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31–961—PDF 2006

S. HRG. 109–739

CHIP AT 10: A DECADE OF COVERING CHILDREN

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH CARE

OF THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JULY 25, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

SUBCOMMITTEE ON HEALTH CARE

ORRIN G. HATCH, Utah, Chairman

OLYMPIA J. SNOWE, Maine

BILL FRIST, Tennessee

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

JIM BUNNING, Kentucky

JOHN D. ROCKEFELLER IV, West Virginia

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

RON WYDEN, Oregon

(II)

C O N T E N T S

OPENING STATEMENTS

Page

Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman, Subcommittee

on Health Care ..................................................................................................... 1

Rockefeller, Hon. John D., IV, a U.S. Senator from West Virginia ..................... 7

WITNESSES

Kennedy, Hon. Edward M., a U.S. Senator from Massachusetts ........................ 3

McClellan, Hon. Mark, M.D., PhD, Administrator, Centers for Medicare and

Medicaid Services, Washington, DC; accompanied by Dennis Smith, Director of Medicaid and State Operations, Centers for Medicare and Medicaid

Services ................................................................................................................. 9

Baumrucker, Evelyne, analyst, Congressional Research Service, Washington,

DC .......................................................................................................................... 24

Peterson, Chris, specialist, Congressional Research Service, Washington,

DC .......................................................................................................................... 26

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baumrucker, Evelyne:

Testimony .......................................................................................................... 24

Prepared statement .......................................................................................... 33

Responses to questions from committee members ......................................... 47

Bingaman, Hon. Jeff:

Statement of the American Academy of Pediatrics ....................................... 59

Hatch, Hon. Orrin G.:

Opening statement ........................................................................................... 1

Prepared statement .......................................................................................... 64

Kennedy, Hon. Edward M.:

Testimony .......................................................................................................... 3

Prepared statement .......................................................................................... 66

McClellan, Hon. Mark, M.D., PhD:

Testimony .......................................................................................................... 9

Prepared statement .......................................................................................... 70

Peterson, Chris:

Testimony .......................................................................................................... 26

Prepared statement with attachments ........................................................... 87

Responses to questions from committee members ......................................... 146

Rockefeller, Hon. John D., IV:

Opening statement ........................................................................................... 7

Prepared statement .......................................................................................... 176

COMMUNICATIONS

America’s Health Insurance Plans ......................................................................... 179

National Association of Community Health Centers, Inc. ................................... 182

New England Campaign for Children’s Health (and its partner organizations) 183

Voices for America’s Children ................................................................................. 185

(III)

(1)

CHIP AT 10: A DECADE OF

COVERING CHILDREN

TUESDAY, JULY 25, 2006

U.S. SENATE, SUBCOMMITTEE ON HEALTH CARE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 2:37 p.m., in

room SD–215, Dirksen Senate Office Building, Hon. Orrin G.

Hatch, (chairman of the subcommittee) presiding.

Present: Senators Snowe, Rockefeller, Bingaman, Lincoln, and

Wyden.

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM UTAH, CHAIRMAN, SUBCOMMITTEE ON HEALTH

CARE

Senator HATCH. The Chairman will call this hearing to order.

We are happy to invite all of you, and happy to have you all here.

It is no coincidence that the inaugural hearing of the Subcommittee on Health Care is on the Children’s Health Insurance,

or CHIP, Program.

Next year, Congress will focus on how to reauthorize and finance

the CHIP program. Therefore, our Ranking Minority Member Senator Rockefeller and I believe it is important for today’s hearing to

set the ground for that process by examining the history of the

CHIP program and the successes that it has had over the past

decade.

The Balanced Budget Act of 1997 (BBA 1997) created CHIP as

title 21 of the Social Security Act. Today, all 50 States, the District

of Columbia, and five territories have CHIP programs.

As is allowed by the law, 17 States use Medicaid expansions, 18

States use separate State programs, and 21 States use a combination approach of both their Medicaid program and the State program.

The CHIP program is financed through both the Federal and

State Governments; it is overseen by the States. States receive an

enhanced Federal match for the CHIP program. This Federal

match is significantly higher than the Federal match that States

receive through the Medicaid program.

The Medicaid Federal Medical Assistance Percentage, known as

the FMAP, ranges between 50 and 76 percent in fiscal year 2006.

The CHIP FMAP ranges from 65 percent to 83.2 percent.

Through BBA 1997, approximately $40 billion in Federal funding

was appropriated for the CHIP program. Collectively, States have

2

spent $10.1 billion since it was first implemented through September 30, 2005.

I am extremely happy to report that 6.2 million children have

their health insurance coverage through the CHIP program. As one

of the original authors of the CHIP program, with my friend, Senator Kennedy, who is here to testify today, Senator Rockefeller, and

the late Senator Chafee, we are all very pleased with the program’s

successes. We know it is an important program, and everybody who

participates in it knows it.

When we drafted this legislation in 1997, our goal was to cover

the several million children who had no insurance coverage. We

have gone a long way in meeting that goal, but we are clearly not

there yet. Coverage of these uninsured children should still be our

top priority.

I know some may disagree with me, but in my opinion we should

not consider expanding this program to other populations until we

have covered all needy children who do not have health care coverage.

This fall, the Health Care Subcommittee will hold a second hearing to examine the more difficult issues facing Congress as it reauthorizes the CHIP program. These issues include the future financing of the program, who should be covered, and how to provide effective outreach to eligible children who are not currently covered.

The purpose of today’s hearing is to focus on the successes of this

very important program. Senator Rockefeller, I, and others on this

committee appreciate the hard work that our staffs have put into

today’s hearing, and those who are testifying have put into today’s

hearing, and we look forward to working with all of the folks involved and the other Senators who have an interest in this issue.

Now, testifying before the subcommittee today is Senator Ted

Kennedy, whose vision and drive were integral to the development

of the CHIP program. Senator Kennedy was co-author with me of

the Child bill, which, when melded with the Chafee-Rockefeller bill

expanding Medicaid coverage for children, became CHIP.

On the second panel, we will hear from the Administrator of the

Centers for Medicare and Medicaid Services, Dr. Mark McClellan.

He is accompanied by Dennis Smith, a Finance Committee alumnus who is now the Director of Medicaid and State Operations for

CMS.

The last panel is made up of Ms. Evelyne Baumrucker and Mr.

Chris Peterson, both of whom are Congressional Research Service

specialists on the CHIP program. Ms. Baumrucker will provide a

broad overview of the program, while Mr. Peterson will focus on

the financing of the CHIP program.

I want to thank all of our witnesses for taking time out of their

busy schedules to testify before the subcommittee today.

Senator Rockefeller is here, so we are going to take his statement

at this time. He has to get seated first, though. He is the only one

that has an ergonomic chair here, and I have just decided I want

one of those, too. That really is a nice chair.

We are ready for you.

Senator KENNEDY. Let me get organized. I have some very nice

things to say about you.

3

Senator HATCH. Oh, my goodness. Let us make sure you have

time to organize then. [Laughter.] Shall we start with Senator Kennedy then?

Senator KENNEDY. I have to get over to that pension conference

to look after Kohl. Do you want me to give an opening statement?

Senator ROCKEFELLER. Do you have a chair like this?

Senator KENNEDY. No. [Laughter.] Only the Rockefellers have

that.

Senator ROCKEFELLER. You cannot afford it? [Laughter.]

Senator HATCH. All right. Would you care to make your statement at this time, Jay?

Senator ROCKEFELLER. No. I am going to defer to Senator Kennedy.

Senator HATCH. Then we will turn to Senator Kennedy. I just

want to personally thank Senator Kennedy for his leadership on

this program and for the privilege of working with him on it, and

on so many other programs that we have worked together on. We

are very honored to have you here, and we will look forward to taking whatever you want to say at this time.

STATEMENT OF HON. EDWARD M. KENNEDY,

A U.S. SENATOR FROM MASSACHUSETTS

Senator KENNEDY. Well, thank you very much, Chairman Hatch,

and my good friend as well, Jay Rockefeller, and my other colleagues and friends on the Finance Committee. I will not take a

long time.

But there are few pieces of legislation which my heart and soul

is in as much as this particular legislation, and I want to thank

you at the outset, Chairman Hatch, for your enormously skilled

and courageous determination in achieving this legislation. Senator

Hatch, as I think the members of this committee know, was the

chairman of our Health and Human Resources Committee prior to

the time he was chairman of the Judiciary Committee. It was during the time that he was the chairman of the Health and Human

Resources Committee that I really—and all of us did—detected his

very strong commitment in terms of children and their needs, and

how best to address them.

So at the time a number of us were working, and working closely, to try to achieve a comprehensive approach to extend health

care coverage to children, it was only natural that Senator Hatch

would be in the leadership.

As we remember, during those negotiations he had a very basic

and fundamental view that was different from mine. I thought we

could expand what had been very successful, and that is the Medicaid program, and just extend it up the ladder in terms of eligibility.

Senator Hatch said, no, he wanted much greater involvement in

the States, to let States make judgments and determinations, and

that we ought to have a framework where the States could select

the range of different services and the types of coverage for children, but that this ought to be a State function. We really worked

during that period of time to effectively work out a grand compromise.

4

It would not have been the way that I would have drafted it, not

the way Senator Hatch would have drafted it, but I think what we

have seen over this period of time is that it has worked in all of

our States, and worked very effectively.

Just very briefly, Mr. Chairman. I think the success from a

health point of view is stated in my full statement. I think the

Academy of Pediatrics says it so well: ‘‘Enrollment in the SCHIP

is associated with improved access, continuity, and quality of care,

and a reduction of racial/ethnic disparities. As pediatricians, we see

what happens when children do not receive the necessary health

care services, such as immunizations and well-child visits. Their

overall health suffers and expensive emergency room visits increase.’’ This is just an overwhelming, compelling endorsement in

terms of the SCHIP program.

