- Ten-year funding levels. The new law invests $47 billion in federal funds
over 10 years for children's health coverage, as follows:
- $40 billion in grants to states for expanded health coverage through
Medicaid or state children's health insurance programs under new Title XXI of
the Social Security Act.
- $5.6 billion for increased Medicaid costs the Congressional Budget Office
(CBO) anticipates will result from increased Medicaid enrollment by already
eligible but uninsured children.
- $900 million CBO expects to be spent on new, optional presumptive Medicaid
eligibility for children.
- $100 million CBO projects for restoring Medicaid to children losing SSI
because of changed disability standards under the Personal Responsibility Act
(PRA) of 1996.
- $600 million for new pediatric diabetes programs, including Native
- Allocation among the states. The General Accounting Office has calculated
its initial projection of state grant levels.
- State match. To participate, a state must contribute payments equal to 70
percent of what a state would have to contribute under Medicaid, except that a
state must pay at least 15 percent of child health costs. For example, if a
state's share of Medicaid costs normally is 50 percent, its share of costs for
children under this program would be 35 percent. Medicaid rules barring use of
certain provider donations and taxes as the state share apply to this program as
well. Parental contributions to premiums and other cost-sharing are not part
of a state's match. In fact, such contributions are not counted as health
- Use of state allotments. A state's allotment may be used to expand
Medicaid, to provide health insurance under a state children's health insurance
program through newly created Title XXI of the Social Security Act, or to
provide a combination of the two. The same low matching requirements for states
apply, regardless of which approach the state takes.
- Uses of funds other than to provide insurance. Up to 10 percent of a
state's allotment may be used for (1) other forms of child health assistance for
children with incomes below 200 percent of poverty, including contracts with
providers for direct services; (2) other health services initiatives to improve
children's health; (3) outreach expenditures; and (4) administrative costs.
Waiver of 10 percent limit. The Department of Health and Human Services
(HHS) may permit more than 10 percent of a state's allotment to be used for
contracts with community-based health delivery systems, including federally
qualified health centers and disproportionate share hospitals, so long as HHS
finds that: (1) coverage meets the requirements for health insurance coverage
under Title XXI; and (2) average costs per child do not increase because of such
- Waiver for purchase of family coverage. Funds may be used to purchase
family coverage (including parents as well as children), either through
employers or otherwise, so long as HHS finds that such purchasing is
cost-effective and does not substitute for coverage that otherwise would have
- Presumptive eligibility reduction. Any federal costs resulting from
presumptive Medicaid eligibility for children, as explained below, are
subtracted from a state's allotment.
- Unused allotments. Amounts unused by a state in a particular year may be
used during the two following years. Funds unused at the end of three years are
redistributed to other states that have spent their full allotments.
2. Entitlement. States are entitled to grants.
3. Tobacco taxes. The program is partially funded by a 10-cent per
pack increase in tobacco taxes, effective in 2000, and a further five-cent
increase, effective in 2002.
4. State plan. To receive funds, a state must submit a plan to HHS
explaining how such funds will be used; the plan must meet the requirements of
the bill; and the plan must be approved by HHS. States must operate their
programs consistently with their plans and the requirements of the bill. The
state plan specifies the quarter in which the new program or Medicaid expansion
begins. The state plan must also describe the method used to involve the
public in the program's initial design and implementation as well as promote
ongoing public involvement.
- Required content for state plans. In addition to describing state plans
for coverage, delivery systems, utilization control, eligibility, outreach,
coordination with existing programs, methods of helping Native American
children, and methods (including monitoring) to assure quality and access to
care, state plans must describe current health coverage for children and current
efforts to help uninsured children. State plans must also provide updated
budget information, including the source of nonfederal funding.
- Amendments. A state may amend its plan at any time. Such amendment may be
effective immediately, even before it has been submitted to HHS. However, if
the amendment restricts eligibility or benefits, the state must comply with its
own law governing prior public notice, and the amendment may only be effective
for 60 days before such submission.
