Interim Evaluation Report: Congressionally Mandated Evaluation of the State Children’s Health Insurance Program. A. Background and Policy Development


States with Medicaid expansion programs must use their Medicaid benefit package for SCHIP. States with separate programs have greater flexibility, although they still must ensure that the SCHIP benefit package meets, or exceeds, the minimum coverage parameters outlined in Title XXI legislation, by adopting one of the following options:

  • Benchmark coverage equivalent to the standard Blue Cross/Blue Shield PPO option of the Federal Employees' Health Benefit Program (FEHBP), the State Employee Health Benefit Plan, or coverage offered by the HMO with the largest commercial enrollment in the state
  • Coverage that is equivalent actuarially to any of the above benchmarks (and that meets coverage requirements specified in Title XXI)
  • Grandfathered coverage provided through pre-SCHIP state programs (offered only to Florida, New York, and Pennsylvania)
  • Other coverage approved by the Secretary

Upon passage of Title XXI, one of the most persuasive arguments among advocates in support of adopting Medicaid expansions under SCHIP was that Medicaid extends to children the broadest possible benefits coverage and virtually open-ended protection against any illness. 45 The Omnibus Budget Reconciliation Act of 1989 (OBRA 89) strengthened Medicaid's Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) provisions by defining them more clearly and, most important, by requiring states to provide, rather than simply arrange for:

"…such other necessary health care, diagnostic services, treatment, and other measures described in [the list of covered services] to correct or ameliorate defects and physical and mental illnesses and conditions discovered by the screening services, whether or not such services are covered under the state plan."

At least on paper, therefore, the OBRA 89 provisions gave Medicaid-eligible children coverage for any medically necessary service. Some referred to Medicaid's comprehensive coverage as the "gold standard."

Those debating whether to design SCHIP as a Medicaid expansion or as a separate state program looked closely at benefit packages. Some states saw Medicaid's broad coverage for low-income children as a good thing, while others viewed it as "too generous," preferring coverage that would more closely resemble private insurance options. Benefits issues influenced the debates greatly in Louisiana, one of the two Medicaid expansion states, where concerns about the adequacy of available private plans for children with special healthcare needs figured importantly.

To varying degrees, all four study states with separate state programs (California, Colorado, New York, and Texas) sought to make the SCHIP benefit package similar to commercial ones rather than designing packages like Medicaid's. In California and Colorado, there were also concerns that the SCHIP benefit package should be no more comprehensive than the packages available to state employees and people covered by the typical private insurance plan.

In New York and Texas, pre-existing state programs for children influenced the design of the benefit packages. The fact that New York's pre-SCHIP benefits package was given "grandfather" approval reinforced its decision to operate a separate program. On the other hand, the pre-existing program in Texas, which had a limited benefit package, helped pave the way for a more comprehensive SCHIP package. 46 In Texas, providers and advocates for children with special health care needs pushed for enhancements to the benchmark to provide adequately for these children.

45. Ian Hill, "Charting New Courses for Children's Health Insurance," Policy and Practice, vol. 58, no. 4, December 2000.

46. Texas Healthy Kids Program was a public-private partnership that had enrolled 15,000 low-income children.

View full report


"Interim.pdf" (pdf, 2.84Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®