We also include in the statement the range of different organizations to really represent the best in terms of children’s interests

that are strongly in favor of the extension and the renewal of the

SCHIP program.

If I could, Mr. Chairman, just take a moment or two in reviewing

for the committee basically what we have in terms of all of the children. This is from the Center for Children and Families at Georgetown. Here we have 53 percent of all uninsured children who are

eligible under Medicaid, or 4.4 million children, who do not receive

Medicaid.

Now, 22 percent of uninsured children would be CHIP eligible,

and you have 1.8 million of those children who, even though they

are eligible, do not receive the coverage, and then 25 percent, 2.1

million children, who are not eligible in terms of income.

What this chart says very compellingly, Mr. Chairman, is that

we have to have much greater outreach, much greater information.

We have millions of children who are eligible for these programs

but who are not taking advantage of them, and there is a much

more aggressive program that could be out there.

I would be glad to work with your committee. We have ideas

about using schools and other ways of trying to get just a reduction

in the number of uninsured children. For those who are eligible

today, this really is a very sad situation, one that we ought to consider.

Mr. Chairman, look at what has happened in terms of the health

care coverage for children since we passed SCHIP. In 1997, 22 percent of children were uninsured. Look where we are now. We have

basically reduced this to half, down to 13.5 percent.

Look at that dramatic line down since SCHIP has been in effect.

We have made dramatic progress in terms of reaching all children.

We still have, obviously, a ways to go. That is certainly my hope,

my ideal.

But this is a remarkable success story in terms of coverage. We

still have a ways to go, as the other chart demonstrated. We can

get there. I think there are ways of doing it. Obviously, it is

through information, it is going to be through resources.

But I dare say, Mr. Chairman, if we had another chart that

shows what had happened to the general population in terms of the

number of uninsured, you would see a similar line going up. We

5

have had 6 million Americans who have lost their health insurance

over this period of time. So it is even more dramatic.

As we have seen a significant reduction in the total number of

Americans who are insured, we have seen a dramatic reduction in

the total number of children who are uninsured. That is, I think,

a very important achievement. So we are making good progress.

That quality, as I mentioned before, has been supported and has

been acclaimed and been very important.

This is the real troublesome aspect, Mr. Chairman. The red line

would be current services, and the blue line is the funding at the

baseline services. You see that that shortfall, as we go out to 2012,

is $12 billion.

We see that that is significant. Even to keep the current services

that we are providing at this time, without the expansion, we are

going to need that level of funding over a period of time.

I think that is best summed up by these two charts, Mr. Chairman. Look at the two charts together. This shows you what we

have seen with the growth. After passage in 1997, we have seen

growth from 1998, and 1999, to 2004, and the 4 million that are

covered.

This chart shows you the millions of children who will lose coverage with the baseline CHIP funding. That shows you, under

2012, what the other chart showed you—basically 1.5 million children without current services. That is without any kind of an expansion.

Finally, Mr. Chairman, this chart here will show you, in the out

years, going to 2012, the 36 States that will run out of CHIP funding in 2012. We have other charts here to show you the increasing

number of States. This is by 2012, but there is an increasing number of States that are losing it. So it is really a question of resources, availability, and accessibility.

This is a program, Mr. Chairman, that is marked by success by

all of the evaluations. You will remember, we had different amendments on the floor of the Senate to try to require eyeglasses, and

we were unable to get that.

We had additional kinds of requirements to try to put in dental

care, and we were unsuccessful. But what we have seen is that a

number of the States, like my own State of Massachusetts, have included dental care and eyeglasses; other States have made judgments in expanded programs.

What we can say is that this has been enormously successful. It

is a quality health care program. It is reaching the most vulnerable. It is reflected not only in giving the children a healthy start,

it is helping children to read the blackboard so that they can learn

better, it is making sure that they are healthier when they go to

school so that they are going to have better attendance and they

are going to have better results in terms of their own academic

achievements and accomplishments.

Basically, this is to ensure that the youngest in our society are

going to have the kind of healthy start that we all want for our

children, and should be available to all America’s children.

We will give to the committee some suggestions and ideas about

how to deal with the financial gap later on, and we would also like

to submit some suggestions and ideas about how to gain informaVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
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tion to get out to the respective States to illustrate some of those

programs that have been the most creative and been most elaborative.

We have McDonald’s, which has used its little paper plates with

SCHIP. We have had a number of organizations in the private sector that have different examples of how they have done it with extraordinary success.

We have, still, a ways to go in that area, but the States are increasingly under pressure, so there is less reliance in terms of trying to expand the program. Unfortunately, there is increasing pressure to try to restrict it.

We hope, Mr. Chairman, that we can work closely with the committee to see that this program is maintained. Hopefully, we will

find ways that it can be expanded, but certainly maintained, to

reach children in our country.

Primarily, these are the children of workers. We know that it

goes up to, depending on the States, with a family of three,

$31,000, $32,000, $33,000. We are getting to individuals who are

working, working hard, and just cannot afford those kind of premiums and are increasingly vulnerable in not having that coverage.

So we thank you very much, Mr. Chairman, and the committee

for giving attention to this issue, and hopefully we will have an extension of the program.

Senator HATCH. Well, thank you, Senator Kennedy. We appreciate you taking time out of what we know is a really busy schedule to come and help us to understand your point of view. We appreciate it very much. We appreciate your leadership on this as

well.

Senator KENNEDY. Thank you very much.

[The prepared statement of Senator Kennedy appears in the appendix.]

Senator HATCH. I think we’re happy to let you go so that you can

keep that busy schedule.

Senator KENNEDY. Thank you.

Senator HATCH. Take care. Thanks for taking time to be with us.

We appreciate it.

Senator Rockefeller, we will turn to you.

Senator ROCKEFELLER. Well, first of all, before he leaves—well,

he is leaving. I went back last night and I read through the whole

Senate debate that we had back in 1997, and it is extraordinary,

what strikes me.

Obviously, you were talking a lot, and John Chafee was talking

a lot, Senator Hatch was talking a lot, I was talking a lot. A lot

of people were talking a lot, and it was all focused on exactly what

you were talking about. In fact, some of the words were the same,

that there had been improvements, but we have so many kids to

go.

There was this sense that the budget really matters, but when

it comes, somehow, to children and health care, and then you referred to dental and vision and the problems that we are running

into now with the Medicaid waiver and EPSDT, all of that, I mean,

everything was discussed and there was passion, and it was bipartisan, and it was beautiful.

7

Anyway, when you leave I am going to say some very nice things

about Senator Hatch. I had not planned on including you. [Laughter.]

Senator KENNEDY. All right. I will just have to live with it, Mr.

Chairman. [Laughter.] Thank you.

Senator HATCH. Now that he has his chair, I think he is more

livable, I will put it that way. [Laughter.]

Senator ROCKEFELLER. Am I on?

Senator HATCH. You are up.

OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV,

A U.S. SENATOR FROM WEST VIRGINIA

Senator ROCKEFELLER. I really mean that. I would just say to

Jeff and Ron and to Blanche, that it was an extraordinary debate.

John Chafee and I came out very much against the idea. We were

very much not for the idea of having it done individually by States.

We thought it should be done through the Medicaid program.

You want to talk about getting information out there to people?

Well, that is what Medicaid does. But the governors were absolutely adamant on that. The result was, it took quite a long time.

In West Virginia, it took 3 years for us to get started, because

a governor would appoint a commission, then somebody else, then

somebody would get fired and you would have to start all over

again.

It took 3 years, really, before we got going. But we now have 92

percent covered. That is not something to relax on. We have to get

to 97 percent because the rest are, statistically, a problem. But one

of the things that I really want people to understand is that Senator Hatch was huge in that whole thing.

I remember, and only you and I in this room know—well, potentially in this room—and remember a table in the middle here.

Senator HATCH. That is right.

Senator ROCKEFELLER. And we were not making a lot of

progress, and it was past 10 or 11 or something at night, so we decided that 20 of us, or whatever, were going to talk alone.

Senator Hatch got up—and I think it was midnight, because that

is what my notes say. He stood up. There was no need for him to

stand up; we were just sitting around one table. But he was lifted

out of his chair to speak, to fight for $8 billion more, the necessity

of the program.

I can remember Al D’Amato, who did not do a lot of talking

about children, Frank Murkowski, and so many people were just

talking. The bipartisanship was redolent. It passed. It passed. The

Health Committee, the Finance Committee did not agree on everything. We worked it out and it passed.

I will read the following: ‘‘Mr. President, I thank both my Ranking Leader,’’ et cetera, et cetera. I said, ‘‘My good friend Senator

Kennedy from Massachusetts, having witnessed this process, Senator Hatch fought like a tiger, would not yield in very close quarters in order to get the additional $8 billion added on for children’s

health insurance, along with Senator Chafee and others.’’

Senator Moynihan said, on the floor of the Senate, ‘‘This is one

of the finest moments of the 105th Congress. It could not have

come about without the courage and the conviction of the Senator

8

from Utah. I would like to affirm everything he has said about support on both sides of the aisle. It would be nice to have a unanimous vote.’’

Orrin Hatch was just critical in all of that, and that needs to be

said. Which then needs to be said that we cannot back up on this.

We have a terrible budget crisis in the country, and I understand

that. There are all kinds of things that maybe we cannot do, but

we cannot not do what we need to do on this, which is to extend

it and to make it possible for States.

West Virginia has been very interesting in this. We are not one

of the States that was on his chart. We are not in need, financially.

So our governor has taken it from 200 percent of poverty—150 percent of poverty where it started out, to 200—and now to 300.

But then he has had to rescind it because he is not sure if the

Federal Government will pay the money back, which is a huge

problem in all of this. A huge problem. Will the Federal Government make those States which are trying to do the right thing

whole? So, 6 million kids. That is extraordinary.

