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49–370 PDF 2008

COVERING UNINSURED KIDS: REVERSING 

PROGRESS ALREADY MADE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

FEBRUARY 26, 2008 

Serial No. 110–91 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

JOHN D. DINGELL, Michigan, Chairman 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

DARLENE HOOLEY, Oregon 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

VITO FOSSELLA, New York 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff 

GREGG A. ROTHSCHILD, Chief Counsel 

SHARON E. DAVIS, Chief Clerk 

DAVID CAVICKE, Minority Staff Director 

(II)

(III) 

SUBCOMMITTEE ON HEALTH

FRANK PALLONE, JR., New Jersey, Chairman 

HENRY A. WAXMAN, California 

EDOLPHUS TOWNS, New York 

BART GORDON, Tennessee 

ANNA G. ESHOO, California 

GENE GREEN, Texas 

Vice Chairman 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

TOM ALLEN, Maine 

TAMMY BALDWIN, Wisconsin 

ELIOT L. ENGEL, New York 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

MIKE ROSS, Arkansas 

DARLENE HOOLEY, Oregon 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

JOHN D. DINGELL, Michigan (ex officio) 

NATHAN DEAL, Georgia, 

Ranking Member 

RALPH M. HALL, Texas 

BARBARA CUBIN, Wyoming 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 1 

Hon. Nathan Deal, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 3 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 4 

Prepared statement .......................................................................................... 6 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. Anna G. Eshoo, a Representative in Congress from the State of California, opening statement .................................................................................... 9 

Prepared statement .......................................................................................... 10 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 11 

Hon. Lois Capps, a Representative in Congress from the State of California, 

opening statement ................................................................................................ 13 

Hon. John B. Shadegg, a Representative in Congress from the State of Arizona, opening statement ...................................................................................... 14 

Hon. Hilda L. Solis, a Representative in Congress from the State of California, opening statement .................................................................................... 15 

Prepared statement .......................................................................................... 16 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 17 

Hon. Jan Schakowsky, a Representative in Congress from the State of Illinois, opening statement ....................................................................................... 18 

Prepared statement .......................................................................................... 18 

Hon. Darlene Hooley, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 19 

Hon. Jay Inslee, a Representative in Congress from the State of Washington, 

opening statement ................................................................................................ 20 

Hon. Edolphus Towns, a Representative in Congress from the State of New 

York, prepared statement .................................................................................... 73 

WITNESSES

Chris Gregoire, governor of Washington ............................................................... 20 

Prepared statement .......................................................................................... 25 

Haley Barbour, governor of Mississippi ................................................................. 39 

Prepared statement .......................................................................................... 40 

Deval L. Patrick, governor of Massachusetts ........................................................ 42 

Prepared statement .......................................................................................... 45 

Sonny Perdue, governor of Georgia ........................................................................ 47 

Prepared statement .......................................................................................... 50 

Ted Strickland, governor of Ohio ........................................................................... 51 

Prepared statement .......................................................................................... 53 

SUBMITTED MATERIAL

Letter of September 17, 2007 from United States Governors to Secretary 

Leavitt ................................................................................................................... 74 

(1) 

COVERING UNINSURED KIDS: REVERSING 

PROGRESS ALREADY MADE 

TUESDAY, FEBRUARY 26, 2008 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 9:40 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Frank Pallone, 

Jr. (chairman of the subcommittee) presiding. 

Members present: Representatives Pallone, Waxman, Towns, 

Gordon, Eshoo, Green, DeGette, Capps, Schakowsky, Solis, Hooley, 

Matheson, Inslee, Markey, Dingell (ex officio), Deal, Wilson, Shadegg, Burgess, Blackburn and Barton (ex officio). 

Staff present: Bridgett Taylor, Chief Health Finance Policy Advisor; Amy Hall, Professional Staff Member; Yvette Fontenot, Professional Staff Member; Hasan Sarsour, Legislative Clerk; Jodi Seth, 

Communications Director; Brin Frazier, Deputy Communications 

Director; Lauren Bloomberg, Press Assistant; Megan Mann, Staff 

Assistant; Ryan Long, Minority Chief Counsel; Brandon Clark, Minority Professional Staff Member; and Chad Grant, Minority Legislative Clerk. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. The subcommittee is called to order. 

The subcommittee is meeting today to discuss the reversal of 

progress made on covering uninsured children in America, and I 

will yield to myself for an opening statement initially. 

First I want to welcome our illustrious panel here today. We 

have of course Governor Strickland, who was a member of this subcommittee and this Committee for many years. He used to sit with 

myself and Sherrod Brown, who is now our Senator from Ohio as 

well. So thank you in particular and thank all of you for being here 

today. 

