Federal “Maintenance of Effort” Protections Help Kids Maintain Health Coverage Amid Tough State Budget Climates by Sean Miskell and Joan Alker Key Points Introduction zz Federal protections, notably The Children’s Heath Insurance Program the Affordable Care Act (ACA)’s (CHIP) serves more than 8.3 million children ‘maintenance of effort’ provision, in the United States.1 CHIP is jointly have helped bring uninsured rates for administered and financed by states and kids down to historic lows. Today, the the federal government, but at the end of The MOE helps only state in the country not subject federal fiscal year 2015 (September 30), ensure that to this protection is Arizona—without no new federal funding for CHIP will be children and the MOE, the state virtually eliminated available. Lawmakers from both parties have its Children’s Health Insurance introduced plans to extend CHIP funding.2 families maintain Program (CHIP), underscoring the However, while some plans to do so would stability in their importance of the federal protection keep CHIP structure and design intact, health coverage. in keeping kids coverage off the state others would make changes that could negotiating table. reduce children’s coverage. zz Even seemingly small changes to The discussion draft released by House eligibility and enrollment procedures Energy and Commerce Health Subcommittee can have significant and lasting Chairman Joe Pitts (R-PA), full committee implications for families and coverage Chairman Fred Upton (R-MI), and Senate for children. Finance Committee Chairman Orrin Hatch (R- zz Without federal protections on UT) would extend CHIP funding. Yet it would eligibility requirements, history shows also, among other changes, cut federal CHIP that some states will almost certainly funding for states and end the ‘maintenance respond to tough fiscal environments of effort’ (MOE) requirement currently in place by scaling back health coverage for through September 2019. children. Federal actions that cut or fundamentally restructure CHIP The MOE helps ensure that children and would compound the likelihood families maintain stability in their health of state moves to cut children’s coverage. Continuous coverage is important coverage. for children and families to ensure that they March 2015 CCF.GEORGETOWN.EDU MAINTENANCE OF EFFORT PROTECTIONS 1 receive the ongoing preventive and primary reducing Medicaid and CHIP income eligibility care that is essential to healthy development. thresholds to make fewer children eligible. It also protects families from financial peril States must maintain the eligibility levels in should an uninsured child experience a broken place as of March 23, 2010. States that reduce bone or other medical emergency. States eligibility will lose all of their federal Medicaid regularly face fiscal and political pressures funding.3 that too often end up harming children. The MOE also prevents states from setting Without federal protections taking kids off the Even modest or negotiating table, lawmakers may choose to enrollment caps or freezes on their CHIP short-term tinkering balance their budgets by reducing, capping, programs or implementing less obvious, ‘back door’ ways to reduce enrollment in their CHIP with eligibility rules or freezing CHIP eligibility levels. Even modest programs, barring states from enacting more can reduce or create or short-term tinkering with eligibility rules can restrictive methodologies or procedures for reduce or create gaps in coverage for children gaps in coverage for CHIP enrollment or renewals. For example, and families. children and families. states may not impose new onerous MOE Protections Ensure that requirements that add extra steps for families to enroll, or additional red tape and paperwork Children Receive Stable, requirements such as new or extended Continuous Coverage waiting periods.4 States may also not increase The MOE, put in place through federal fiscal premiums in CHIP beyond what was in place year 2019 by the Affordable Care Act (ACA), as of March 23, 2010 beyond nominal inflation ensures stability of coverage for children in adjustments.5 CHIP and Medicaid. The protection prohibits states from eliminating their CHIP program or Maintenance of Effort Requirement: What States Can and Cannot Do States can: zzAdopt or continue enrollment simplification initiatives zzMaintain caps or freezes that existed prior to the MOE (March 23, 2010) zzChoose not to renew waiver programs once they expire States cannot: zzEliminate CHIP or scale back eligibility for children in CHIP or Medicaid below levels in place as of March 23, 2010; zzRaise