a

GAO

United States General Accounting Office

Report to the Ranking Minority Member, 

Committee on Energy and Commerce, 

House of Representatives

September 2001 MEDICAID AND 

SCHIP

States’ Enrollment and 

Payment Policies Can 

Affect Children’s 

Access to Care

GAO-01-883

Page i GAO-01-883 Medicaid and SCHIP

Contents

Letter 1

Results in Brief 3

Background 4

While Similarities Often Exist, Enrollment Differences Can Affect 

Ability to Obtain and Keep Coverage 11

Health Plan and Physician Participation, and Payment Differences 

Can Affect Access to Care 23

Medicaid Offered Families More Choice Between FFS and Managed 

Care Plans 24

Concluding Observations 33

Agency and State Comments 34

Appendix I: Objectives, Scope, and Methodology 38

Appendix II: States’ Design Choices Under SCHIP 45

Appendix III: State Income Eligibility Levels in Medicaid and SCHIP 47

Appendix IV: Comments From the Department of Health and Human 

Services 52

Appendix V: GAO Contact and Staff Acknowledgments 54

Tables Table 1: Key Differences in Federal Eligibility Requirements 

Between Medicaid and SCHIP Separate Child Health 

Programs, as of June 2001 8

Table 2: Income Eligibility for Medicaid and SCHIP, by Age Group, 

in Florida and Vermont 11

Table 3: Information and Documentation Requirements for 

Medicaid and SCHIP Applications in 10 States 13

Table 4: Four States’ Policies on Payment of SCHIP Premiums 22

Table 5: Use of FFS and Capitated Plans in Medicaid and SCHIP in 

10 States 24

Table 6: Health Plan Participation in Medicaid and SCHIP in 10 

States 27

Table 7: Medicaid and SCHIP Physician Fees as a Percentage of 

Medicare Fees for Selected Preventive Medical Services 

for Children in Four States 30
Contents

Page ii GAO-01-883 Medicaid and SCHIP

Table 8: Medicaid Physician Fees as a Percentage of SCHIP Fees 

for Selected Preventive Medical Services in California and 

Michigan 31

Table 9: Age-Adjusted Capitation Rates Paid to Health Plans for 

Children in Medicaid and SCHIP in Four States 32

Table 10: Selected CPT 4 Codes for Preventive Medical Services for 

Children 41

Table 11: States’ and the District of Columbia’s Choices for SCHIP 

Programs, as of June 2001 45

Table 12: Eligibility Standards by Age and Program in States With 

SCHIP Separate Child Health Programs 47

Figures Figure 1: Medicaid/SCHIP Initial Screening Process for States With 

Joint Applications 10

Figure 2: Weighted Average Monthly Capitation Rates in Three 

States, Adjusted for SCHIP Enrollment Populations 43

Abbreviations

AFDC Aid to Families With Dependent Children

CMS Centers for Medicare and Medicaid Services

CPT 4 Current Procedural Terminology, 4th edition

EPSDT Early and Periodic Screening, Diagnostic and Treatment

FFS Fee-For-Service

HCFA Health Care Financing Administration

HHS Department of Health and Human Services

HRSA Health Resources and Service Administration

PCCM Primary Care Case Management

PMPM Per-Member-Per-Month

PPO Preferred Provider Organization

SCHIP State Children’s Health Insurance Program

SSI Supplemental Security Income

TANF Tempory Assistance for Needy Families
Page 1 GAO-01-883 Medicaid and SCHIP

United States General Accounting Office

Washington, D.C. 20548

A

September 10, 2001 Letr

The Honorable John D. Dingell

Ranking Minority Member

Committee on Energy and Commerce

House of Representatives

Dear Mr. Dingell:

States provide health care coverage to low-income uninsured children 

largely through two federal-state programs—Medicaid and the State 

Children’s Health Insurance Program (SCHIP). Medicaid was established 

in 1965 to provide health care coverage to certain categories of low-income 

adults and children; in 1998, Medicaid expenditures for health services to 

about 22.3 million children totaled $32.4 billion.1

 The Congress established 

SCHIP in 1997 to provide health care coverage to children living in lowincome families whose incomes exceed the eligibility requirements for 

Medicaid; in 1999, SCHIP expenditures for health services to nearly 2 

million children totaled $2 billion.2

 In implementing SCHIP, states could 

choose to expand their Medicaid programs, thus affording SCHIP-eligible 

children the same benefits and services that the state Medicaid program 

provides. Alternatively, states could construct a separate child health 

program distinct from Medicaid that uses specified public or private 

insurance plans offering a minimum benefit package. Thirty-five states 

have chosen SCHIP approaches that are, to varying degrees, separate from 

their Medicaid programs.

In April 2000, we reported to you that Medicaid and SCHIP programs in 10 

states that have separate SCHIP programs have differences in the way the 

programs enroll children and in the scope of benefits they offer. 3 In 

particular, we noted that 5 of the 10 states had more requirements for 

Medicaid than for SCHIP, which increased the burden for families applying 

for Medicaid. For example, Alabama Medicaid required applicants to 

1

The most recent Medicaid enrollment and expenditure data for children are for 1998.

2

These figures are for children covered from October 1, 1998, through September 30, 1999. 

SCHIP enrolled over 3 million children from October 1, 1999, through September 30, 2000.

3

See Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and Benefits

(GAO/HEHS-00-86, Apr. 14, 2000). The 10 states reviewed in that report were Alabama, 

Arkansas, California, Colorado, Florida, Kansas, North Carolina, New York, Pennsylvania, 

and Utah. 
Page 2 GAO-01-883 Medicaid and SCHIP

submit proof of income (such as pay stubs), while Alabama SCHIP allowed 

applicants to self-report their income without documentation. Because 

eligibility for Medicaid and SCHIP can vary with a child’s age, children may, 

at different ages, need to move from one program to the other. Therefore, 

coordination between Medicaid and SCHIP—which is required under the 

SCHIP statute—can be critical to ensuring that children are promptly 

enrolled in the appropriate program so they have access to necessary 

health care. Access to care, however, is also affected by the extent to 

which health plans and providers are available and participate in Medicaid 

and SCHIP. Because of your concern that differences between the 

programs may limit children’s access to care, you asked us to analyze, for 

selected states’ Medicaid and SCHIP programs, differences in (1) states’

enrollment requirements, particularly application requirements and 

eligibility determination practices, and (2) health plan and provider 

participation and program payments to plans and providers. With regard to 

both objectives, you also asked that we examine the implications that these 

differences might have for children’s access to care.

To address differences in states’ enrollment requirements, we analyzed the 

application requirements for Medicaid and SCHIP for 10 states with SCHIP 

separate child health programs. These 10 states were Alabama, California, 

Colorado, Florida, Kansas, Michigan, New York, North Carolina, 

Pennsylvania, and Utah. We chose states with programs that had a mixture 

of administrative structures, ranging from SCHIP programs that were 

administered by the states’ Medicaid program to those that were operated 

separately. In addition, we selected states whose SCHIP programs had 

been in operation since January 1999 and that represented a range of 

geographic locations. We selected 4 of the 10 states for site visits 

(California, Colorado, Michigan, and New York), based in part on the 

number of enrollees in both programs and variation in administrative 

structure. In our site visits, we obtained supporting data on Medicaid and 

SCHIP application and eligibility determination practices and interviewed 

representatives of programs, including state, county, and private sector 

officials, as well as health plan officials, child health advocates, and 

representatives of provider organizations. We reviewed with these groups 

the steps necessary for beneficiaries to obtain, maintain, and renew their 

eligibility. To obtain broader information about health plan and provider 

participation in the two programs, we interviewed Medicaid and SCHIP 

officials in the 10 states. We also collected and analyzed information and 

data on payments in the four states we visited. In conducting our payment 

analysis, we focused on comparing the two programs’ (1) physician fees for 

primary care services and (2) plan capitation rates, which are paid to health
Page 3 GAO-01-883 Medicaid and SCHIP

plans prospectively on a per-member-per-month (PMPM) basis. Finally, we 

conducted interviews with officials from the Department of Health and 

Human Services (HHS), including the Centers for Medicare and Medicaid 

Services (CMS), formerly called the Health Care Financing Administration 

(HCFA),4

 which has oversight responsibilities for both programs, and the 

Health Resources and Services Administration (HRSA), which shares 

oversight responsibilities for SCHIP with CMS. We performed our work 

from June 2000 through July 2001 in accordance with generally accepted 

government auditing standards. (See app. I for details on our scope and 

methodology.)

Results in Brief Differences in Medicaid and SCHIP enrollment requirements—particularly 

application requirements and eligibility determination practices—can 

affect beneficiaries’ ability to obtain and keep coverage. To help simplify 

the process for applicants, 8 of the 10 states we reviewed used joint 

applications that had similar—but not always identical—requirements for 

Medicaid and SCHIP applicants. When application requirements differed, 

Medicaid applicants had to provide additional information or 

documentation, including items such as proof of types of income or assets, 

or participate in interviews. The extent of coordination between the 

programs affected applicants’ ability to enroll because joint applications 

often were transferred between the Medicaid and SCHIP offices to ensure 

enrollment in the appropriate program. Delays in these transfers or in 

identifying applications as missing required information could also delay 

eligibility determination and program enrollment. In two of the four states 

we visited, where comparable data were available, the average processing 

time for applications was longer for Medicaid than for SCHIP. While 

differences in processing times could be affected by poor coordination, 

other factors, such as additional time allowed to process applications for 

individuals with special needs, can contribute to Medicaid’s longer average 

processing times. Once enrolled, Medicaid and SCHIP families faced 

different requirements for maintaining coverage, such as a more complex 

redetermination process for Medicaid, and monthly premiums or an annual 

enrollment fee in SCHIP. A family’s failure to pay required SCHIP 

premiums can result in the loss of coverage for children, which happened 

for 10 percent of enrolled children in one state.

4

In June 2001, HCFA’s name was changed to the Centers for Medicare and Medicaid Services 

(CMS). Since our fieldwork was conducted while the agency was known as HCFA, we are 

referring to it in the report findings section by its former name.
Page 4 GAO-01-883 Medicaid and SCHIP

Differences in the health plans and providers that participate in Medicaid 

and SCHIP, as well as differences in the payments they receive, have 

implications for beneficiaries’ access to care. In the 10 states we reviewed, 

SCHIP often required enrollees to join a managed care plan and sometimes 

did not offer a choice of plans, while Medicaid offered families a choice of 

two or more plans or of care on a fee-for-service (FFS) basis, including 

primary care case management. However, having such choices did not 

necessarily give beneficiaries greater access to providers because plan 

choices may be limited to a number of smaller plans—and exclude larger 

plans with more extensive networks. Plans that do not participate in both 

Medicaid and SCHIP can create problems with continuity of care, since 

children can shift between programs as family income or a child’s age 

changes. Where differences in health plan and physician participation 

existed, a family with children in both programs—possible in all 10 states 

we reviewed—potentially had to use two different sets of providers for its 

children. Some states did not know the extent to which physicians 

participated in both programs. Payment disparities between Medicaid and 

SCHIP also could affect access to care, and low payments have been a longstanding issue affecting provider participation in Medicaid. In two of the 

four states we visited, where comparisons between Medicaid and SCHIP 

physician fees were possible, the fees were consistently lower in Medicaid 

than in SCHIP. Comparisons of plan capitation rates were more difficult 

because of differences in the benefits included in these rates. In one state 

with comparable benefits, SCHIP paid more than Medicaid; in the 

remaining three states, capitation rates were less comparable because of 

differences in the benefits or the populations included in the capitation 

rate, or both. 

In commenting on a draft of this report, HHS generally concurred with our 

observations, also noting the important policy considerations associated 

with differences in physician participation and payment rates between 

Medicaid and SCHIP, and their comparability with other payers for similar 

services.

Background For over 35 years, Medicaid has operated as a joint federal-state 

entitlement program to finance health care coverage for certain categories 

of low-income individuals. Medicaid eligibility is based in part on a family’s 

income in relation to the federal poverty level. Federal law requires states 

to extend Medicaid eligibility to children aged 5 and under if their family 

income is at or below 133 percent of the federal poverty level and to 

children aged 6 to 16 in families with incomes at or below the federal
Page 5 GAO-01-883 Medicaid and SCHIP

poverty level.5 At their discretion, most states have set income eligibility 

thresholds that expand their Medicaid programs beyond the minimum 

federal statutory levels. 

