIP eligibility systems, for automatic enrollment and notification of level and this new level, and estimates based on prior all children. For example, states could document that experience suggest that about two-thirds of this group they routinely collect data on coverage from public would enroll in SCHIP under a program expansion.3 payers, insurance carriers, and employers. This enrollment would leave about 8.4 million, Moreover, the plans would be required to out of the 9.0 million children uninsured today, with- incorporate reporting on population health outcomes out coverage. Of the group remaining uninsured, 6.5 and provider processes. In that way, governments million would have been eligible for public coverage could move toward purchasing outcomes—as opposed (Medicaid or SCHIP) before the expansion, 0.4 million to merely paying for the delivery of services. Upon would be newly eligible for public coverage under the approval of their plans by the Centers for Medicare expansion but not expected to take it up, and a final and Medicaid Services, states would begin to receive 1.5 million would be in families with incomes above enhanced payments, conditional on meeting predefined 300 percent FPL. But the requirement to “go univer- periodic enrollment targets. sal” would lead states to develop new administrative and marketing strategies aimed at enrolling all public Covering All Children . . . program–eligible children who are not covered. It An effort to encourage states to move toward universal would lead higher-income parents to prioritize cover- coverage of children would meet three important pub- age for their children, to take up employer-sponsored lic policy goals. First, “going universal” would provide insurance where it is available, or to seek coverage coverage to millions of children who would otherwise through new purchasing mechanisms where it is not. remain uninsured (Figure 1). Health insurance makes a real difference for children. Research shows that continuous insurance Figure 1. Distribution of Uninsured Children Under Age 19, coverage, such as that provided through the SCHIP by Percentage of Federal Poverty Level (FPL) expansions, reduces hospital admissions and improves 400% FPL and Higher health outcomes.4 Universal coverage of children 869,000 300%–399% FPL (10%) would be an essential step in investing in the health 616,000 and well-being of future generations. (7%) Below FPL 3,349,000 200%–299% FPL (37%) . . . With Minimal Disruption 1,443,000 (16%) Second, going universal would demonstrate that mean- 100%–199% FPL ingful health care reform could be accomplished with- 2,739,000 (30%) out upending the existing system. Mandating coverage for children was one of the elements of Mr. Obama’s Total Children Uninsured = 9.0 million Source: Analysis of March 2008 Current Population Survey by Bisundev Mahato, campaign platform, and it is a goal that is achievable. Columbia University. E xpanding SCHIP: A D ownpayment on H ealth R eform 3 Figure 2. States’ Medicaid/SCHIP Income Eligibility Levels for Children Percent of federal poverty level (FPL) 350 300 250 200 150 100 50 0 West Virginia Michigan New Mexico Dist. of Columbia Massachusetts Nebraska North Dakota Alaska Montana Idaho Oklahoma Oregon Alabama Arizona Colorado Florida Illinois Indiana Kentucky Maine Mississippi North Carolina South Carolina South Dakota Texas Utah Virginia Vermont New Jersey Arkansas Delaware Iowa Nevada Ohio Wyoming Georgia California Louisiana New York Rhode Island Tennessee Wisconsin Minnesota Connecticut Hawaii Maryland Missouri New Hampshire Pennsylvania Kansas Washington Source: Kaiser Family Foundation, “Income Eligibility Levels for Children’s Separate SCHIP Programs, 2008,” www.statehealthfactsonline.org (accessed Dec. 18, 2008). Indeed, spurred by the prior success of the SCHIP pro- The federal government has historically had a gram and the accomplishment of universal coverage in limited role in overseeing private insurance plans— Massachusetts, many states have already drawn up insurance regulation is largely under state authority. plans to expand coverage for children and even to While the U.S. Office of Personnel Management does move to universal coverage. The souring economy has oversee the Federal Employees Health Benefits led them to put these plans on hold, but there is a size- Program, it is not poised to operate a large insurance able group of states—Maine, Minnesota, New York, exchange for individuals who have no employment Oregon, Pennsylvania, Vermont, Washington, and oth- connection to the federal government. Similarly, ers—whose programs are nearly ready to go. With a federal experience in enrolling people in health quick federal start, it is not unrealistic to imagine that insurance programs is drawn mainly from Medicare, as many as 10 states could boast of universal (or whose beneficiaries gain eligibility through aging into near-universal) coverage of children within two to Social Security or through disability determinations. three years. States, by contrast, have had many years of experience Efforts to expand coverage more broadly in finding beneficiaries and enrolling them into would benefit tremendously from such early initia- Medicaid and SCHIP, with eligibility increasingly tives. Indeed, gradually expanding coverage from a based on income. limited regional base has been the mechanism for Finally, while the federal government has had moving to universal coverage in other nations little experience with the enforcement of insurance or (notably Canada). health-related mandates, state insurance departments already administer automobile insurance mandates and Acting Locally local school districts and health departments adminis- Third, going universal in the states would enable the ter immunization mandates. development and refinement of the new institutional Any program of universal coverage with mul- infrastructure essential to expanding