It should be more, as the chart showed and as we all know. We

did provide the States the flexibility. Many of them are using that

very, very well. States should be allowed to continue their ability

to expand benefits. I now feel that way strongly, as long as they

have adequate funds to match the Federal contribution.

So, this was one of the best things that has ever happened in the

Senate in the 21 years that I have been here, partly because of the

way it was done, the lack of acrimony, the coming together. The

Finance Committee and the Health, Education, and Labor Committee had a different way of doing it than we did, so it ended up

making no difference whatsoever. We got it done. Children have

health insurance. But a lot more have yet to get it, and that is our

mission. Thank you.

Senator HATCH. Well, thank you, Senator Rockefeller. I remember it was really an interesting time, because the Democrats wanted CHIP, and so did the Republicans on the committee, except for

two. And the Republicans wanted the Balanced Budget Act. This

was the glue that brought the first balanced budget together in

over 40 years.

I can remember standing at the dais when the bill came up for

passage, and one of the leading Republicans came up to me and he

said, ‘‘I hate this bill.’’ Then he voted ‘‘aye.’’ I was just tickled to

death at that. I thought that was just wonderful.

Today, almost everybody claims it is their bill, and they should

because it has been a very workable and good bill. I appreciate

your awfully kind remarks, and Senator Kennedy’s as well. It

means a lot to me, coming from you.

Well, we are very privileged to have the Administrator of the

Centers for Medicare and Medicaid Services, Dr. Mark McClellan.

Later, he will be joined by Dennis Smith, a former Finance Committee alumnus who is now the Director of Medicaid and State Operations for CMS.

I have really been pleased with your service out there. It is an

almost impossible job, and you work really hard at it. So it is always a pleasure to see you, and we really look forward to hearing

your testimony.

9

STATEMENT OF HON. MARK McCLELLAN, M.D., PhD, ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC; ACCOMPANIED BY DENNIS SMITH,

DIRECTOR OF MEDICAID AND STATE OPERATIONS, CENTERS FOR MEDICARE AND MEDICAID SERVICES

Dr. MCCLELLAN. Thank you, Mr. Chairman and Senator Rockefeller, and all the distinguished members of the subcommittee. I

very much appreciate the opportunity to discuss the successes and

the importance of continuing the States’ Children’s Health Insurance Program.

I would like to give particular thanks to Chairman Hatch, to

Senator Rockefeller, and to Senator Kennedy who just left us, for

their leadership, as we have just been talking about, in establishing this very important program.

Next year marks the tenth anniversary of SCHIP. It is a program that has exceeded expectations in providing effective, innovative, and up-to-date coverage. Enrollment of children exceeds the

original expectation that this program would cover 5 million children. There are now more than 6.1 million children, more than 6.7

million people overall, with coverage in fiscal year 2005.

The administration remains committed to building on their success by working with the States and all of you in the Congress to

continue to serve children and families through SCHIP as effectively as possible.

SCHIP has succeeded because of its design. As we have just discussed, it was designed to give States the flexibility to find the best

way to provide coverage within very broad and reasonable Federal

guidelines. SCHIP gives States the ability to adjust the program’s

coverage to reflect the particular needs and economic circumstances

of the populations serviced.

It gives States the ability to use new and creative approaches to

provide affordable, mainstream health insurance coverage for children and families effectively.

For example, instead of setting up costly new benefit programs,

some States have used SCHIP to help families pay for employerprovided coverage, with employers and the beneficiaries contributing to help keep costs down.

I want to highlight some specific areas where we want to work

with you to build on these notable successes. First, we want to

strengthen our efforts to identify and enroll the many eligible, but

unenrolled, children.

While the coverage successes have been notable, there are still

about 5.5 million children with family incomes below 200 percent

of poverty who are not enrolled. As Senator Kennedy highlighted,

over three-fourths of all unenrolled children in this country are eligible now for Medicaid and SCHIP, but are not enrolled.

The President proposed his Cover the Kids initiative to change

that and build on the successful outreach models we have seen so

far. This initiative would provide $1 billion in grants to States,

tribes, schools, and faith-based and community organizations to increase enrollment in SCHIP and Medicaid.

Second, as the Finance Committee works to reauthorize SCHIP,

the administration wants to work together to address the multiVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
10

billion dollar imbalance in funding that results in some States having shortfalls while others have surpluses beyond their needs.

Since fiscal year 2002, spending of SCHIP funds in some States

has exceeded their annual allotment of Federal funds. Shortfalls of

Federal SCHIP funds have been avoided, in practice, by using leftover prior year balances and by redistributing funds from States

with unspent funds to those that are facing the shortfalls.

At the end of fiscal year 2006, this fiscal year, we are projecting a total of $4.1 billion in existing unexpended allotments, and these

amounts will be available for expenditure in fiscal year 2007 and

beyond. In addition, the $5 billion 2007 allotment will become available

for fiscal year 2007 as well, so that makes a total of $9.1 billion

available nationally to States in fiscal year 2007. The State projected expenditures in fiscal year 2007 are about $6.4 billion, far

less than the total allotment of funds available to address their

needs.

However, even though the available SCHIP funds will total more than $9 billion, the shortfall for certain States in 2007, if there is

no reallotment, will still be about $906 million.

That is because most of the $4.1 billion in unexpended funds,

carried over from this year and previous years, is unavailable for

use in fiscal year 2007 by the States that may need it.

The only funds available for reallotment under current law are about $105 million in unexpended fiscal year 2004 allotments

which remain at the end of fiscal year 2006.

As we work to reauthorize the SCHIP program, we also want to

work with you to address this issue, so that SCHIP allotments are

distributed in a manner that meets State needs more effectively.

We have an effective track record of assuring that available

SCHIP funds are used when needed for coverage to prevent any

consequences from shortfalls in specific States caused by the statutory allocation formula, combined with differences in how States

have used the program.

Third, CMS is taking new steps to increase the quality of care

in SCHIP programs and to ensure that SCHIP supports enhancing

the overall quality and affordability of our health care system.

CMS, my agency, is working with the States to develop long-term

performance measures for SCHIP. We are also collaborating with

States to improve how performance measurement data is collected.

So, I am very pleased, again, by the opportunity to take stock of

the SCHIP’s successes and begin the process of working with you

to reauthorize this landmark health care legislation. I would be

happy to answer any questions you have.

As you mentioned, Mr. Chairman, Dennis Smith, our Director of

the Center for Medicaid and State Operations, is here with me to

help with any particular technical issues or further questions you

may have.

[The prepared statement of Dr. McClellan appears in the appendix.]

Senator HATCH. Well, thank you. And at the request of Senator

Rockefeller and myself, we would like to invite Dennis Smith to sit

with you at the table in case any Senators would care to ask any

technical questions. So, that would be good.

11

Dr. McClellan, I certainly appreciate your testimony, and taking

time to testify before the committee today. Of course, the purpose

of this hearing is to promote the successes of the CHIP program.

Many States are experiencing shortfalls, as you have mentioned,

in their CHIP allotments, and the problem is growing, so we need

to put more money into the CHIP program to solve this problem.

Do we need to do that, or is the issue really how the money is allocated under current law? I would like to know that.

Also, is it not true that States that cap their CHIP enrollments

are not included in the list of shortfall States? Why is this? Are

States required to notify CMS when they take that type of action?

Dr. MCCLELLAN. Let me answer both in turn. First of all, as I

mentioned in my opening statement, there are billions of dollars of

funds in allocations that have not yet been used and are not projected to be used in the next year, the year after that, or the next

several years of the program, so there are some real opportunities

to keep meeting State shortfall needs with available funds that

have not been used in all the States.

In 2007, I mentioned that there were about $9.1 billion that we

are projecting to be available to meet a total of $6.4 billion in expected program funding, so that is billions of dollars in excess if we

can keep taking steps like we have in the past to make sure that

the allocations go where they are needed.

Now, you are right that some States have imposed limitations on

enrollment. What we have seen more of in recent years, in recent

months, is States not necessarily restricting the number of children

who can participate in the program, but, rather, limiting sometimes the manner in which they participate.

For example, certain States have had problems with what is

called adverse selection in the program, where people might buy

into it just for 1 month when they or their children need particular

medical services, drop it, then get back in again a few months

later.

So some States—and I think Utah is a good example of this—

have gone to more limited open enrollment periods, with the expectations that people can, and should, participate in the program for

the whole coming year until the next enrollment period so that you

avoid that kind of selection problem.

That promotes more continuity in health insurance coverage.

While it is a restriction on when people can enroll in the program,

it is not so much a cap on the number of children that can be

served.

Again, because of the things that we have been able to do together with reallocating unspent funds, we have been able to make

sure that all States are able to get the Federal funding they need

to support their coverage.

Senator HATCH. Do you have a list of the States that cap CHIP

enrollment, and would you provide that for us?

Dr. MCCLELLAN. We would be delighted to do that. For 2006,

there are four States that would be projected to have a shortfall,

but that is being addressed, as you know, with measures taken in

the Deficit Reduction Act and the use of some of the expiring 3-

year-old allotments from 2003.

Senator HATCH. Well, thank you.

12

I have a difficult question. I am deeply concerned about the fact

that many children who are eligible for CHIP or Medicaid are not

covered. Personally, I believe covering those children should be our

number-one priority before we start covering others under the

CHIP program.

So, Dr. McClellan, could you explain the administration’s position on this issue? I know that the administration has granted

waivers to some of the States in order to give them flexibility as

far as providing health coverage to their residents.

I certainly understand that logic. However, when we have so

many eligible children out there who are not covered, that also

causes me a lot of concern. So, how many uninsured children are

out there today and how many are eligible for CHIP and Medicaid,

and what are we going to do about these problems?

