Children’s Health Insurance Program Reauthorized and Expanded

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In an early demonstration of the change in direction of health care policy, on February 4th the 111th Congress passed - and the president swiftly signed - a revised and somewhat expanded version of legislation reauthorizing the popular Children’s Health Insurance Program (CHIP). Similar legislation had been vetoed twice by President Bush, and on each occasion Congress failed to override the veto. The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) reauthorizes CHIP through September 30, 2013, expanding the program to provide health insurance to more than 4 million additional children. The estimated $33 billion five-year price tag of the law will be financed primarily through a tobacco tax increase. The final version of CHIPRA passed the Senate 66-32 and the House 290-135. Nine Senate Republicans and twenty House Republicans voted for the legislation.

While some Congressional Republicans opposed the law as a first step toward “government-run health insurance,” Congressional Democrats and the Obama Administration view it as a first step towards their goal of universal coverage. The bill provides new CHIP funding to states through a revised formula intended to prevent chronic funding shortfalls experienced by some states under the old formula. CHIPRA also includes a number of significant programmatic changes:

Coverage of Immigrant Children. Prior to CHIPRA, legal immigrants were precluded from enrolling in Medicaid or CHIP during their first five years of legal residence in the United States. CHIPRA allows states to waive this enrollment restriction for children and pregnant women whose lawful residence can be established. CHIPRA also eases Medicaid and CHIP citizenship verification requirements.
Dental Benefits and Mental Health. CHIPRA requires states to provide dental coverage for CHIP enrollees and includes an option for states to use CHIP funds to provide dental coverage to underinsured children. The law also requires comparability in CHIP between mental health and medical and surgical benefits.
Coverage of Low-Income Children. CHIPRA contains a number of initiatives to improve coverage and enrollment of low-income children, including a performance bonus system for states that adopt measures to streamline enrollment and an option for states to use findings from other agencies to establish eligibility (“Express Lane Eligibility”).
Children at Higher Income Levels. Addressing the controversy over whether the program should permit coverage of children at higher income levels, the bill allows states that currently cover or have plans to cover children above 300% of the federal poverty level (FPL) to receive enhanced CHIP matching rates for that coverage. However, any new states desiring to expand coverage will receive only the regular Medicaid matching rate.
Coverage of Pregnant Women. CHIPRA sets out new prerequisites in order for states to cover pregnant women through CHIP. In particular, states must use Medicaid to cover pregnant women with incomes up to at least 185% of the FPL and must use either Medicaid or CHIP to cover children in families with income up to at least 200% of the FPL.
Coverage of Parents and Childless Adults. CHIPRA phases out coverage of childless adults under CHIP. To continue to provide such coverage, states would have to do so through a Medicaid waiver. The bill permits states to continue existing programs covering parents through CHIP, but at a gradually reduced matching rate. No new states would be permitted to establish such coverage.
Premium Assistance. CHIPRA contains a new state option to subsidize employer-sponsored health coverage that includes children. To qualify, the employer must contribute at least 40% of the costs of coverage, and the coverage must be actuarially equivalent to the CHIP benchmark plan. CHIPRA also amends ERISA to (1) establish gain/loss of Medicaid/CHIP coverage as a “qualifying event” for purposes of eligibility for employer-sponsored coverage, (2) require employers to share information about their group plans with state officials when assessing wraparound services, and (3) require employers to notify employees in writing of state Medicaid and CHIP assistance in plan disclosure documents.
Payment and Access Commission. CHIPRA amends the Medicaid statute to create a new commission, the Medicaid and CHIP Payment and Access Commission (MACPAC), to review Medicaid and CHIP policies affecting children’s access to covered items and services. MACPAC is loosely modeled on its Medicare counterpart, the Medicare Payment Advisory Commission (MedPAC).

Other CHIP-Related Developments
CHIPRA did not address a controversial August 17, 2007 directive of the Bush Administration that crippled state efforts to expand CHIP coverage. As subsequently restated and reinforced by a Centers for Medicare and Medicaid Services (CMS) memorandum issued on May 7, 2008, that directive prohibited states from extending CHIP eligibility to children in families with incomes over 250% of the FPL, unless the states could first demonstrate that their programs already covered at least 95% of children in families with incomes up to 200% of the FPL. However, on February 4th, the day he signed CHIPRA, President Obama issued a one-page memorandum revoking the August 17, 2007 and May 7, 2008 directives, thereby lifting these CHIP restrictions in full.

Prohibition on Physician-Owned Hospitals Not Adopted
The initial House version of CHIPRA contained a provision authored by Representative Pete Stark (D-CA) that would have effectively prevented new physician investment in specialty hospitals. However, the Senate bill did not contain similar language; and, as it was this version that the Congress ultimately passed and sent to the president for signature, the Stark restrictions did not make it to final passage.