For most populations, state Medicaid programs must offer certain benefits, 

such as physician services, inpatient and outpatient hospital services, and 

nursing facility and home health services. In addition to the benefits that 

are federally mandated, states may offer optional services, such as dental, 

physical and occupational therapy, prescription drugs, and case 

management services. For most children, states must provide Early and 

Periodic Screening, Diagnostic, and Treatment (EPSDT) services.6

 These 

services are intended to provide comprehensive, periodic evaluations of 

health and developmental history, as well as vision, hearing, and dental 

screening services, to most Medicaid-eligible children. States are required 

to cover any service or item that is necessary to correct or ameliorate a 

condition detected through an EPSDT screening, regardless of whether the 

service is otherwise covered under a state’s Medicaid program. 

Across the nation, 48 states and the District of Columbia have Medicaid 

managed care programs, which require approval from CMS. These 

managed care programs can be targeted to specific geographic areas within 

a state or can be statewide. As of June 2000, 36 states and the District of 

Columbia had Medicaid mandatory managed care programs. In such 

programs, certain beneficiaries may choose between at least two capitated 

managed care plans, and states pay prospectively for each enrolled 

beneficiary on a PMPM basis. As a part of their managed care programs, 

states can provide beneficiaries a FFS based alternative, such as primary 

care case management (PCCM). Under PCCM, primary care providers are 

paid a nominal fee to manage the care of beneficiaries, and all services 

received are paid on a FFS basis.7

 The remaining 12 states have managed

5

Medicaid eligibility is mandatory for all children born after September 30, 1983 whose 

family incomes are less than or equal to the poverty level. By September 2002, mandatory 

Medicaid eligibility will apply to all children (up to age 19) who meet the income 

requirements. See 42 U.S.C. § 1396a(a)(10)(A)(i)(VII), (l)(1)(D), (l)(2)(C).

6

EPSDT is optional for the medically needy population, a category of individuals who 

generally have too much income to qualify for Medicaid but have “spent down” their income 

by incurring medical and/or remedial care expenses. See 42 U.S.C. § 1396(a)(10)(C). 

7

For this report, we included PCCM as a FFS-based arrangement because PCCM 

arrangements pay providers predominantly on a FFS basis.
Page 6 GAO-01-883 Medicaid and SCHIP

care programs that are voluntary for beneficiaries, including a FFS-based 

alternative (such as PCCM), or both. 

The Congress created SCHIP in 1997 as a means of providing health 

benefits coverage to children living in families whose incomes exceed the 

eligibility limits for Medicaid.8

 Although SCHIP is generally targeted to 

families with incomes at or below 200 percent of the federal poverty level, 

each state may set its own income eligibility limits, within certain 

guidelines.9

 Using the flexibility built into the statute, states’ upper income 

eligibility for SCHIP ranged from 133 percent to 350 percent of the federal 

poverty level for separate SCHIP programs as of October 2000. 10 States 

have three options in designing SCHIP: they may expand their Medicaid 

programs, develop a separate child health program that functions 

independently of the Medicaid program, or do a combination of both.11 

Fifteen states and the District of Columbia have created Medicaid 

expansion programs, 16 states have separate child health programs, and 19 

states have a combination Medicaid expansion and separate child health 

component. (See app. II for a summary of states’ SCHIP design choices and 

app. III for states’ income eligibility levels in SCHIP and Medicaid.) 

8

Established as title XXI of the Social Security Act by P.L. 105-33, SCHIP is codified as 42 

U.S.C. § 1397aa et seq.

9

In general, the SCHIP statute targets children in families with incomes at or below 200 

percent of the poverty level—$35,300 for a family of four in 2001. Recognizing the variability 

in state Medicaid programs, the statute allows a state to expand eligibility up to 50 

percentage points above its Medicaid income eligibility standard in 1997. See 42 U.S.C. §

1397jj(b)(1)(B)(ii)(I). 

10Neither Medicaid nor SCHIP dictates how a state defines income for purposes of eligibility 

determination. Thus, some states have expanded income eligibility levels for families 

through “income disregards,” which ignore certain types of family income for purposes of 

determining eligibility. For instance, one state has imposed income disregards as high as 

100 percent of the federal poverty level, which means that a family with an income equal to 

200 percent of the federal poverty level is treated as if its income were equal to the federal 

poverty level. See 42 U.S.C. § 1396u-1(b)(2).

11States’ SCHIP programs that expand Medicaid and create a separate component are 

termed combination programs. Combination programs can involve small increases in 

eligibility for states’ Medicaid programs. For example, five states added coverage only for 

children aged 17 and 18 in families with incomes at or below the federal poverty level. This 

group is already being phased into mandatory Medicaid coverage under current federal law; 

consequently, these Medicaid expansions will not exist after September 2002. See 42 U.S.C. 

§ 1396a(a)(10)(A)(i)(VII), (l)(1)(D), (l)(2)(C).
Page 7 GAO-01-883 Medicaid and SCHIP

While Medicaid expansion programs under SCHIP must use Medicaid’s 

enrollment structures, benefit packages, and provider networks, SCHIP 

separate child health programs may depart from Medicaid requirements, 

particularly with regard to benefits and the plans, providers, and delivery 

systems available to enrollees. SCHIP separate child health programs 

generally cover basic benefits, such as physician services, inpatient and 

outpatient hospital services, and laboratory and radiological services, and 

may provide other benefits at the state’s discretion, such as prescription 

drugs and hearing, mental health, dental, and vision services. In contrast to 

Medicaid, SCHIP does not require that beneficiaries have freedom to 

choose among providers or plans, and permits states to implement 

mandatory managed care; thus, states may place SCHIP enrollees in a 

single managed care plan without an alternative. 

Medicaid and SCHIP separate child health programs may differ in other 

respects, particularly in terms of their application requirements, eligibility 

determination processes, cost-sharing requirements, and periods of 

eligibility. Some of these differences are based in federal statute, while 

others are the result of federal regulations. For example, federal law has 

been interpreted to require that public employees determine Medicaid 

eligibility,12 while SCHIP contains no such requirement; consequently, 

states are currently permitted to use private contractors to determine 

SCHIP eligibility. Also, while federal Medicaid regulations generally do not 

permit cost-sharing for children, the SCHIP statute allows states to require 

beneficiary cost-sharing, which some states have implemented as a way to 

mirror private insurance and encourage appropriate use of services. (See 

table 1.)

12By statute, a state or local agency must determine Medicaid eligibility. See 42 U.S.C. §

1396a(a)(5). 
Page 8 GAO-01-883 Medicaid and SCHIP

Table 1: Key Differences in Federal Eligibility Requirements Between Medicaid and 

SCHIP Separate Child Health Programs, as of June 2001

a

Effective August 24, 2001, states may choose to require a Social Security number for children 

applying for SCHIP.

b

In general, Medicaid does not allow premiums, deductibles, copayments, or other charges for 

children. However, CMS may waive these restrictions and allow states to require nominal costsharing. 

Source: GAO analysis.

Medicaid and SCHIP also differ in terms of the proportion of their program 

expenditures that come from federal funds and in whether eligible 

individuals are considered entitled to the program benefits and services. 

State expenditures for Medicaid are matched by the federal government 

using a formula that results in federal shares ranging from 50 to 77 percent 

of expenditures, depending on a state’s per capita income in relationship to 

the national average. The national average federal share of Medicaid 

expenditures is about 57 percent. The SCHIP statute provides for an 

“enhanced” federal matching rate, with each states’ SCHIP rate exceeding 

its Medicaid rate. Federal shares of SCHIP expenditures range from 65 to 

84 percent with the national average federal share equaling about 72

Element Medicaid 

SCHIP separate child health 

program

Application 

requirements 

Social Security number 

required.

Social Security number not required.a

Eligibility 

determination

Public employee must 

determine eligibility.

States must have a system in 

place to verify family’s income 

after eligibility determination.

Private entities may determine 

eligibility and conduct other 

administrative functions.

Income verification not required.

Cost-sharing Generally, no cost-sharing 

allowed for children.b

Cost-sharing, such as premiums or 

annual enrollment fees, allowed for 

children in families with incomes above 

150 percent of the poverty level, up to 

5 percent of family income. For 

children in families with incomes below 

150 percent of the poverty level, 

nominal cost-sharing is allowed.
Page 9 GAO-01-883 Medicaid and SCHIP

percent.13 In the Medicaid program, all eligible individuals are entitled to 

program benefits. No overall federal budget limit exists for the Medicaid 

program. In contrast, for SCHIP, federal matching for each state is limited. 

The Congress appropriated $40 billion over 10 years (from fiscal year 1998 

to 2007), with a specified amount allocated annually to each of the 50 

states, the District of Columbia, Puerto Rico, and the U.S. territories. 

States’ choices to operate a Medicaid expansion or separate child health 

program determine whether eligible individuals are entitled to receive the 

benefits and services offered. States opting for a Medicaid expansion under 

SCHIP must provide Medicaid benefits to all eligible children. The state 

must continue to serve those children even if its allocated federal funds are 

exhausted.14 In contrast, SCHIP separate child health programs are not 

entitlements to coverage or services; once federal funds are exhausted, 

states have the option to discontinue providing services or cover the 

services with other funds. 

Both statutory and regulatory requirements for coordination between 

Medicaid and SCHIP exist at the federal level. The SCHIP statute requires 

the program to coordinate with Medicaid, including first screening SCHIP 

applicants for Medicaid eligibility.15 On the basis of this initial screen, 

applications (which in most states are the joint Medicaid/SCHIP 

applications) are directed to either Medicaid or SCHIP, where each 

program is responsible for final eligibility determination and enrollment. 

(See fig. 1.) In addition, as of August 24, 2001, SCHIP regulations also 

require that state Medicaid agencies adopt a process that facilitates 

enrollment in a state child health program when a child is determined 

ineligible for Medicaid.16

13Each state’s SCHIP enhanced match is equal to 70 percent of its Medicaid matching rate 

plus 30 percentage points, not to exceed a federal share of 85 percent. Thus, a state with the 

minimum 50-percent Medicaid match receives a 65-percent match under SCHIP.

14However, states that expend their available SCHIP funds may then claim a Medicaid 

matching rate for benefits and services provided under a Medicaid expansion. 

15See 42 U.S.C. § 1397bb(b)(3). 

16 See 42 C.F.R. § 431.636.
Page 10 GAO-01-883 Medicaid and SCHIP

Figure 1: Medicaid/SCHIP Initial Screening Process for States With Joint 

Applications

Source: GAO analysis.

In part because Medicaid and SCHIP eligibility represent a continuum of 

income levels, coordination between the programs is important. Several 

states have found that many families applying for SCHIP actually have 

incomes that qualify them for Medicaid.17 In addition, families may need to 

apply to both Medicaid and SCHIP to obtain health care coverage for all of 

their children because Medicaid eligibility standards can vary according to 

the age of the child. Table 2 illustrates for two states (Florida and 

Vermont), how income eligibility can—but does not always—vary by age. 

(App. III shows the eligibility standards for SCHIP and Medicaid in the 35 

states with SCHIP separate child health programs.)

17See Children’s Health Insurance Program: State Implementation Approaches Are 

Evolving (GAO/HEHS-99-65, May 14, 1999). 

Family 

applies

Fills out and 

submits 

joint application

Appears 

SCHIP-eligible

SCHIP makes 

final eligibility 

determination 

and completes 

enrollment process

Appears 

Medicaid-eligible

Medicaid makes 

final eligibility 

determination 

and completes 

enrollment process

Initial 

screen 

for Medicaid 

eligibility
Page 11 GAO-01-883 Medicaid and SCHIP

Table 2: Income Eligibility for Medicaid and SCHIP, by Age Group, in Florida and Vermont

a

Infants in this income eligibility range are covered under Florida’s Medicaid expansion component of 

its SCHIP program.

b

Children aged 17 to18 in families with incomes ranging from above 28 percent to 100 percent of the 

federal poverty level are covered under Florida’s Medicaid expansion component of its SCHIP 

program. The remaining children are covered under the state’s SCHIP separate child health program.