Last year should have been a landmark year for children’s 

health. Within our reach was the opportunity to build upon the 

success of the previous 10 years in which millions of low-income 

children were provided access to healthcare coverage through the 

Children’s Health Insurance Program, or CHIP. We sought to exceed that achievement by providing States with the resources they 

needed to maintain current enrollment as well as expand enrollment by 4 million additional children who are presently eligible but 

2 

don’t participate. In spite of our extensive efforts to develop bipartisan bicameral legislation, that opportunity was lost, in my opinion to petty politics and ideological warfare waged by a President 

who has continually ignored the needs of hardworking American 

families. Instead of working with Congress to develop a compromise that would build CHIP up for future generations, he set 

out to unilaterally tear it down. 

On August 17 of last year, the Administration issued a new directive to State CHIP officers that would seriously alter the way 

CHIP currently operates, essentially stripping States of the flexibility they have long enjoyed since the program’s inception. Under 

the new directive, a State would have to prove that it has enrolled 

95 percent of its CHIP and Medicaid-eligible children in families 

with incomes below 200 percent of the federal poverty level before 

providing coverage above 250 percent of the federal poverty level. 

By almost every account, there is no State that will be able to meet 

this requirement, and adding insult to injury, research suggests 

that CMS does not even have a methodology to measure State participation rates. There are equally egregious new policies imposed 

on the beneficiaries themselves such as a 12-month waiting period 

for a child who loses private coverage before he or she can enroll 

in CHIP, and I still have not found an answer for what that child 

is supposed to do for healthcare during those 12 months. 

There is no doubt that if enforced this new directive would seriously constrain States who are trying to provide coverage to more 

kids. We have already seen some of the effects. New York planned 

to expand coverage from 250 to 400 percent of the federal poverty 

line but had its plan denied by CMS. That means approximately 

47,000 fewer children in New York will have access to health coverage as a result of that denial. And while the Administration 

claims it will not expect any effect on current enrollees, I believe 

the policies put forth within that August directive could imperil the 

coverage of thousands of children in those States that already cover 

children above 250 percent of the federal poverty level. 

Now, in addition to this August 17th directive, this Administration has issued a slew of Medicaid regulations that seriously jeopardize the healthcare of millions of low-income and disabled Americans of all ages. You have already talked about that at your governors’ conference. What is on the chopping block? Funding for 

rehab services for those with disabilities, outreach, enrollment assistance and coordination of healthcare services for children with 

disabilities in school settings as well as payments for graduate 

medical education, which is an important revenue source for teaching hospitals around the country including in my home State of 

New Jersey, which is in desperate need of these funds to avoid further hospital closings. We had a hospital closing announced in my 

district just last Thursday. And most recently, CMS has proposed 

two new rules that would allow States to enroll Medicaid beneficiaries into benefit packages that offer fewer benefits as well as 

charge them higher premiums. If allowed to go into effect, these 

regulations would slash billions of dollars from State Medicaid programs, shifting costs to States at a time when many are strapped 

for cash. I know this to be true in my home State of New Jersey. 

Our governor couldn’t appear today because he is delivering his 

3 

budget address that freezes State spending in order to close our 

budget shortfall. If New Jersey starts losing federal dollars for its 

Medicaid and CHIP programs, the State simply will not have 

enough money to make up the difference. Instead, it is more likely 

that enrollment will be curtailed and services will be cut. 

Now, it is clear that the Administration is on the wrong side of 

history here. Everyone but the President seems to be working to 

expand health coverage, especially to our most vulnerable citizens. 

Because of the President’s intransigence, we were unable to pass 

a robust CHIP reauthorization last year that would have helped 

move us towards covering all uninsured kids. Now he is clearly trying to move backwards from longstanding federal commitments by 

cutting federal dollars from our Nation’s safety net programs at a 

time when States are talking about using these very programs to 

build the basis for universal coverage. How is a State like California, New Jersey or New York supposed to provide universal coverage without the Federal Government doing its part to help or 

how is a State like Massachusetts supposed to continue its current 

endeavor if the Administration is going to pull the rug out from 

under them? 

As we see increasing signs that the U.S. economy is weakening 

and heading towards a recession, it is crucial now more than ever 

that we ensure that those hardworking American families who are 

negatively impacted by the economic downturn have a safety net 

to fall upon, and that is why myself, Chairman Dingell, Representatives Peter King and Tom Reynolds introduced H.R. 5268, legislation that would help protect access to health coverage through 

Medicaid during the economic downturn. It provides a temporary 

increase of the Federal Medical Assistance Percentage, or FMAP. 

During a time when the outlook for so many American families 

seems uncertain, we should be promoting policies with programs 

that provide States and beneficiaries with the relief they need. 

Temporarily increasing the federal matching payments in Medicaid 

is a proven strategy for stimulating the economy. Slashing billions 

of dollars from Medicaid through administrative fiat is not. 

