States Sue Bush Administration over SCHIP Eligibility Reforms

Published December 1, 2007

On October 4, four states filed suit in a New York federal court against the U.S. Department of Health and Human Services, saying new guidelines it issued in August for the State Children’s Health Insurance Program (SCHIP) should not have been implemented without public notice and comment.

The suit was filed by Illinois, Maryland, New York, and Washington. Other states, including Arizona, California, and New Hampshire, plan to file supporting briefs.

New Jersey filed a separate lawsuit on similar grounds.

Too-Generous Coverage

In mid-August the Bush administration told states SCHIP would no longer reimburse them for covering families earning more than 250 percent of the federal poverty level (FPL). Under the new rules, states would have to cover 95 percent of poverty-level families before enrolling middle-income children in the program.

The new rules also require states to prove any SCHIP expansion to non-poor families did not cause privately insured families to drop their coverage in favor of SCHIP, and that their new SCHIP enrollees had been uninsured for at least one year before enrolling in the program.

Covering poor children, not middle-income families and not adults, was the original purpose of SCHIP. Yet covering 95 percent of them is a goal many states say they cannot meet.

According to a news story on, published by the American Medical Association, no state has enrolled more than 92 percent of children in families earning 200 percent of the FPL or less. “This is not a secret to HHS,” Washington Gov. Christine Gregoire (D) said.

At least 16 states currently have SCHIP eligibility limits above 250 percent of FPL. They have until August 17, 2008, to meet the new criteria. States that fail to meet the new guidelines will receive Medicaid-level federal matching funds, lower than SCHIP matching funds, for children in families above 250 percent of FPL.

“These lawsuits prove that the states see SCHIP as a way to use federal dollars to expand this government health program to cover kids in middle-income families,” noted Grace-Marie Turner, president of the Galen Institute.

“The higher the income threshold for eligibility,” Turner continued, “the more likely it is that the private insurance many of these children already have will be replaced by taxpayer-supported coverage. It will not be a wise trade-off.”

Turner explained, “Parents who drop private coverage for their children may be very surprised when they learn that access to private physicians is significantly curtailed because payment rates to doctors are lower, and often much lower, for SCHIP than for private insurers.”

Karla Dial ([email protected]) is managing editor of Health Care News.