While Similarities 

Often Exist, 

Enrollment Differences 

Can Affect Ability to 

Obtain and Keep 

Coverage

Differences in Medicaid and SCHIP enrollment requirements—particularly 

application requirements and eligibility determination practices—can 

affect beneficiaries’ ability to obtain and keep coverage. To help simplify 

the process for applicants, 8 of the 10 states we reviewed used joint 

applications that had similar—but not always identical—requirements for 

Medicaid and SCHIP applicants. When application requirements differed, 

Medicaid applicants had to provide additional information or 

documentation. The extent and effectiveness of coordination between the 

programs affected applicants’ ability to obtain coverage because joint 

applications often were transferred between the Medicaid and SCHIP 

offices to ensure that applicants were enrolled in the appropriate program. 

Poor coordination meant that applications that were transferred or 

incomplete risked being delayed or denied. In two of the four states we 

reviewed, Medicaid applications generally took more time to process. 

However, different processing times could not be attributed solely to lack 

of coordination efforts because other factors may affect processing times 

as well. Once enrolled, Medicaid and SCHIP families faced different 

requirements for maintaining coverage, such as a more complex 

redetermination process for Medicaid, and premium and annual fee 

requirements in SCHIP. 

Florida income eligibility 

as a percentage of federal poverty level

Vermont income eligibility 

as a percentage of federal poverty level

Age group Medicaid SCHIP Medicaid SCHIP

Infants Up to 185 Over 185 to 200a Up to 225 Over 225 to 300

1-5 years Up to 133 Over 133 to 200 Up to 225 Over 225 to 300

6-16 years Up to 100 Over 100 to 200 Up to 225 Over 225 to 300

17-18 years Up to 28 Over 28 to 200b Up to 225 Over 225 to 300
Page 12 GAO-01-883 Medicaid and SCHIP

Joint Applications Had 

Similar, but Not Always 

Identical, Requirements

Joint Medicaid/SCHIP applications are used widely—31 of the 35 states 

with SCHIP separate child health programs (including 8 of the 10 states we 

reviewed) have them.18 In most states, joint applications are the primary 

method for applying for SCHIP; however, families applying for Medicaid 

and other public programs may be required to use a separate, different 

application form.19 Joint application forms have helped simplify 

application and eligibility determination for both programs. When an 

applicant is found ineligible for one program, the joint form can minimize 

or eliminate the follow-up needed to determine eligibility for the other 

program. While the 10 states we reviewed generally had similar 

information and documentation requirements for both programs, some 

differences remained with regard to income deductions, asset information, 

and interview requirements.

With regard to income reporting, 9 of the 10 states we reviewed established 

identical requirements for both Medicaid and SCHIP. Some of the 10 states 

in our sample have taken other steps to make application requirements 

consistent between the programs. For example, most of the states we 

reviewed did not ask for information about assets or require the applicant 

to complete an interview. California eliminated its former requirement for 

an in-person interview as part of the Medicaid application process and 

allowed Medicaid applications to be mailed in like SCHIP applications. 

(See table 3.)

18The remaining four states—Nevada, North Dakota, Texas, and Utah—did not have joint 

applications in place as of July 2000. See The Kaiser Commission on Medicaid and the 

Uninsured, Making It Simple: Medicaid for Children and CHIP Income Eligibility 

Guidelines and Enrollment Procedures (Oct. 2000).

19While joint applications can be used for children applying for Medicaid, a state may have a 

number of different Medicaid application forms. For example, in addition to its joint 

Medicaid/SCHIP application for children, Florida has a Medicaid application for families 

that includes food stamps and cash assistance; similarly Utah and Michigan have more 

extensive application forms for families that are applying for Medicaid and other programs. 
Page 13 GAO-01-883 Medicaid and SCHIP

Table 3: Information and Documentation Requirements for Medicaid and SCHIP Applications in 10 States

Legend

✔= Information and documentation required.

n = Information required, documentation not required.

- = Information not asked for or required.

a

Income deductions allow families to deduct from the family’s monthly income a portion of work-related 

expenses, out-of-pocket child care costs, and child support received. 

b

Alabama and Utah interviews can be conducted over the telephone; New York interviews are face-toface. 

Source: GAO analyses of states’ joint applications and eligibility practices as of March 2001.

Documenting income and income-related information has been cited as a 

barrier to program eligibility—but also as a means of ensuring that only 

eligible individuals are enrolled in the appropriate program. In particular, 

the need to offer documentation, such as pay stubs or proof of child care 

expenses, can be problematic for families. For instance, families that do 

not receive regular paychecks can have difficulty showing several months 

of pay stubs. Similarly, child care expenses can be difficult to document, 

particularly if an individual pays cash or with a money order. Seven of the 

10 states we reviewed were consistent in requiring applicants to document 

their income for both programs. However, individuals in four states could 

report income deduction information for both programs, such as child 

support or day care expenses, without supplying proof. Only one state 

required both Medicaid and SCHIP applicants to document income 

Income Income deductionsa Assets Interview

State Medicaid SCHIP Medicaid SCHIP Medicaid SCHIP Medicaid SCHIP

Alabama ✔ n ✔ n - - nb -

California ✔ ✔ ✔ ✔ -- - -

Colorado ✔ ✔ nn n - --

Florida nn n n -- - -

Kansas ✔ ✔ - - -- - -

Michigan nn n n -- - -

New York ✔ ✔ ✔ - -- nb -

North Carolina ✔ ✔ n n -- - -

Pennsylvania ✔ ✔ n n -- - -

Utah ✔ ✔ ✔ - ✔ - nb n

Number of states with different 

requirements

1 3 22
Page 14 GAO-01-883 Medicaid and SCHIP

deductions, while three states required documentation for Medicaid 

applicants but not for SCHIP. 

Of the 10 states we reviewed, 2 states—Florida and Michigan—had no 

income documentation requirements for Medicaid or SCHIP. For example, 

Medicaid and SCHIP officials in Michigan told us that they eliminated 

documentation requirements because they were a barrier to application 

and enrollment. Before the state eliminated the documentation 

requirements, Michigan officials reported that 75 percent of the 

applications received were incomplete because individuals failed to 

provide adequate documentation. Michigan eliminated income 

documentation for both programs and, as a result, the proportion of 

incomplete applications received for both programs dropped to below 20 

percent.20

While application requirements for both Medicaid and SCHIP in the 10 

states we reviewed were generally similar, they were not always identical. 

Where differences existed, Medicaid required more information or 

documentation, particularly with regard to income deductions, assets, or 

the need to participate in an in-person interview. For example, Colorado 

required applicants to report income deductions and assets for Medicaid 

but not for SCHIP, and New York required in-person interviews and proof of 

income deductions for Medicaid applicants but not for SCHIP. (See table 3.) 

New York’s Medicaid interview requirement was part of its facilitated 

enrollment strategy intended to assist applicants in completing the 

enrollment process. This strategy uses community-based organizations 

(such as hospitals, clinics, schools, and libraries) as sites where such 

interviews can be conducted. SCHIP applicants can also use the facilitated 

enrollment process for assistance in applying for the program, but they are 

not subject to the in-person interview requirement. 

The states we visited had various strategies for addressing the differences 

between Medicaid and SCHIP requirements on their joint applications. In 

California, application questions that were Medicaid-specific—such as the 

need for a Social Security number—were clearly marked as not required 

for a SCHIP applicant. Colorado joint applications, on the other hand, 

20Michigan officials asserted that self-reported income has not resulted in a high error rate 

for Medicaid and SCHIP applications. In particular, an official told us that posteligibility 

audits, which are conducted by taking a sample of Medicaid and SCHIP applications and 

verifying the information reported by applicants, showed an error rate of 3 percent. These 

posteligibility reviews began in October 2000. Data on prior error rates were not available.
Page 15 GAO-01-883 Medicaid and SCHIP

asked for information without differentiating between items required by 

one program versus another. For example, its joint application asked for 

information about assets, although this was only required for Medicaid, to 

lessen the need for additional information if an applicant appeared 

Medicaid-eligible. Both policies have implications for applicants—either 

the applicant submits information that may not be necessary or risks 

having to provide additional information later, which could prolong the 

approval process.

Delayed or Denied Coverage 

Often Linked to 

Coordination and 

Processing Issues

Delayed or denied coverage often was associated with a lack of 

coordination between the programs and other processing issues. In 

particular, delays or denials were at risk when Medicaid and SCHIP 

applications were transferred between programs, or when applications 

were deemed incomplete. The amount of risk depended on how closely the 

programs coordinated. Generally, states that had identical Medicaid and 

SCHIP application requirements and that maintained geographically close 

or colocated eligibility determination offices for both programs, reduced 

the risk of delayed or denied coverage. However, different application 

requirements for Medicaid and SCHIP, as well as poor coordination 

between the programs could delay coverage for families. In two of the four 

states we visited where we could obtain comparable data, processing 

Medicaid applications took longer than for SCHIP; however, longer 

processing times could be due to a variety of factors besides differences in 

application requirements and insufficient coordination. 
Page 16 GAO-01-883 Medicaid and SCHIP

Application Transfers Between 

Programs Increased the Need for 

Coordination

Increased coordination between Medicaid and SCHIP was important in 

part because joint applications were often transferred between programs. 

Application and eligibility determination processes for Medicaid and 

SCHIP include an initial eligibility screen for Medicaid and a final eligibility 

determination in the appropriate program.21 Across the four states we 

visited, the initial eligibility screening generally took place when an 

applicant submitted a joint application to a SCHIP processing location.22 

SCHIP eligibility determination officials were responsible for performing 

the initial screen; applications deemed potentially Medicaid-eligible were 

typically sent to the Medicaid office in the county where the applicant 

resided, while those deemed potentially SCHIP-eligible remained at the 

SCHIP office for final eligibility determination. 

In the four states we visited, the proportion of joint applications 

transferred between the programs was substantial. For example, Michigan 

officials reported that one-half of the applications submitted to SCHIP were 

determined to be potentially Medicaid-eligible and were forwarded to 

Medicaid, and California SCHIP officials estimated that about 30 percent of 

the applications received by mail were eligible for Medicaid and thus 

required transfer. Applications could also flow in the opposite direction. 

For example, SCHIP application processing sites for Colorado and 

Michigan each reported that about 20 percent of their applications were 

transferred from county offices that determine Medicaid eligibility to the 

SCHIP processing location. Colorado officials estimated that, although 

average times were not available, such transfers could take anywhere from 

2 weeks to 6 months. 

21Across the 10 states we reviewed, the applications were sent to various locations. For 

example, states instructed applicants to mail their applications directly to health plans, to 

county-based Medicaid eligibility determination offices, to SCHIP, or gave them a choice of 

locations. 

22In California, Colorado, and Michigan, families mailed joint applications to a single 

location within the state that was run by SCHIP workers. In New York, an applicant for 

SCHIP could mail in the application to the health plan he or she selected; applicants for 

Medicaid submitted their applications at the time of the required in-person interview. 
Page 17 GAO-01-883 Medicaid and SCHIP

Application transfers took less time if the program offices were 

geographically close or colocated. For example, Michigan established a 

state-operated Medicaid eligibility determination office in the same 

building as the SCHIP enrollment contractor responsible for processing 

joint applications. At this SCHIP processing center, joint applications that 

appeared Medicaid eligible were to be transferred immediately to this 

Medicaid office instead of being sent to various county Medicaid offices for 

eligibility determination.23

Different Application 

Requirements Increased the Risk 

of Incomplete Applications

When joint applications ask for different information for Medicaid and 

SCHIP, applications transferred between programs can be considered 

incomplete, which will delay processing until the needed information is 

supplied. For instance, if required Medicaid information, such as a Social 

Security number, is missing from a joint application, Medicaid processing 

can be delayed because the application is incomplete.24 When applications 

were incomplete for these or other reasons, it increased the likelihood of 

follow-up and often prolonged the completion of the eligibility 

determination process. For example, community assistance workers in 

California told us that families who were required to supply additional 

information or documentation did not always return to complete the 

application process, and many applications were ultimately denied because 

they remained incomplete.25 California officials noted that it is unknown 

whether these families were deterred by the requirements or they did not 

follow through because they believed they were not eligible for the 

program.