Dr. MCCLELLAN. I think that is the number-one priority. I agree

with you fully about that. Among the children who are still uninsured, the majority, 5.5 million of the 8 million or so children, are

in families with incomes under 200 percent of poverty who are eligible for Medicaid or SCHIP in every case; many others at even

higher income levels also are eligible for Medicaid or SCHIP in

their State.

So the vast majority of children who do not have coverage today

are eligible for our existing programs, particularly SCHIP, and that

highlights the importance of effective outreach and education strategies. Now, I started working on this issue soon after you all had

enabled legislation to get enacted.

When I was here working in the previous administration, I was

at the Department of Treasury, and we set up a program there

through local Tax Assistance Offices to provide help to lowerincome families in finding out about the program when they came

in for help with their taxes.

Since that time, we have seen example after example—Senator

Kennedy mentioned this too—of creative approaches by State and

local governments, by the private sector, by volunteer organizations

to help with outreach. We need to do more to support those efforts.

There are, clearly, approaches that are effective. That is why the President has proposed in his budget fully $1 billion to promote

outreach and education efforts in order to help people get enrolled.

That absolutely should be our top priority.

Senator HATCH. Well, thank you. I have 2 minutes left, but I notice they did not start the clock on time.

I am going to turn to Senator Rockefeller.

Senator ROCKEFELLER. Dr. McClellan, let me just pick up on

that. This is not what I was going to ask you. But explain to me

why West Virginia is in the situation that it is. In other words, it

is a State that has lots of money left over, and they want to go

from 200 to 300 percent of poverty. People say that is outrageous,

but when you do the numbers, it really is not. Anyway, an uncovered kid is an uncovered kid.

But they actually withdrew that. The legislature passed it, then

pulled back from the 300 because they were afraid that the Federal

Government would not reimburse.

Now, they are ready with their share and with a much more generous inclusion that would get us more toward 97 percent, MedVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
13

icaid, CHIP, regular insurance, but they are afraid—our governor

is very much in touch with Secretary Leavitt all the time—that the

Federal Government is not going to reimburse their money. Is their

fear in any way justified?

Dr. MCCLELLAN. Well, we have been in frequent contact with

Governor Manchin and with other officials in the State. As I mentioned in my earlier statements, there is currently an excess of

total funding for this program. Even if States like West Virginia

did expansions to 300 percent of poverty, we have more than

enough funds for the foreseeable future to pay for that.

I think it would help give the States more certainty if we could

work together, as we often have in the past, on making sure the

States know that if they are going to need additional funds, that

they can draw down much of the unallocated funds that are available.

Senator ROCKEFELLER. But he may be worried, as I am, that the

first call on that money will go to the States that do not have the

money right now, that do not have an excess and cannot meet, let

us say, 200 percent of poverty, much less 300 percent. Is he justified?

Dr. MCCLELLAN. We are looking, Senator, next year, even in

2007, at an excess, between the total funds potentially available

and the spending projected for the program, of close to $3 billion.

Now, there are a lot of lower-income families and children in

West Virginia without health insurance coverage now, but the kind

of cost that West Virginia is projecting for their program is far less

than the total allocation available to this program.

I think what we could do in the relatively short run to help provide your governor with more certainty is support the kinds of reallocation approaches that we have done in the past to make sure

that no State faces a shortfall, with all the excess funding that is

currently available.

Looking ahead to the longer term, this is why reauthorization of

the program is so important. That is why the administration wants

to work with you, Senator Hatch, and the Congress to make sure

that this program continues effectively.

Senator ROCKEFELLER. One more question. The cost of health

care has gone up, God knows what, in the last 10 years, which has,

of course, its effect on coverage. What covered people then could

not cover people now. Let us forget about dental, vision, EPSDT,

and all the rest of it. Just, the cost has gone up. How much is that

affected?

Dr. MCCLELLAN. How much has that affected the program? Well,

some of that projection was expected when you authorized the program initially close to a decade ago. That is why the allotments

grew over time, and we’re now serving more people than had ever

projected to be enrolled in SCHIP, and we are doing it within the

current overall funding that the program received, that $40 billion

in funding back in 1997.

The reason that we are doing that, I think, is SCHIP has been

a pretty cost-effective way of delivering coverage. The average benefits, Senator, in the SCHIP program nationally cost only around

$1,100 per person, and that is for several reasons.

14

Number one, the States had flexibility in designing the benefits

to meet the needs of their population. Number two, the States had

flexibility in finding ways to combine SCHIP support with other

sources of financial support.

So, for example, many States have implemented programs that

help people afford private health insurance through their job so

that the employer can contribute as well.

Senator ROCKEFELLER. Can I slip in one more question? Do you

think that Senator Chafee and I were wrong? And we were just

beaten back by the governors. We, unfortunately, invited the governors to come in, and they did, and so we were beaten.

Again, my theory always was that they are out there already.

People know about them. They are in every community. They are

available. You do not have to worry about school lunches and all

kinds of things like that to inform kids or their parents. But it has

worked very well.

I am just curious as to whether you think that Senator Chafee

and I were wrong about that. Could it have started earlier? Would

it have made any difference—it is 10 years later—if we got 6.2, or

whatever? Maybe that was sufficient. Maybe it is academic at this

point.

Dr. MCCLELLAN. It is certainly not academic. This is very important to the lives of children in this country. But I am very glad you

invited the governors in, and I hope you will invite them back for

the reauthorization next time around.

I think what they will tell you—again, what they told you before—is that giving them opportunities to design this program in

a way that is going to work best and most cost effectively in the

State is going to help get more children covered.

Now, it may have taken a little bit more time as a result for

some of these programs to get going, but we had the program established in every State within just a couple of years of enactment.

At this point, participation is good. We need to do more on getting eligible people enrolled. I think the governors can have some

useful input on that process as well.

Senator ROCKEFELLER. I think you are right. I would not even be

discussing 200 or 300 percent if we had had our way, right?

Dr. MCCLELLAN. Right.

Senator HATCH. We appreciate the work of Senator Bingaman as

well. You are next, Senator Bingaman.

Senator BINGAMAN. Thank you very much, Mr. Chairman, for

having the hearing.

Mr. Administrator, thank you for being here.

Let me, first, just say I agree with many of the previous statements, yours included, about the success that has been achieved

under the SCHIP program. A couple of things I want to just mention very briefly before I ask questions. I hope that this effort to

expand coverage to other children can be included in the reauthorization.

As I recall, we had this provision for covering kids, which Senator Frist introduced. I co-sponsored it with him. We worked with

your staff in drafting that. We included it in the Senate-passed

version of the Deficit Reduction Act. That was dropped in conVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
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ference. I assume you will support the inclusion of that in any reauthorization.

Dr. MCCLELLAN. Absolutely. It is a key part of our budget, as you

know. I want to thank you personally for your strong support and

leadership on the outreach and education efforts, both in the legislation and in some of the creative things that the State of New

Mexico has done.

Senator BINGAMAN. Well, great.

Let me also make mention of this bill that Senator Lugar has

which I am also co-sponsoring entitled ‘‘The Children’s Express

Lane to Coverage Act.’’

This is intended to reduce the bureaucracy across a number of

programs by allowing income eligibility determinations for other

Federal programs to apply to Medicaid and SCHIP. That is something I also hope we could support as part of a reauthorization. I

hope that would be consistent with your thinking.

Dr. MCCLELLAN. We would be delighted to look into it with you.

Senator BINGAMAN. All right.

Let me just, now, move to an issue that was put into this legislation, this Deficit Reduction Act. That is, a provision was put in

there that, in my view, is wrong-headed. It requires people enrolling in Medicaid to prove their citizenship, including at least 28 million children and 15 million adults.

Failure to prove citizenship by citizen children and their parents

will result in the denial of health services financed with Federal

Medicaid funds. This is particularly a problem, as I have understood it, for children in foster care and newborns.

On the foster care issue, I think the Basilon Center issued a

statement on this indicating that it is particularly difficult for

these children, given that their birth families may not cooperate for

them to get the citizenship papers that they need to prove their

citizenship.

If they are already enrolled in foster care, I would think that

would be a pretty good indication that they are citizens and, therefore, should not be denied SCHIP coverage for lack of citizenship

proof. Have you looked into that?

Dr. MCCLELLAN. Senator, we spent a lot of time looking into the

most effective way to implement this requirement which, as you

note, is intended to make sure that the Medicaid benefits go to people who are entitled to receive them, but to do so in a way that

does not impose undue burdens that prevent access for people who

may need it.

That is why, in the regulation that we issued in early July, we

laid out a whole set of alternative ways to standardize documentation for people to demonstrate their citizenship.

We had a lot of useful input from the States on that, including

concerns related to foster children and some of the other groups

that you have mentioned. For example, with input from the States,

we included an ability for States to use their existing data systems,

kind of like you mentioned for that Senator Lugar bill.

There are existing data systems that were already established to

document citizenship and eligibility for the Medicaid benefits. That

is something that a lot of States are using. With automated access

to birth records or other records, they do not need to go to the birth

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family in order to use it. We want to watch this closely. As you

identify issues and problems, we want to work with you to address

them.

Senator BINGAMAN. One other, related issue is, of course, newborn children. We all know, under our Constitution, that they are

citizens. It seems a bit perverse to be requiring them to prove citizenship, or someone to prove that they are citizens, if they were

just born in this country.

Let me ask, finally, about children who are dual eligibles under

both Medicaid and Medicare. We wrote you a letter in February.

I wrote to you and Secretary Leavitt and raised the problem of

thousands of these children. These are largely children with endstage renal disease or transplant patients, and they were moved

from getting vaccines from children and Medicaid drug coverage to

the Medicare Part D program.