premiums for CHIP or Medicaid children; zzImpose or increase waiting periods, or the time that children must remain without group coverage before becoming eligible to enroll in CHIP. Current federal rules do not allow states to impose waiting periods longer than 90 days.6 2 MAINTENANCE OF EFFORT PROTECTIONS CCF.GEORGETOWN.EDU March 2015 State Actions without the MOE: New Coverage Limits Imposed Amid State Budget Woes and Uncertain Federal Funding Recent history shows that some states will Coverage losses for Arizona children would be reduce children’s coverage absent of the far worse without a provision of the ACA that federal MOE protection. required states to align eligibility for kids in the Medicaid program up to 138 percent of federal Arizona children lose CHIP; ACA poverty level (FPL). Previously, children below ‘stairstep’ provision mitigates the loss. six years old in this income range were covered While virtually every state has kept eligibility by Medicaid, while states could choose to steady per federal requirements, Arizona cover children aged 6-18 in this income range serves as an unfortunate example of what though CHIP, creating a ‘stairstep’ eligibility states may do in the absence of these structure for children. However, because protections. Arizona’s CHIP program was, the ACA required that states raise Medicaid in effect, not subject to MOE requirements eligibility for children of all ages to 138 percent because the state already had a CHIP of FPL, these ‘stairstep kids’ in Arizona moved enrollment freeze before the ACA was to Medicaid—a program that cannot be enacted. capped. In Arizona, 23,000 kids fell into this category and maintained their health insurance Without the federal requirement that Arizona as a result. The Hatch-Upton-Pitts proposal maintain eligibility levels, state policy would also eliminate this provision of the ACA makers enacted multiple changes to CHIP that protected coverage for Arizona children. amid rounds of state budget cuts that were reflected in the state’s rate of uninsured children (see Figure 1). Between 2010 and 2014, Arizona made six policy changes in Figure 1. Percent of Uninsured Children: KidsCare, its CHIP program. In January 2010, Arizona vs. United States, 2008-2013 Without federal protections, Arizona’s rate of uninsured children fluctuates Arizona froze enrollment in KidsCare, meaning no children could newly apply or renew coverage after disenrollment. The freeze led January 2010 May 2012 15.1% KidsCare/CHIP to a KidsCare waiting list that reached more enrollment freeze KidsCare ll opens than 100,000 by July 2011.7 In May 2012 12.8% 12.9% 13.2% Arizona re-opened CHIP under a time-limited 12.0% 11.9% program called KidsCare II. The state let the program end in 2014 and 14,000 children lost CHIP coverage.8 In addition to those that lost 9.3% coverage, frequent changes to the program 8.6% 8.0% 7.5% 7.2% created confusion and instability for families 7.1% seeking to insure their children.9 Today only 1,876 children remain enrolled in the state’s 20082009 2010 2011 20122013 separate CHIP program as compared to a United States Arizona peak of 112,100 in FY 2008.10 March 2015 CCF.GEORGETOWN.EDU MAINTENANCE OF EFFORT PROTECTIONS 3 Children lost coverage when states significant. By the fall of 2004, enrollment had enacted freezes, caps, and ‘backdoor’ declined by 29 percent in North Carolina, by 27 cuts to suppress enrollment and save percent in Colorado, by 17 percent in Utah, by state funds during recent recessions. 12 percent in Alabama, and by six percent in Florida and Maryland.16 Prior to the existence of the children’s MOE protections, states often established barriers These efforts to reduce enrollment caused to reduce enrollment in CHIP. In response to hardship for the families whose children were an economic recession that began in 2001, unable to get CHIP coverage. For example, many states took action to reduce enrollment in North Carolina, families reported “juggling in CHIP to save state dollars. Some states payments, borrowing money from friends or chose to implement subtle methods to depress family, buying basic and lower quality food, and enrollment, including reducing outreach going without food” in their efforts to ensure States have enacted efforts, charging co-pays, and scaling back that their children continue to have health freezes, caps, and administrative simplifications previously coverage.17 Years later, some families were “backdoor” cuts to intended to facilitate sign-ups.11 For example, still paying for medical bills incurred during in 2003 Washington began requiring families to suppress enrollment