While incomplete information on applications resulted in some denials, 

states varied in the extent to which they could provide data on denials. 

For example, California and Colorado were able to provide data on SCHIP 

23A Michigan State official noted that, despite this centralized processing of Medicaid 

applications, about 25 percent of applications that appeared Medicaid-eligible were still sent 

from the colocated Medicaid office to the county offices for processing. Under certain 

circumstances, the joint applications that appear Medicaid-eligible are sent to the Medicaid 

office in the county where the applicant lives. For example, when a family that is already 

receiving Medicaid or whose enrollment is under review in Medicaid submits a joint 

application for a child, the case will be flagged and sent to the county office. 

24California allows applicants that appear Medicaid-eligible 60 days to submit their Social 

Security number. 

25Some states denied coverage after a certain time period if the information was not 

provided. 
Page 18 GAO-01-883 Medicaid and SCHIP

denials that resulted from incomplete information. California indicated that 

27 percent of applications received are denied; of these, almost half were 

denied because of incomplete information. In 2000, Colorado reported that 

31 percent of all applications received were denied because they were 

incomplete. Beginning January 2001, however, the state changed its 

application, which an official told us reduced the percentage of denials due 

to incomplete applications to about 24 percent. In contrast, Michigan 

indicated that less than 3 percent of applications were denied for 

incomplete information. A Michigan official attributed this low denial rate 

to the state’s policy to minimize the amount of required documentation for 

both Medicaid and SCHIP, which has reduced the number of applications 

that are incomplete and require follow-up. 

Better Program Coordination 

Helped Avoid Delays

Officials gave us examples of poor coordination between the programs that 

resulted in delayed coverage or inconvenience to families. In California, 

application assistants reported that SCHIP coverage could be denied if the 

family had not been promptly taken off Medicaid’s rolls after becoming 

ineligible. For example, when a Medicaid family’s income rose enough to 

make the family ineligible for Medicaid but eligible for SCHIP, as long as 

the family was still recorded as enrolled in Medicaid, its SCHIP application 

would be denied. Other difficulties could occur if program eligibility 

information was not provided to the family. For example, some Colorado 

families that were denied Medicaid were not informed that their 

applications had been sent to SCHIP and only discovered they were eligible 

for SCHIP when they received a notice that SCHIP premiums were due. 

Michigan has made efforts to improve coordination between the programs 

by avoiding repeated transfers of the same application that occurred when 

Medicaid and SCHIP eligibility workers disagreed on an applicant’s 

eligibility. To address this, the state developed a policy in which Medicaid 

and SCHIP eligibility workers accept each other’s calculations for purposes 

of determining program eligibility. To ensure that only eligible individuals 

are enrolled in the appropriate program, the state checks applications for 

calculation errors. If any problems consistently occur with workers from 

either program, the state conducts eligibility worker training to minimize 

the incidence of errors.
Page 19 GAO-01-883 Medicaid and SCHIP

Limited Data Indicated Longer 

Medicaid Processing Times 

Differences in the application requirements and processes could affect how 

long it took children to obtain coverage in the two programs. However, 

only SCHIP offices were able to provide information on application and 

eligibility determination processing times in all four states; for Medicaid in 

these states, comparable processing times were only available in Colorado 

and Michigan.26 In these two states, Medicaid application and eligibility 

determination processing generally took longer than SCHIP. For example, 

Colorado reported statewide average processing times that were longer for 

Medicaid (38 days) than for SCHIP (14 days for a completed application 

and 30 days for those requiring follow-up). Michigan reported that average 

processing times were 19 days for Medicaid and 8 days for SCHIP.27 While 

differences in processing times could be affected by poor coordination, 

other factors can contribute to Medicaid’s longer average processing times. 

For example, the Medicaid eligible population includes adults and 

individuals with special needs in addition to children, which also can affect 

how quickly applications are processed. 

26We did not include Medicaid processing times from California and New York because the 

data received were not comparable to SCHIP data. For example, in California, Los Angeles 

County provided an average processing time for Medicaid that included eligibility 

determinations for applicants with disabilities, while SCHIP reported an average processing 

time for joint applications only. Under Medicaid, states have 90 days to determine Medicaid 

eligibility for disability-related coverage. See 42 C.F.R. § 435.911(a)(1), (2). While New York 

actually provided a shorter average processing time for Medicaid eligibility determinations 

than for SCHIP, Medicaid’s processing times did not include the time it took to complete the 

requirement for an in-person interview.

27The state’s average Medicaid application processing time was shortened to fewer than 10 

days for applications processed at the Medicaid office that was colocated with the SCHIP 

eligibility processing center.
Page 20 GAO-01-883 Medicaid and SCHIP

States may allow families to receive covered services while applications 

are being processed by adopting a presumptive eligibility policy, an option 

available to states under both programs. Presumptive eligibility allows a 

child to receive coverage immediately while eligibility determination is in 

process. Nationally, however, few states have opted for presumptive 

eligibility in their Medicaid and SCHIP programs. As of July 2000,28 five 

states had adopted and implemented presumptive eligibility in their 

Medicaid programs—Massachusetts, Nebraska, New Hampshire, New 

Jersey, and New Mexico, while three states—Massachusetts, New Jersey, 

and New York—had adopted and implemented presumptive eligibility for 

SCHIP. A Michigan official told us that although the state has allowed 

health plans to adopt presumptive eligibility, none of the plans had done so 

as of May 2001.

Differing Program 

Requirements Affected 

Families’ Abilities to 

Maintain Coverage

Once enrolled, Medicaid and SCHIP families faced different requirements 

for maintaining coverage. SCHIP children were generally guaranteed a 

longer period of eligibility regardless of changes in income or family size, 

while Medicaid children could lose coverage sooner because of 

requirements to report such changes. Also, Medicaid enrollees faced a 

more complex redetermination process than SCHIP children did. In 

contrast, SCHIP children risked losing coverage for their families’ failure to 

pay required premiums or enrollment fees, while Medicaid generally did 

not have such cost-sharing requirements.

28The Kaiser Commission on Medicaid and the Uninsured, Making It Simple: Medicaid for 

Children and CHIP Income Eligibility Guidelines and Enrollment Procedures. 
Page 21 GAO-01-883 Medicaid and SCHIP

The four states we visited generally required redetermination of eligibility 

after 12 months for both programs. To maintain coverage during the 

eligibility period, two states—Michigan and Colorado—required Medicaid 

families to report any significant changes, such as income or family status, 

and the families could lose coverage if changes made them ineligible.29 In 

contrast, SCHIP families in these two states had “continuous eligibility,”

meaning they remained covered for the full 12 months regardless of 

changes in income or family status.30 New York did the opposite: Medicaid 

families had continuous eligibility, while SCHIP families did not.

At the end of the coverage period, the programs redetermine enrollees’

eligibility for coverage. Medicaid families in California, Michigan, and New 

York faced a more complex redetermination process than SCHIP families. 

For example, to begin Medicaid redetermination, Michigan mailed families 

a new Medicaid application, but it was a 10-page form, not the 4-page joint 

application. In contrast, the state’s SCHIP beneficiaries were mailed a 

summary of the information on their last application and asked to update 

information that had changed. In New York, families completed 

redetermination forms for both Medicaid and SCHIP, but Medicaid again 

required an in-person interview. In contrast, Medicaid redetermination in 

Colorado may be less burdensome than SCHIP redetermination, depending 

on the information the state is able to collect before contacting the family. 

The state first searches other program files, such as Food Stamps and 

Temporary Assistance for Needy Families (TANF), to determine whether it 

already has the necessary application information. If the state does not 

find the information with this process, it sends families a redetermination 

form that essentially has the same information requirements as the joint 

application. For SCHIP redetermination, families must submit another 

joint application. 

While Medicaid, under federal law, generally does not allow premiums or 

fees for children under age 18,31 the SCHIP legislation permits states to 

29In June 2001, California changed its Medicaid program to allow eligible children to remain 

covered for at least 1 year, regardless of changes in family circumstance, income, or 

resources. 

30Continuous eligibility is available for children as a state option in both Medicaid and 

SCHIP. This option guarantees coverage for 12 months, or a designated eligibility period, 

regardless of changes in family income or composition. Without continuous eligibility, 

families are required to report any significant changes in income or household status.

31See 42 U.S.C. § 1396o. 
Page 22 GAO-01-883 Medicaid and SCHIP

require limited cost-sharing. SCHIP families in the four states we visited 

faced varying degrees of risk of losing coverage for failure to pay monthly 

premiums or annual enrollment fees. The percentage of children who lost 

SCHIP coverage because of their families’ failure to pay premiums ranged 

from 0 percent in Colorado to 10 percent in Michigan. (See table 4.)

Table 4: Four States’ Policies on Payment of SCHIP Premiums 

a

In some states, premiums can vary per child based on family income, household size, and, in one 

state, (California) by the health plan in which the child is enrolled. 

b

Loss-of-coverage data is expressed as a percentage of total enrollment. The data represented 

different time frames, depending on what the state was able to provide. The percentages represented 

11 months of data in California, over 24 months in Colorado, 12 months in Michigan, and 3 months in 

New York. 

c

Data represent a new state policy instituted in spring 2001, when Colorado began charging SCHIP 

families an annual enrollment fee. Before this, the state had charged certain SCHIP families monthly 

premiums that ranged from $9 to $30, depending on a family’s income and number of children.

d

Data represent disenrollment activity under the former policy of monthly premiums. According to a 

state auditor’s report, the state never put a policy in place to make collections on premiums, so no 

families lost coverage for failure to pay. 

Source: State information. 

State Premiuma

Maximum 

family premium

Is coverage lost upon 

failure to pay?

Time allowed for 

premium payment

Percentage of 

children who lost 

coverageb

California $4-$9/child/month $27/month Yes 60 days 9

Colorado $0-$25/child/yearc $35/yearc Yes 30 daysc 0d 

Michigan $5/month $5/month Yes 30 days 10

New York $0-$15/child/month $45/month Yes 30 days 4
Page 23 GAO-01-883 Medicaid and SCHIP

Health Plan and 

Physician 

Participation, and 

Payment Differences 

Can Affect Access to 

Care 

Differences in the plans and physicians that participate in Medicaid and 

SCHIP and in payments the programs make to these plans and physicians 

have implications for beneficiaries’ choices and access to care. In the 10 

states we reviewed, SCHIP often required enrollees to join a managed care 

plan and sometimes did not provide a choice of plans. In contrast, 

Medicaid beneficiaries had a choice of at least two capitated plans in 

locations offering managed care or could receive care on a FFS basis, 

including through PCCM.32 However, having such choices did not 

necessarily mean greater access to providers. For example, FFS options do 

not necessarily provide greater access to physicians than managed care 

plans do, since physicians may choose to limit participation or not 

participate in Medicaid. Similarly, one program may have a number of 

smaller plans, while larger plans with more extensive provider networks 

may not participate in the program. Payment disparities between Medicaid 

and SCHIP also had the potential to affect access to care. In two states 

where comparable data were available, Medicaid FFS payments to 

physicians for children’s preventive services were lower than the rates 

physicians were paid for the same services in SCHIP. We also compared 

Medicaid and SCHIP physician fees with those of Medicare and found 

Medicaid fees consistently lower in all four states, while our comparison of 

SCHIP and Medicare fees showed a less consistent relationship. 

Comparisons of capitation rates were difficult because of differences in the 

benefits included within these rates. In one state with comparable benefits 

covered by the capitation rate, SCHIP paid more than Medicaid. In the 

remaining three states, capitation rate comparisons were not feasible 

because of differences in the benefits or populations covered, or both. 