You sent out a letter on this, or a notice—I guess it is called a

memorandum—to all Part D sponsors. I read through it. Frankly,

I did not see that it solved the problem.

It says, ‘‘We have been notified of circumstances where Part D

sponsors are unaware of Part D eligibility for children,’’ and then

goes on to say that you have heard about reports and you want to

remind plans about this group.

But it sort of punts the responsibility to solve the problem to

these plans, and that was not what we had in mind. We thought

this was something that CMS could solve.

Dr. MCCLELLAN. Our goal is to make sure that everyone who is

eligible for Medicare and Medicaid gets the drug coverage they

need. The program memorandum that you mentioned was a reminder to the plans that they have an obligation to provide access

and necessary treatments.

When we hear about any beneficiary having difficulty getting

needed medicines, we have an entire CMS-directed process to make

sure there is timely action to resolve the issue.

The notice that you mentioned was a reminder to the plans that

they need to comply with these coverage requirements. So if you

know, or if there is any beneficiary here who is listening who is on

Medicare and Medicaid particularly, or has a child with end-stage

renal disease on Medicare and Medicaid, if they are having any difficulty getting the medicines they need, they need to let us know

at 1–800–MEDICARE.

We also can handle these cases through our regional offices. I

know you have worked with us on certain cases like that. We will

resolve them to make sure they get the coverage they need. This

was just a reminder to the plans that they have to provide that

coverage.

Senator BINGAMAN. All right. So you interpret this memo as saying they have to provide that coverage.

Dr. MCCLELLAN. Right. And we also combine it with our oversight of the plans and our process for resolving any beneficiary

complaint issues to make sure that they do.

Senator BINGAMAN. Thank you. My time is up.

Senator HATCH. Well, thank you, Senator.

17

Senator Wyden and Senator Lincoln, would you defer and allow

me to call on Senator Snowe so she can go over and represent both

of us at the unveiling of Senator Dole’s portrait?

Senator LINCOLN. Sure.

Senator HATCH. I wish I could be there, but this is important.

Senator SNOWE. Thank you.

Senator HATCH. With your acquiescence, we would appreciate it.

Senator SNOWE. I will be very brief. Thank you, Mr. Chairman.

I thank my colleagues as well. I want to thank you, Chairman

Hatch, for your tireless advocacy on behalf of children, and being

a true leader, along with Senator Kennedy, and I know Senator

Rockefeller, on this issue and creating this funding program for

poor children in America.

Hopefully, we can look to the future and ways in which we can

do more in not only addressing the potential funding shortfalls that

will exist in the future, but also with respect to expanding the program as well to accommodate all children.

I just wanted to follow up on some of the issues. You indicated

that, potentially, there obviously is an unmet need. We know that

there are 9 million children that are currently uninsured, 70 percent of whom would be eligible for the SCHIP program.

So given the fact that there will be less dollars available for reallocation and redistribution for States—the unspent fund and who

could use it—I know in our State, if we were to enroll all the children who were currently eligible, there would not be sufficient

funding.

So what are your views about, how do we address that for the

future? Because, obviously, we are going to have a serious funding

shortfall in future years, based on all the studies that have been

developed. What would you recommend in not only attacking that

problem, but also in the future and expanding it to more children?

Dr. MCCLELLAN. Well, we want to make sure that the SCHIP

program continues to serve all the children who need benefits in

the program effectively. That does mean, Senator, as part of the reauthorization process next year, we need to look closely at these financing mechanisms. I think we can address a lot of this problem,

especially in the next few years, by finding more effective ways to

allocate the dollars that are already in the program to where they

are actually needed by States, including Maine.

As I mentioned earlier, with looking ahead to 2007, I know

Maine does have some significant Federal financing needs for this

program. But there is more than enough money, billions of dollars

more than we are projecting is necessary, to meet those financing

needs.

So that is, I think, the right step in the short term. This is obviously going to be part of the reauthorization process, where we

want to work with you to get it right for the longer term.

Senator SNOWE. Do you think that there is sufficient funding

currently to meet all the needs in America with respect to those

who are in the program currently? What about all the other children who remain uninsured that could be eligible as well?

Dr. MCCLELLAN. The gap projected for 2007 between funds allocated to the program and expected spending in the program with

18

current projected enrollment, is close to $3 billion. That is almost

50 percent of the total program costs this year.

So even if we did succeed wildly, as I hope we will, in expanding

the use of this program to people who are eligible, the program has

a lot of extra funding in it right now that we need to allocate appropriately. We do need to keep working together, as we have in

the last few years, to make sure those allocations go to where they

are needed.

In the longer term, this is something that we need to discuss as

part of the reauthorization process. But for looking ahead this year

and in 2007, I think the most important issue for us to keep working together on, as we have in the past, is giving the dollars to the

States that need them and to continue identifying and promoting

effective education and outreach programs.

Senator SNOWE. Even with the growing cost of health care, will

you be able to accommodate that differential? Because that is obviously adding to the cost of the overall program.

Dr. MCCLELLAN. Right, it is. But remember that a lot of the people who are eligible, but unenrolled in programs now, are eligible

for Medicaid, not SCHIP. As you know, for the SCHIP enrollment

process, States are required to do a screen for Medicaid first before

they enroll them in SCHIP.

So if we succeed in enrolling most of these children, that is going

to mean more people participating in Medicaid, but it is not going

to directly affect the SCHIP dollar allocation. So that still gives us

a very big cushion if we direct the dollars to the right place to accommodate all these children.

Senator SNOWE. According to a July 20, CRS report on the

SCHIP program, they indicated that some States have occasionally

experienced year-to-year declines in the number of children covered. Between 2003 and 2004, annual SCHIP enrollment in 12

States fell.

What would cause enrollments to fall in those States, and what

happens to those families? Do they re-enroll at some point or are

they enrolled in another program with employer coverage, or what?

Dr. MCCLELLAN. Senator, there are a number of factors that

could contribute. Overall, what we have seen in the last few years

is States expanding coverage and expanding benefits.

But certain States may have economic upturns, they may have

other unique circumstances that cause the number to remain level.

I do not think we have seen big declines in any States.

If you look at enrollment trends beyond just 1 year where fluctuations, for a lot of reasons, could affect the year-to-year trends,

the overall pattern in the program has been steadily increasing

participation up through 2005 and, as I said, expansion of benefits

overall.

But we can watch that closely. If there are any particular States

where you have questions, I would be happy to look into it for you.

Senator SNOWE. Thank you.

Thank you, Mr. Chairman. I thank my colleagues as well.

Senator HATCH. Thank you, Senator.

Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman. I just want to say to

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tion and commitment you both showed last time around, I want

people to understand that this success did not happen by accident.

You two put in an extraordinary amount of effort, and millions of

kids and parents are the better for it.

Senator HATCH. Thank you, Senator.

Senator WYDEN. I just wanted to tell you both how much I appreciate your leadership.

Dr. McClellan, my two questions essentially involve how I am approaching health care today. I have come to feel that we ought to

be taking steps to help people immediately. That is, for example,

reauthorizing this SCHIP program to help children.

But we also ought to be thinking in terms of the broader challenge, which is to create a system that works for all Americans.

Most of the world has figured it out. We have not. So I really want

to look in a couple of areas, both with respect to what we do now

and what we do for the future.

With respect to children, probably one of the first things I want

to do now is to get parents more involved in health care for kids.

All my colleagues have been asking why we have all of these kids

who are eligible, yet we are not getting them signed up.

I would really like to try to come up with some fresh strategies

for getting parents involved in the delivery of this program, and

health care for kids generally.

I imagine we could look at a variety of approaches. We could

even say that, for communities and States that had innovative

ways to get parents more involved, we could give them a bit more

help.

But tell me, if you would, from this point on, what can we do to

get parents more involved in getting health care to children?

Dr. MCCLELLAN. Well, first of all, I want to thank you for focusing on this issue and for the discussions that we have had an opportunity to engage in about these bigger picture goals for our

health care system, spending dollars more effectively, and keeping

people healthier.

As you have mentioned to me in those discussions, getting people

more involved in thinking about their health, thinking about the

health care of their family, is an absolutely essential step to doing

it. We have looked at a number of strategies that States have employed in order to get parents more involved in these decisions with

their children.

For example, in New Mexico, outreach through school nurse programs has been effective in reaching parents, informing them

about the program, particularly for kids who are having any kinds

of health difficulties. I mentioned earlier the work that I had done

back in the 1990s through Tax Offices, which, again, get parents

involved as well.

One of the steps that seems to have really worked in SCHIP is

having more of a family focus in coverage. In other words, if you

just have coverage focusing on a child, it may be more difficult to

engage the parent, engage the whole family, in getting into effective coverage.

That is one reason I think we have seen such success in the

SCHIP expansions that have covered parents as well as kids, and

the SCHIP expansions that have provided support for covering a

20

kid through a parent’s employer coverage on top of the employer

subsidy for that parent themselves.

So steps like that are absolutely the right way to go, and I look

forward to some more opportunities, through this reauthorization

process, to make sure that we are supporting family involvement,

family responsibility, and family participation in effective, mainstream health insurance coverage.

Senator WYDEN. I think that that is, clearly, important. Obviously, if you make the link between parents and children, it helps.

But I think we have to challenge the parents of this country. I

think that they may not know exactly the toll that the lack of

health care takes.

I would just encourage you and the administration to work with

us to be a lot bolder than we have been. This is a moral blot on

our country, that we have millions of eligible kids who are falling

between the cracks.

You have Senator Hatch, Senator Rockefeller, these Senators

doing a lot of work in trying to approach this on a Federal level,

but it really comes down to communities, and families, in particular. So, I am going to follow up with you some more in this

area.

It also touches on the second question I have, which is, given the

scarcity of dollars, I would like to get a sense of what we get the

most benefit for in terms of the SCHIP dollars.