- Approval of state plans or amendments. Plans shall be deemed approved
unless HHS notifies a state, within 90 days of receiving the plan or amendment,
that it is disapproved or that additional information is needed. An approved
state plan continues in effect until either it is amended or HHS finds
substantial non-compliance with the bill's requirements.
5. Effective date. States may receive funding under the bill beginning
October 1, 1997.
6. Abortion. Federal funds may not be used to pay for abortion except
in case of rape, incest, or if necessary to save the life of the mother. State,
local, or private funds used outside the context of a state plan under the bill
may pay for abortions in other cases.
7. Outreach and coordination. States must conduct outreach to families
potentially eligible for new child health assistance or previously available
public coverage, including Medicaid. States must also coordinate new state
programs with other public and private health insurance programs.
8. Other sources of coverage.
- Medicaid maintenance of effort. New federal grant funds may not go to a
state adopting more restrictive resource and income standards and methodologies
under Medicaid than those in effect on June 1, 1997. This prevents a state
from using new funds to substitute for its existing Medicaid coverage.
- Potentially available federal payments. Funds under the bill may not pay
for services that reasonably can be expected to be reimbursed promptly under any
federally operated or financed health care program (other than the Indian Health
- Private insurers may not exclude coverage of otherwise insured children who
are eligible for assistance under this program.
Option for new state
children's health insurance program
If a state chooses to use some or all of the new funds to cover children through
a new program rather than Medicaid, it must follow certain rules:
1. Legal status. This program operates under new Title XXI of Social
2. Eligibility for assistance.
- General. To the extent consistent with new Title XXI, a state's
eligibility rules may be based on geographic area, age, income, resources,
residency, additional coverage for children with disabilities, other available
health coverage, and duration of eligibility.
- Age. Only children under 19 years of age may be assisted.
- Medicaid eligibility. A state must screen applicants to make sure that
children eligible for Medicaid are covered by Medicaid rather than Title XXI.
- Avoiding "crowd-out." A state must adopt procedures to ensure
that insurance provided through Title XXI does not substitute for
- Upper income limits. Generally, only children with incomes at or below
200percent of poverty may be assisted.
- Exception for states with Medicaid eligibility levels above 150 percent of
poverty: If, on June 1, 1997, a state extended Medicaid to children of a
particular age with family incomes above 150 percent of poverty, then children
of that age may benefit from funding under the bill if their family income is
less than 50 percentage points above the applicable Medicaid standard in effect
on June 1, 1997. For example, if on June 1, 1997, a state's Medicaid program
covered children under age 6 up to 185percent of poverty, funds under this bill
may be used to pay for coverage for children under age 6 up to 235 percent of
- Limitations on eligibility standards.
- Discrimination by diagnosis is not permitted.
- Preference for lower income children. Within any category of covered
children, children with higher family income may not be covered while children
with lower income are not.
- Pre-existing conditions. Eligibility for assistance to pay for
health insurance may not be denied based on preexisting conditions. However,
group health plans may limit their coverage of services for preexisting
conditions, as under current law.
- Children of public employees eligible for state coverage are not eligible.
This forbids states from shifting them from state-funded public employee
insurance into the new federal grant program.
- Children in penal institutions or institutions for mental illness are not
3. Family costs
- Children with family incomes below 150 percent of poverty ($24,075 a year
for a family of four in 1997) are subject to no more than the following costs
permitted for some adults under the Medicaid program:
- Premiums. Families may be asked to pay up to $15-$19 a month, depending on
family size. It is unclear whether maximum premium amounts are lower for
coverage of a single child.
- Out-of-pocket payments. Such payments may only be nominal. HHS may
adjust for inflation or other reasonable factors the following
Medicaid-allowable, maximum charges:
- Deductibles -- $2 per month per family
- Co-insurance -- 5 percent of noninstitutional costs
- Co-payments -- Depending on the service, from $0.50 to $3.00 per
- Institutional care -- 50 percent of the first day's costs
- Children with family incomes above 150 percent of poverty. Costs for these
children may be charged on a sliding scale developed by the state; parents who
earn more could be charged more. Total charges may not exceed 5 percent of
- Preventive care. For all children, well-child and well-baby care, as well
as immunizations, are exempt from deductibles, co-payments, and co-insurance.