Now, we are going to hear from all of you today. I want to thank 

you all for being here. We are anxious to hear your testimony. I 

mentioned Ted Strickland, and we realize that you are taking time 

beyond the Governors’ conference to be here today and we certainly 

appreciate that. 

Mr. PALLONE. I now recognize our ranking member, Mr. Deal, for 

an opening statement. 

OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. DEAL. Thank you, Mr. Chairman. I thank you for holding 

this hearing on an important topic as we revisit the reauthorization 

of SCHIP and possible reforms to the program. We are indeed honored to have such a distinguished panel of witnesses, and I want 

to thank these governors for taking time out of their very busy 

schedules to be with us here today. States play a very integral part 

of making the SCHIP program work and your input is certainly appreciated. 

4 

At this point I think we all know that SCHIP was created to 

allow the States to cover targeted low-income children with federal 

matching funds with a capped allotment. Moreover, SCHIP has 

been remarkably successful at achieving its goals. Unfortunately, 

like any new program, there have been some abuses. Some States 

have covered more adults than children. Others have focused on 

covering children who are up the income scale while leaving the 

truly needy children from low-income families behind. Still others 

have failed to discourage families from dropping their private 

health insurance and replacing it with a government program. 

It is these abuses which led to the August 17th guidance from 

CMS. I understand that many governors are concerned about the 

impact this guidance will have on their SCHIP programs and I am 

certainly willing to work with governors and my friends on the 

other side of the aisle to address this August 17th letter. But before 

we do so, we must ensure that the abuses within SCHIP are addressed so that poor children do come first. With reauthorization 

of SCHIP I believe we could craft a better solution than the August 

letter while addressing the other legitimate concerns about the current operation of the program. 

I also hope the governors will take some time to shed light on 

what I believe is a major contradiction we are hearing from some 

governors lately. Recently due to slower economic growth, I believe 

the National Governors Association requested an increase in federal matching rate for Medicaid to meet the demands Medicaid 

places on State budgets. In this context, it is hard for me to understand how in the case of SCHIP States act as if they have ample 

resources to expand that program. It would seem to me that if 

States cannot afford to meet their obligation in Medicaid to the Nation’s neediest citizens, they would not be able to expand eligibility 

of SCHIP to higher incomes. 

Again, I want to thank each of you for taking time to be with 

us. We look forward to your testimony and welcome you to this 

hearing. 

I yield back. 

Mr. PALLONE. Thank you, Mr. Deal. 

I recognize the chairman of the full Committee, Mr. Dingell. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy and 

I commend you for having this hearing. It will give us an opportunity to hear from a number of distinguished governors as to perspectives of themselves and their States with regard to current 

issues relating to children’s health programs. 

We are delighted to have before us five outstanding governors 

representing different regions and differing political perspectives. I 

want to express my thanks to each of you ladies and gentlemen for 

your presence here and your assistance. We know how busy you 

are and I am grateful to you for your kindness in this matter. 

I am also pleased to welcome back a former member of this Committee, our good friend, Governor Strickland from Ohio. Welcome 

5 

back. This is a room that you will remember from other good days 

when you served here with such distinction. 

The governors joining us today will provide enormously valuable 

insights into the importance of the State Children’s Health Insurance Program and Medicaid and the efforts of several States to reduce the number of children who do not have health insurance. 

However, storm clouds threaten to undermine the progress the 

States have made in recent years. Over the past year, the Administration has taken a number of actions directly impeding State coverage efforts not only in SCHIP but also in Medicaid. The Administration’s August 17th directive will affect at least 26 States by this 

summer, causing the States to roll back existing coverage and to 

stop planned expansions. While this directive is couched in rhetoric 

about helping the poorest first, the Administration’s own actions 

make it clear that this is not the real intent. If this Administration 

were interested in helping those with the lowest incomes, the 

President would not have vetoed the bipartisan Children’s Health 

Insurance Program Reauthorization Act that provided new incentives, new tools, bonus payments to make sure that the States had 

the funds to get the job done and the assistance of the Federal Government in doing so, and I will not mention the $35 million over 

the next 5 years that would have been made available to the States 

to make sure that they had sufficient funds to meet the growing 

need for SCHIP and for its beneficiaries. If the August 17th directive was not enough, the President’s budget proposes to go one step 

further, stopping the States from covering children in families with 

annual incomes above $35,200. 

As the infomercial would say, wait, there is more. The six Medicaid regulations the Administration has issued in the past year 

would cut more than $13 billion from Medicaid. These cuts would 

come from critical services for people with disabilities such as rehabilitation and case management services as well as from public institutions that serve as a safety net for our most vulnerable of our 

society. In the face of these cuts, many States will choose to do the 

right thing and use State-only funding to protect coverage of those 

in need. But States cannot and should not bear this burden alone, 

and there are many that cannot carry the kind of load that the Administration expects them to do. 

