Chairman Bilirakis, Congressman Brown, distinguished
Subcommittee members, thank you for inviting us here today to
discuss our progress in implementing the State Children's Health
Insurance Program. The State Children's Health Insurance
Program, or "CHIP," has provided us with a landmark opportunity
to improve children's health and help working families who do not
earn enough to afford coverage for their children. This historic,
bipartisan achievement is an excellent example of how Congress,
the Administration, and States can work together constructively to
genuinely improve the lives and health of American children. We
greatly appreciate your hard work and the work of Chairman
Bliley, Congressman Dingell and other members of the Commerce
Committee in securing passage of this critical legislation.
Reversing an Unhealthy Trend
The CHIP program was created through the bipartisan Balanced
Budget Act just one year ago to address the fact that more than 10
million American children -- one in seven -- are uninsured and
therefore at significantly increased risk for preventable health
problems. Many of these children are in working families that earn
too little to afford private insurance on their own but too much to
be eligible for Medicaid. Unfortunately, the number of uninsured
children has been rising. The number of uninsured children rose
from 8.2 million in 1987 to 10.6 million in 1996 -- from 13 percent to
16 percent of all children. The number of children covered through
their parent's employer-based plans is also down, from 67 percent in 1987 to 59
percent in 1995.
With aggressive outreach and implementation of CHIP, we hope to
help reverse the trend of rising numbers of uninsured children.
Already we have approved 40 plans that are expected to cover
more than two million children by the end of FY 2000. Outreach
efforts are critically important to help us find those children who
are eligible for Medicaid but not enrolled, further increasing the
number of children who are able to get the care they need to go on
to lead long, healthy, productive lives.
Implementation of CHIP has really gotten off the ground in the last
six months. We have approved about three-quarters of the 40 State
plans since April 1. Because most of the states have just started to
enroll children, spending for CHIP has been slower than we
originally projected for FY 1998. Our latest estimates indicate that
federal spending on CHIP will exceed $600 million for this year.
This slow start does not mean that Congress appropriated too much
money for the program. States also are applying to expand their
programs, and this will further increase spending. We project that
all of the CHIP funds will be spent over the next ten years as states
expand their programs and enroll more uninsured children.
Outreach to children for both CHIP and Medicaid is one of our
biggest challenges. In order to take advantage of this historic
opportunity, we must all work together to find those children
eligible for these programs and make sure that they are enrolled
and receiving the health care they need. The Administration has
initiated a comprehensive effort with the states, private companies,
advocacy organizations and others. We need to continue to work
with our partners and the Congress to ensure that children are
enrolled.
What is CHIP
Congress and the Administration wisely agreed to set aside $24
billion over five years to create the Children's Health Insurance
Program -- the largest health care investment in children since the
creation of Medicaid in 1965. These funds cover the cost of
insurance, as well as outreach services to get children enrolled and
reasonable costs for administration. To make sure that funds are
used to cover as many children as possible, funds must be used to
cover previously uninsured children, and not to replace existing
public or private coverage. Important cost-sharing protections also
were established so families would not be burdened with out-of-pocket expenses they could not
afford.
The statute sets broad outlines of the program's structure, and
establishes a partnership between the Federal and State
governments. States are given broad flexibility in tailoring
programs to meet their own circumstances. States can create or
expand their own separate insurance programs, expand Medicaid,
or combine both approaches.
States can choose among several benchmark benefit packages,
develop a benefit package that is actuarially equivalent to or better
than one of the benchmark plans, or use the Medicaid benefit.
States also have the opportunity to set eligibility criteria regarding
age, income, resources, residency, and duration of coverage within
broad Federal guidelines. The Federal role is to provide technical
assistance to the states and ensure that programs meet statutory
requirements that are designed to ensure meaningful coverage
under the program.
Success is a Priority
Making the Children's Health Insurance Program a reality is one of
this Administration's highest priorities. We have worked closely
with States, Congress, the Health Resources and Services
Administration and other Federal agencies to meet the challenge of
implementing this program and defining its parameters, while at
the same time approving State plans as quickly as possible. We
have provided extensive guidance and interim instructions so
States can develop their plans and start using Federal funds to
begin insuring children at the earliest possible date.
We began by providing States with a draft template, or standard
format, to help them provide information that is required by the
statute. We have sent more than a dozen letters to State health
officials regarding specific policy issues, including outreach,
financial issues, and cost sharing. We also have released five sets
of detailed answers to important policy questions. All these
documents are available on the Internet, providing easy access and
quick reference for all interested parties. Since the law was passed
in August 1997 and the money became available October 1, 1997,
we have been working diligently to approve plans and provide
guidance at the same time.
We have worked carefully and diligently to review proposals and
help States meet statutory requirements. We approved the first
State plan, for Alabama, this January -- just five months after the
legislation was signed. As of today, I am proud to report that we
have approved 40 plans, including 37 States, two territories, and
the District of Columbia. We have only a few more State plans to
review.
Each State with an approved plan has a 10-year Federal
commitment of at least $2 million per year. The statute gives States
three full fiscal years to spend each fiscal year's allotment, which
is critically important because already States are expanding their
initial programs to insure even more children. Alabama, the first
State with an approved plan, also became one of the first States to
secure Federal approval to expand its program on August 18.
Alabama's extension will cover thousands more children and allow
the State to receive as much as an additional $18 million of the FY
1998 allotment to which the State is entitled. More than a dozen
States have indicated that they intend to expand these initial
submissions. This is a trend we must and will encourage.
Of the plans approved so far, 11 are for programs the States
created, 20 are Medicaid expansions, and nine are combinations of
State programs and Medicaid expansions. A progress report
showing this information by State is attached to this testimony. We
expect the mix to change as States expand their initial submissions.
