August 1, 1997

Highlights of Child Health Insurance Provisions in the Budget Bill

• Over the next ten years, states get roughly $4 billion a year in federal grants. (During the first five years, the budget bill allocates $24 billion to child health, but nearly $4 billion of that amount goes, not for the new grant program, but for increased Medicaid spending on several groups of children.)
• Each state chooses whether to participate in the new grant program. Funding is available beginning October 1, 1997. A state may spend each year's allotment either in that year or in the two following years.
• States can use this money to expand Medicaid, create a new state program for children's health insurance, or both.

• Up to 10 percent of a state's allocation can be spent on a combination of administrative costs, outreach, direct health services for children and other health services initiatives for children. The rest must be spent on health insurance, either through Medicaid or a new state program.

• Who's eligible: As a general rule, federal grants can help only children ineligible for Medicaid with family income at or below 200 percent of the federal poverty level ($32,100 a year for a family of four in 1997). However, the bill makes an exception for states that, in June 1997, provided Medicaid to children with family incomes above 150% of poverty ($24,075 for a family of four). In such states, new child health funds can cover children with family incomes higher than 200% of poverty, up to 50 percentage points above the state's previous Medicaid eligibility level.

  Benefits: A state running a child health insurance program must provide at least the benefits covered by certain specified, commercial insurance plans (Blue Cross/Blue Shield for federal employees, a state employee health plan, or the largest HMO in the state). It can also provide a different combination of services, so long as the total value of all services is the same as under one of these benchmark plans.

  Cost-sharing: In a state child health insurance program, children with family incomes at or below 150 percent of poverty can be charged no more than the same small amounts for premiums, deductibles, co-payments and co-insurance that are permitted for adults under Medicaid. Children with family incomes over 150 percent of poverty can be charged on a sliding scale, but total payments may not exceed 5 percent of family income. For all children, well-baby care, well-child care and immunizations are exempt from any cost-sharing.

  State match: To receive federal funds, a state must pay matching amounts. The state's matching percentage is 70% of its matching rate under Medicaid. For example, a state that pays 50% of general Medicaid costs would pay only 35% of costs for new children, whether they are covered through Medicaid expansion or a new child health insurance program. Each state must pay at least 15% of such costs.

  Medicaid: To receive grants, a state must maintain Medicaid eligibility for children that was in effect in June 1997. A state that creates a new child health program must screen applicants for possible Medicaid coverage and enroll Medicaid- eligible children into Medicaid.

The actual bill language is available at http://speakernews.house.gov/child.htm. A comprehensive, detailed summary will soon be available on CDF's Web site -- http://www.childrensdefense.org. For more information, contact cdfhealth@childrensdefense.org. Our thanks to Families USA for the basic format of this summary.

Thank you to The Children's Defense Fund and Families USA for this timely information.