When both Medicaid and SCHIP were created, the Federal Government was a full partner and it should remain so. Moreover, 

with the country facing an economic downturn, it is unclear how 

long States can sustain their commitment if the Administration 

continues to erode federal assistance to the States. This Congress 

will work to ensure and to restore the ability of the States to cover 

uninsured children in need. We will press forward with the good 

policies included in the SCHIP reauthorization vetoed by the President twice so that SCHIP is fully funded and the States have the 

resources to meet the growing need for coverage and we will work 

to stop this Administration’s assault on healthcare coverage for 

children. 

I look forward to today’s witnesses’ testimony, and I want to 

thank the governors for their presence here and their assistance to 

us. I look forward to working with them to protect SCHIP and the 

6 

Medicaid programs and to assist them in their difficult labors in 

this matter. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Dingell follows:] 

STATEMENT OF HON. JOHN D. DINGELL

I thank Chairman Pallone for calling this hearing to provide the opportunity for 

the Committee to hear State perspectives on current issues relating to children’s 

health programs. 

We are pleased to have before us today five Governors representing different regions and political perspectives. I am especially pleased to welcome back a former 

member of this committee, Governor Strickland from Ohio. 

The Governors joining us today will provide valuable insights into the importance 

of the State Children’s Health Insurance Program (SCHIP) and Medicaid, and the 

efforts of their States to reduce the number of children who do not have health insurance. 

However, storm clouds threaten to undermine the progress that States have made 

in recent years. The Administration has taken a number of actions over the last 

year that directly impede State coverage efforts. 

The Administration’s ‘‘August 17th directive’’ will affect at least 26 states by this 

summer, causing States to roll back existing coverage and stop planned expansions. 

While this directive is couched in rhetoric about helping the poorest first, the Administration’s own actions make clear that is not its real intent. If this Administration were interested in helping those with the lowest income, the President would 

not have vetoed the bipartisan Children’s Health Insurance Program Reauthorization Act (CHIPRA) that provided new incentives, tools, and bonus payments to make 

sure States got the job done—not to mention $35 billion over the next 5 years to 

make sure that States had sufficient funding to meet the growing need for SCHIP. 

And, if the August 17th directive wasn’t enough, the President’s budget proposes 

to go one step further, stopping States from covering children in families with annual incomes above $35,200. 

As the infomercial would say, wait: there’s more. The six Medicaid regulations the 

Administration has issued in the past year would cut more than $13 billion from 

Medicaid. These cuts would come from critical services for people with disabilities, 

such as rehabilitation and case management services, as well as from public institutions that serve as the safety net for the most vulnerable of our society. 

In the face of these cuts, many States will choose to do the right thing, and use 

State-only funding to protect coverage for those in need. But, States cannot—and 

should not—bear this burden alone. 

When both Medicaid and SCHIP were created, the Federal Government was a full 

partner, and it should remain so. 

Moreover, with the country facing an economic downturn, it is unclear how long 

States can sustain their commitment if the Administration continues to erode Federal assistance to States. 

This Congress will work to restore the ability of States to cover uninsured children in need. We will press forward with the good policies included in the SCHIP 

reauthorization vetoed by the President twice so that SCHIP is fully funded and 

States have the resources to meet the growing need for coverage. And we will work 

to stop this Administration’s assault on health coverage for children. 

I look forward to the testimony of today’s witnesses and to working with the Governors to protect SCHIP and Medicaid programs. 

Mr. PALLONE. Thank you, Chairman Dingell. 

I recognize the gentlewoman from Tennessee, Ms. Blackburn. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Ms. BLACKBURN. Thank you, Mr. Chairman, and I want to welcome all of our governors who are here to talk with us about this. 

I appreciate that you would take the time away from your duties 

to be here and talk with us about SCHIP. It is an important proVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
7 

gram to us and I certainly support SCHIP as it was originally created and support the goals of that program. Indeed, they are good 

goals. It is a worthy program and it fills such a need in our country. 

This hearing and what we are going to talk about today is responsible guidance from CMS requiring States to ensure that 

SCHIP funds are targeted toward the low-income children before 

States spend money to expand coverage to wealthier populations 

and I appreciate the good government effort put forth by CMS to 

ensure that States cover 95 percent of their eligible low-income 

children first and reach those children first. In addition, we will 

also talk about procedures to address crowd-out. 

Now, I come from Tennessee and we know a lot about crowd-out 

in Tennessee and we have a lot of experience in government taking 

over a majority of the healthcare market. We have seen it in our 

State with the TennCare program. I am certain some of you are 

aware of this and are aware of the TennCare program that we have 

had. So we know what happens when government overextends 

itself and when promises are made that cannot be kept or that are 

very difficult to be kept and the burden that this places on our citizens, so we are interested to hear what you have to say. We are 

interested in hearing how we address these issues, how we meet 

the needs of this population before we take any other steps, and 

we are looking forward to all the information that you will bring 

forward to us as we address the issues that we have with funding 

and with the budget and with other proposals that will come before 

us as we proceed through the years. 

