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Testimony on the Children's Health Insurance Program by Nancy-Ann DeParle
Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Chairman Roth, Senator Moynihan, distinguished Committee members, thank you for inviting me to discuss our progress with the Children's Health Insurance Program or "CHIP."This program is providing 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.

I am happy to report that the CHIP program is strong and growing, with 52 plans now approved that States and territories expect to cover up to 2.5 million children by September 2000. We have also already approved 15 amendments that expand States' initial programs. And we estimate that there are now about one million children enrolled in the 43 States with programs operating during 1998, a year when many States were just beginning to enroll children. Only seven programs were enrolling children throughout the entire year and 10 of the 43 programs did not start enrollment until after October 1. These statistics indicate that States met their enrollment estimates for 1998 and are well on their way to enrolling their target of 2.5 million children by 2000.

Our primary challenge now is to increase and improve outreach efforts and get more eligible children enrolled in both CHIP and Medicaid. We must also work to ensure that we have consistent, reliable, and timely data on the effectiveness of each CHIP plan. The President launched a broad and innovative national outreach campaign in February, and his fiscal year 2000 budget proposal includes increased flexibility so States can use more of funding available to them for outreach. It would increase access to CHIP funds for outreach, and expand the use of a special $500 million Medicaid fund now aimed at outreach to children losing welfare benefits, to fund outreach to all eligible children. We look forward to working with you to improve outreach efforts to make sure the CHIP program's promise of better health through affordable coverage becomes a reality for as many eligible children as possible.

BACKGROUND

The CHIP program was created through the bipartisan Balanced Budget Act of 1997 to address the fact that nearly 11 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.

Congress and the Administration wisely agreed to set aside $24 billion over five years, beginning in fiscal 1998, to create CHIP -- the largest health care investment in children since the creation of Medicaid in 1965. These funds cover the cost of insurance, reasonable costs for administration, and outreach services to get children enrolled. 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 for children who already have 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 the 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 benchmark benefit packages, develop a benefit package that is actuarially equivalent to one of the benchmark plans, use the Medicaid benefit package, or a combination of these approaches. Of the 982,000 children enrolled at the end of 1998, about 540,000 were in separate State programs and about 442,000 were in Medicaid expansions.

States also have the opportunity to set eligibility criteria regarding age, income, resources, and residency within broad Federal guidelines. The Federal role is to ensure that State programs meet statutory requirements that are designed to ensure meaningful coverage under the program.

Making CHIP a success 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 application format, to help them provide information that is required by the statute. We have sent twenty letters to State health officials regarding specific policy issues, including outreach, financial issues, and cost sharing. We also have released more than 100 detailed answers to important policy questions. All these documents are available on the Internet at cms.hhs.gov, providing easy access and quick reference for all interested parties.

We are developing a regulation that will codify this extensive guidance that we have already issued on eligibility, benefits, beneficiary financial responsibilities, strategic planning, program integrity and beneficiary protections, reporting and evaluation, and Medicaid coordination. We anticipate that the regulation will be published in the Federal Register later this year. On March 4, 1999, we published in the Federal Register a regulation setting forth the methodologies and procedures to determine and disburse the allotments of Federal funds to States and the Territories.

PLAN APPROVALS

In the 21 months since legislation creating the program was enacted, we have approved 52 CHIP plans. We approved the first State plan, for Alabama, last January -- just five months after the legislation was signed. States and territories estimate that these programs have the potential to cover up to 2.5 million children by the year 2000.

Of the 52 CHIP approvals, 14 create or expand a separate State CHIP program, 26 expand existing Medicaid programs, and 12 use a combination of these two approaches. As predicted, States are moving quickly to expand their initial programs. We have already approved 15 amendments for eligibility expansions or program changes. Another 13 such amendments are under review, and another ten States have indicated that they plan to submit such amendments. We believe most States will eventually expand eligibility for children up to 200 percent of the Federal Poverty Level. About half of the approved CHIP plans are already at or above 200 percent of the Federal Poverty Level.

THE OUTREACH CHALLENGE

As mentioned above, our priority now is to find and enroll as many eligible children as possible. Successful outreach efforts will identify children who are eligible for both CHIP and Medicaid, and should increase total coverage rates well above what CHIP plans alone can provide. However, States have indicated that their outreach efforts have been hampered by limited funding. This is in large part because the Federal statute limits State spending for outreach and all other administrative expenses to 10 percent of program expenditures, which at first are naturally low.

In February, the President announced a broad and innovative national campaign called "Insure Kids Now" to increase enrollment in CHIP and Medicaid. It includes:

• a toll-free 877-KIDS-NOW hotline, developed with the National Governors Association and Bell Atlantic, that will connect callers anywhere in the country directly to specific information about the CHIP plan in their State;
• a national ad campaign to promote the toll-free number on network television, radio, and in newspapers;
• printing the toll-free number on commonly used products such as diaper boxes, grocery bags, toothbrushes, child safety seats, and school buses; and
• a special website with general CHIP information and links to State-specific web pages.

