![](media/image1.jpeg){width="5.999305555555556in"
height="1.0708333333333333in"}

# Legislative Bulletin..........................................September 25, 2007

**Contents:**

**H.R. 976**--- **Children's Health Insurance Program Reauthorization
Act**

**H.R. 976---Children's Health Insurance Program Reauthorization Act**

***(Rangel, D-NY)***

**[Order of Business]{.underline}**: H.R. 976 is scheduled to be
considered on Tuesday, September 25^th^, under a closed rule. The House
will take up the House amendment to the Senate amendment to H.R. 976; it
is thus not a formal conference report nor is there an opportunity for a
motion to recommit. It is important to note that the 299-page bill was
not received by Republicans until roughly 6 PM on September 24^th^,
leaving little time to digest the bill's many provisions.

**[Summary]{.underline}**: H.R. 976 reauthorizes and significantly
expands the State Children's Health Insurance Program (SCHIP), while
increasing cigarette taxes to supposedly offset the bill's costs. The
legislation follows closely the Senate-passed version of SCHIP
reauthorization, expanding the program but discarding much of the
Medicare-related provisions included in the House-passed legislation.
*Highlights* of the bill are as follows:

**[Cost]{.underline}**: H.R. 976 provides \$34.9 billion over five years
and \$71.5 billion over ten years in *new* mandatory spending---this
spending is on top of the \$25 billion over five years that would result
from a straight extension of the program. The House-passed version
provided \$47.4 billion over five years and \$128.7 billion in new SCHIP
spending (as well as billions of non-SCHIP spending).

The new spending is *partially* offset by increasing taxes on tobacco
products (see below). However, this CBO score overlooks a major gimmick
which the bill employs to lower its costs. The bill dramatically lowers
the SCHIP funding in the fifth year by 80%, from \$14.25 billion in the
first six months to \$1.75 billion. In all likelihood, such a reduction
would not actually take effect, which would make this an effort to
generate unrealistic savings in order to comply with PAYGO rules. To
that end, H.R. 976 is technically compliant with PAYGO.

**[Block Grant]{.underline}**: Under current law, a federal block grant
is awarded to states, and from the total annual appropriation, every
state is allotted a portion for the year according to a statutory
formula. The bill extends the SCHIP block grants from FY 2008-12. In
addition, the bill also creates a new Child Enrollment Contingency Fund
capped at 20% of the total annual appropriation, for states that exhaust
their allotment by expanding coverage, and Performance Bonus Payments
comprised of a \$3 million lump sum in FY 2008 plus unspent SCHIP funds
in future years.

**[Encourages Spending]{.underline}**: H.R. 976 shortens from three to
two years the amount of time a state has to spend its annual SCHIP
allotment. Under current law, states are given three years to spend each
year's original allotment, and at the end of the three-year period, any
unused funds are redistributed to states that have exhausted their
allotment or created a "shortfall," i.e. making commitments beyond the
funding it has available. In addition, the bill establishes a process
through which any unspent funds would be redistributed to any states
with a shortfall. Some conservatives may be concerned that this process
provides incentives both for states to spend their allotment quickly and
to extend their programs beyond their regular allotments into shortfall,
so as to be relieved by the unspent funds of other states or the new
Contingency Fund (see above).

**[Expansion to Higher Incomes]{.underline}**: Under current law, states
can cover families earning up to 200% of the Federal Poverty Level (FPL)
or \$41,300 for a family of four in 2007 *or* those at 50% above
Medicaid eligibility. However, states have been able to "disregard"
income with regard to eligibility for the program, meaning they can
purposefully ignore various types of income in an effort to expand
eligibility. For instance, New Jersey covers up to 350% of FPL by
disregarding any income from 200-350%, allowing them to cover beyond
200% with the enhanced federal matching funds that SCHIP provides.

*As of 2010,* H.R. 976 increases the eligibility limit to 300% of FPL or
\$61,950 for a family of four but also continues the current authority
for states to define and disregard income. States which extend coverage
beyond 300% of FPL would receive the lower Medicaid match rate. The bill
also grandfathers states with an approved state plan amendment (or a
state about to submit such an amendment in compliance with state law)
that already covers those above 300% of poverty. This provision is for
New Jersey and New York (seeking to cover 400% of FPL or \$82,600 for a
family of four). In addition, Section 116 of the bill overturns CMS'
current policy of requiring states to ensure that 95% of the eligible
children in their state below 250% of FPL are enrolled before expanding
coverage to higher incomes.

Practically speaking, H.R. 976 places no limit on SCHIP eligibility
since states can always manipulate the definition of income to expand
coverage, and the Centers for Medicare and Medicaid is limited in its
ability to reject such determinations. Proponents of the bill may argue
that this is not much different than current law, and that the bill
merely increases the coverage limit from 200% of FPL to 300%. However,
some conservatives may be concerned that Congress is passing up an
important opportunity to tailor and prioritize SCHIP for *low-income*
children by continuing the current practice for income disregards.