So welcome. We appreciate your taking the time to be with us, 

and Mr. Chairman, I yield back the balance of my time. 

Mr. PALLONE. Thank you. 

I now recognize the gentleman from California, Mr. Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I want to 

welcome the Governors here as well. I want to thank my colleagues 

for allowing me to give an opening statement early because I have 

to run to chair my own hearing, so I won’t be here to hear all of 

your testimony. But I think it is important we hold this hearing 

and I thank Chairman Pallone for convening us. 

We need to look at a number of Medicaid issues. I know that a 

lot of the discussion this morning will be on the August 17th CMS 

letter, which as a practical matter eliminates State flexibility to extend SCHIP coverage to children in families with income above 250 

percent of the federal poverty level. In my view, this policy doesn’t 

make any sense. It doesn’t have any basis in statute. This is clearly 

the province of the Congress, not the Executive Branch, and I will 

continue to work with my colleagues on both sides of the aisle to 

bar CMS from implementing this misguided and mean-spirited directive. 

But I hope that in addition to the August 17th letter, we will also 

hear from the Governors about the State-specific impact on the 

Medicaid regulations CMS issued last year affecting payments to 

8 

government providers, payments for graduate medical education, 

provider taxes and coverage for outpatient hospital services, rehabilitative services, case management services and school administrative and transportation costs. The Federal Government is 

issuing regulations saying we know how better to handle all those 

things, we are not going to let the States decide these matters, we 

are going to tell you what to do. 

Last November the Oversight Committee asked Mr. Smith, the 

principal author of these regulations, for a State-by-State analysis 

of their impact. Well, as the governors well understand, there are 

very great differences between States and the impact would differ 

from State to State. We asked for the impact, and last Friday we 

finally got a response from Mr. Smith. 

Here is what he wrote: ‘‘With respect to your second request concerning State-specific impact analysis, I regret that we are unable 

to develop and report this information. While we share your interest in having State-specific impacts, it is not possible at this time 

to generate accurate assessments due to a variety of deficiencies in 

data collection including variation in State reporting, changes in 

State funding practices, current available data sources, information 

systems and resource levels.’’ 

Well, this is a pretty breathtaking response. The federal official 

in charge of Medicaid who has issued seven regulations that will 

reduce federal payments to the States by at least $15 billion over 

the next 5 years cannot tell us how any of these new policies will 

affect individual States. 

Fortunately, we have the five of you here today to help us understand better what the effect of these regulations will be on coverage 

of low-income children. Will the regulations denying Medicaid payments to schools for outreach and enrollment activities result in a 

decline in Medicaid and SCHIP enrollment? Will the regulation 

narrowing Medicaid coverage for rehabilitative services result in 

the defunding of early childhood development programs for children from birth to 3? Will the cumulative loss of federal matching 

funds from all these regulations in a time of an economic downturn 

undercut the ability of States to finance their share of health coverage for children under Medicaid and SCHIP? 

I hope the hearing can shed some State-specific light on these 

issues. This is a federal-State cooperative program and your federal 

partner is telling you we don’t know what the impact will be on 

you. Maybe you can tell us what the impact will be before we allow 

these regulations to take effect. 

Thank you. I yield back the balance of my time. 

Mr. PALLONE. Thank you, Mr. Waxman. 

Mr. Burgess of Texas. 

Mr. BURGESS. Thank you, Mr. Chairman. It is an important 

hearing. In the interests of time, I am going to submit my opening 

statement for the record. 

I just want to thank all of our witnesses for being here today. 

I do feel obligated to let you know there is a competing subcommittee hearing on food safety, and with all the attention that 

has been on food safety recently, it is not for lack of attention or 

for lack of desire that I have to divide my time between two subcommittees. I wish the subcommittees would work together in a 

9 

better fashion so that we didn’t have these problems occur but such 

is life on this side of the dais. 

Mr. Chairman, I would say this is an extremely important hearing and we are going to get some great information today. I am so 

pleased as we go through the process this year. I wish we have 

seen so this type of effort and attention last year when it was incumbent upon us to do the work of reauthorization of the State 

Children’s Health Insurance Program. I hope that as we go forward, the importance of this subcommittee will be recognized. I realize process arguments aren’t the kinds of things of which headlines are made and I am not supposed to talk about process, but 

in this subcommittee, process is important. I said it before and I 

will say it again: Some of the best legislative and scientific minds 

in the United States Congress, in the United States House of Representatives today are on this Committee, and Mr. Strickland, they 

were last year as well, but it is imperative that this committee 

weigh in on this important subject and we don’t need a bill cut 

from whole cloth from the Speaker’s office, air dropped into the full 

committee in the middle of the night. That is not the way to do it. 