the freeze. Others delayed care, sometimes reapply twice a year rather than annually and requiring more extensive treatment such as and save state funds. also stopped using the state earnings database surgery or tooth extraction.18 In addition to to verify income, instead requiring families increasing the number of children who were to submit paystubs. As a result, more than unable to obtain CHIP coverage, the freeze 30,000 children lost coverage over the next two was disruptive and confusing for families in years before the state reinstituted 12-month North Carolina. When the state lifted the freeze eligibility.12 While requiring families to reapply almost one-fourth (22 percent) did not reapply more frequently is a strategy no longer allowed for coverage.19 Even after North Carolina under the ACA, the example demonstrates that ended its enrollment freeze, it came close to states may look for other ways to find savings re-instituting waiting lists twice by the end of through decreased enrollment that is not as 2003.20 explicit as cutting income eligibility. More recent rollbacks suggest states Seven states (Alabama, Colorado, Florida, need confidence about availability of Maryland, Montana, North Carolina, and Utah) federal funds to keep children covered. froze CHIP enrollment between 2001 and State decisions on children’s coverage leading 2003.13 State officials cited difficulties meeting up to the 2009 reauthorization of CHIP suggest the state share of CHIP costs, 30 percent on concerns about hitting federal allotments also average, leaving eligible low-income children influenced eligibility or enrollment rollbacks. uninsured.14 For example, when Florida For example, Georgia instituted an enrollment implemented a freeze on July 1, 2003, it only freeze for its CHIP program in 2007 when faced took four and a half months for the waiting with a federal funding shortfall.21 California list of uninsured children who would have ended up freezing enrollment in 2009. State been eligible for CHIP in the state to grow to officials estimated that the as many as 350,000 44,000.15 children would have to be put on waiting lists Though these recession-induced enrollment because of the freeze.22 Wyoming also imposed restrictions were in place for relatively brief a cap on CHIP sign-ups in 2009.23 periods, the impact on children’s coverage was 4 MAINTENANCE OF EFFORT PROTECTIONS CCF.GEORGETOWN.EDU March 2015 Cutting Back or Eliminating CHIP Leaves Some Families Without Options and Can Increase Costs for States Were the MOE to be lifted, it would be But federal protections like the MOE help especially tempting in light of the ACA for ensure that children continue to have a stable states to reduce CHIP eligibility—because source of coverage. The Hatch-Upton-Pitts of the perception that families could enroll proposal would also exacerbate the budget in marketplace coverage with tax subsidies problems that have caused states to cap their and be no worse off. However, the Medicaid CHIP programs by not fully funding CHIP. The and CHIP Payment and Access Commission proposal cancels a 23 percent increase in (MACPAC) estimates that subsidized exchange federal CHIP matching funds slated to begin coverage is likely to be available to less than in FY 2016. Because this match increase is half of the 5.3 million children enrolled in current law, many states have included it in separate state CHIP programs.24 Those families their budgets. Previous experience shows that that lose CHIP coverage may indeed be able states seek to reduce CHIP enrollment when to obtain subsidized coverage through the federal funding is threatened, in addition to ACA’s marketplaces, while others might not their own state budget concerns. be eligible for this financial assistance as a The Hatch-Upton-Pitts proposal also reduces result of the way in which the ACA has been the federal enhanced CHIP match for families interpreted to define eligibility for subsidies— over 250 percent of the poverty level to the known as the ‘family glitch.’ A parent’s offer Medicaid match level and eliminates CHIP of employer-sponsored insurance is deemed coverage for families above 300 percent of affordable based solely on the offer of poverty. These measures would result in individual, not family, coverage—thus many less federal CHIP funding for a majority of families are not eligible for tax credits even if states. For the 33 states that currently use their employer coverage remains financially out federal CHIP funding to provide children with of reach. For these families, if states cap their coverage through Medicaid, moving from the CHIP programs, those affected by the family federal CHIP matching rate to lower federal glitch have no path to affordable coverage. Medicaid matching rate would increase Growing research shows that even families state expenditures for those children by 43 that are able to secure financial support to percent.26 Combined with the elimination purchase marketplace coverage for their of federal protections like the MOE, these children will face higher costs for coverage that funding reductions would undermine state is less comprehensive than the CHIP coverage CHIP programs and almost certainly reduce they receive today. Marketplace plans in coverage for children. many states have service gaps or limits that can hinder children’s healthy growth and development.25 March 2015 CCF.GEORGETOWN.EDU MAINTENANCE OF EFFORT PROTECTIONS 5 Conclusion: Federal protections Federal Protections Are Essential to Protect like the MOE protect Children’s Health Coverage children’s coverage Some recent proposals to change CHIP call Stable health coverage is critical for children from getting caught for more flexibility for states, including ending and families to ensure access to health in the back and forth the federal MOE protection. Even though services children need and to ensure financial CHIP is a popular program, past experience security for these families, especially during of state budget- shows that states will employ ways to reduce difficult economic times. Further, in light of making, preventing CHIP enrollment to save state funds during recent research that establishes the long term lawmakers from economic downturns when families need it the economic and educational benefits of covering tinkering with or most and/or as a result of reductions or limits children, programmatic changes to CHIP that rolling back CHIP on federal funding. Despite the success of result in even a temporary loss of coverage for CHIP and Medicaid in reducing the number of children can have lasting effects.27 The MOE enrollment. uninsured children to historic lows, it is clear keeps children’s coverage from getting caught that additional state flexibility of this kind will in the back and forth of state budget making, result in some children losing coverage. helping to ensure that historic state and national success covering children continues. Endnotes 1 Data is recent as of FY 2013, according to Medicaid and available at http://ccf.georgetown.edu/wp-content/ CHIP Payment and Access Commission, “MACStats: uploads/2012/03/Health%20reform_final%20qa%20 Medicaid and CHIP Program Statistics,” (March 2014), on%20moe.pdf. available at http://www.macpac.gov/macstats. 5 Kaiser Commission on Medicaid and the Uninsured, 2 In February 2015, various lawmakers introduced plans “Understanding the Medicaid and CHIP Maintenance to extend CHIP. Republicans on the House Energy and of Eligibility Requirements,” (May 2012), available Commerce Health Subcommittee released a discussion at https://kaiserfamilyfoundation.files.wordpress. draft of a bill, Democrats on the House Energy and com/2013/01/8204-02.pdf. Finance and Ways and Means Committees released the 6 T. Brooks, “Making Kids Wait for Coverage Makes No CHIP Extension and Improvement Act of 2015, Senate Sense in a Reformed Health System,” Georgetown Center Democrats released their Protecting & Retaining Our for Children and Families (February 2015), available at Children’s Health Insurance Program Act of 2015, and http://ccf.georgetown.edu/wp-content/uploads/2015/03/ President Obama’s FY 2016 budget also called for an Making-Kids-Wait-for-Coverage-Makes-No-Sense-in-a- extension of CHIP. Reformed-Health-System-2015.pdf . 3 CHIP MOE provisions are spelled out in Section 2105(d) 7 E. Burak, “Children’s Health Coverage in Arizona: A (3) of the Social Security Act, as added by section Cautionary Tale for the Future of the Children’s Health 2101(b) of the Affordable Care Act. See also Centers for Insurance Program (CHIP),” Georgetown University Center Medicare & Medicaid Services, “The Affordable Care Act for Children and Families (January 2015). Maintenance of Effort (MOE)—Questions & Answers,” (February 25, 2011), available at http://downloads.cms. 8 Ibid. gov/cmsgov/archived-downloads/SMDL/downloads/ SMD11001.pdf. 9 M. Heberlein, J. Guyer, and C. Hope, “The Arizona KidsCare CHIP Enrollment Freeze: How Has it Impacted 4 For additional information see Georgetown Center for Enrollment and Families?” Kaiser Commission Children and Families and Center on Budget and Policy on Medicaid and the Uninsured and Georgetown Priorities, “Holding the Line on Medicaid and CHIP: Key University Center for Children and Families (September Questions and Answers About Health Care Reform’s 2011), available at http://ccf. georgetown.edu/ccf- Maintenance of Effort Requirements,” (March 26, 2010), resources/1403/?issue=chip%2F. 6 MAINTENANCE OF EFFORT PROTECTIONS CCF.GEORGETOWN.EDU March 2015 10 Current data reflects enrollment as of January 1, www.pewtrusts.org/en/research-and-analysis/blogs/ 2015 as reported by the Arizona Health Care Cost stateline/2003/11/04/five-states-freeze-chip-enrollment. Containment system, available at http://www.azahcccs. 