**[Adult Coverage:]{.underline}** Under current law, some states cover
*nonpregnant, childless adults*---these states have received waivers in
the past in an effort to expand health insurance to uninsured
populations, even though the program was intended for children. H.R. 976
would prohibit any further waivers but would provide continued funding
for existing coverage of such adults through FY 2008. Beginning in FY
2009, funding for nonpregnant childless adults will be capped at FY 2008
levels, but states would receive the lower Medicaid match and be limited
to only covering those already enrolled.

Current law also provides that states may choose whether or not to offer
coverage to *pregnant women* (which results in coverage for both the
baby and the mother), and currently, many do offer such coverage, after
receiving waivers from CMS. H.R. 976 provides a new avenue for states to
cover pregnant women through a state plan amendment *if* the state meets
the following criteria:

-   covers pregnant women under Medicaid up to 185% of FPL

-   covers children under SCHIP up to 200% of FPL

-   eligibility levels for pregnant women are not lower than state's
    Medicaid level (taking into consideration income disregards)

-   covers lower income women before higher income women

-   does not deny benefits to a pregnant women due to pre-existing
    conditions

-   does not have a waiting list, enrollment cap or limitation on
    children's coverage

-   does not cover pregnant women at higher eligibility levels than
    children

SCHIP coverage for a pregnant woman would be transferred to the child
upon birth and the child would be *automatically* enrolled in SCHIP
until age 1, assuming that the mother's eligibility is proof of infant's
eligibility. In addition, this provision would allow states who
currently provide coverage to pregnant women (either by a waiver or by
regulation) to continue providing such coverage (including postpartum
services up to 90 days). This bill also mandates that there be no
cost-sharing for pregnancy-related benefits.

Similar to its treatment of nonpregnant childless adults, H.R. 976 would
prohibit any new waivers to cover the *parents of eligible children*,
and current coverage will transition to the lower Medicaid match rate.
Current coverage of parents will continue through FY 2009, after which
point states can only continue coverage at the SCHIP match if they meet
the following criteria:

-   the state falls into the bottom 1/3 of all states with regards to
    uninsured low-income children

-   the state proves that they have improved their outreach for eligible
    children

-   the state is eligible for a bonus for increased enrollment

If a state does not meet these criteria, they will only receive the
Medicaid match rate for currently covered parents.

**[Private Insurance Crowd-Out]{.underline}**: According to CBO, under
H.R. 976, 2 million children will shift from receiving private health
insurance to government health insurance. This means that they may get
worse health care service and become increasingly dependent on the
federal government. In addition, as H.R. 976 begins to reduce SCHIP
funding in 2012 (if such a reduction is actually intended, see above),
some have noted that states may shift these children made newly eligible
for a government program into Medicaid. This phenomenon takes place
despite a provision in H.R. 976 to offer a premium assistance subsidy
under SCHIP for employer-sponsored coverage. A qualifying
employer-sponsored plan would have to contribute at least 40 percent of
the cost of any premium toward coverage.

**[Legal Immigrants and Citizenship Certification]{.underline}**: H.R.
976 states that "nothing in this Act allows Federal payment for
individuals who are not legal residents." However, the bill weakens
existing law by removing the documentation requests under the Deficit
Reduction Act (DRA), specifically the burden that citizens and nationals
provide documentation proving their citizenship in order to be covered
under Medicaid and SCHIP. Instead, the bill would require that a name
and Social Security number be provided as documentation of legal status
to acquire coverage and that those names and Social Security numbers be
submitted to the Secretary to be checked for validity. If a state is
notified that a name and Social Security number do not match, the state
must contact the individual and request that within 90 days the
individual present satisfactory documentation to prove legal status.
During this time, coverage for the individual continues. If the
individual does not provide documentation within 90 days, he is
"disenrolled" from the program but maintains coverage for another 30
days (after the 90 days given to come up with proper documentation),
giving the individual up to four months of coverage on a false identity.

Some conservatives may be concerned that a Social Security number and
name are not enough for a proof of citizenship and that more documents
should be required to determine eligibility. For instance, according to
a recent letter from Social Security Administration Commissioner Michael
Astrue, a Social Security number would *not* keep someone from
fraudulently receiving coverage under Medicaid or SCHIP (if they claimed
they were someone they were not).

In addition, this bill may allow illegal aliens the opportunity to
enroll falsely in Medicaid or SCHIP and retain coverage for an
undetermined amount of time before they are disenrolled for lack of
proper identification.

**[Tax Increase]{.underline}**: H.R. 976 increases the cigarette tax by
61 cents to \$1 per pack, and the cigar tax up to \$3 per cigar,
supposedly generating \$35.5 billion over five years and \$71.1 billion
over ten years. It is important to note that this is a substantial tax
increase on low-income individuals in order to pay for an expansion of
SCHIP to higher income levels, which it was not initially designed for.
In addition, this revenue source is constantly declining as fewer and
fewer individuals smoke, and since placing a tax on cigarettes will
likely deter sales, some have questioned the efficacy of the offset.
According to study by the Heritage Foundation, "To produce the revenues
that Congress needs to fund SCHIP expansion through such a tax would
require 22.4 million new smokers by 2017." The bill also changes the
timing for some corporate estimate tax payments.