States have taken advantage of the flexibility provided to them.
Connecticut created the HUSKY program which expands Medicaid
and models a program for higher income children on its State
employee health plan. New York expanded its existing CHPLus
program in which the State subsidizes private coverage. And
Michigan created the MIChild program, which mirrors the State
employee plan and is administered by multiple managed care
providers.
Challenges Ahead
We can all be proud of the progress to date in implementing the
Children's Health Insurance Program. However, several challenges
remain. Perhaps our greatest challenge is reaching out to find and
enroll children eligible for coverage under the Children's Health
Insurance Program, as well as Medicaid. The Administration has
taken a number of steps to help and encourage State outreach
efforts, and the President's FY 1999 budget includes several
additional proposals to help States find and enroll children.
The Agency for Health Care Policy and Research this year reported
that 4.7 million uninsured children are eligible for, but not enrolled
in, Medicaid. Several million more are in families with incomes
too high for Medicaid but too low to afford private coverage.
Without an aggressive, broad-based effort to identify and enroll
eligible children, we will not succeed in meeting the full potential
of the Children's Health Insurance Program.
Experience with Medicaid suggests that many families do not
know that their children are eligible for coverage under Medicaid,
let alone under the new Children's Health Insurance Program.
There is a remaining stigma related to Medicaid's old tie to
welfare, and the application process has all too often been long and
unduly complicated. Cultural issues, such as difficulty in language
comprehension, also have posed barriers.
The President's FY 1999 budget would give States both the funds
and the flexibility to find and enroll hard-to-reach children. It
would allow States to let schools, child care resource and referral
centers, and others who have contact with children facilitate
enrollment into both Medicaid and the Children's Health Insurance
Program.
The President's FY 1999 budget also would broaden use of an
existing $500 million fund States may use to make sure children
who are no longer enrolled in welfare continue to receive Medicaid
benefits for which they are eligible. Few States have used these
funds, partly because of the difficulty of targeting such a narrow
group. Under the President's plan, Medicaid would pay $9 of every
$10 spent by States for outreach efforts to all uninsured children
who qualify for assistance. It also would remove the fund's 2000
sunset date and add another $25 million to the effort.
The President also has launched a Children's Health Insurance
outreach initiative to encourage full participation in Medicaid and
the CHIP. A Federal Interagency Task Force on Children's Health
Outreach has been created with representatives from the White
House and eight Federal Departments. The Vice President
announced the addition of two more agencies, the Department of
Justice and the Small Business Administration. Each Department is
responsible for developing an action-oriented plan to assist in
children's health insurance outreach efforts, focusing on programs
that serve low-income children. We have many programs that can
reach families, such as child care assistance and the Earned Income
Tax Credit, and we need to make sure that we take advantage of
these programs to get the word out about Medicaid and CHIP
availability. The President has challenged the private sector to
participate in this important effort, as well.
Other Challenges
One concern is the current cap that limits states from spending
more than 10 percent of their program expenditures on
administrative expenses. In some States, this limit has restricted
funding needed for States to implement new programs. States face
substantial start-up costs for activities such as development of data
systems and simplified application forms, which must be in place
before they begin providing services. We are willing to work with
Congress and the States on legislative proposals to ensure that
States have the administrative funds they need up front to put these
programs into place.
Another key challenge is the need to obtain data and objectively
assess how varied State programs are working. Documenting
CHIP's success will be essential to its continued strong support. In
addition, the law mandates that we send a Report to Congress in
2001 on how well the program is working. We want to work with
Congress and the States as we proceed to ensure that we are able to
collect the right data so our monitoring and evaluation will be
accurate, meaningful, and helpful to all interested parties.
Preventing what's known as "crowd out," or use of CHIP funds to
cover children who were already covered privately or through other
public programs such as Medicaid, is yet another challenge. The
statute requires this because Congress and the Administration want
to ensure that as many children as possible are covered by this
funding. We will continue to work with Congress and the States to
implement this part of the law.
We also need to maintain the careful balance struck in the law
between the desire for maximum State flexibility, and the
Administration, Congressional, and statutory intent that funds be
used to cover uninsured children. Some States have expressed
interest in using Children's Health Insurance Program funds to buy
coverage for parents. The statute allows for the narrow use of
program funds to cover children in family policies, allowing some
assistance for parents, when, and only when, it is cost effective in
covering the children -- that is, the cost of buying coverage for the
family policy cannot exceed the cost of providing care for only the
children in the family. We have approved one state plan so far, for
Massachusetts, which includes family coverage. Massachusetts is
meeting the statutory requirement by purchasing coverage for the
family through employer-based plans where the employer is
paying a large percentage of the cost.
This Administration will continue to provide states with guidance,
technical assistance and support for the outreach efforts to make
this program a success. We can and we must do more, and we look
forward to working with this Committee and all of Congress to
pass the legislation needed to enact outreach activities that will
find and enroll eligible children in these vital health insurance
programs.
Conclusion
We have made substantial progress in making the Children's
Health Insurance Program a reality, but much remains to be done.
This is a program that will continue to evolve to meet the needs of
children and the individual States who administer it. We expect to
see States becoming more and more innovative in tailoring
programs to meet their own circumstances. We will see more and
more children obtain the health care coverage they need and
deserve. We will see our children and our nation become healthier
and stronger because of this effort. Congress, the Administration,
States, local communities, providers and families all have essential
roles to play in getting the job done. To date, our work together has
been highly productive, and this effort will remain near the top of
my list of priorities. Let us continue in the spirit that has brought us
this far. Again, thank you for inviting us to be here today, and I
would be happy to answer any questions you might have.