4. Benefits. A state may provide any of the following three options:
- "Benchmark coverage" -- or the same coverage offered by one of
- The standard Blue Cross/Blue Shield preferred provider plan for federal
employees (for information about covered benefits, see the Office of Personnel
Management's Web Site, http://www.opm.gov)
- The commercial HMO with the largest insured, non-Medicaid coverage in the
- A health benefits plan offered and generally available to state employees.
- Benchmark-equivalent coverage. Such coverage must meet the following
- It must include hospital services, physicians' services, laboratory and
x-ray services, well-baby and well-child care, and immunizations.
- It must have a total actuarial value equal to one of the benchmark coverage
options. Such assessments of the dollar value of coverage must be done using
generally accepted accounting principles, using a standardized population
representative of privately insured children.
- Some coverage of prescription drugs, mental health services, and vision and
dental care is required if it is covered under the benchmark plan the state uses
as a reference point. For each such service category covered by the benchmark
plan, benchmark-equivalent coverage must provide at least 75 percent of the
actuarial value of coverage within the category.
- Secretary-approved coverage. A state may offer any other benefits package
that the secretary of HHS determines, upon application by the state, will
provide appropriate coverage for the children slated to receive coverage.
- Special rule for New York, Florida, and Pennsylvania. New York's Child
Health Plus, Florida's Healthy Kids, or Pennsylvania's Children's Health
Insurance Program may continue to offer benefits furnished on the date of
enactment of the bill.
- HHS enforcement. HHS must establish an enforcement procedure for
violations of Title XXI, including withholding of funds for substantial
noncompliance. States must be given a reasonable opportunity for correction
before financial sanctions are imposed.
- Performance measures, data, and reports. State plans must include
strategic objectives, performance goals, and performance measures for covering
children. States must collect data, maintain records, agree to necessary
audits, and provide reports to HHS as needed to monitor compliance and compare
effectiveness of state plans. Each states must provide annual assessments and,
by March 31, 2000, a comprehensive report to HHS. HHS in turn must provide
Congress with a report on the program by December 31, 2000.
Option for Medicaid
1. Increased federal matching for expanded Medicaid coverage of children.
A state may receive the same enhanced federal matching rate for covering
uninsured children through Medicaid as it would receive through Title XXI. In
other words, the state would pay only 70 percent of generally applicable levels.
2. Children affected. Higher matching is available for any children
with family incomes up to 200 percent of the federal poverty level, so long as
they would not have qualified for Medicaid under the state plan in effect on
April 15, 1997. In states that on June 1, 1997, covered children of a
particular age with family incomes above 150 percent of poverty, states may
exceed this 200 percent ceiling and cover children of that age with family
incomes 50 percentage points above the state's previous Medicaid eligibility
3. Accelerating the phase-in of coverage for children ages 14-18 with
family incomes at or below the poverty level. Federal law requires
coverage of such children only if they were born on October 1, 1983, or
thereafter. The new bill makes enhanced federal matching available for children
born before that date, so long as they were not covered under the state plan in
effect on April 15, 1997.
1. Medicaid for children losing SSI. Children losing SSI because of
changes in the definition of disability under the PRA continue to be eligible
for Medicaid, so long as they would have qualified for SSI under standards in
effect before adoption of the PRA.
2. Presumptive eligibility. States have the option to give children
who appear to qualify for Medicaid presumptive eligibility for short periods of
time, pending final processing of their Medicaid applications.
3. Diabetes grant programs. The bill establishes a special grant
program for children with diabetes.
4. Medicaid eligibility under old standards. Generally applicable
federal matching percentages apply to children eligible for Medicaid under rules
in effect on April 15, 1997.