32Capitated managed care plans are paid on a PMPM basis, while a PCCM pays primary care 

physicians a nominal fee to manage beneficiary care and makes FFS payments for services 

provided.
Page 24 GAO-01-883 Medicaid and SCHIP

Medicaid Offered 

Families More Choice 

Between FFS and 

Managed Care Plans

In terms of the broad choices available—obtaining health care through FFS 

or enrollment in a managed care plan—families with children in Medicaid 

generally had more choice than SCHIP families. In the 10 states we 

reviewed, Medicaid generally offered families a choice of receiving services 

on a FFS basis;33 selecting between a capitated managed care plan and FFS, 

including PCCM; or choosing from at least two capitated plans. Across the 

nine states with capitated managed care, enrollment of Medicaid 

beneficiaries in capitated plans ranged from 4 percent to 75 percent.34 In 

contrast, virtually all children enrolled in SCHIP in 8 of the 10 states were 

enrolled in capitated managed care plans; the remaining two states offered 

only FFS care.35 (See table 5.) 

Table 5: Use of FFS and Capitated Plans in Medicaid and SCHIP in 10 States 

33To participate in Medicaid, providers must have a provider agreement with the state 

Medicaid agency; the availability of FFS providers is based on the number of agreements a 

state has in place, as well as how many of these providers are currently accepting patients.

34We did not include Alabama among these states because both Medicaid and SCHIP are FFS 

programs. We included North Carolina Medicaid—although its Medicaid and SCHIP 

programs are predominantly FFS—because the state does enroll Medicaid beneficiaries in 

one county in capitated plans.

35Capitated managed care plans refers to how states pay health plans in Medicaid and 

SCHIP, which is on a PMPM, capitated basis. Managed care plans participating in Medicaid 

or SCHIP may choose to pay their providers on a capitated or FFS basis. 

Option Percentage of beneficiaries enrolled in 

FFS capitated plans a Capitated

State Medicaid SCHIP Medicaid SCHIP Medicaidb SCHIP

Alabama nc n ❍ ❍ 0 0

California ◗ ❍ ◗ d n 54 100

Colorado ◗ ❍ ◗ d n 40 100e

Florida n ❍e n n 37 98f

Kansas n ❍ ◗ n 26 100

Michigan ◗ ❍ n d n 67 100

New York ◗ ❍ ◗ d n 32 100

North Carolina n n ❍g ❍ 4g 0

Pennsylvania ◗ ❍ ◗ d n 70 100

Utah ◗ ❍ ◗ d n 75 100
Page 25 GAO-01-883 Medicaid and SCHIP

Legend 

n - Option is available for nearly all beneficiaries.

❍ - Option is rarely or not available to beneficiaries.

◗ - The extent to which option is available varies across the state.

Note: This table refers to the financial relationship between the state and participating plans or 

providers. Under FFS, the state pays providers directly for services delivered to eligible beneficiaries. 

Under capitation, the state pays managed care plans on a capitated PMPM basis, and the managed 

care plans are responsible for paying providers. 

a

FFS here includes PCCM programs and preferred provider organization (PPO) arrangements that are 

not capitated.

b

With the exception of Colorado Medicaid, all Medicaid capitation percentages include adults as well 

as children.

c

While Alabama’s Medicaid is primarily FFS-based, inpatient hospital services are provided on a 

capitated basis. Since the focus of this study is on primary care, we classified this program as FFS. 

d

The state requires Medicaid beneficiaries in some geographic areas—but not others—to enroll in 

capitated plans. 

e

May include some beneficiaries whose physicians are paid on a FFS basis.

f

A small portion of SCHIP children in this state—those under age 5—must use Medicaid plans and 

PCCM physicians.

g

North Carolina Medicaid enrolls beneficiaries in one county in capitated plans. 

Source: GAO analysis.

Medicaid beneficiaries’ choices within a state depended on where they 

lived. The Medicaid programs in seven states—California, Colorado, 

Michigan, New York, North Carolina, Pennsylvania, and Utah—mandated 

that certain Medicaid beneficiaries enroll in capitated health plans,36 but 

the extensiveness of mandatory enrollment within a state varied greatly. 37

In certain areas of these states, enrollment in a capitated Medicaid plan 

was mandatory for most children:

• in 22 of 58 counties in California,

• in urban areas of Colorado,

• in 73 of 83 counties in Michigan, 

• in 16 of 57 counties in New York and in parts of New York City, 

• in one county in North Carolina,

36Medicaid programs typically target certain beneficiary groups, such as families in TANF, 

for enrollment in mandatory managed care programs. Sometimes other groups, such as 

certain children with special health care needs, are exempted or excluded from mandatory 

enrollment in managed care.

37In Florida and Kansas, Medicaid programs required beneficiaries to enroll in managed care 

but included a PCCM option in most counties. 
Page 26 GAO-01-883 Medicaid and SCHIP

• in the Pittsburgh and Philadelphia areas of Pennsylvania,38 and 

• in 4 urban counties in Utah. 

While enrollment was mandatory in these locations, Medicaid beneficiaries 

could still choose among two or more capitated plans. For example 

Medicaid beneficiaries could choose among 9 capitated plans in Wayne 

County, Michigan, and among 13 to16 plans in New York City, depending on 

the area in which they live.

SCHIP beneficiaries generally had less choice between managed care plans 

and FFS than Medicaid beneficiaries, and these choices also depended on 

where the beneficiaries lived. Four of the states we reviewed with 

capitated managed care plans in SCHIP—Colorado, Florida, New York, and 

Pennsylvania—had geographic regions in which the SCHIP program 

offered a single managed care plan and no FFS option. In addition, SCHIP 

children throughout Kansas were enrolled in the single available plan in 

their area and did not have a FFS option, while Medicaid children were 

enrolled in either a PCCM or a capitated plan. While SCHIP children did 

not always have a choice of FFS, this did not mean that choices were 

necessarily limited. For example, California SCHIP officials noted that in 

the five counties with the largest enrollment (over 60 percent of the SCHIP 

enrollment statewide), SCHIP beneficiaries have between 7 and 9 health 

plan choices. Similarly, in New York City, SCHIP beneficiaries have 

between 10 and 15 plan choices, depending on where they live. 

Degree to Which Plans and 

Physicians Participated in 

Both Programs Varied 

Among States

The degree to which health plans and physicians participated in both 

Medicaid and SCHIP varied among the 10 states we reviewed. Several 

states, such as Colorado, Kansas, New York, and Utah, reported that 

generally the same health plans participated in both programs, but in 

Florida, Michigan, and Pennsylvania, there was limited overlap between 

the health plans participating in Medicaid and those participating in SCHIP. 

(See table 6.) This difference was especially pronounced in Michigan, 

where 80 percent of SCHIP beneficiaries were enrolled in a single capitated 

plan that did not participate in Medicaid and that contracted with over 95 

percent of the physicians in the state. Michigan officials told us that in one 

quarter, 27 percent of children that reapplied for SCHIP were eligible for 

Medicaid; to the extent that these children were enrolled in the plan that 

38Pennsylvania officials noted that Medicaid beneficiaries are required to enroll in 

mandatory managed care as soon as managed care plans become available in their area.
Page 27 GAO-01-883 Medicaid and SCHIP

did not participate in Medicaid, the transfer to Medicaid would require that 

they select a new health plan. 

Table 6: Health Plan Participation in Medicaid and SCHIP in 10 States

Note: The table above represents the number of capitated managed care plans that participate in a 

state, and does not reflect the choices available to beneficiaries in any particular location. Across 

these 10 states, the number of plans available to beneficiaries in a single area ranged from 1 plan for 

Medicaid and SCHIP in various states and counties to 13 to 16 plans for Medicaid and 10 to 15 for 

SCHIP in New York City, depending on the borough. 

a

The program is largely FFS for beneficiaries in this state.

b

This number represents an unduplicated count of the capitated plans that participate in Medicaid. In 

California, the Medicaid managed care program known as the “two-plan model” limits 12 counties in 

the state to having two health plans per county participating in the Medicaid program. Within these 12 

counties, however, the two health plans sometimes subcontract with additional managed care plans. 

For example, in Los Angeles County, 10 plans participate in Medicaid either directly or through 

subcontracts.

c

This number does not include Colorado’s state managed care network, where the state pays primary 

care providers on a capitated basis. However, we did not include this plan in the table because the 

state’s insurance department does not recognize this entity as a health plan. 

Source: State data.

State

Number of capitated managed care plans

Medicaid SCHIP

Participation in

both programs

Alabama aaa

California 27b 26 22

Colorado 5 6c 5

Florida 14 15 6

Kansas 1 2 1

Michigan 26 14 10

New York 29 31 29

North Carolina 3aaa

Pennsylvania 6 7 2

Utah 4 3 3
Page 28 GAO-01-883 Medicaid and SCHIP

When plans do not participate in both programs, continuity-of-care 

problems can arise as beneficiaries shift between programs because of 

changes in family income or children’s ages. For example, because 

Medicaid eligibility changes with a child’s age in all 10 of the states we 

reviewed, a child may have to move from Medicaid to SCHIP at certain ages 

even when family income remains constant. (See app. III.) Losing 

eligibility in one program and becoming eligible for the other can therefore 

mean joining a new plan and possibly seeing a new physician. In addition, a 

family with more than one child could have children enrolled in each 

program, so having the same providers in both programs would make 

obtaining health care easier for the family as a whole.39 

To facilitate continuity of care, a few states reported taking action to 

ensure that plans and physicians participated in both Medicaid and SCHIP. 

For example, in 1998, New York began requiring that new plans participate 

in both programs and that existing plans serve both Medicaid and SCHIP in 

any new service areas. Similarly, Colorado required managed care plans 

contracting with SCHIP to be willing to contract with Medicaid, and it has 

allowed only one exception to this requirement. Colorado state officials 

reported that they also intend to request that health plans submit Medicaid 

and SCHIP physician networks for review so that the state can 

independently determine the degree of participation in both programs. The 

remaining six states we reviewed with Medicaid and SCHIP capitated 

programs did not require health plans to participate in both programs. 

However, officials in one of the six states—Kansas—said that in the future 

they intend to require plans’ participation in both Medicaid and SCHIP. 

Neither requiring health plan participation in both programs nor having 

FFS options can guarantee, however, that the two programs will have the 

same physicians, since physicians may choose not to participate in one or 

the other program or plans may establish different physician networks for 

each program.40 Medicaid and SCHIP officials in the 10 states seldom were 

able to report whether physicians participated in both programs—and the 

39For additional information on differences in provider networks and complexities for “split”

families (that is, families with a child (or children) in each program), see Implementation of 

the State Children’s Health Insurance Program: Momentum Is Increasing After a Modest 

Start, First Annual Report (Mathematica Policy Research Inc. for HCFA, Jan. 2001).

40Moreover, the level of physician participation in each program also can vary. For example, 

physicians may participate fully in Medicaid or SCHIP, accepting all patients that present 

themselves; participation could be less extensive if a physician limits the number of patients 

he or she accepts, or if the physician refuses to take new patients from either program. 
Page 29 GAO-01-883 Medicaid and SCHIP

extent of their participation. A few states-such as Michigan and New York 

noted that their state insurance departments were responsible for 

reviewing network adequacy. In most cases, however, states did not have 

the data needed to compare physician participation in both Medicaid and 

SCHIP, particularly where a significant portion of care was provided by 

capitated plans. Colorado officials noted that provider data systems in 

Medicaid and SCHIP were not comparable and that comparisons also 

would be difficult because provider participation changes frequently within 

and between networks. 

Payment Rates Can Affect 

Physician Participation and, 

Ultimately, Access to Care 

Payment rates—whether they are physician fees or capitation rates to 

health plans—can affect the degree to which physicians and health plans 

participate in Medicaid and SCHIP, and thereby affect beneficiaries’

choices and access to care. The relative fees paid by different insurers—

Medicare,41 Medicaid, SCHIP, and private health plans—can also affect 

providers’ willingness to participate.42 Nationally, low Medicaid physician 

fees and physician participation have been long-standing areas of concern. 

In a recent national survey, pediatricians cited low fees as one of the most 

important factors in their decision to limit participation in Medicaid.43 In 

three of the four states we visited—California, Colorado, and Michigan—

the percentage of pediatricians accepting Medicaid patients was below the 

national average of 67 percent. Some plans and physicians have 

demonstrated their dissatisfaction with Medicaid’s fees by taking legal 

action. In New York, for example, two provider groups recently initiated 

lawsuits that resulted in increases in Medicaid dental fees, and physician 

fees for office visits were increased from $7 to $30. In both cases, these 

were the first Medicaid fee increases in more than 30 years. 