The President's fiscal year 2000 budget includes proposals to increase outreach funding for States. It would allow States to spend 3 percent of program expenditures on outreach in addition to the 10 percent cap on overall outreach and administrative spending. It also would permit States to expand use of a special $500 million Medicaid fund now aimed at outreach for children losing welfare benefits, to include outreach to all eligible uninsured children. We look forward to working with this Committee to enact these provisions and ensure that States are able to enroll as many eligible children as possible.

The President's budget also increases CHIP funding for Territories by a total of $144 million over five years to fulfill his pledge to work with Congress to provide more equitable funding for children's health care in the insular areas. The Balanced Budget Act set aside only 0.25 percent of total CHIP funds for the Territories, and last year's Omnibus Consolidated and Emergency Supplemental Appropriations Act allocated an additional $32 million to the Territories only for fiscal 1999.

Outreach Successes

Meanwhile many States are taking innovative approaches and making excellent outreach and enrollment progress.

South Carolina is among States that stand out. The State simplified its enrollment process and widely distributes applications in places like pharmacies and day care centers. Most applications are picked up in schools, where they are handed out by nurses, guidance counselors, and athletic Directors. Churches have also been active partners in distributing applications and inviting speakers to talk to congregations about CHIP. The State worked with the Catawba Indian reservations to enroll Native Americans, with the March of Dimes to target Hispanics and migrant workers, and with the sorority Alpha Kappa Alpha to reach African-Americans. All this has paid off. The State enrolled 44,500 children in CHIP in just five months and, at the same time, increased Medicaid enrollment by 29,600.

Missouri has also had great success with a more tried-and-true grass roots approach. The State has gone door-to-door in low-income neighborhoods to help parents of potential enrollees fill out application forms. In just four months it enrolled more than 20,000 children.

We are taking lessons from these and other early successes and sharing them widely.

• We have issued two letters to States providing guidance on how to simplify and streamline the eligibility process, as that appears to be a key step to promoting enrollment. This guidance included a simplified model application form that can be used as a joint CHIP and Medicaid application.
• We are expanding our HCFA website to facilitate faster sharing of outreach innovations.
• We continue to meet with States to gather and share outreach success stories, and to help States help each other address enrollment issues.
• We have held several outreach conferences around the country to identify more innovative and successful strategies used by State and local communities.
• And we are sponsoring, with the Health Resources and Services Administration, a series of focus groups and technical advisory panels to share successful outreach innovations.

While these early successes are encouraging, outreach results from States across the country are mixed. There is a great deal that remains to be done to ensure that eligible children are enrolled. One key element is ensuring that we have consistent, reliable, and timely data from States to evaluate their programs.

DATA COLLECTION and EVALUATION

Monitoring CHIP plans and collecting meaningful data is another challenge we must meet to make the program a success. Data collection is necessary to meet the requirements of the statute, ensure Federal funds are being spent appropriately, track States' progress in meeting their enrollment goals, and help us identify problems that we should work with States to address.

As with outreach and enrollment, this is a challenge that is not yet met. Some States are still working to get programs off the ground. Some States have had data collection efforts hampered by efforts to make all computer systems Year 2000 compliant. And, as with funding for outreach and enrollment, States have indicated that funding for data collection is also limited under the provision in the statute limiting funding for all administrative expenses to 10 percent of program expenditures.

We are working with States to ensure that they meet the statutory requirements to collect and report financial and enrollment data. We are actively providing technical assistance to States to analyze data, to evaluate the effectiveness of their programs, and to establish a workable system to monitor and assure quality in CHIP programs. States are required to submit quarterly and annual reports to us, and to file their own evaluations of their programs in the year 2000. And the Health and Human Services Secretary is required to submit a report to Congress on CHIP in December of 2001.

We share Congress' strong interest in this information, and we are aggressively working with States to ensure that they can provide all the necessary data. In a December 6, 1997 letter to States, we outlined our requirements for the submission of financial data. In early 1998, we began consulting with States on the enrollment data. And in a December 4, 1998 letter to States, we provided further detail on requirements for submission of quarterly expenditure and enrollment data, the development of a baseline number of low-income, uninsured children who are potentially eligible under the Federal statute, and the fiscal year 1998 CHIP annual reports. We have tried to make all these different data requests consistent in order to streamline the reporting process.

Last month, in another letter to State health officials, we again stressed the importance of data collection and our eagerness to work with States to ensure that they can meet our data requirements. We want to help assess their ability to meet our deadlines, determine if they need some additional time and identify any needs for technical assistance. We urged States having data collection problems to at least provide aggregate enrollment data now, and to furnish other required enrollment data stratified by age and income at a later date.

An independent State workgroup is working to develop a model protocol for State CHIP annual reports and evaluations, which should help establish consistency in CHIP data from the States. We hope this voluntary effort is successful, because we need consistent, comparable data across States in order to evaluate the effectiveness of State programs.

CONCLUSION

We have had solid success in approving and implementing State CHIP plans. The fact that almost all States have approved plans upon which they can build is a substantial achievement. Each CHIP plan is different, and the States have designed programs to meet their individual needs.