Children's health insurance: How much aid is enough?

from USA Today

By Richard Wolf, USA TODAY

WEST NEW YORK, N.J. — The view of Midtown Manhattan rising majestically above the Hudson River doesn't get much better than from here. And the cost of living doesn't get much higher.

It's little wonder, then, that Anna Velazquez says she and her husband, José, can't afford private health insurance for their two children on a $57,000 family income.

Lucky for them, they live in New Jersey. The state has the nation's highest income eligibility level for the Children's Health Insurance Program, a federal-state partnership created in 1997 to help families who earn too much to get Medicaid. Under CHIP, which will expire Oct. 1 unless President Bush and Congress agree to renew it, families of four can get coverage with incomes up to $72,275 — 350% of the federal poverty level. The Velazquezes pay $18.50 a month per child; taxpayers cover the rest.

"What would I do without health insurance?" says Velazquez, 39, who works at a health center. "I wouldn't be able to sleep at night, worrying about my kids."

Families such as the Velazquezes are at the center of what Bush calls a "philosophical divide" in Washington over health care, a debate now taking shape with the future of the Children's Health Insurance Program (CHIP) at stake. The escalating battle over the program, which insures more than 6 million children and adults, is helping to fuel a larger debate over health care that will heat up in next year's presidential race.

The key question: At a time when 47 million people in the USA are uninsured, how much government assistance is enough?

The children's health program has come to symbolize the conflicting views on that. Some states limit enrollment in CHIP to the poorest of children; for a small fee, other states — mostly those with high costs of living — welcome adults and children in some families of four earning more than $50,000.

During its first few years, the federal block grant funding the program provided more money than states could use. Now, because of outreach efforts and health care inflation, many states can't cover all the eligible children seeking to enroll. About 17 states faced shortfalls this year until Congress put more CHIP money into an Iraq war spending bill.

Democrats and some Republicans in Congress last week agreed to add about $35 billion more over five years to the $5 billion-a-year program — enough to cover about 4 million more children. The House and Senate are scheduled to vote on the package this week. Without any more federal funds next year, nearly 1 million children and adults in 20 states would lose coverage.

Bush wants to limit CHIP enrollment to families earning less than 250% of the poverty level — $51,625 for a family of four. That's more generous than most federal anti-poverty programs, such as welfare, housing and food stamps.

Saturday, he vowed to veto the Democrats' bill and asked for a simple extension of the program. "Health coverage for these children should not be held hostage while political ads are being made and new polls are being taken," Bush said.

The administration, meanwhile, has used its rule-making power to draw a line in the sand. Within a year, it said last month, states must stop enrolling families with incomes above 250% of the poverty level unless they meet several new criteria. The Democrats' bill seeks to nullify the rule.

The new federal policy threatens to create a hodgepodge of haves and have-nots not only among states, but within them. It does not apply to children in families with higher incomes who already are in the program or who enroll within the next year. After that, however, the new income limits would apply. Next-door neighbors with similar incomes could be treated differently by the same state program.

The debate over CHIP "is a crossroads," says Health and Human Services Secretary Mike Leavitt.

Rather than expanding government programs, Bush wants to give people without employer-sponsored plans a tax deduction — $7,500 for individuals, $15,000 for couples — if they buy insurance on their own.

Leavitt says the president sees the CHIP impasse as the "moment" to have a larger debate about helping the uninsured.

"He's going to veto this bill," Leavitt says, "and as part of it he'd like to see the larger debate begin."

'Serve low-income families first'

When CHIP was created a decade ago by President Clinton and a Republican-led Congress, it targeted families with incomes of up to 200% of the poverty rate, or $32,800 at the time for a family of four. The U.S. government pays most of the costs — 65% to 83% of each state's program, depending on a state's median income level.

Today, CHIP is heralded by both parties as a success, but 8.7 million children remain uninsured. The number rose in 2005 and 2006, as employers of lower-income workers shed coverage for dependents.

With approval from the Department of Health and Human Services, many states have raised their income eligibility levels or expanded their programs to cover pregnant mothers, parents, even childless adults. Last year, 9% of children in the program, or more than 500,000, were in families with incomes above 200% of the poverty line, according to the Congressional Research Service.

The loosening of eligibility standards has made CHIP coverage easier to get than most other types of government aid for the poor. To get food stamps, for example, a family of four must earn less than $27,000 annually, or 130% of the federal poverty line.Low-income housing eligibility varies by state, but a family of four generally qualifies with an income below $50,000.

Anti-poverty advocates say health insurance is different. Higher-income families don't need help with food and housing, they say, but many families can't afford to see the doctor. They equate it with college loans, often received by dependent children in families of four earning up to $80,000.

