State Children's Health Insurance Program

Nearly a decade after Congress established the State Children's Health Insurance Program (SCHIP) on the shoulders of Medicaid to reduce the number of uninsured low-income children, more than 4 million, most of whom would be otherwise uninsured, receive comprehensive health insurance coverage through the SCHIP-funded programs.  Regrettably, much of the progress that SCHIP has made in reducing the ranks of uninsured children in the United States may be lost.

In fiscal year 2007, some fourteen states will have inadequate funds to cover the same number of beneficiaries as in 2006 through SCHIP.  The ten-year program, set to expire later this year, must be reauthorized by Congress or the grants to states that began in 1997 to provide low-income children with health care will cease.  SCHIP is a block grant with a fixed annual funding level.  Increasingly, the federal SCHIP funding received by states has not kept pace with the rising cost of healthcare or population growth.

President Bush has said that he wants to slow the growth of the program and keep its costs in check while reocusing resources on children of the working poor who may already be receiving Medicaid.  The program would require $15 billion over the next five years to keep operating at status quo.  Providers have recommended a fund increase of at least $60 billion , but President Bush wants to add only $5 billion.  Any action that Congress takes would affect each state differently.

West Virginia, for example, doesn't foresee any funding deficits through 2010 having used grant money less quickly than other states.  West Virginia receives $28 million a year from SCHIP.  Additionally, the state matches $1 for every $4 awarded by the federal government.  The number of children covered by West Virginia CHIP averages a 2% rise annually; a slow, moderate growth.

Georgia's governor, Sonny Perdue, on the other hand, may eliminate the children's health program, altogether, if Congress doesn't allot more money for it, soon.  Georgia will stop accepting new applicants in a few weeks.

According to the Center on Budget and Policy Priorities (CBPP), if SCHIP funding is frozen, Maine, Massachusetts, and Rhode Island face projected federal funding shortfalls of $11.4 million, $170.9 million, and $54.5 million, respectively, in 2008 and $20.3 million, $282.8 million, and $77.7 million, respectively in 2012.  Twenty states, in all, will face a funding shortfall in 2008 equivalent to the average, annual cost of covering up to 940,000 children.  In 2012, some 36 states will face a shortfall equivalent to the average, annual cost of covering up to 1.9 million children.

SCHIP, according to the CBPP, is challenged with three basic realities.  First, rising health-care costs will cause states that are now leaving some funds unspent to spend more of their SCHIP allotments, over the next few years, simply to continue covering the same number of beneficiaries, reducing the amount of unspent funds available for redistribution.  Second, the block-grant structure of SCHIP makes it impossible to target funds perfectly among the states.  Each state's annual SCHIP allotment is based on a formula built into federal statute, not on the state's precise funding needs.  Under the current SCHIP system, some states inevitably will have either too much funding or too little.  Third, the fundamental factor driving the shortfalls is not some deep flaw in the financing structure of SCHIP; rather, it is health care cost inflation.  With health care costs rising significantly throughout the U.S. health care system -- in the private and public sectors alike -- it costs more each year just to keep insuring the same number of SCHIP beneficiaries.■