When I look at the studies, by and large they tend to have people

quoting the same people and they tend to be, if not dated, they

tend to be ones that say, look, we know that vaccinations make

sense, and the like.

I would really like to see, for purposes of this reauthorization,

some fresh evidence that tells us what gets us the most for the dollar that we spend on kids. Do you have that? Is that under way?

Dr. MCCLELLAN. I would very much like to work with you on getting that together for next year’s reauthorization. One of the areas

where we have been focusing more lately—and if the Chair does

not mind us spending a few extra seconds, I would like to ask Dennis Smith to talk a little bit about this—is looking at how families

get their health care now.

In many cases, they are getting care, they are just getting it in

an expensive and poorly coordinated way, because they wait until

their child gets sick because they were not vaccinated, or they did

not get ongoing preventive care and they go to the emergency room.

Well, that is very costly and it does not promote good health and

participation in school as much as we would like to see.

So I would like to ask Dennis Smith to maybe add a couple of

words about the importance of getting good performance measures

along these lines to help us with the reauthorization.

Mr. SMITH. Thank you very much. And again, one of the things

that we have learned to focus on through the SCHIP experience is

helping to get parents to understand the importance of insurance

rather than just going to the emergency room for health care.

One of the most exciting things that is going on right now is in

Massachusetts and their model waiver, in which they looked at the

expenditures of people just going into the emergency room for their

health care versus when they could actually change someone’s beVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
21

havior by giving them a card and saying, your appointment is next

Tuesday, come back then.

Physician visits went up, hospital admissions went down, and

Massachusetts is saving a lot of money because they have really

gotten people to understand the importance of insurance itself.

We experienced that with SCHIP as well. Part of the slow uptake

was helping people to understand the importance of getting enrolled in the program that they are eligible for.

Senator WYDEN. Well, my time is up. I think your last point is

especially important, because there was progress made even before

the new legislation went into effect. The new legislation is going to

build on that as well by further integrating private insurance and

these preventive benefits under Medicaid.

Mr. Chairman, I thank you and Senator Rockefeller, and look

forward to working with both of you.

Senator HATCH. Well, we look forward to working with you, Senator Wyden.

Senator Lincoln, we appreciate having you here.

Senator LINCOLN. Thank you, Mr. Chairman. I, too, want to offer

my thanks to you and to Senator Rockefeller for your years of dedication in this arena, and what it means to families across this

country and to children, particularly to the future of our country.

As we know, children that are healthier are going to learn better,

they are going to perform better. They are going to be healthier because they are going to eat better. I mean, all of the things come

back to their overall health and the ability to be able to get that

kind of health care that they need at critical stages in their lives.

I guess, as the mother of twin boys and having spent a good bit

of time in the pediatrician’s office these last 6 months, I know all

too well, as we all do as parents, the importance of reliable health

insurance coverage for children. We realize the blessing it is to us

when we need it the most and it is actually there for us.

I just think, in situations like these where you really need it and

it is there for you and you really understand how important it is

and how blessed you are to have it, and then you think of all of

those who do not, we realize how critical it is, not only to the

health of my child, but also to our family’s peace of mind and to

other children across the country.

That peace of mind that we talk about is something that, for all

of us as parents, we know and understand what it means to us.

But it should belong not only to those families who can afford private health insurance, it should be a peace of mind that should also

be available to working families who are struggling to make ends

meet.

I think that is one of the reasons this program has made many

of us so proud, is that it does enable, and it empowers, working

families across this country who otherwise would not have the comfort and the peace of mind of knowing that, when they do need the

doctor’s visit or the health care for their children, it is going to be

available to them.

So, it is certainly why I am a very staunch supporter of the State

Children’s Health Insurance Program. I am proud of my colleagues

who have led the way, and look forward to working with them, and

others, to ensure that we fund the reauthorization in a way that

22

is not only respectful of what we have already done, but encouraging in terms of the progress that we can make in enhancing and

improving the program.

Between SCHIP and Medicaid, in my State, since 1997, those

two programs have cut the number of children without health coverage by one-third. Yet, in excitement over that success, I realize

that millions of children still remain uninsured. I hope that we will

all work in a bipartisan way, as I know we have in the past, to ensure that the reauthorization occurs in a way that is really important.

I also feel, after looking at Senator Kennedy’s charts, reinvigorated in my dedication to shoring up the funding shortfalls for this

vital program and providing our children with the care that they

need and, again, that peace of mind that I think families deserve.

Dr. McClellan, we appreciate you being here, and your work and

attention to this issue. Just a couple of quick questions from me

on things that are important.

As we look at shoring up that funding, I also hope that we would

look and focus some attention on preventive efforts that I think can

ultimately cut down on the growing health care costs to our Nation’s children, and to our budget.

I know last week I met with a delightful young lady from

Jonesboro, AR to discuss the wonderful effort she has made in her

efforts to educate her high school colleagues on the effect of teen

pregnancy and the effects it can have on the lives of not only the

teenagers, but also the children.

Research has certainly shown us that children of teen mothers

are more likely to be born prematurely and at a low birth weight,

both of which can lead to a host of long-term health problems and

a greater reliance on Federal programs, which we do not want to

see happen, and we know that we can do a better job at that.

I think the National Campaign to Prevent Teen Pregnancy is

currently compiling a report to better determine the extent to

which teen pregnancies impact Federal programs such as SCHIP,

and I hope that we will use some of those types of information as

we move forward in building a stronger program.

There has been an overall improvement in terms of newborn

screenings across the 50 States. Nearly one-quarter of 4 million babies born in the U.S. this year will not be screened, however, for

the full panel of disorders recommended by the American College

of Medical Genetics. Approximately 40,000 of the babies born in Arkansas each year are screened for less than a third of these disorders.

I think this situation is unacceptable and I hope that we can do

better by our families there. I would just like to have your input

in terms of considering the substantial health care costs that could

be avoided by a stronger focus on preventive care.

Is it time that we implement a national newborn screening policy, which I think could be so important and such a cost-saving

measure in terms of economics? What an incredible relief it could

be to many families, where we could actually prevent some of the

debilitating circumstances of diseases if we catch them quite early,

or disabilities.

23

Dr. MCCLELLAN. I absolutely agree with you that an emphasis on

prevention needs to be a key part of the SCHIP reauthorization

process. It goes along with what Senator Wyden said as well.

We have seen what a difference participation in SCHIP programs

can make for newborn well-being. I also would highlight that,

through SCHIP waivers, we have been able to expand coverage to

many pregnant women as well.

Senator LINCOLN. Right.

Dr. MCCLELLAN. And getting them into regular care is a good

predictor of making sure that their kids are going to avoid those

low birth weights and are going to get the needed screening tests

and get connected with effective health care coverage when they

are born.

So I think that fits in very well with the directions that we would

like to see for the future.

Senator LINCOLN. Of course, those are all State mandates, really,

in terms of the preventive care, the newborn screening policies.

To what extent do you think that CMS could educate beneficiaries, the parents of newborns, about the significance of preventive newborn screening?

Dr. MCCLELLAN. I think it very much goes along with the direction that Dennis Smith laid out in terms of what we are seeing in

State-effective steps in SCHIP today, towards more family involvement and more emphasis on prevention.

States do differ in required newborn screening. However, it is

clear that getting newborns into effective coverage from the time

they are born—and ideally from the time their mom is pregnant—

is a good predictor of effective use of early prevention-oriented

tests.

So that is a direct tie-in between what we would like to continue

to build on in the SCHIP program and your points about the use

of these newborn screening tests.

Senator LINCOLN. Well, it is just so remarkable, when you meet

these children who have had the newborn screening, for a child

that perhaps could not have heard, but through audiology newborn

screening has been able to, whether it is implants, what have you,

and really see a difference in their growth and in their health. So,

I think that is important.

Mr. Chairman, my time is up. But may I ask a unanimous consent request, on behalf of my colleague, Senator Bingaman, to include in the record testimony of The American Academy of Pediatrics?

Senator HATCH. Without objection.

Senator LINCOLN. Thank you.

Thank you, Dr. McClellan.

Dr. MCCLELLAN. Thank you.

[The prepared statement of The American Academy of Pediatrics

appears in the appendix on page 59.]

Senator HATCH. Well, I want to thank both of you for being here.

We really appreciate the testimony you have brought here, and the

knowledge and practical experience that you have had with this

program. It means a lot to us. So, thanks to both of you. We appreciate you being here.

Dr. MCCLELLAN. Thank you.

24

Senator HATCH. Our last panel is made up of Ms. Evelyne

Baumrucker and Mr. Chris Peterson. Both are Congressional Research Service specialists on the CHIP program.

Ms. Baumrucker will provide a broad overview of the program,

while Mr. Peterson will focus on the financing of the CHIP program. This is both Ms. Baumrucker’s and Mr. Peterson’s first time

testifying before a Congressional committee, so I promise that the

subcommittee members will not be too difficult for you or too hard

on you. [Laughter.]

I also want to say hello to my friend, Royal Schipp, whose daughter worked with me for a number of years before the Finance Committee Chairman stole her away from me. Although we have been

really happy with her work on the Finance Committee.

Royal is the Director of the Domestic Social Policy Division of

CRS, and we are very proud of you, Royal, and the long, long service that you have given around here. It means a lot to us up here

on Capitol Hill because we rely rather extensively and heavily on

the Congressional Research Service, and especially your division as

well. We are glad to have you.

We will start with you, Ms. Baumrucker.

STATEMENT OF EVELYNE BAUMRUCKER, ANALYST,

CONGRESSIONAL RESEARCH SERVICE, WASHINGTON, DC

Ms. BAUMRUCKER. Good afternoon, Mr. Chairman, Mr. Rockefeller, and members of the committee. My name is Evelyne

Baumrucker, and I am a Health Policy Analyst with the Congressional Research Service.

