SCHIP Allotments to States

SCHIP allotments to states are based on an allocation formula that uses  (1) the number of children, which is expressed as a combination of two  estimates—the number of low-income children without health insurance  and the number of all low-income children, and (2) a factor representing  state variation in health care costs. Under federal SCHIP law and subject  to certain exceptions, states have 3 years to use each fiscal year’s  allocation, after which any remaining funds are redistributed among the  states that had used all of that fiscal year’s allocation. SCHIP Enrollment Has Grown Rapidly; States’ Rates of Uninsured Children Vary Significantly

SCHIP enrollment increased rapidly over the first years of the program,  and has stabilized for the past several years. Of these 6.1 million enrollees, 639,000 were adults. Many states adopted innovative  outreach strategies and simplified and streamlined their enrollment  processes in order to reach as many eligible children as possible. States’ SCHIP Programs Reflect a Variety of Approaches to Providing Health Care Coverage

States’ SCHIP programs reflect the flexibility allowed in structuring  approaches to providing health care coverage, including their choice  among three program designs—Medicaid expansions, separate child  health programs, and combination programs, which have both a Medicaid  expansion and a separate child health program component. In fiscal year 2005, 41 states used SCHIP funding to cover children in  families with incomes up to 200 percent of FPL or higher, including   7 states that covered children in families with incomes up to 300 percent  of FPL or higher. Most SCHIP Programs Require Cost-Sharing, but Amounts Charged Vary Considerably

In 2005, most states’ SCHIP programs required families to contribute to the  cost of care with some kind of cost-sharing requirement. As of February 2007, we identified  14 states with approved waivers to cover at least one of three categories of  adults: parents of eligible Medicaid and SCHIP children, pregnant women,  and childless adults. States’ SCHIP Spending Was Initially Low but Now Threatens to Exceed Available Funding

SCHIP program spending was low initially, as many states did not  implement their programs or report expenditures until 1999 or later, but  spending was much higher in the program’s later years and now threatens  to exceed available funding. But as spending has grown,  the pool of funds available for redistribution has shrunk. To cover projected shortfalls that several states faced,  Congress appropriated an additional $283 million for fiscal year 2006. States that have outspent their annual allotments over the 3-year period of  availability have also relied on redistributed SCHIP funds to cover excess  expenditures. In fiscal years 2000 and 2003, Congress amended  statutory provisions for the redistribution and availability of unused  SCHIP allotments from fiscal years 1998 through 2001, reducing the  amounts available for redistribution and allowing states that had not  exhausted their allotments by the end of the 3-year period of availability to  retain some of these funds for additional years. Some States Consistently Spent More than Their Allotted Funds

Some states consistently spent more than their allotted funds, while other  states consistently spent less. Moreover, 18 states were projected to face shortfalls—that is, they were  expected to exhaust available funds, including current and prior-year  allotments—in at least 1 of the final 3 years of the program. In contrast, none of the 4 states that began  covering adults with SCHIP funds in the period from fiscal year 2004  through 2006 faced shortfalls. These include the  following:    Maintaining flexibility without compromising the goals of SCHIP. Considering the federal financing strategy, including the financial  sustainability of public commitments. Assessing issues associated with equity. Appendix I: SCHIP Upper Income Eligibility by State, Fiscal Year 2005

Appendix I: SCHIP Upper Income Eligibility  by State, Fiscal Year 2005 expressed as a percentage of FPL  200 expressed as a percentage of FPL  While Tennessee has not had a SCHIP program since October 2002, in January 2007, CMS  approved Tennessee’s SCHIP plan, which covers pregnant women and children in families with  incomes up to 250 percent of FPL. Related GAO Products

Children’s Health Insurance: State Experiences in Implementing SCHIP  and Considerations for Reauthorization. GAO-07-447T. Washington, D.C.:  February 1, 2007.
Why GAO Did This Study

In August 1997, Congress created the State Children's Health Insurance Program (SCHIP) with the goal of significantly reducing the number of low-income uninsured children, especially those who lived in families with incomes exceeding Medicaid eligibility requirements. Unlike Medicaid, SCHIP is not an entitlement to services for beneficiaries but a capped allotment to states. Congress provided a fixed amount--approximately $40 billion from fiscal years 1998 through 2007--to states with approved SCHIP plans. Funds are allocated to states annually. Subject to certain exceptions, states have 3 years to use each year's allocation, after which unspent funds may be redistributed to states that have already spent all of that year's allocation. GAO's testimony addresses trends in SCHIP enrollment and the current composition of SCHIP programs across the states, states' spending experiences under SCHIP, and considerations GAO has identified for SCHIP reauthorization. GAO's testimony is based on its prior work, particularly testimony before the Senate Finance Committee on February 1, 2007 (see GAO-07-447T). GAO updated this work with the Centers for Medicare & Medicaid Services' (CMS) January 2007 approval of Tennessee's SCHIP program.

What GAO Found

SCHIP enrollment increased rapidly during the program's early years but has stabilized over the past several years. As of fiscal year 2005, the latest year for which data are available, SCHIP covered approximately 6 million enrollees, including about 639,000 adults, with about 4 million enrollees in June of that year. Many states adopted innovative outreach strategies and simplified and streamlined their enrollment processes in order to reach as many eligible children as possible. States' SCHIP programs reflect the flexibility federal law allows in structuring approaches to providing health care coverage. As of July 2006, states had opted for the following from among their choices of program structures allowed: a separate child health program (18 states), an expansion of a state's Medicaid program (11), or a combination of the two (21). In addition, 41 states opted to cover children in families with incomes at 200 percent of the federal poverty level (FPL) or higher, with 7 of these states covering children in families with incomes at 300 percent of FPL or higher. Thirty-nine states required families to contribute to the cost of their children's care in SCHIP programs through a cost-sharing requirement, such as a premium or copayment; 11 states charged no cost-sharing. As of February 2007, GAO identified 14 states that had waivers in place to cover adults in their programs; these included parents and caretaker relatives of eligible Medicaid and SCHIP children, pregnant women, and childless adults. SCHIP spending was initially low, but now threatens to exceed available funding. Since 1998, some states have consistently spent more than their allotments, while others spent consistently less. States that earlier overspent their annual allotments over the 3-year period of availability could rely on other states' unspent SCHIP funds, a portion of which were redistributed to cover other states' excess expenditures. By fiscal year 2002, however, states' aggregate annual spending began to exceed annual allotments. As spending has grown, the pool of funds available for redistribution has shrunk. As a result, 18 states were projected to have "shortfalls" of SCHIP funds--meaning they had exhausted all available funds--in at least one of the final 3 years of the program. To cover projected shortfalls faced by several states, Congress appropriated an additional $283 million for fiscal year 2006. SCHIP reauthorization occurs in the context of debate on broader national health care reform and competing budgetary priorities, highlighting the tension between the desire to provide affordable health insurance coverage to uninsured individuals, including low-income children, and the recognition of the growing strain of health care coverage on federal and state budgets. As Congress addresses reauthorization, issues to consider include (1) maintaining flexibility within the program without compromising the primary goal to cover children, (2) considering the program's financing strategy, including the financial sustainability of public commitments, and (3) assessing issues associated with equity, including better targeting SCHIP funds to achieve certain policy goals more consistently nationwide.