Mr. Chairman, I hope you will take your leadership and make 

certain that this subcommittee is able to do its work through the 

legislative hearings and the legislative markup that this subcommittee is supposed to conduct to get this vital legislation passed 

for the American people, and I will yield back. 

Mr. PALLONE. Thank you. 

I now recognize the gentlewoman from California, Ms. Eshoo. 

OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. ESHOO. Thank you, Mr. Chairman, for holding today’s hearing about healthcare for uninsured children in our country. Welcome to the governors and certainly to our colleague and our 

friend, always will be. You are an honorary member of this Committee, the full Committee and the House, Governor Strickland. 

In the last several weeks the subcommittee has had much testimony from State Medicaid officials, from parents, from academics, 

from policy experts who testified about how we are losing ground 

in covering uninsured children in our country, so your presence 

here today is very important to 45 other States whose governors 

can’t be here today. This is, I think, one of the better partnerships 

that the State and the Federal Government have for the children 

of our country, so your testimony is going to be really important 

to us. 

With the economy on the verge of recession, many States including my home State of California are facing deep budget shortfalls. 

I think I am probably preaching to the choir when I say that to 

you, but it is a tough time, and families obviously are very concerned about their jobs and their healthcare coverage. Rather than 

providing security to these families the Administration diminished 

its commitment to low-income children by vetoing the expansion of 

SCHIP which would have covered an additional 4 million uninsured kids in our country. We thought that that was making 

10 

progress, which I think is synonymous with being an American, 

that that really signified real progress. 

Now this is on the ropes but what has been added to the ropes 

is what the Administration came out with in their August 17th 

memo. Now, there are 43 governors of both parties that endorsed 

the legislation, so it was neither a partisan bill nor a bill that 

didn’t enjoy important support from governors across the country. 

Among other things, the Administration’s August 17th directive for 

SCHIP enrollment set nearly impossible goals for States to achieve 

before they can expand their program to cover uninsured kids and 

families earning up to $43,000 a year. Thousands of uninsured kids 

in States that plan to expand their programs have already seen 

this avenue to healthcare coverage closed as a result of the directive. Other States which already expanded have to come into compliance by this summer in order to maintain their plans, otherwise 

they are going to be forced to scale back the programs. Obviously 

as a result, it is more likely that we are going to see more children 

without healthcare and I think that is why several States, including Washington State, are suing over the directive. That is a major 

step for a State to take, to sue over this. Further undermining the 

program, the Administration’s 2009 budget failed to propose funding sufficient to cover existing enrollment, so it is adding insult to 

injury. 

In a letter to Oversight and Government Reform Committee 

Chairman Waxman, the Chief Deputy Director for the Health Programs for California wrote, ‘‘The reductions in federal funding as 

a result of regulatory proposals are likely to lead to destabilization 

of an already fragile healthcare safety net system in California 

which bears a heavy burden in rendering needed healthcare services to Medicaid beneficiaries and the uninsured.’’ I think if we had 

children here testifying in the next panel, that a child might say 

what did I do to you, what did I do to you that you are doing this 

to us. In one of the issues relative to the guidance that was put 

out, it bars children from enrolling in the program until they have 

been without insurance for a full year, and as one of my colleagues 

said, and much sicker. 

So Mr. Chairman, thank for you having the series of hearings. 

Thank you to the governors that are here today. You have tough 

jobs in tough atmospheres today, and we want to work with you 

to see that your hand can guide what your State chooses to do and 

that the Federal Government will be a fair and full partner in that. 

Thank you. 

[The prepared statement of Ms. Eshoo follows:] 

STATEMENT OF HON. ANNA G. ESHOO

Thank you, Mr. Chairman, for holding today’s hearing about health care for uninsured children in our country. 

In the last several weeks, the Subcommittee has heard testimony from state Medicaid officials, academics, policy experts and parents who have testified about how 

we’re losing ground in covering uninsured kids. I’m pleased that we’ll be hearing 

the perspective of five of our nation’s governors today, including our former colleague, Ted Strickland. 

With the economy on the verge of recession, many states, including my home state 

of California, are facing steep budget shortfalls. Families are concerned about their 

jobs and their healthcare coverage. Rather than providing security to these families, 

the Administration diminished its commitment to low-income children by vetoing 

11 

the expansion of the SCHIP which would have covered an additional 4 million uninsured kids. This was not a partisan or unreasonable bill: 43 of our nation’s governors from both parties, including Governor Schwarzenegger, supported this legislation. 