On the individual market, "health insurance is unaffordable … particularly if you're sick," says Sharon Parrott of the liberal Center on Budget and Policy Priorities.

Now the Bush administration wants to return CHIP to its roots. Last month's guideline is designed to reduce the number of families at higher incomes who drop private health insurance for a cheaper, taxpayer-funded deal.

About 25% to 50% of CHIP's children, or 1.5 million to 3 million, previously had private insurance, the Congressional Budget Office says. They now cost taxpayers $1.25 billion to $2.5 billion a year.

To go beyond the income limit under Bush's new policy, states would first have to cover 95% of children below 200% of poverty. In a letter to Bush last month, the governors of California and New York called the 95% standard "virtually impossible" to meet because "this is not a static population." Also, families with higher incomes could enroll their children only if they were uninsured for a year.

Dennis Smith, the Medicaid director who set the new policy, says the message to states is "serve your low-income families first. Go find them. That's who you're responsible for before you go to those higher income levels."

Ten states, three counties in California and the District of Columbia have federal approval to cover children above 250% of poverty. Several more states have been granted 300% limits on a case-by-case basis since Bush took office.

Eight other states now are stymied in their efforts to extend coverage to higher-income families.

That includes New York, which was blocked this month by the Bush administration from going to four times the poverty level, or $82,600 a year for a family of four. The state has threatened to sue the federal government to get its way.

"If you happen to have a ZIP code that puts you in one of those other states, then you don't get the benefit," says Helen Jones-Kelley, director of Ohio's Department of Job and Family Services.

Some kids stay in, some left out

The new Bush rule would affect states differently, depending on whether they already enroll children in higher-income families, had planned to do so, or have broad plans to cover all their citizens.

•In states such as Connecticut, Maryland and New Hampshire, thousands of children in families with incomes between 250% and 300% of poverty are insured under CHIP. Officials are reaching out to others, at least for one more year. At that income, "you're certainly doing OK," says Connecticut Medicaid director David Parrella. "But whether you can access health insurance without some assistance from the state is questionable."

•In states such as New York, Ohio and Washington, legislative efforts to raise the CHIP eligibility level are stymied by the new guideline. New York says it can enroll 50,000 children above 250%, mostly in families earning just over the current limit. "They may cobble together a $60,000 income working two or three jobs at low wages," says Judy Arnold, New York's CHIP program director.

•In states such as California, Massachusetts and Vermont, efforts to insure every citizen could be jeopardized if the U.S. government puts new limits on the CHIP program. "When you're trying to get everybody insured, every piece is important," says Vermont Medicaid director Joshua Slen.

California Gov. Arnold Schwarzenegger wants to take the 300%-of-poverty threshold statewide. "What 250% of poverty is in Iowa … is much less than it takes to live here," says Lesley Cummings, who runs California's program.

Here in New Jersey, about 10,500 children above the 250% of poverty threshold are covered under the state's CHIP program. "They're the working poor," says Ann Kohler, New Jersey's deputy commissioner for human services. "Sometimes they're one-parent households struggling to make ends meet."

That describes Ann Martinez, 28, and her children, ages 12 and 9. The Horizon Health Center employee has income above the $42,925 level that Bush set for a family of three.

In New Jersey, her kids qualify for coverage. She pays $35 a month per child — including a son who has Attention Deficit Hyperactivity Disorder. One of his medicines has no generic alternative. Without CHIP, she says, "I wouldn't be able to afford my son's medication."

INCOME LIMITS

President Bush wants to limit eligibility for the Children's Health Insurance Program to families earning no more that 250% of the federal poverty level. What families could earn and get benefits:

Family size Maximum income1 Poverty level
1 $25,525 $10,210
2 $34,225 $13,690
3 $42,925 $17,170
4 $51,625 $20,650
5 $60,325 $24,130
6 $69,025 $27,610
7 $77,725 $31,090
8 $86,425 $34,570

1 Income limits higher in Alaska and Hawaii.

Source: Department of Health and Human Services

WHERE STATES STAND

States where families with annual incomes above 250% of the poverty level ($51,625 for a family of four) qualify for the Children's Health Insurance Program:

State Poverty level
New Jersey 350%
California 300%1
Connecticut 300%
District of Columbia 300%
Hawaii 300%
Maryland 300%
Massachusetts 300%
Missouri 300%
New Hampshire 300%
Pennsylvania 300%
Vermont 300%
Minnesota 280%

1 in three counties only

States seeking to cover children above 250% of the poverty level but lacking federal approval:

State Poverty level
New York 400%
Indiana 300%
Louisiana 300%
North Carolina 300%
Ohio 300%
Oklahoma 300%
Washington 300%2
West Virginia 300%

2 in 2009

Sources: National Association of State Medicaid Directors, Kaiser Commission on Medicaid and the Uninsured, Families USA