The Centers for Medicare & Medicaid Services is taking steps to make sure states are using the State Children's Health Insurance Program for the purpose of providing health insurance for low-income children.
The federal agency on Wednesday sent letters to state health officials specifying how it will review state health programs to see how SCHIP approaches are being used.
The message in the CMS letter is clear - it wants states to use SCHIP to cover the lowest-income children first and prevent the use of public health benefits as a substitute for private insurance coverage.
States last year were straying into that territory by crafting SCHIP plans that raised the eligibility levels of income that families could have and still apply for health insurance through SCHIP-backed coverage schemes. The administration used those incidents as a major argument for not increasing SCHIP funding last year.
"Over the course of SCHIP, we have become increasingly concerned that these programs might be expanded to kids with higher incomes while not assuring that children in poorer circumstances had coverage," said Kerry Weems, acting administrator at CMS.
In a letter last August, CMS notified states that it planned to use a policy of reviewing state plans if a state raised SCHIP eligibility above 250 percent of the federal poverty level, or $53,000 for a family of four in 2008. The CMS reviews specifically look at whether families were dropping private coverage in favor of SCHIP, a practice known as "crowd-out."
Last year's letter said CMS specifically would be looking to determine whether such families were without healthcare insurance for 12 months before enrolling in a SCHIP plan, and it asked states to prove that 95 percent of its children in families with incomes of less than 200 percent of the federal poverty level had coverage from SCHIP, Medicaid or private coverage before states permitting those at higher income levels to enroll in SCHIP.
In Wednesday's clarification, CMS officials said they are open to suggestions of other strategies to prevent crowd-out at higher income levels.
"CMS will continue to work cooperatively with states to cover children and avoid substitution of existing coverage," Weems said.
Wednesday's letter also supplied assurances that children already enrolled in SCHIP plans can be "grandfathered" into the program and are not affected by changes CMS requires to alleviate crowd-out. And crowd-out policies don't apply to unborn children eligible for SCHIP.
But the letter also refuted worries from states that the goal of covering 95 percent of their low-income children was too high a threshold to meet.
"We are convinced that a number of states have already reached this goal," Weems said. "We will continue to work with them on ways to document compliance using several different, yet reliable, data sources."