I am pleased to provide the committee with an overview of the

State Children’s Health Insurance Program, including a brief legislative history and discussion of program basics.

I will begin with a brief legislative history of the program, where

I highlight some of the major themes that were influential in shaping the SCHIP program. Major themes include incremental expansion of the Medicaid program to pregnant women and children beginning in the mid-1980s, followed by consideration by the 104th

Congress of comprehensive health care reform. When majority support could not be achieved for this proposal, some in Congress

backed alternative measures to expand health insurance coverage

solely for children. In 1995–1996, the 104th Congress considered

proposals to dramatically restructure Medicaid by transforming it

into a capped grant program. While President Clinton vetoed the

legislation, it initiated the movement from costly and unpredictable

mandatory spending on individual entitlements to capped Federal

grant programs, culminating in the passage of Welfare Reform,

which created the Temporary Assistance for Needy Families Federal capped grant to States. It is in this historical context that the

105th Congress enacted the Balanced Budget Act of 1997 that established the State Children’s Health Insurance Program under a

new title 21 of the Social Security Act.

SCHIP entitles States, with approved plans to predetermined

capped Federal allotments, to offer health insurance to low-income,

uninsured children either under an expansion of Medicaid, under

a new, separate SCHIP program, or a combination of both approaches. SCHIP was crafted to maximize State flexibility in proVerDate 11-MAY-2000 15:25 Jan 19, 2007 Jkt 095484 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 31961.000 SFIN1 PsN: SFIN1
25

gram design and was intended to look like private health insurance

coverage in terms of Federal rules regarding covered benefits, cost

sharing, and so forth.

In fiscal year 2004, there were 6.2 million children enrolled in

SCHIP. Of those, about a fourth were covered under Medicaid, with

the remaining 4.4 million covered under separate SCHIP programs.

In addition, 646,000 adults, mostly parents of SCHIP- and Medicaid-eligible children, were enrolled in SCHIP in eight States, primarily through section 1115 waivers under the Health Insurance

Flexibility and Accountability Initiative.

Like Medicaid, SCHIP is a Federal/State matching program. But

to encourage State participation, State dollars are matched with

available Federal funds at a higher matching rate. On average, the

Federal Government financed about 70 percent of all SCHIP costs,

as compared to about 57 percent of all costs under Medicaid. The

Congress appropriated approximately $40 billion in Federal funds

over 10 years, beginning in 1998. Of that amount, approximately

$4.6 billion in new Federal grants for SCHIP was available in fiscal

year 2004. By contrast, Federal spending under the Medicaid program for comparable populations was 10 times that spent on

SCHIP, or approximately $50 billion. Despite its relative size,

SCHIP represents the largest Federal health care investment in

children since the creation of Medicaid in 1965, and has served as

an important model for the benefit and cost-sharing changes to the

Medicaid program under the recently-enacted Deficit Reduction Act

of 2005.

Since SCHIP was established, the number of uninsured children

has declined nationwide, particularly among those who are nearpoor. According to the Center for Disease Control’s National Health

Interview Survey, the percentage of uninsured children declined by

5 percent, from 13.9 percent in 1997, to 8.9 percent in 2005, and

the percentage of near-poor uninsured children declined by 8.1 percent, from 22.8 percent to 14.7 percent over the same period.

Under broad Federal rules, States have the flexibility to define

coverage and to require certain beneficiaries to share in the cost of

some SCHIP services. For States that provide Medicaid coverage to

SCHIP children, Medicaid benefit and cost-sharing rules prohibiting cost sharing for most children under the age of 18 will apply.

In addition, States have the option to implement the new DRA

Medicaid options for alternative benefits and cost sharing, and may

choose to target SCHIP enrollees as a part of their State plan

amendments. When States provide coverage to children through

separate SCHIP programs, coverage and benefit options outlined in

SCHIP and modeled after a set of employer plans will apply. Medicaid coverage for SCHIP children is considered an individual entitlement. No such individual entitlement exists for children covered

under separate SCHIP programs.

With all of the flexibility available to States, SCHIP programs

across States continue to evolve, as evidenced by the numerous

changes States have made to their original State plans over time.

States seek amendments to adjust their programs to meet the

changing needs to, for example, make changes to income eligibility

thresholds, define new co-payment standards, or to modify their

benefit packages.

26

The SCHIP program was designed to allow States maximum

flexibility to design their programs within the constraints of a

capped Federal grant program. Within this context, the Congress

may need to consider how to balance State variability with equity

among States. As the Congress turns its focus to SCHIP in anticipation of the program’s reauthorization in fiscal year 2007, discussions surrounding the SCHIP funding formula and redistribution

issues will likely dominate. Limited Federal funding may require

priority setting by Federal and State Governments.

I look forward to continuing to support the committee as you

work through these, and other, SCHIP issues.

Senator HATCH. Well, thank you so much, Ms. Baumrucker.

[The prepared statement of Ms. Baumrucker appears in the appendix.]

Senator HATCH. Mr. Peterson, we will take your testimony.

STATEMENT OF CHRIS PETERSON, SPECIALIST,

CONGRESSIONAL RESEARCH SERVICE, WASHINGTON, DC

Mr. PETERSON. Thank you, Chairman Hatch, Senator Rockefeller.

I am here to talk about the Federal financing of SCHIP; in particular, to provide an overview of policy levers that could be used

to affect the projected 2007 shortfalls, and the program’s reauthorization.

But to illuminate some of those future issues, a quick look back

is necessary, and I use this table to highlight certain patterns

which have been talked about earlier.

Column B shows the Federal SCHIP allotments made to States

and territories every year over the program’s history. Now, original

allotments have three key characteristics. First is their total

amount, as you see here. These levels were originally set in BBA

1997 and have been altered only slightly since.

Senator HATCH. That is in billions of dollars, right?

Mr. PETERSON. Billions of dollars. Well, millions. Actually, $4.2

billion is 1998, for instance.

Senator HATCH. All right.

Mr. PETERSON. In essence, these numbers represent the size of

the pie available to States.

The second key characteristic is what each State’s share of that

pie is. This is based on a formula in statute that has also been

largely unaltered and takes into account each State’s number of

low-income children, uninsured low-income children, and States’

average wages for health care employees. The third key characteristic is how long these funds are available, which has always

been 3 years.

After 3 years, the unspent funds are available for redistribution

to other States. As you can see in column C, in the first few years

of redistribution, a lot of unspent money was at stake and Congress

intervened to affect how those funds were distributed.

However, as these amounts dropped, Congress left the distribution up to the HHS Secretary. These funds now go entirely to

States’ projected initial shortfalls.

Looking ahead, less redistribution money means that States

must place greater reliance on their own original allotments. Thus,

27

the determination of original allotments becomes increasingly critical to States.

Column D shows State spending of Federal SCHIP dollars, with

amounts ever increasing since 1998. Based on State projected

spending, 2006 appeared to be the first year in which numerous

States faced shortfalls, totaling about $283 million.

Among the proposals that Congress considered, the one that made it into the final Deficit Reduction Act appropriated $283 million, which you see down in red, to address the 2006 shortfalls.

Based on State estimates from November of 2005, CRS projects this would leave a shortfall of approximately $3 million in four

States. Based on the same State estimates, we project a shortfall

of about $1 billion for 18 States in 2007.

In his testimony, Dr. McClellan used projections 6 months more

recent, with slightly different projected shortfalls. I retained the

earlier numbers, one, because it was the basis of the DRA distribution, and two, because it illustrates some fairly significant changes

in State projections in a short amount of time.

This could be due to States altering their SCHIP programs, local

economic factors, or the way States produced these projections. Regardless, a much larger appropriation would be required to eliminate the 2007 shortfall compared to what was needed for 2006.

The President’s budget calls for the 2005 allotment’s availability

to be reduced from the standard 3 years to 2. CRS projects this

would eliminate the projected shortfalls in 2007.

However, in the long run, assuming baseline allotment levels,

more States face the prospect of chronic shortfalls, raising more

fundamental questions about SCHIP, such as, how much responsibility does the Federal Government have to address shortfalls in

this capped grant program?

Ten years ago when SCHIP was created, it could not be predicted

what various States would do, let alone whether they would exhaust their Federal SCHIP funds years down the road.

Now, however, we have years of experience. That information

could be useful for changing the program, if Congress thought it

worthwhile. That information will also enable analysts like myself

to make projections about which States might face what size shortfalls, based on criteria considered by Congress.

Financing is just one of the potential issues for SCHIP moving

forward. Regarding potential shortfalls, which policy levers are

used depends on the goals. If the goal is absolutely to prevent any

State from experiencing shortfalls, Congress could, for example,

allow States to draw Federal SCHIP funds on an uncapped basis,

or, similar to DRA, simply appropriate the additional funds.

Moving forward in the current construct, however, the three

major financial levers pertain to the original allotments—their

total level, how each State’s share is determined, and how long the

States have access to the funds. These are difficult questions, and

CRS looks forward to continuing its work with this subcommittee.

[The prepared statement of Mr. Peterson appears in the appendix.]

Senator HATCH. Well, thank you both very much. I know that it

is always a little worrisome to testify before any Congressional

committee, and this is your first time.

28

You have both done very, very well, and we are very appreciative

to have both of you here. We are appreciative of your work as well,

and that of all of you folks at CRS.

I also noted, Ms. Baumrucker, in your testimony and CRS reports, that you talked a lot about the difference between the Medicaid FMAP and the CHIP FMAP.

Could you go into that issue in just a little more detail for the

committee? How does a State determine how many uninsured children reside in that particular State, especially since that is a particular component of how the CHIP FMAP is determined? What

typically happens if States cannot match the Federal contribution?