More than rejecting this opportunity to broaden coverage, the Administration has 

pushed forward a series of new rules and policy directives that are already reducing 

children’s access to health care. 

Among other things, the Administration’s August 17, 2007, directive for SCHIP 

enrollment set nearly impossible goals for states to achieve before they can expand 

their programs to cover uninsured kids in families earning up to $43,000 a year. 

Thousands of uninsured kids in states that planned to expand their programs have 

already seen this avenue to health care coverage closed as a result of this directive. 

Other states which already expanded their programs, must come into compliance by 

this summer in order to maintain their programs, otherwise, they may be forced to 

scale back their programs. As a result, we’re likely to see more children without 

healthcare. That’s why several states including Washington State are suing over the 

directive. 

Further undermining SCHIP, the Administration in its Fiscal Year 2009 budget 

failed to propose funding sufficient to cover existing enrollment. 

The Administration has advanced six regulations that scale back Medicaid funding by $13 billion. Although many of these cuts have been temporarily set-aside by 

congressional moratoria, the moratoria will be expiring over the next few months. 

The implementation comes at worst time for states as they struggle to balance budgets in the face of cumulative budget deficits of more than $34 billion this year. 

In a letter to Oversight and Government Reform Committee Chairman Waxman, 

the Chief Deputy Director for the Health Programs for the State of California wrote, 

‘‘The reductions in federal funding [as a result of CMS’s regulatory proposals] are 

likely to lead to destabilization of an already fragile health care safety-net system 

in California, which bears a heavy burden in rendering needed health care services 

to Medicaid beneficiaries and the uninsured.’’ 

I don’t envy our governors for the position they are being put in. Most of all, the 

children of our country deserve so much better. 

Mr. PALLONE. Thank you. 

I recognize the ranking member of the full committee, Mr. Barton. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Mr. Chairman. 

I want to welcome our governors, especially Governor Strickland. 

It is unusual to see you sitting down there. I am used to having 

you up here. Of course, I kind of liked it when you called me Mr. 

Chairman. It is obvious that you are doing a great job for the great 

State of Ohio, and of course, our good friend Haley Barbour, who 

is no stranger to this committee, and the other governors also. We 

are very delighted that you are here. 

I do want to thank Chairman Pallone for holding the hearing. I 

know that the focus theoretically on the hearing is on CMS’s August 17th guidance letter, and I think that it is fair to have an 

open and vigorous debate about that, but I hope we can also get 

into some of the broader issues that deal with SCHIP and Medicaid, the component program with SCHIP. Several years ago we 

had in budget reconciliation a major review of Medicaid. We 

worked with the National Governors Association on a bipartisan 

basis. The two governors that led the taskforce were Governor 

Warner, a Democrat of Virginia, and believe it or not, Governor 

Huckabee, a Republican from Arkansas. They testified before this 

Committee several times, and Governor Warner on the record, and 

I quote, talked about Medicaid ‘‘being on the road to meltdown.’’ I 

12 

couldn’t agree more with that statement that Governor Warner 

made several years ago. 

According to our latest CBO estimates, in the next 10 years Medicaid is going to spend $5.4 trillion—that is about a half a trillion 

dollars per year—and of that, the States are responsible for over 

$2 trillion, and I am sure that each of you governors is very well 

aware of that. It is an open question how we can afford on this one 

program, a State-federal program of Medicaid, to spend that much 

money and have all the other programs that each of you so well 

know your States work with the Federal Government to provide 

services and help to our less wealthy individuals at the State level. 

Last year the former chairman of the subcommittee Deal and I 

put forward an SCHIP proposal that would have required that before States could go above 200 percent of poverty, they had to show 

90 percent enrollment of their children between 100 and 200 percent of poverty. That is a little bit different than the guidance letter of 95 percent but it is close to it. It seems to me only fair before 

we go above the original intent of SCHIP in terms of enrollment 

of children at higher income levels, we really, really ought to try 

to get as many of our moderate low-income children in the program 

as is possible. It just doesn’t seem fair that proposal that the Majority put on the Floor back in August would have let States go up 

to 400 percent of poverty, which would be over $80,000 per family 

and also cover adults. I just think that we should cover children 

first and of those we should cover the low-income children between 

100 and 200 percent of poverty. 

I know I am going to be stunned if each of you don’t talk about 

State flexibility. I didn’t reach your statements but I chaired 

enough of these things and I know enough about a governor, or 

governors, generically, that you all want State flexibility. That is 

why people like me support block grant programs so that we give 

you the flexibility to manage the programs at the State level that 

you think is best for your State. So I don’t have a problem with 

requiring flexibility for SCHIP, but again, I think the basic guidepost should be, let us cover our moderately low-income children 

first. 

