WASHINGTON, Nov. 16 (UPI) -- At a Senate subcommittee hearing Thursday, advocates called on Congress to increase funding and flexibility for a key children's health insurance program -- but a battle looms over how the funds will be distributed.
The State Children's Health Insurance Program (SCHIP) provides coverage for children of families with incomes just above the cut-off for Medicaid. Federal funding for the program comes in the form of block grants to states, who then contribute a share of state funding. Funds left unused by states are redistributed to states which exceed their allotments.
That funding formula, intended to keep the cost of the program in check, is beginning to backfire, and it will likely be a point of contention when the program is up for reauthorization in Congress next year.
SCHIP is "one of the most important programs ... in the government," said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee Subcommittee on Healthcare. But "reauthorization poses many challenges."
In 2001, 12 states exceeded their allotments. By 2005 27 had, and experts estimate the program will require $12 to $14 billion over the next five years just to sustain coverage for children already enrolled.
If that money does not materialize next year, states could be forced to close enrollment or even take coverage away from children, state SCHIP program directors from New Jersey, Utah and West Virginia said during hearing testimony.
"There's an urgent need for Congress to increase the allocations states receive," said Ann Kohler, director of the Division of Medical Assistance and Health Services in the New Jersey Department of Human Services (NJDHS). "We feel action is needed now."
Since SCHIP's inception, the number of uninsured children in the United States has decreased, even while the overall number of uninsured has grown -- a sign of the program's effectiveness, said Lisa Dubay, associate faculty member at the Bloomberg School of Public Health at Johns Hopkins University.
"Because of the SCHIP program, we've never had to choose between food and gas and our children's health," said Toby Drabczyk, an SCHIP beneficiary from Maryland who testified at the hearing. She and her husband Kevin would not be able to afford coverage for their four children on their $35,000 per year income without the program's help, she said.
But 72 percent of the nation's 7.5 million uninsured children are eligible for Medicaid or SCHIP coverage, she said, and the uncertainty of adequate funding is getting in the way of aggressive recruitment efforts because states do not want to recruit children they cannot afford to cover.
"It's important to ask why there are so many children who are eligible, but uninsured," Dubay said.
One technique is to also offer coverage to parents, she said, which leads to a 14 percent increase in participation, but providing health insurance to a new wave of children and their parents will require more federal funding.
Aggressive advertising and simplified enrollment processes are also important, but difficult for states to justify when future funding is uncertain, she said. "Children will lose coverage and the country will not be able to make progress unless there are adequate federal funds."
But even if those funds are made available, a potential conflict still brews over how the funds will be distributed.
Because states lose any funds they do not use, there is no incentive to be thrifty with SCHIP funding, said Nina Owcharenko, senior healthcare analyst at the Heritage Foundation, a conservative Washington think tank. That system "discourages states from being fully prudent."
Also, states have discretion to determine their eligibility requirements and some states have used that leeway to establish generous cutoff points. Fifteen states extend eligibility for families up to 200 percent of the federal poverty line, or $40,000 for a family of four in 2006. Nine states offer eligibility to families at 300 percent of the federal poverty line.
Other states have chosen to eliminate cost sharing like premiums and co-payments, Owcharenko said, or offer coverage to parents.
The states with more generous eligibility and benefits are getting the lion's share of redistributed funds -- causing some to question the fairness of taking funds from states with more limited coverage and sending it to states that cover children and their parents above 300 percent of the poverty line.
Congress should re-examine these issues during the reauthorization process, Owcharenko said. "Federal lawmakers have a responsibility to look beyond funding."
But NJDHS's Kohler said the increased funding for some states makes sense, because the cost of living and insurance vary greatly between states. "In New Jersey it costs a lot more to be poor than in other states," she said.
Utah, a state which has traditionally not used all of its allotment, has not been concerned about losing unused funds so far, Utah SCHIP director Nate Checketts told United Press International. But there is concern about possible revisions of the funding distribution formula that would result in more funds moving out of the state.
However, the distribution issue could be "something of a red herring," Johns Hopkins' Dubay told UPI. "High eligibility states are high-cost-of-living states. They are trying to level the playing field."
"If we want to insure all eligible children, we're going to have to allocate more money," she said. "When we make something a national priority, we can find the funds."
