To assist states as they address the issue of substitution in their Title XXI plans, this paper focuses primarily on an examination of the experiences of a set of states that have already developed and implemented children's health insurance programs prior to the creation of Title XXI. Qualitative data, which was collected from state officials through interviews and a round-table discussion, augments previous research by examining states' perceptions and their actual experiences with substitution.
This report is organized within the following structure. Section I provides the background and purpose of the paper, a brief synopsis of Title XXI of the Social Security Act, and a discussion on individual- and employer-based substitution. Section II contains the methodology and an introduction to the literature. Section III defines substitution and provides a review of the literature including the range of substitution estimates. Section IV describes state mechanisms to limit substitution. Section V discusses estimating substitution, the disconnect between state experiences and research findings, and the impact of secular trends on measuring crowd out. Section VI presents implications for future expansions under Title XXI; evaluation of the nature, scope, and levels of substitution; summary types of data to be collected by states; and the need for additional research. Section VII presents a summary of the findings.