41Medicare is a federal health insurance program for elderly and disabled persons and 

persons with end-stage renal disease; about 4,000 children also are enrolled in the program. 

Private insurance companies have often based their payments to physicians on Medicare 

rates. 

42Stephen Norton, Recent Trends in Medicaid Physician Fees, 1993 –1998, The Urban 

Institute, Assessing the New Federalism (Washington, D.C.: Sept. 1999), p. 1. Some evidence 

also exists to show that fees must increase to a certain level before participation is affected; 

see Oral Health: Factors Contributing to Low Use of Dental Services by Low-Income 

Populations (GAO/HEHS-00-149, Sept. 11, 2000).

43Yudkowsky, Tang, and Siston, American Academy of Pediatrics, Division of Health Policy 

Research, Pediatric Participation in Medicaid/SCHIP: Survey of Fellows of the American 

Academy of Pediatrics, 2000 (Chicago, Ill.: American Academy of Pediatrics, n.d.). 
Page 30 GAO-01-883 Medicaid and SCHIP

Across the four states we visited, Medicaid fees were consistently lower 

than Medicare fees for the same preventive services for children, while 

SCHIP and Medicare fees had a less consistent relationship in the two 

states where comparable data were available.44 Medicaid fees ranged from 

29 percent to 61 percent of what Medicare would pay for selected 

preventive medical services for children. SCHIP fees as a percentage of 

Medicare fees varied, with two large health plans in California paying 44 to 

72 percent of what Medicare would pay and one large health plan in 

Michigan paying 103 to 124 percent of what Medicare would pay.45 (See 

table 7.)

Table 7: Medicaid and SCHIP Physician Fees as a Percentage of Medicare Fees for 

Selected Preventive Medical Services for Children in Four States

Note: The range of Medicaid, SCHIP, and Medicare FFS ratios are based on fees paid for seven 

preventive medical services for children, by age group. These services are listed in app. I, table 10.

a

We obtained Medicare fees for preventive medical services for children for calendar year 2000 and, 

where there was geographical variation, we used the lowest payment for Medicare in the state. Within 

a state, Medicaid fees did not vary by geographic location.

b

SCHIP fee comparisons are based on what two health plans in California enrolling about 40 percent 

of the SCHIP children statewide and one large plan in Michigan enrolling about 80 percent of SCHIP 

children paid their physicians on a FFS basis.

c

We were unable to make FFS comparisons in Colorado and New York. In Colorado, the state paid 

fewer than 1 percent of physicians for SCHIP beneficiaries on a FFS basis, and the plan we visited did 

44We were unable to make FFS comparisons for Colorado’s or New York’s SCHIP programs. 

Colorado had a small percentage of providers—less than 1 percent—who provided services 

to SCHIP beneficiaries on a FFS basis. In New York, SCHIP was entirely a capitated 

program. Among the three plans we visited in New York, only one paid its providers on a 

FFS basis. Since this plan enrolled only 4 percent of all SCHIP children in New York, we did 

not include these data in our analysis.

45Even though SCHIP programs in California and Michigan were 100 percent capitated 

managed care, we were able to compare fees in SCHIP because a large health plan in each 

state paid providers on a FFS basis. Two plans in California served approximately 40 

percent of SCHIP beneficiaries in the state, while a plan in Michigan served approximately 

80 percent of the SCHIP beneficiaries in the state.

Physician fees as a percentage of Medicare fees

State Medicaida SCHIPb

California 42 – 55 44 – 72

Colorado 42 – 58 c

Michigan 56 – 61 103 – 124

New York 29 – 39 c
Page 31 GAO-01-883 Medicaid and SCHIP

not pay its physicians on a FFS basis. In New York, where SCHIP was entirely a capitated program, 

only one of the three plans we visited paid its providers on a FFS basis. This plan enrolled only 4 

percent of all SCHIP children in New York. 

Source: GAO analysis of FFS payments, March 2001.

In comparing Medicaid and SCHIP fees for the same children’s preventive 

medical services, Medicaid fees in two states—California and Michigan—

were consistently lower than what physicians were paid for the same 

services in SCHIP. Medicaid fees were 46 percent to 58 percent of what one 

dominant health plan in Michigan paid SCHIP physicians and 83 percent of 

what a large plan in California paid SCHIP physicians. (See table 8.) 

Table 8: Medicaid Physician Fees as a Percentage of SCHIP Fees for Selected Preventive Medical Services in California and 

Michigan

a

California SCHIP payments are based on what two large plans, enrolling about 40 percent of SCHIP 

children statewide, paid its FFS physicians. 

b

Michigan SCHIP payments are based on what a large plan, enrolling about 80 percent of SCHIP 

children statewide, paid its FFS physicians. 

Source: State and health plan data.

Medicaid physician fees as a percentage of SCHIP physician fees 

Californiaa Michiganb

Preventive medical service category Plan A Plan B

New patient, under 1 year 83 100 58

New patient, 1 – 4 years 83 100 52

New patient, 5 – 11 years 83 72 51

Established patient, under 1 year 83 92 52

Established patient, 1 – 4 years 83 83 47

Established patient, 5 – 11 years 83 88 47

Established patient, 12 – 17 years 83 92 46
Page 32 GAO-01-883 Medicaid and SCHIP

Just as physician fees can affect physician participation, capitation rates 

can affect plan participation. Capitation rates can be difficult to compare, 

however, because the PMPM rates do not always encompass the same 

benefits. In Michigan, Medicaid capitation rates were lower than SCHIP 

rates by $26 PMPM, even though the two programs contracted for 

essentially the same services.46 In California, differences in benefits and in 

the populations included in the rates complicated rate comparisons. 

Medicaid’s capitation rate included both adults and children, while SCHIP’s 

rate was limited to children. In the remaining two states, the benefits were 

not comparable between the two programs, which precluded any 

conclusions regarding the comparability of capitation rates. (See table 9.) 

Table 9: Age-Adjusted Capitation Rates Paid to Health Plans for Children in 

Medicaid and SCHIP in Four States 

46Responding to concerns regarding Medicaid rates, Michigan’s state legislature increased 

the capitation rates in the fall of 2000. These rate increases are included within our rate 

analysis.

State

Medicaid

ratea

 (PMPM)

SCHIP rate

(PMPM)

Key benefits excluded from capitation 

ratesb

California $95c $80 Medicaid:

• selected psychiatric and AIDS 

prescription drugs 

• mental health benefits

• substance abuse treatment

Colorado $54d $70 Medicaid:

• most mental health benefits

SCHIP:

• dental benefits

Michigan $47 $73 Medicaid:

• mental health benefits

• substance abuse treatment

• dental benefits

SCHIP:

• mental health benefits

• substance abuse treatment

• dental benefits

New York $90e $110 Medicaid: f

• prescription drugs

• newborn inpatient hospital costs

SCHIP:

• newborn costs (program starts at 1 mo.) 
Page 33 GAO-01-883 Medicaid and SCHIP

Note: Medicaid and SCHIP capitation rates are comparable only in Michigan; in the remaining three 

states, direct comparisons are not feasible because of differences in benefits and populations covered 

in the capitation rate. Appendix I describes the methods used to develop weighted average capitation 

rates based on the age distribution of enrollees in each state. 

a

Medicaid rates exclude rates for enrollees receiving Supplemental Security Income (SSI) to achieve a 

closer match in the health status of Medicaid and SCHIP enrollees for comparison purposes.

b

Where Medicaid excludes benefits from its capitation rate, such benefits are provided either on a FFS 

basis or through a separate capitated arrangement. EPSDT benefits are covered under Medicaid but 

not typically under SCHIP.

c

The California Medicaid capitation rate is not for children only; it is a family rate that adults, primarily 

parents who are also eligible for Medicaid under the Temporary Assistance to Needy Families (TANF) 

program. 

d

These rates are for children up to age 18 in Colorado Medicaid’s Baby Care Kids Care, foster care, 

and Aid to Families With Dependent Children (AFDC) categories. Maternity care was not included in 

the Medicaid rate; however, a SCHIP official said that very few enrollees in the SCHIP program 

required maternity benefits.

e

We excluded a one-time inpatient hospital payment for newborns from the Medicaid weighted average 

PMPM rate to make it more comparable with New York SCHIP, which does not cover children under 1 

month old.

f

Rates for New York Medicaid include plans’ optional benefits, which are dental, emergency 

transportation, nonemergency transportation, and family planning.

Source: GAO analysis of state data.

Concluding 

Observations

Although states have a significant amount of flexibility to design their 

Medicaid and SCHIP programs, differences in enrollment policies have a 

bearing on how easily children gain and retain access to health care. 

Differing application requirements and processing times can lead to 

delayed coverage—and in some cases, to no coverage—if families find the 

application process too difficult to complete. Well-coordinated programs, 

however, can minimize the effect of such differences and facilitate 

enrollment and continuity of care for children. 

Differences in provider participation and in the relative payment rates also 

have implications for children's access to health care. Few states, 

however, could assess the degree to which the same physicians were 

available to both Medicaid and SCHIP children. Since physicians decide 

whether to participate in Medicaid and SCHIP partly on the basis of the 

payment rates, lower Medicaid payments relative to other payers continue 

to be a source of concern, although some states have recently increased 

Medicaid provider payments. While comparing payment rates in a 

managed care environment is often complicated by differences in covered 

benefits, differential rates between the two programs can affect plans’ and 

physicians’ willingness to participate and, in turn, beneficiaries’ access to 

care. 
Page 34 GAO-01-883 Medicaid and SCHIP

Agency and State 

Comments

We provided the Secretary of Health and Human Services an opportunity to 

comment on a draft of this report. In its comments, HHS generally agreed 

with our concluding observations that differences in enrollment policies, 

provider participation, and relative payment rates in Medicaid and SCHIP 

can have implications for program enrollment as well as access to care. 

HHS expressed uncertainty, however, about the degree to which our 

concluding observations provide a national assessment of enrollment and 

payment policies. The report notes throughout that our findings on 

enrollment policies and provider participation were based on the 

experience of 10 states and that our comparisons of payment rates were 

limited to 4 states. Our intent was not to generalize nationwide, but to 

illustrate how selected states are addressing challenges that other states 

might also face in administering their Medicaid and SCHIP programs. 

HHS noted that the influence of relative reimbursement levels on physician 

and dentist participation in the Medicaid program is an important policy 

consideration. It expressed concern, however, about comparing Medicare 

physician fees to Medicaid fees for selected pediatric preventive medical 

services because of differences in the populations eligible for these 

programs. We made this comparison for several reasons. First, while 

Medicare is a federal health insurance program primarily for the elderly 

and persons with disabilities, its fee schedule includes fees for pediatric 

medical services. Second, both public and private health care insurers 

often base their payments to physicians on the Medicare fee schedule. For 

example, in California, Medicare payment levels were used as a benchmark 

for revisions to the Medicaid fee schedule in August 2000.47 Finally, 

research on Medicaid payment frequently considers Medicare fee 

47In addition, almost half of the Medicaid programs across the country have adopted 

Medicare’s methodology as a benchmark for establishing physician FFS payments. See 

Sandra Hunt et al, Applying RBRVS to Medi-Cal; Case Studies in Seven States, 

PricewaterhouseCoopers (Oakland, Calif.: Medi-Cal Policy Institute, June 2001), pp. 2 and 

42.
Page 35 GAO-01-883 Medicaid and SCHIP

schedules as a point of comparison for Medicaid rates.48 While HHS also 

suggested that a comparative analysis of payment data from commercial 

plans would be helpful, such an analysis was beyond the scope of this 

review. 

Finally, HHS commented that findings from the American Academy of 

Pediatrics on physician participation and payments—noted in this report—

might warrant further investigation by GAO. We agree that additional 

analysis of children’s access to care and payments to physicians in both 

Medicaid and SCHIP is warranted, and are continuing to address these 

issues in other work. 

We also provided a copy of our draft report to Medicaid and SCHIP officials 

in the 10 states included in our analysis. We received comments from the 

Medicaid and SCHIP programs in California, Colorado, Kansas, Michigan, 

and Pennsylvania. We also received comments from the Medicaid program 

in Alabama, and the SCHIP programs in North Carolina and New York. 

