10 million children in the United States are not covered by health
insurance. Fortunately, Congress has provided the state governors
with a way to help uninsured children to receive coverage through
superior private health plans. The governors need to act on this
1997, as part of the Balanced Budget Act, Congress enacted the
State Children's Health Initiative Program (S-CHIP), which is
intended to help uninsured children to get coverage by providing
$48 billion in taxpayer funds to states over a period of 10 years.
The best way to expand health insurance coverage to low-income
children is to give real choices and incentives to families, and
S-CHIP contains legislative language that allows states to employ
private options. Congressional conferees explicitly encouraged the
states to "consider such innovative means as vouchers and tax
many state officials have looked to alleviate the problem of
uninsured children, however, by enrolling them in the troubled
Medicaid program. The answer is not to co-mingle S-CHIP dollars
with Medicaid funds. The Medicaid money comes with myriad federal
regulations that limit a state's ability to design programs to make
a difference in the lives of children and their families. Although
Medicaid expansion may be an expedient option, it locks a state
into a far more expensive set of benefits than is necessary for
children, increasing cost pressures in the Medicaid program.
Putting S-CHIP funds into Medicaid programs and then having to live
by Medicaid restrictions is like throwing good money after bad.
States no longer have to do this.
S-CHIP allows governors to experiment with
alternatives. Under Section 2103(a) of the Balanced Budget Act, the
scope of health insurance coverage required to meet the terms of
S-CHIP shall consist of (1) benchmark coverage or (2)
benchmark-equivalent coverage. Section (b) spells out the three
acceptable benchmark benefit packages. The first is the Children's
Health Insurance Coverage (equivalent to the Federal Employees
Health Benefits Program), which means the standard Blue Cross/Blue
Shield preferred provider option service plan. Second is a health
benefits coverage plan that is "offered and generally available to
State employees in the State involved." Third is coverage offered
by a health maintenance organization that has the largest insured
commercial, non-Medicaid enrollment in the state in question.
is in the second option that states can find significant
flexibility. In a February 9, 1999, letter to Texas Governor George
W. Bush, House Commerce Committee Chairman Thomas J. Bliley (R-VA)
notes that a state is not limited to existing employee
health plans. A state is free to create a new state employee health
plan so long as it is "offered and generally available to State
employees." Therefore, a state has the power to design a
cost-effective plan to meet its needs. And there is no minimum
enrollment requirement that such a plan must satisfy to be used as
a benchmark plan.
Federal approval of a state health plan
used as a benchmark package under Section 2103(b) is not required.
So long as a state uses one of the options set forth under Section
2103(b) as its benchmark, its use is de facto approved. The
Secretary of Health and Human Services' scope of review is focused
simply on compliance with Section 2103(a). In other words, a state
that uses a benchmark benefit package as described in Section
2103(b) must satisfy the Secretary that the health benefits
coverage to be offered to eligible children is "equivalent," as
required under Section 2103(a)(1) to the benefits coverage in the
benchmark benefit package.
After satisfying this requirement, a state
then is free to create a benchmark plan that gives personal choice,
responsibility, and ownership of health care plans where it
rightfully belongs--in the hands of families. Offering tax credits
or vouchers to assist low-income families to purchase private
health insurance best serves the needs of individual families.
credits and vouchers are a superior vehicle to Medicaid enrollment.
First, by giving a single mother (for example) the means to
purchase health insurance for herself and her children, she can buy
coverage that includes the entire family under one plan. This
eliminates the common problem of a mother's being under one plan
while Medicaid covers her kids. Not only is this more simple, it
also allows family members to see the same doctor. Second, using
vouchers helps states to strengthen their welfare-to-work programs.
Very often, a single mother is discouraged from returning to work
if it means giving up Medicaid coverage for herself, her children,
or both. Vouchers offer the alternative of private coverage.
Moreover, if a state were able to make funds available to employers
in the form of vouchers to offset the cost of a low-income family's
joining a private plan, then employers would have the incentive to
offer them coverage. This would remove a major barrier to a single
mother's returning to the workforce.
States have real opportunities to
experiment with federal dollars under the S-CHIP program. By
establishing a new state employee health benefit plan to serve as
the required benchmark under Section 2103(b) of the S-CHIP law, a
state can take full advantage of the flexibility afforded by the
law's language. By using that leeway to create a system of tax
credits and/or vouchers for low-income families to obtain private
coverage, a state can make real progress toward reducing the number
of uninsured families at no additional cost to the taxpayer.
James Frogue is a former
Health Care Policy Analyst at The Heritage Foundation.
Eric Berger, Director of Planning and
Public Policy, American Oncology Resources. (281) 873-2674.
Grace-Marie Arnett, President, The Galen
Institute, Inc. (703) 299-8900.
Tom Giles, House Commerce Committee. (202)
John Hood, President, John Locke
Foundation. (919) 828-3876.
See also The State Children's Health
Insurance Program (S-CHIP) Implementation Guide,
House Commerce Committee chairman Thomas J. Bliley (R-VA). Contact
the committee at (202) 225-2927.