Interim Evaluation Report: Congressionally Mandated Evaluation of the State Children’s Health Insurance Program. B. Implementation Experiences

02/26/2003

SCHIP spending patterns varied across the six study states. As in 10 other states in the nation, Missouri and New York had spent their full FFY 1998 federal allotment by the end of the 3-year spending period for the funds (Table 20); on this basis, they qualified for additional distributions from the pool of funds unexpended in the other 38 states. New York received the largest redistribution of FFY 1998 funds (nearly $435 million), while Missouri received more than $9 million. The remaining four states pose a sharp contrast. Colorado spent 57 percent of its FFY 1998 allotment, the median percentage nationwide; whereas spending in California, Louisiana, and Texas, was far below the national median percentage.

State officials in Missouri and New York attributed their high spending levels to high rates of enrollment. Notably, too, both states had programs ready to start immediately after obtaining SCHIP funds--a Medicaid expansion program in Missouri and a pre-existing separate state children's program in New York. Missouri also cited high per capita costs and large increases in prescription drug costs as factors associated with its high level of spending. In neither case, however, did the high spending lead to a state fiscal crisis or to a cap on enrollment. Missouri came closest to a shortfall of state matching funds as a result of a unique constraint known as the "Hancock Amendment," which precludes state revenues from increasing at a higher rate than personal income growth, unless taxpayers agree to a tax increase. A funding problem was averted for FFY 2001, when the state received approval to use tobacco settlement funds to meet the shortfall. New York officials interviewed in the case study were concerned about a shortfall because they believed that they had received an inadequate federal allotment. The large amount New York received from redistributed allocations was sufficient to avert a shortfall in total funding.

According to case study respondents, the relatively low spending in the remaining states resulted from four factors: (1) overestimates of eligible, uninsured children in calculating the federal allotment; (2) lower than average per capita expenditures under SCHIP than the federal allotment anticipated; (3) late program starts; and (4) low-income eligibility thresholds that limited the number of children who qualified.

In California, state officials interviewed for the case study believed that the federal estimate of uninsured, low-income children overstated the number who would qualify for SCHIP by neglecting to account for those who would qualify for Medicaid, resulting in an inflated allotment. This was the major reason cited by state officials for their "underspending." Officials in California also cited lower per capita expenditures under SCHIP than they had expected. In Louisiana, low spending was attributed to two factors. First, LaCHIP was not implemented until the end of 1998, with only two small Medicaid expansions--first, to 133 percent, then to 150 percent of the FPL; and, second, it did not raise the eligibility level to 200 percent until the beginning of 2001. A late start was also the cause of low spending rates in Texas--that state's separate program component did not begin until April 2001, and the first two years saw negligible spending on behalf of children covered by the limited Medicaid "placeholder" expansion.

The views of state officials and legislators on the fiscal outlook for SCHIP--which were obtained during the summer of 2001, a period before the full impact of the economic recession was felt in most states--ranged from "very positive" to "uncertain." Most of the opinions concerned the prospects for state financing and tended to be correlated with legislative and gubernatorial support for the program.

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