Several states, including Michigan, and Pennsylvania, commented that 

differences in health plan participation in their Medicaid and SCHIP 

programs did not necessarily mean that the same physicians do not 

participate in both programs. We agree that physician participation can be 

similar even when health plans differ; however, states generally could not 

provide documentation of the extent of physician participation in both 

programs. California and Colorado also commented on the difficulty of 

making capitated payment comparisons between the two programs. We 

agree that it is difficult to compare Medicaid and SCHIP capitated rates, 

particularly when program benefits or populations differ. As a result, we 

noted benefit and population differences throughout the report and did not 

draw conclusions about comparative payment rates where such 

differences existed. 

48See Joel Menges, and others, Comparing Physician and Dentist Fees Among Medicaid 

Programs, The Lewin Group (Oakland, Calif.: Medi-Cal Policy Institute, June 2001); Sandra 

Hunt, and others, Comparing CPT Code Payments for Medi-Cal and Other California 

Payers, PricewaterhouseCoopers (Oakland, Calif.: Medi-Cal Policy Institute, June 2001); 

Stephen Norton and Stephen Zuckerman, “Trends in Medicaid Physician Fees, 1993-1998”, 

Health Affairs, (Vol. 19, No. 4, July/August 2000); Stephen Norton, Recent Trends in 

Medicaid Physician Fees, 1993-1998, The Urban Institute, Assessing the New Federalism 

(Washington, D.C.: Sept. 1999). In addition, the American Academy of Pediatrics includes 

questions about Medicare fees in relation to Medicaid fees in its survey of pediatricians’

Medicaid reimbursement rates for 2000. 
Page 36 GAO-01-883 Medicaid and SCHIP

HHS and the states also provided technical and clarifying comments, which 

we incorporated where appropriate. (HHS’ comments are included in app. 

IV.)

As arranged with your office, unless you release its contents earlier, we 

plan no further distribution of this report until 30 days after its issuance 

date. At that time, we will send copies of this report to the Secretary of 

Health and Human Services, the Administrators of CMS and HRSA, and 

other interested parties. We will make copies available to others upon 

request. If you or your staff have any questions regarding this report, 

please contact me on (202) 512-7114 or Carolyn Yocom at (202) 512-4931. 

Key contributors to this report are listed in app. V. 

Sincerely yours, 

Kathryn G. Allen

Director, Health Care—Medicaid and

Private Health Insurance Issues 
Page 37 GAO-01-883 Medicaid and SCHIP
Page 38 GAO-01-883 Medicaid and SCHIP

Appendix I

Objectives, Scope, and Methodology ApendxiI

The objectives of this report were to analyze, for Medicaid and SCHIP in 

selected states, differences in (1) enrollment requirements, particularly 

application and eligibility determination practices, and (2) health plan and 

physician participation and payments to plans and physicians. With regard 

to both objectives, we were also asked to consider whether differences 

between Medicaid and SCHIP might have implications for children’s access 

to care.

To do this, we conducted telephone interviews of Medicaid and SCHIP 

state, county, and private sector officials responsible for Medicaid and 

SCHIP administration in 10 states. We visited four states, and we analyzed 

data from states’ programs as well as federal Medicaid and SCHIP program 

reports and documents. Because states’ Medicaid programs varied 

considerably, data collected from states did not always represent the same 

time frames. We asked states to provide their latest available data, which 

ranged from 1999 to the summer of 2001. In addition, we reviewed 

published studies and reports on application and eligibility determination 

practices, plan and physician participation, and provider payment issues in 

Medicaid and SCHIP. We also relied on information from our previous 

work.1

To analyze the extent of programmatic differences for the two reporting 

objectives, we selected 10 states that had SCHIP programs with separate 

child health programs. These states were Alabama, California, Colorado, 

Florida, Kansas, Michigan, New York, North Carolina, Pennsylvania, and 

Utah. With one exception, these were the same states included in our 

previous Medicaid and SCHIP comparison report.2

 In selecting these 

states, we considered attributes of SCHIP separate child health programs, 

such as administrative structure and the method of providing services (feefor-service (FFS) or managed care) compared to Medicaid programs in 

each state. We also selected states whose SCHIP programs had been in 

operation since January 1999 and represented a range of geographic 

locations. We made site visits to four of these states (California, Colorado, 

Michigan, and New York) to probe certain issues more deeply and obtain 

the multiple perspectives needed. We selected these four states primarily 

because of their geographic distribution, the varying sizes of their Medicaid 

1

See Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and Benefits

(GAO/HEHS-00-86, Apr. 14, 2000).

2

We substituted Michigan for Arkansas because the latter did not have a separate SCHIP 

program.
Appendix I

Objectives, Scope, and Methodology

Page 39 GAO-01-883 Medicaid and SCHIP

and SCHIP enrollments, and their different program administration 

structures. For example, the Medicaid program in California operates at 

the county level, while SCHIP operates statewide; in contrast, Michigan 

operates both Medicaid and SCHIP out of the same state agency. 

During the four site visits, we interviewed representatives of programs—

including state, county, and private sector officials—as well as a wide range 

of groups, including 

• state Medicaid and SCHIP directors and their staffs; 

• managed care plan officials; 

• local organizations responsible for assisting families with applications;

• contractors and other staff responsible for determining eligibility and 

for enrolling children in Medicaid and SCHIP;

• physician organizations, such as local chapter officials of the American 

Academy of Pediatrics; and 

• child health advocacy organizations. 

We also obtained documentation and data from states on application and 

eligibility determination, plan participation, and plan and physician 

payments. 

To compare application requirements and eligibility determination 

practices under Medicaid and SCHIP, we analyzed application requirements 

from the 10 states. Our site visits to four states allowed us to obtain a more 

in-depth understanding of how Medicaid and SCHIP programs at the state 

level determined whether applicants were eligible; how the two programs 

referred ineligible applicants; and how both programs enrolled 

beneficiaries into managed care plans, where pertinent. In each state we 

visited, we obtained data and conducted interviews with state, plan, 

physician, and community groups on Medicaid and SCHIP procedures and 

requirements, time frames, and coordination efforts.

To obtain information about health plan arrangements and provider 

participation in the two programs, we conducted semistructured telephone 

interviews with Medicaid and SCHIP directors or their key staff in the 10 

states. These interviews allowed us to capture variations between 

Medicaid and SCHIP both within and across states. In the four states we 

visited, we also obtained more extensive information about the degree of 

beneficiary choice of health plans and physicians in each program, in urban 

and rural areas and under Medicaid managed care programs. In addition, 
Appendix I

Objectives, Scope, and Methodology

Page 40 GAO-01-883 Medicaid and SCHIP

we obtained data on the number of plans, degree of plan participation in 

each program, enrollment by plan, and provider overlap. 

Finally, we collected and analyzed information and data on Medicaid and 

SCHIP payments to managed care plans and FFS providers in the four 

states we visited. In analyzing payments, we focused on making 

comparisons within a state regarding Medicaid and SCHIP (1) FFS 

payments to physicians for services for Medicaid and SCHIP beneficiaries 

and (2) capitation rates to plans. Plans are paid a fixed amount per 

member per month (PMPM), regardless of the services provided, while 

under FFS, physicians are paid a specific amount for each service. 

We performed our work from June 2000 through July 2001 in accordance 

with generally accepted government auditing standards. 

Methodology for 

Comparison of FFS 

Payment Rates

Since many Medicaid beneficiaries are in a FFS arrangement, we compared 

Medicaid payments with SCHIP payments for the same preventive services 

for children. While SCHIP programs do not typically use FFS 

arrangements, we identified three dominant health plans, two in California 

and one in Michigan, that served significant numbers of SCHIP 

beneficiaries and that paid their providers on a FFS basis.3

 We compared 

Medicaid payments in California and Michigan with the payments that each 

of these SCHIP plans paid their providers. 

3

We did not make FFS comparisons between Medicaid and SCHIP in Colorado or New York. 

Colorado has a small percentage of providers—about 1 percent—who provide services to 

SCHIP beneficiaries in rural areas and are paid on a FFS basis by the state. In New York, 

SCHIP was entirely a capitated program and the state did not develop FFS rates. Among the 

three plans we visited in New York, one paid its providers on a FFS basis. Since this plan 

enrolled only 4 percent of all SCHIP children in New York, we did not include these data in 

our analysis. 
Appendix I

Objectives, Scope, and Methodology

Page 41 GAO-01-883 Medicaid and SCHIP

We obtained fee schedules for pediatric medical services using selected 

codes from the most commonly used procedural coding system in states 

reporting Medicaid EPSDT services—the standard Physicians Current 

Procedural Terminology, 4th edition (CPT 4). (See table 10.) These CPT 4 

codes were the most commonly used procedural codes for reporting 

Medicaid’s EPSDT services under capitated managed care programs and 

the second most commonly used codes for reporting these services under 

FFS.4

Table 10: Selected CPT 4 Codes for Preventive Medical Services for Children 

Source: Current Procedural Terminology, American Medical Association, 4th edition 1999.

Methodology For 

Comparison of 

Capitation Rates 

Managed care plans often receive different capitation rates for each risk 

group or category of eligible populations. For example, plans may be paid 

separate rates for infants and teenagers, or for Supplemental Security 

Income (SSI) program beneficiaries in Medicaid, who are often more costly 

to serve because of their complex health needs. The distribution of such 

population groups and the benefits offered also can differ between 

Medicaid and SCHIP. Because of this, comparing programs’ capitation 

rates to health plans required analyzing any existing differences between 

Medicaid and SCHIP rates based on a program’s enrollment by age, risk 

groups, and benefits; where possible, we made adjustments to address the 

differences we identified. 

4

Elicia J. Herz Medicaid Services for Children: State Programs Under Early and Periodic 

Screening, Diagnostic and Treatment (EPSDT), Congressional Research Service 

(Washington, D.C.: Library of Congress, Feb. 11, 1999), p. 21.

CPT 4 codes Description

99381 New patient, under 1 year

99382 New patient, 1 to 4 years

99383 New patient, 5 to 11 years

99391 Established patient, under 1 year

99392 Established patient, 1 to 4 years

99393 Established patient, 5 to 11 years

99394 Established patient, 12 to 17 years
Appendix I

Objectives, Scope, and Methodology

Page 42 GAO-01-883 Medicaid and SCHIP

In general, to compare capitation rates, we first excluded SSI children from 

Medicaid’s enrollment figures and calculated or obtained weighted average 

capitation rates for non-SSI children to make the Medicaid rates more 

comparable to SCHIP.5

 While this approach made the Medicaid and SCHIP 

populations more similar, the number of beneficiaries in each age group 

varied by program. To adjust for these differences, we used the SCHIP 

program’s enrollment distribution by age in each state and applied 

weighted average Medicaid capitation rates, thus calculating a populationadjusted PMPM Medicaid rate that was more comparable to SCHIP. By ageadjusting the two populations, we arrived at more comparable price-toprice evaluations of Medicaid and SCHIP capitation rates. 

For example, in Colorado, infants (aged 0 to 1) made up 8,236 (15 percent), 

of all children in Medicaid, while infants composed 633, or 3 percent, of all 

children in SCHIP. Capitation rates differ by age groupings—with infant 

rates higher than rates for older children under both programs. For 

example, the weighted average Medicaid rate for infants in Colorado was 

$300 PMPM, while the weighted average rate for ages 1 to 18 was $47 

PMPM.6

 Given these differences, the weighted average monthly capitation 

rate for a program enrolling many infants—such as Medicaid—reflects the 

higher costs of these beneficiaries. This rate is not comparable to the 

weighted average rate for a program with fewer infants. To adjust for these 

differences in populations, we used SCHIP’s enrollment distribution by age 

in Colorado and applied Colorado’s Medicaid rates to the SCHIP enrollment 

distribution in order to calculate a population-adjusted PMPM rate. This 

gave us comparable price-to-price evaluations of Medicaid and SCHIP 

capitation rates in Colorado of $54 PMPM in Medicaid and $70 PMPM in 

SCHIP. We also obtained or calculated price-to-price evaluations of

5

Because SSI eligibility is frequently a criterion for Medicaid eligibility, children with severe 

disabilities are disproportionately represented within the Medicaid enrollment numbers for 

children. In addition, Medicaid covers many services that SSI-eligible children would likely 

use that are not represented in SCHIP benefit packages. Thus, including SSI children would 

overstate per-child Medicaid expenditures for purposes of comparisons with SCHIP.

