Examining a Major Policy Shift: New Federal Limits on Medicaid Coverage for Children

This State Health Policy Briefing explores recent decisions by the Centers for Medicare and Medicaid Services (CMS) which have serious implications for states striving to expand health coverage for children. Download available here.
While Congress was debating the reauthorization of the State Children’s Health Insurance Program (SCHIP) in 2007, CMS issued a directive and other decisions that attempt to limit states’ ability to cover children in low-income families. First, in what has become a well-publicized and controversial action, CMS sent a letter to state health officials on August 17, 2007, effectively capping SCHIP eligibility at 250 percent of the federal poverty level ($44,000 per year for a family of three). Also, in a second set of less-publicized but critically important decisions, CMS prohibited some states from increasing Medicaid eligibility for low-income children who are eligible currently for SCHIP, stating that this population must first be covered using SCHIP funds if such funds are available.
 
This lesser-known set of decisions has serious implications for states striving to expand health coverage for children. It limits significantly the availability of federal financing for child health insurance; locks in wide disparities in children’s coverage between states; and, given the lack of transparency in CMS’s decision-making, leaves state Medicaid and SCHIP programs in an uncertain and unpredictable climate. These decisions also have broader implications for Medicaid policy, undermining long-standing state flexibility to provide eligibility for children at incomes above mandatory levels if they choose.
This State Health Policy Briefing explores these recent decisions involving transferring the financing of coverage for low-income children from SCHIP to Medicaid and their implications for states. The Briefing provides:
 

• An overview of CMS’s recent decisions that contradict long-standing Medicaid policy providing state flexibility to expand Medicaid for children;

 

• The policy consequences of CMS’s decision in terms of limiting a state’s ability to expand children’s coverage.
• A review of language in the twice-vetoed Children’s Health Insurance Program Reauthorization Act of 2007 (CHIPRA), which would grant states the needed flexibility given the limitations imposed by CMS.

 

shpbriefing_limitsoncoverage.pdf

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