Number A-35 in Series, "New Federalism: Issues and Options for States"
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. This report was supported under a contract with The urban Institute. The views expressed in this report are solely those of the authors, and no endorsement by the United Hospital Fund, New York university, or The Urban Institute, its trustees, or its funders is intended or should be inferred. We gratefully acknowledge the assitance of Lali Ruiz for her assistance in scheduling the interviews for this project.
Note: This report is available in its entirety in the Portable Document Format (PDF).
In August 1997, Congress enacted the Children's Health Insurance Program (CHIP) to expand health insurance coverage for low-income children up to age 19. CHIP, established as Title XXI of the Social Security Act, is a voluntary program that entitles states to approximately $40 billion through 2007. States must supply matching funds, but the required matching rates are lower than Medicaid rates. As of August 1, 1999, all 50 states and the District of Columbia had developed plans for children's health insurance expansions under CHIP—and all but three had received federal approval.1
This brief provides a snapshot of the types—and scale—of expansions that states have adopted in the early implementation phase of CHIP and their efforts to equalize income eligibility for all children regardless of age. In addition, the brief examines how coverage expansions vary in relation to state characteristics.
Three Approaches to CHIP Expansion
The Balanced Budget Act of 1997 provides states with three options for increasing coverage under CHIP: expand Medicaid, establish a new insurance program separate from Medicaid, or implement a combination of both. Although expanding Medicaid affords less programmatic flexibility—for example, benefit package design and cost-sharing are predetermined—it has a number of advantages.2 First, administrative structures and benefit packages are already in place, an advantage for states that want to act quickly. Second, Health Care Financing Administration (HCFA) guidelines guarantee these states funds at regular Medicaid matching rates if they exceed CHIP allotments. Third, states may wish to use CHIP to equalize Medicaid income eligibility criteria for children of all ages.
However, creating a separate non-Medicaid program has advantages too.3 First, separate programs provide states greater flexibility to design alternative benefit packages and impose more stringent cost-sharing requirements. Second, because separate programs are not considered entitlements, policymakers can cap enrollment and expenditures. Finally, separate programs can create a new image for publicly sponsored health insurance programs, thus avoiding the stigma that families and providers often associate with Medicaid.
Of the 51 CHIP plans set forth by each state and the District of Columbia, 18 expand Medicaid, 17 create programs separate from Medicaid, and 16 do both.4 The number of states relying either entirely or partially on Medicaid is similar to the number of states that have introduced or expanded a non-Medicaid program. However, at least 10 of the states that have created "new" programs have actually developed Medicaid look-alikes, which are nonentitlement programs that resemble Medicaid but cap enrollment and/or impose cost-sharing requirements.
Notes from this section
1. Three states that are awaiting federal approval under CHIP are Tennessee, Washington, and Wyoming.
2. Weil, Alan. 1997. "The New Children's Health Insurance Program: Should States Expand Medicaid?" Washington, D.C.: Urban Institute. October.
3. Ibid.
4. The states using a Medicaid expansion are AK, AR, DC, HI, ID, LA, MD, MN, MO, NE, NM, OH, OK, RI, SC, SD, TN, and WI; the states with a separate program are AL, AZ, CO, DE, GA, KS, MT, NV, NH, NC, OR, PA, UT, VT, VA, WA, and WY; and the states using a combined approach are CA, CT, FL, IL, IN, IA, KY, ME, MA, MI, MS, NJ, NY, ND, TX, and WV.
Note: This report is available in its entirety in the Portable Document Format (PDF).