**[Outreach and Enrollment Activities]{.underline}:** From FY 2008 to FY
2012, H.R. 976 provides \$100 million in mandatory funding for grants to
eligible institutions to conduct outreach and enrollment efforts for
Medicaid and SCHIP. Within this amount, 10 percent of the funds are set
aside for a national enrollment campaign and 10 percent of funds are set
aside for outreach and enrollment efforts for Native American children.
Among other things, the funds (\$10 million) set aside for a national
enrollment campaign could be used for a "joint public awareness outreach
initiatives with the Secretary of Education and the Secretary of Labor
regarding the importance of health insurance to building strong
communities and the economy."

In addition, the bill encourages states to take steps to increase the
enrollment of Native Americans residing near or in reservations by
exempting states from the 10 percent limit on administrative expenses to
the extent the administrative expenses are used to increase enrollment
of Native Americans in SCHIP and Medicaid. H.R. 976 also allows states
to rely on a new Express Lane Agency option to determine eligibility
standards for the Medicaid and SCHIP programs. This, among other things,
allows states to make a determination for an individual's eligibility in
the Medicaid and SCHIP program based on the individual's eligibility for
TANF, food stamps, the McKinney Homeless Assistance Act, and other
federal programs.

**[Expanded Benefits:]{.underline}** H.R. 976 also expands the benefits
that are mandated under SCHIP and Medicaid. For instance,
Medicaid-eligible children would be entitled to dental benefits
"necessary to prevent disease and promote oral health, restore oral
structures to health and function, and treat emergency conditions." In
addition, if a state child health plan provides for mental health
benefits, then the plan must ensure that the financial requirements and
treatment limitations on mental health or substance abuse benefits are
no more restrictive than what is applied to medical and surgical
benefits covered by the plan.

[]{.mark}

**[TMA and Title V Abstinence]{.underline}:** Unlike the House-passed
version, H.R. 976 does not extend Transitional Medicaid Assistance or
Title V Abstinence, which are scheduled to expire September 30, 2007.
[]{.mark}

[]{.mark}

**[Other Provisions:]{.underline}**

-   **Disregarding of Pension Contributions as Income.** The bill
    disregards "extraordinary employer pensions" as income. According to
    CMS, only one state would fall into this category---Michigan, due to
    the auto manufacturers. Some conservatives may view this as an
    authorizing earmark.

-   **Diabetes Demonstration Project.** The bill authorizes a total of
    \$15 million over five years to fund demonstration projects in up to
    10 states, with the aim of promoting lifestyle changes that will
    reduce the incidence of type 2 diabetes.

-   **Increased Funding for Current Population Survey.** The Current
    Population Survey collects data for the Census Bureau, primarily
    concerning the U.S. labor force. H.R. 976 would increase funding for
    this program from \$10 million to \$20 million a year for the
    purpose of collecting better data on children enrolled in health
    coverage.

-   **Name Change.** H.R. 976 renames the program the "Children's Health
    Insurance Program."

-   **Medicaid Disproportionate Share Hospital (DSH) Allotment for TN
    and HI.** The bill sets the DSH allotments for Tennessee at \$30
    million a year beginning in FY 2008, and sets the DSH allotment
    increases for Hawaii, beginning in FY 2009 and thereafter, as the
    allotments for low DSH states. Some conservatives may view these
    provisions as authorizing earmarks.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: Yes, the bill would expand the SCHIP program
by \$35 billion over five years and loosen the program's eligibility
requirements.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: A formal CBO cost estimate with
such information is not yet available. []{.mark}

**[Does the Bill Comply with House Rules Regarding Earmarks/Limited Tax
Benefits/Limited Tariff Benefits?]{.underline}**: H. Res. 675 waives
clause 9 of Rule XXI requiring a list of all earmarks contained within
and their sponsor.

**[Constitutional Authority]{.underline}**: While no updated committee
report is available for H.R. 976, the committee report accompanying the
original House passed version (H.R. 3162) by the Committee on Ways and
Means reads, "With respect to clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives (relating to Constitutional Authority),
the Committee states that the Committee\'s Action in reporting this bill
is derived from Article I of the Constitution, Section 8 (\`The Congress
shall have Power to lay and collect Taxes, Duties, Imposts and
Excises\...\'), and from the 16th Amendment to the Constitution," but
does not cite a specific clause.

**[RSC Staff Contact]{.underline}**: Sarah Makin, 202-226-0718,
<sarah.makin@mail.house.gov>; Russ Vought, 202-226-8581,
<russ.vought@mail.house.gov>; Brad Watson, 202-226-9719,
<brad.watson@mail.house.gov>.