health coverage. tiple payers and modes of entry would need to be While discussions of health care reform tend to center designed around local conditions, which states, at least on the federal government, existing federal entities are in the short run, are better positioned to reflect. Over not always well placed to create the institutions time, states might continue to run separate programs; required for multipayer insurance expansions such as alternatively, state-based programs could be integrated insurance exchanges, enrollment facilitation organiza- into a national structure. In either case, states could tions, and mandate enforcement mechanisms. serve as “laboratories of democracy”—natural locations 4 T he  C ommonwealth F und for experimenting with the best institutional designs Political opposition to SCHIP expansions for insurance exchanges and mandates. certainly exists: opponents are mainly concerned that such expansions will shift the balance of the system A Base for More Comprehensive Reforms toward public coverage. But the likelihood that most Building the institutions of universal mixed-payer cov- states would move to universal coverage by combining erage around state-based child health expansions has SCHIP expansions with a private insurance mandate other advantages as well. Because most children are might ease this concern, as such a structure would healthy and those who are not are already dispropor- provide a boost to both the public and private tionately enrolled in public insurance programs, the insurance markets. direct federal cost of universal coverage for children Because Congress hopes to take up the SCHIP would be relatively modest. Meanwhile, the federal bill early in 2009, this legislation offers an opportunity government could continue to play a critical role by to act quickly, jumpstarting the critical movement toward providing regulatory oversight, ensuring that states transformation of the U.S. health care system. Including adhered to their universal coverage plans. provisions in this bill that prompt states to go universal Building an expansion around children also for kids would enable the building of new institutional has delivery system advantages. Children mainly use a infrastructure. This would complement, rather than dedicated network of child health providers; in 2000, crowd out, later and more comprehensive reforms. 80 percent of primary health care visits for young chil- dren were to pediatricians.5 Few regions are currently experiencing shortages of pediatricians, so the capacity to effect coverage expansions to this population is already in place, making it easier to develop and implement appropriate delivery system reforms. Sherry A. Glied, Ph.D., chairs the Department of Health Policy and Management of Columbia University's Mailman School of Public Health. In 1992–93, she served as a senior economist for health care and labor market policy to the President's Council of Economic Advisers, under Presidents Bush and Clinton. She is the author of Chronic Condition (Harvard University Press, 1998), a book about health care reform, and the coauthor (with Richard Frank) of Better but Not Well: Mental Health Policy in the U.S. Since 1950 (Johns Hopkins University Press, 2006), as well as numerous articles. She can be reached at sag1@columbia.edu. Editorial support was provided by Steven Marcus. E xpanding SCHIP: A D ownpayment on H ealth R eform 5 N otes of Health Care for the Poor and Underserved, Feb. 2005 16(1):96–110; M. R. Cousineau, G. 1 Kaiser Commission on Medicaid and the Uninsured, D. Stevens, and T. A. Pickering, “Preventable “State Children’s Health insurance Program Hospitalizations Among Children in California (SCHIP): Reauthorization History,” Nov. 2008; Counties After Child Health Insurance Expansion available at www.kff.org/medicaid/upload/7743.pdf; Initiatives,” Medical Care, Feb. 2008 46(2):142–47; and Kaiser Family Foundation, “Income Eligibility M. H. Fox, J. Moore, R. Davis et al., “Changes Levels for Children’s Separate SCHIP Programs by in Reported Health Status and Unmet Need for Annual Incomes as a Percent of Federal Poverty Children Enrolling in the Kansas Children’s Health Level, 2008,” State Health Facts, Jan. 2008, Insurance Program,” American Journal of Public available at www.statehealthfacts.org. Health, April 2003 93(4):579–82; P. C. Damiano, J. C. Willard, E. T. Momany et al., “The Impact 2 Kaiser Commission on Medicaid and the Uninsured, of the Iowa S-SCHIP Program on Access, Health “Children’s Health Insurance Program Reauthoriza- Status, and the Family Environment,” Ambulatory tion Act of 2007: The Revised Bill Compared to the Pediatrics, Sept./Oct. 2003 3(5):263–69; and A. B. Original Bill,” Nov. 2007, available at Bindman, A. Chattopadhyay, and G. M. Auerback, http://www.kff.org/medicaid/upload/7714.pdf. “Interruptions in Medicaid Coverage and Risk for 3 L. Dubay, J. Guyer, C. Mann et al., “Medicaid at the Hospitalization for Ambulatory Care-Sensitive Ten-Year Anniversary of SCHIP: Looking Back and Conditions,” Annals of Internal Medicine, Dec. 16, Moving Forward,” Health Affairs, Mar./Apr. 2007 2008 149(12):854–60. 26(2):370–81. 5 S.-F. S. Tang, L. M. Olson, W. L. Cull et al., “From 4 A. Aizer, “Public Health Insurance, Program Infants to Teens: Pediatricians Provided Primary Take-Up, and Child Health,” Review of Economics Care for More Children, 1991–2000” (poster), and Statistics, 2007 89(3):400–15; D. Bermudez American Academy of Pediatrics (2003); available and L. Baker, “The Relationship Between SCHIP at: www.aap.org/research/PASPoster2003.pdf. Enrollment and Hospitalizations for Ambulatory Care Sensitive Conditions in California,” Journal The mission of The Commonwealth Fund is to promote a high performance health care system. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the author and not necessarily those of The Commonwealth Fund or its directors, officers, or staff.