Ms. BAUMRUCKER. The difference is the Medicaid FMAP is, on

average, around 57 percent Federal share; in the SCHIP program,

the Federal Government pays about 70 percent of the share. That

share is based on the low-income uninsured children in the State,

the State cost factor.

Mr. PETERSON. Are you are referring to the number of uninsured

estimates in general?

Senator HATCH. Right.

Ms. BAUMRUCKER. Or the FMAP?

Senator HATCH. I just want to know how you go about it.

Ms. BAUMRUCKER. The match piece?

Senator HATCH. Yes. How does a State figure out how many uninsured children really reside there?

Mr. PETERSON. The number of uninsured children? The Current

Population Survey is currently the only source of information of

that on a national basis that provides uninsured estimates for all

50 States. Issues with that are, for small States, there is a lot of

variability that is probably just a function of the State being small.

So there are other opportunities, perhaps. The American Community Survey, for example, has been offered as an alternative, but

it currently does not include a question on the number of uninsured. So, for instance, the ACS interviews many more people, 3

million people, compared to 100,000 in the Current Population Survey. So, it is a great source of information, particularly for estimates of low-income kids, but at this point it does not yet include

estimates for the number of uninsured.

Senator HATCH. Could you tell us, Mr. Peterson, who the children are who are not covered by CHIP or Medicaid? Either one of

you can respond.

Mr. PETERSON. Well, some of that has been talked about before

in terms of the total number. But from one set of estimates, they

estimate that approximately 60 percent of uninsured kids are eligible for public coverage. There are a number of characteristics we

could talk about.

I will just highlight one. Among kids who are eligible and uninsured, the estimates that I have from the Agency for Healthcare

Research and Quality are that 82 percent of these kids are in families with income under $30,000.

It is interesting that, in contrast, among those who are uninsured and ineligible, 82 percent have income above $30,000. The

point being, among those who are eligible and unenrolled, they

tend to be very low-income kids.

29

Senator HATCH. Could you provide for the record for the committee, whether now or later, any information that you have on the

4 million children who are uninsured, but are not eligible for CHIP

or Medicaid?

Mr. PETERSON. Sure.

Senator HATCH. All right. I would appreciate that.

[The information appears in the appendix on pages 163 and 169.]

Senator HATCH. Now, in your written statement, you mention

that some States facing shortfalls can use Medicaid dollars when

their Federal CHIP funds run out, but other States do not have

that option.

Could you explain what is going on there?

Mr. PETERSON. Under current law, as Evelyne had mentioned,

States can create their SCHIP programs either through a Medicaid

expansion, or with a separate SCHIP program, or combination of

both.

When States exhaust all of their SCHIP funds, for the portion

that is Medicaid expansion, they can revert to Medicaid at that reduced FMAP, but they are at least getting some funds for that. If

a State has only a separate program, then they have no fall-back,

so they are responsible for 100 percent of those costs.

It is the case that in the 18 States that we project to face shortfalls in 2007, four of those have only a separate SCHIP program,

meaning that once those SCHIP funds are exhausted they cannot

receive additional Federal funds, but the other 14 would be able to

draw down Medicaid funds, at least for some portion.

Senator HATCH. Ms. Baumrucker, why would States have chosen

a Medicaid expansion program over a separate CHIP program, or

vice versa, when they are in the process of deciding their CHIP

programs?

Ms. BAUMRUCKER. At the start of SCHIP, a lot of States went

with Medicaid expansion programs because they already had Medicaid programs up and running. So, that was an easy place for

them to start to guarantee that they would be part of the SCHIP

program and be able to draw down their allotment that was entitled to them.

However, when States choose a Medicaid expansion program,

they are extending an individual entitlement to the children that

they bring in through the Medicaid expansion program.

When a child comes in through Medicaid expansion, they are entitled to the benefits and the cost-sharing rules of that program.

You cannot cap enrollment in a Medicaid expansion program, except if you use the 1115 waiver authority to cap coverage.

In a separate SCHIP program, however, States that would run

out of their Federal allotments could cap their program enrollment

or institute waiting lists, et cetera, in order to scale back on their

programs and stay within their Federal allotments.

In addition, the benefit packages look more like private health

insurance coverage in terms of the coverage that is offered, and in

terms of the cost sharing for program participation.

So, States that were covering children at higher income levels

look to that flexibility provided under the separate SCHIP program

and title 21 for options that were available there.

Senator HATCH. Well, thank you. Thanks to you both.

30

Senator Rockefeller?

Senator ROCKEFELLER. Thank you, Mr. Chairman. You notice, we

have a vote just starting. But we have time for a couple of questions.

I mentioned earlier to Dr. McClellan, and I used the word

‘‘EPSDT.’’ Now, it is interesting. I think John Chafee and I were

thinking about that. Under Medicaid, you have to do EPSDT.

Ms. BAUMRUCKER. That is right.

Senator ROCKEFELLER. A State, if it takes initiative on its own

in the CHIP program, does not have to do that. It does not have

to do that.

Ms. BAUMRUCKER. That is right.

Senator ROCKEFELLER. That is serious business, not doing that.

I mean, Senator Kennedy talked about vision and dental, and that

is true. But EPSDT is the basic way you screen children, the basic

way you sort of set where they are in terms of health care.

I want you to address that, but I want you to hold on a minute

so I can ask my second question. Either of you can respond.

Also, do you not think that it makes sense, in any kind of a

health care program—or does it make any sense at all—not to take

into account health care inflation, which has been discussed here,

or the number of people who will newly become eligible in the cost

predictions? Yet, I believe it is true that CHIP does not take into

account those real and likely possibilities in preparing its projections in terms of funding.

My own view is, we have to change somehow the way we fund

CHIP or the rules by which we do it, if that is possible. We should

want more States to step up and try to cover more children under

CHIP, not to dry up the resources available to those States who are

willing to do the right thing.

I also understand that nearly 1.5 million children will lose their

coverage if we do not fix this financing flaw. I am interested in

your answer to both questions, either of you, both of you.

Mr. PETERSON. On the financing side, those levels—and that was

what I first talked about in that column B—were first set in BBA

1997. Of course, that was when SCHIP was created from scratch.

Senator ROCKEFELLER. Right.

Mr. PETERSON. So now, with reauthorization coming up, it seems

like a perfect opportunity, if one thinks that is the way to go, to

incorporate new information such as enrollment.

Senator ROCKEFELLER. It makes for better predictions, right?

Better budget planning?

Mr. PETERSON. If one is trying to tie the allotments to actual

spending, yes.

Senator ROCKEFELLER. Yes. Yes.

Mr. PETERSON. Yes. And the other thing is regarding——

Senator ROCKEFELLER. Is it not weird, strange, or wrong to have

Medicaid do EPSDT and have CHIP not do it, when I think that

most people think that CHIP probably does do it? That is, those

that know what EPSDT is.

Ms. BAUMRUCKER. Right. EPSDT refers to a benefit under the

Medicaid program that is called the Early Periodic Screening Diagnosis and Treatment Program, and it provides for screenings that

31

happen at periodic times in the child’s life that would identify

health care needs.

The EPSDT benefit guarantees coverage for services that would

ameliorate the effects of the health defect that are identified

through one of these health care screenings. It is true that this is

offered under Medicaid, and it is an individual entitlement to children under the Medicaid program. This benefit is not a covered

benefit under the SCHIP benefit package.

Senator ROCKEFELLER. That is how you find out if a kid is autistic, right?

Ms. BAUMRUCKER. That could be a potential place where that

type of problem would be identified.

Senator ROCKEFELLER. Yes. All right. So that is on our plate.

Did you answer the second one?

Mr. PETERSON. Yes. I think you were talking about——

Senator ROCKEFELLER. Yes, you did. You did, fundamentally. You

did.

What changes would you recommend be made if our goal was to

serve, in fact, all children? In the case of West Virginia, 92 percent,

up to 97 percent. We are getting up in that range, or we can think

that way. We are always assuming that there are some we will

never find, or circumstances change for them.

I understand that we believe that there are nearly 6 million children under age 19 who could be enrolled in CHIP or Medicaid, but

for whatever reason are not.

Mr. PETERSON. Well, the flip side of that is, States have their

own constraints. So on the Federal side, there is the limitation that

this is a capped grant program. But then States also have their

own financial issues. They have to pay 30 percent of those costs.

So for reauthorization, both of those pieces will need to be considered if one’s goal is to expand as much as possible for children.

Senator ROCKEFELLER. All right. Let me just finish on EPSDT

again.

I was governor for 8 years. We did not have this. I think EPSDT

is a real benchmark, to me. It is just a huge thing. If I had been

instructed by the Federal Government—which I never wanted to

have happen, because governors are governors—that if we were

going to get any help on this at all, that CHIP had to do EPSDT,

no questions asked. It had to as a condition of getting any money.

Is that unfair?

Ms. BAUMRUCKER. That is for you to decide. That would have to

be a priority set based on a capped grant program. If that is something that is really a priority for the Senate, then that would be

something that you would have to take under consideration and include in the benefit list as a mandate or as a ‘‘must cover.’’

Senator ROCKEFELLER. She sounds like an intelligent analyst.

[Laughter.]

Ms. BAUMRUCKER. Yes.

Senator ROCKEFELLER. Knows all the facts but does not come up

with a solution. All right. Thank you.

Senator HATCH. She is saying you have to come up with the solution.

Senator ROCKEFELLER. That is correct.

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Senator HATCH. We are grateful for the testimony of both of you.

This has been a good hearing. I feel like we are on our way to

maybe fully understanding some of the more remarkable aspects

about this bill and how it has worked, and what we need to do in

the future. So, I want to thank you for being here.

With that, we will recess until further notice.

[Whereupon, at 4:13 p.m., the hearing was concluded.]

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A P P E N D I X

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

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SUBMITTED BY SENATOR BINGAMAN

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