6

These rates are for children up to age 18 in Colorado Medicaid’s Baby Care Kids Care, foster 

care, and Aid to Families With Dependent Children (AFDC). 
Appendix I

Objectives, Scope, and Methodology

Page 43 GAO-01-883 Medicaid and SCHIP

Medicaid and SCHIP capitation rates for children in Michigan and New 

York.7

 (Figure 2 shows the original capitation rate for Medicaid and SCHIP, 

as well as the population-adjusted rate for Medicaid.) 

Figure 2: Weighted Average Monthly Capitation Rates in Three States, Adjusted for 

SCHIP Enrollment Populations

Source: GAO analysis of state data.

7

We excluded a one-time inpatient hospital payment for newborns in the Medicaid weighted 

average PMPM rate to make it more comparable with New York SCHIP, which does not 

cover children under 1 month old. 

0

20

40

60

80

100

120

Colorado Michigan New York

PMPM rates in dollars

Medicaid rate based on program enrollment

SCHIP rate based on program enrollment

Medicaid rate based on SCHIP enrollment
Appendix I

Objectives, Scope, and Methodology

Page 44 GAO-01-883 Medicaid and SCHIP

In California, the Medicaid program developed its capitation rates by 

eligibility groupings, not by age ranges, and so it could not provide rates for 

children by age.8

 For our capitation rate comparison, we selected a 

“family” population grouping that best represented families with children 

because it included a Medicaid category of eligibility that is based on 

enrollment in the Temporary Assistance to Needy Families (TANF) 

program.9

 Within this family rate category, capitation rates were the same, 

regardless of the age of the child or adult. As a result, creating comparable 

populations between Medicaid and SCHIP was not possible.10 The 

California capitation rates cited represent the weighted averages for 

Medicaid beneficiaries and for SCHIP beneficiaries in 12 counties that 

enrolled the majority of Medicaid- and SCHIP-eligible individuals in 

capitated care. 

8

In contrast, California SCHIP developed different rates for children under 1-year-old 

($187.15 PMPM) and for children 1 year and older ($78.66 PMPM).

9

TANF is a federal grant program operated by states that provides cash assistance and other 

services to needy families.

10California officials noted that the state’s Medicaid PMPM capitation rate included both 

adults and children, thus complicating comparisons with SCHIP’s capitation rate, which was 

limited to children. As a result, we noted population and benefit differences throughout the 

report and did not draw conclusions where such differences existed.
Page 45 GAO-01-883 Medicaid and SCHIP

Appendix II

States’ Design Choices Under SCHIP ApendxiI

States are allowed three options in designing SCHIP: expand their 

Medicaid program, develop a separate child health program that functions 

independently of the Medicaid program, or combine both approaches. (See 

table 11.) As of June 2001, 35 states have separate programs or 

combination programs separate from Medicaid. Fifteen states and the 

District of Columbia have chosen to create Medicaid expansion programs 

under SCHIP, 16 states have separate child health programs, and 19 states 

have programs that combine Medicaid expansion and separate child health 

programs.

Table 11: States’ and the District of Columbia’s Choices for SCHIP Programs, as of 

June 2001

State

Medicaid

expansion

Separate

program Combination

Alabama n

Alaska n

Arizona n

Arkansas n

California n

Colorado n

Connecticut n

Delaware n

District of Columbia n

Florida n

Georgia n

Hawaii n

Idaho n

Illinois n

Indiana n

Iowa n

Kansas n

Kentucky n

Louisiana n

Maine n

Maryland n

Massachusetts n

Michigan n

Minnesota n
Appendix II

States’ Design Choices Under SCHIP

Page 46 GAO-01-883 Medicaid and SCHIP

Source: HCFA data.

Mississippi n

Missouri n

Montana n

Nebraska n

Nevada n

New Hampshire n

New Jersey n

New Mexico n

New York n

North Carolina n

North Dakota n

Ohio n

Oklahoma n

Oregon n

Pennsylvania n

Rhode Island n

South Carolina n

South Dakota n

Tennessee n

Texas n

Utah n

Vermont n

Virginia n

Washington n

West Virginia n

Wisconsin n

Wyoming n

Total 16 16 19

(Continued From Previous Page)

State

Medicaid

expansion

Separate

program Combination
Page 47 GAO-01-883 Medicaid and SCHIP

Appendix III

State Income Eligibility Levels in Medicaid 

and SCHIP ApendxiI

Because Medicaid and SCHIP income eligibility levels vary by age, children 

in the same family can qualify for different programs. (See table 12.) Using 

a family with two children, aged 2 and 7, and an income at 125 percent of 

the federal poverty level provides an example of how family eligibility can 

be split between Medicaid and SCHIP. In 21 of the 35 states with separate 

child health programs, the 2-year-old would be eligible for Medicaid, while 

the 7-year-old would be eligible for SCHIP.1

 Assuming that the family’s 

income remains at 125 percent of the poverty level, these children would be 

split between Medicaid and SCHIP for 4 years, until the 2-year-old turned 6 

and thus qualified for SCHIP, not Medicaid. Six states have consistent 

eligibility levels for all ages: four states—Connecticut, Indiana, Maryland, 

and South Dakota—used SCHIP Medicaid expansions, while two states—

Vermont and Washington—already had eligibility levels that were 

consistent for all children. The remaining eight states have consistent 

levels for all ages with the exception of infants, which are typically covered 

at a higher level in Medicaid.

Table 12: Eligibility Standards by Age and Program in States With SCHIP Separate Child Health Programs

1

The 21 states are Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, 

Kansas, Mississippi, Montana, Nevada, New York, North Carolina, North Dakota, Oregon, 

Pennsylvania, Texas, Utah, Virginia, West Virginia, and Wyoming.

Income as a percentage of federal poverty level, by agea

State Program <1 1-5 6-16 17-18

Alabama

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion bbb 100

Medicaid 133 133 100 15

Arizona

Separate SCHIP program 200 200 200 200

Medicaid 140 133 100 30

California

Separate SCHIP program 250 250 250 250

SCHIP Medicaid expansion bbb 100

Medicaid 200 133 100 82
Appendix III

State Income Eligibility Levels in Medicaid 

and SCHIP

Page 48 GAO-01-883 Medicaid and SCHIP

Colorado

Separate SCHIP program 185 185 185 185

Medicaid 133 133 100 37

Connecticut

Separate SCHIP program 300 300 300 300

SCHIP Medicaid expansion bbb 185

Medicaid 185 185 185 100

Delaware

Separate SCHIP program 200 200 200 200

Medicaid 185 133 100 100

Florida

Separate SCHIP program c 200 200 200

SCHIP Medicaid expansion 200 b b 100

Medicaid 185 133 100 28

Georgia

Separate SCHIP program 235 235 235 235

Medicaid 185 133 100 100

Illinois

Separate SCHIP program 185 185 185 185

SCHIP Medicaid expansion 200d b 133 133

Medicaid 133 133 100 46

Indiana

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion b 150 150 150

Medicaid 150 133 100 100

Iowa

Separate SCHIP program c 200 200 200

SCHIP Medicaid expansion 200 b 133 133

Medicaid 185 133 100 37

Kansas

Separate SCHIP program 200 200 200 200

Medicaid 150 133 100 100

Kentucky

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion b 150 150 150

Medicaid 185 133 100 33

(Continued From Previous Page)

Income as a percentage of federal poverty level, by agea

State Program <1 1-5 6-16 17-18
Appendix III

State Income Eligibility Levels in Medicaid 

and SCHIP

Page 49 GAO-01-883 Medicaid and SCHIP

Maine

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion b 150 150 150

Medicaid 185 133 125 125

Maryland

Separate SCHIP program 300e 300e 300e 300e

SCHIP Medicaid expansion 200 200 200 200

Medicaid 185 185 185 40

Massachusetts

Separate SCHIP program c 200 200 200

SCHIP Medicaid expansion 200 150 150 150

Medicaid 185 133 114 86

Michigan

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion bbb 150

Medicaid 185 150 150 100

Mississippi

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion bbb 100

Medicaid 185 133 100 34

Montana

Separate SCHIP program 150 150 150 150

Medicaid 133 133 100 41

Nevada

Separate SCHIP program 200 200 200 200

Medicaid 133 133 100 31

New Hampshire

Separate SCHIP program c 300 300 300

SCHIP Medicaid expansion 300 b bb

Medicaid 185 185 185 185

New Jersey

Separate SCHIP program 350 350 350 350

SCHIP Medicaid expansion b 133 133 133

Medicaid 185 133 100 41

(Continued From Previous Page)

Income as a percentage of federal poverty level, by agea

State Program <1 1-5 6-16 17-18
Appendix III

State Income Eligibility Levels in Medicaid 

and SCHIP

Page 50 GAO-01-883 Medicaid and SCHIP

New York

Separate SCHIP program 250 250 250 250

SCHIP Medicaid expansion bbb 100

Medicaid 200f 133 100 87

North Carolina

Separate SCHIP program 200 200 200 200

Medicaid 185 133 100 100

North Dakota

Separate SCHIP program 140 140 140 140

SCHIP Medicaid expansion bbb 100 g

Medicaid 133 133 100 100 h

Oregon

Separate SCHIP program 170 170 170 170

Medicaid 133 133 100 100

Pennsylvania

Separate SCHIP program 235i 235i 235i 235i

Medicaid 185 133 100 41

South Dakota

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion 140 140 140 140

Medicaid 133 133 100 100

Texas

Separate SCHIP program 200 200 200 200

SCHIP Medicaid expansion bbb 100

Medicaid 185 133 100 17

Utah

Separate SCHIP program 200 200 200 200

Medicaid 133 133 100 100

Vermont

Separate SCHIP program 300 300 300 300

Medicaid 225 225 225 225

Virginia

Separate SCHIP program 185 185 185 185

Medicaid 133 133 100 100

(Continued From Previous Page)

Income as a percentage of federal poverty level, by agea

State Program <1 1-5 6-16 17-18
Appendix III

State Income Eligibility Levels in Medicaid 

and SCHIP

Page 51 GAO-01-883 Medicaid and SCHIP

a

Unless otherwise noted, Medicaid eligibility levels are reported as of March 31, 1997, while Medicaid 

expansion and SCHIP eligibility levels are reported as of October 1, 2000. 

b

State has no SCHIP Medicaid expansion category of eligibility for this age group. 

c

State has no SCHIP separate child health category of eligibility for this age group.

d

Infants born to Medicaid-enrolled mothers are covered up to 200 percent; infants for whom application 

is made independent of their parents are covered up to 185 percent.

e

Effective as of July 1, 2001.

f

Increased from 185 to 200 percent as of November 1, 2000.

g

Covers age 18 only.

h

Covers ages 15 through 17.

i

No federal matching funds are provided for children in families with incomes above 200 to 235 percent 

of the poverty level. Pennsylvania covers these children with state funds only.

Source: GAO summary of HCFA and state data. 

Washington

Separate SCHIP program 250 250 250 250

Medicaid 200 200 200 200

West Virginia

Separate SCHIP program 200 200 200 200

Medicaid 150 133 100 100

Wyoming

Separate SCHIP program c c 133 133

Medicaid 133 133 100 55

(Continued From Previous Page)

Income as a percentage of federal poverty level, by agea

State Program <1 1-5 6-16 17-18
Page 52 GAO-01-883 Medicaid and SCHIP

Appendix IV

Comments From the Department of Health 

and Human Services ApendxiIV
Appendix IV

Comments From the Department of Health 

and Human Services

Page 53 GAO-01-883 Medicaid and SCHIP
Page 54 GAO-01-883 Medicaid and SCHIP

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact Carolyn L. Yocom, (202) 512-4931

Staff 

Acknowledgments

Key contributors to this analysis were Joy L. Kraybill, JoAnn

Martinez-Shriver, and Deborah A. Signer. In addition, Yorick F. Uzes 

contributed to the initial design and data collection, Behn Miller provided 

legal analysis, and Elizabeth T. Morrison assisted in writing the report.

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