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

02/26/2003

States with Medicaid expansion programs must follow Medicaid's cost-sharing rules, which generally prohibit cost sharing for services provided to children, except under special waiver authority. 57 States with separate programs, however, may impose cost sharing as long as it meets federal requirements. Specifically, the following rules apply: (1) cost sharing for children below 150 percent of the FPL is limited to the nominal levels specified in Medicaid regulations; (2) the cumulative, annual cost sharing incurred under SCHIP for the children in any one family may not exceed five percent of the family's annual income; (3) copayments may not be imposed on well-baby or well-child care or related preventive and diagnostic services; and (4) families with lower incomes may not be charged more than families with higher incomes.58 Because cost sharing is relatively new in publicly funded health insurance programs for low-income families, there is great interest in the approaches that states have adopted, as well as how these approaches affect enrollment, utilization, retention, and other outcomes.

According to the majority of people interviewed in the five study states that use it, cost sharing was considered an important and positive program element. (These were the four states with separate SCHIP programs and Missouri, which was permitted to include cost sharing under its Section 1115 demonstration. 59) Officials in the four states with separate programs believed that cost sharing modeled on private insurance provided a "bridge" to help families make the transition from public to private coverage. In Colorado, New York, and Texas the emphasis on making SCHIP look like private insurance was seen as a way to promote SCHIP as health insurance, rather than as welfare. There was strong sentiment in Missouri, New York, and Texas that higher-income families should contribute to the cost of coverage. Finally, to varying degrees, cost-sharing proponents in each state believed that cost sharing would promote personal responsibility and reinforce the value of health care coverage.


57. Nominal cost sharing is permitted for children who qualify under Medicaid's medically needy provisions.

58. In addition, American Indians and Alaska Natives are exempt from cost sharing.

59. Although state leaders in Missouri originally had planned an expansion that would not include cost sharing, they became convinced early in the design phase that to get legislative approval they needed cost sharing, particularly given the high income threshold proposed for SCHIP (up to 300 percent of the FPL).

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