21 Gwinnett Daily Post, “State to Freeze PeachCare gov/reporting/Downloads/KidsCareEnrollment/2015/ Enrollment,” (February 9, 2007). Jan/KidsCareDemographics.pdf. Historical enrollment data available from the Kaiser Family Foundation, “Total 22 K. Sack, “Defying Slump, 13 States Insure More Number of Children Ever Enrolled in CHIP Annually,” Children,” The New York Times (July 18, 2009), available available at http://kff.org/other/state-indicator/annual- at http://www.nytimes.com/2009/07/19/us/19chip.html. chip-enrollment/. 23 Ibid. 11 I. Hill, H. Stockdale, and B. Courtot, “Squeezing SCHIP: States Use Flexibility to Respond to the Ongoing Budget 24 Medicaid and CHIP Payment and Access Commission, Crisis,”New Federalism: Issues and Options for States “Report to the Congress on Medicaid and CHIP,” (June The Urban Institute Program to Assess Changing Social 2014). Policies. A-65: 1-12 (2004). 25 Ibid. 12 J. Solomon, “Repealing Health Reform’s Maintenance 26 See for example S. Cohodes et al.,“The Effect of Child of Effort Provision Could Cause Millions of Children, Health Access on Schooling: Evidence from Public Parents, Seniors, and People With Disabilities to Lose Insurance Expansions,” National Bureau of Economic Coverage,” Center on Budget and Policy Priorities Research (Working Paper 20178, May 2014) available at (February 24, 2011), available at http://www.cbpp.org/ http://www.nber.org/papers/w20178; and S. Brown et cms/?fa=view&id=3397. Note: At the same time, the al., “Medicaid as an Investment in Children: What is the state maintained Medicaid income eligibility because the Long-term Impact on Tax Receipts?” National Bureau of 2009 American Recovery and Reinvestment Act paired Economic Research (Working Paper 20835, January 2015) more federal financial assistance to state Medicaid available at http://www.nber.org/papers/w20835. programs via an increase in the Federal Medical Assistance Percentages to the requirement that states maintain Medicaid eligibility levels. 13 Montana, North Carolina, and Utah enacted enrollment Authors: Sean Miskell and Joan Alker caps in 2001 as the recession began, while Alabama, The authors would like to thank Elisabeth Wright Colorado, Florida, and Maryland capped enrollment Burak and Alisa Chester of CCF, as well as Edwin between July and November 2003 at the recession’s Park, Matt Broaddus, and Jesse Cross-Call at height. For more information see I. Hill et al., Coping the Center on Budget and Policy Priorities for With SCHIP Enrollment Caps: Lessons From Seven their feedback and reviews. Design and layout States’ Experiences, Health Affairs, volume 26, number 1, assistance provided by Nancy Magill. January 2007, pages 258-268. The Center for Children and Families (CCF) is an 14 D. Cohen Ross and L. Cox, “Enrollment Freezes in Six independent, nonpartisan policy and research State Children’s Health Insurance Programs Withhold center whose mission is to expand and improve Coverage for Eligible Children,” Kaiser Commission on health coverage for America’s children and families. Medicaid and the Uninsured (December 2003). See also CCF is based at Georgetown University’s Health M. Broaddus, “CHIP’s Success Not an Argument for Policy Institute. Block-Granting Medicaid,” Center on Budget and Policy Priorities (June 29, 2011), available at http://www.cbpp. Center for Children and Families org/cms/?fa=view&id=3528. Health Policy Institute 15 Ibid. Georgetown University Box 571444 16 Op. cit. (11). 3300 Whitehaven Street, NW, Suite 5000 17 As reported in focus groups conducted by the Kaiser Washington, DC 20057-1485 Commission on Medicaid and the Uninsured. See P. Phone (202) 687-0880 Silberman et al., “The North Carolina Health Choice Email childhealth@georgetown.edu Enrollment Freeze of 2011,” Kaiser Commission on Medicaid and the Uninsured (January 2003). ccf.georgetown.edu/blog/ 18 Ibid. 19 Ibid. facebook.com/georgetownccf 20 E. Madigan, “Five States Freeze CHIP Enrollment,” Stateline (November 4, 2003), available at http:// twitter.com/georgetownccf March 2015 CCF.GEORGETOWN.EDU MAINTENANCE OF EFFORT PROTECTIONS 7