I do appreciate you all being here, and I appreciate Mr. Pallone 

and Mr. Dingell for holding the hearing. I was one of the most vociferous objectors last year that we were legislating on the Floor 

without having hearings in committee, and I know there is a political element to this and there will be great gnashing of teeth and 

beating of breast and things like that as we go through today, but 

I do hope that we do focus on the policy underlying SCHIP, which 

is a State-federal partnership and it is designed to cover children 

between 100 and 200 percent of poverty. 

I thank each of you governors for being here. I have another 

hearing going on in the Oversight Subcommittee so I am going to 

be shuttling back and forth, but I will try to listen to as much of 

your testimony as possible. 

Thank you, Mr. Pallone. 

Mr. PALLONE. Thank you, Mr. Barton. 

The gentlewoman from California, Ms. Capps. 

13 

OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. CAPPS. Thank you, Chairman Pallone. 

I am very much looking forward to hearing the particular perspectives of our esteemed witnesses today. Of course, I am going 

to add my congratulations and welcome back to our former colleague, Governor Strickland from Ohio, and really commend the 

five of you for taking the time from your very busy schedules to 

give us the perspective from the ground troops in your States, from 

the people who really see the issues we are discussing today face 

to face and know the families and know the people we are talking 

about. You are the ones struggling to cope with some very traumatic setbacks that the Bush Administration has proposed for 

SCHIP and Medicaid. I commend the National Governors Association for rightly standing up against these misguided rules and I am 

pleased to see attention drawn to your concerns on the front page 

of this past Sunday’s New York Times. I think it is interesting to 

note that many of the prominent Republican governors are the 

loudest objectors. 

Governor Perdue, we shook hands a few minutes ago and I want 

to put a quote into my statement from your commissioner of the 

Georgia Department of Community Health, Dr. Meadows. She said 

this: ‘‘These rules taken together would have a tremendous adverse 

impact. They would undermine the healthcare safety net for the 

entire State of Georgia.’’ But Georgia is not the only one. Our own 

governor, those of us from California, Arnold Schwarzenegger, has 

estimated $12 billion in losses to California alone. 

When we talk about these numbers, however, I think we lose 

sight of what these numbers really mean. The money isn’t being 

taken away from Governor Schwarzenegger, his pockets or mine or 

yours. These are billions of dollars which represent lost services to 

our Nation’s neediest families, to the children who will live lives 

compromised because of this lack of service. How insulting at the 

very time that we are experiencing an economic downturn when 

basically what the Bush Administration now has said through the 

SCHIP and Medicaid proposed rules is this: sorry, States, but we 

are reneging on the commitment we have made to work as partners in order to serve the needy families. What is also disturbing 

to me is the effect that this will have on public hospitals which are 

the backbone and the safety net in your communities, when they 

are being asked, when we rely on them. As President Bush has 

said, well, you can always go to the emergency room. They are 

going to be strapped for funds if we follow through with these rules 

and the hospitals they operate, we are going to see a domino effect 

as you know from where they will have to cut services in these 

very emergency rooms, in the trauma units and all of the services 

that your public demands and needs. 

So I look forward to hearing from you today, and I look forward 

to a thoughtful discussion that we can have on how important it 

is we prevent these harmful rules from going into effect. 

I yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Arizona, Mr. Shadegg. 

14 

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA 

Mr. SHADEGG. Thank you, Mr. Chairman, and I thank you for 

holding this hearing. It is extremely important that we examine 

this issue. 

I would like everybody to take one step back from the discussion 

of the SCHIP program and look at the broader issue of healthcare 

for Americans. I want to thank our witnesses. I think they are important players in this discussion and what we do. I would like to 

put my written statement into the record. 

But in asking you to step back, I would like to ask you to not 

think about what role in this debate you play, whether you are a 

governor who would control some of those funds and run a program 

or whether you are a Congressman and would enact what we pass 

into law, but rather think about it from the standpoint of the patient. In this case, think about it in the standpoint of the child and 

of the child’s parents. I would suggest we are at a watershed in 

healthcare in America. I would suggest that anyone who examines 

healthcare in America today will find very rapidly that one of the 

biggest problems we face is that the consumer of the healthcare 

product, the individual who is treated, is not put into a position to 

make decisions. If you examine healthcare in America today, too 

many decisions are made by third parties. They are made by your 

employer, they are made by the plan that your employer hired and 

they are made by the doctor that the plan hired by your employer. 

And so you don’t get to make those decisions because your 

healthcare plan was picked by your employer, or in the case of government healthcare programs, you don’t get to make the decisions 

because some bureaucrat made those decisions. I would argue that 

we have a crisis in the delivery of healthcare in America today because we are not putting the people who know the most, the consumer of the goods, in a position to make a decision. 

I have introduced a bill every single year that I have been in this 

Congress since 1995 which would change that, which would say let 

us let individuals choose, let us say to an employer, you can buy 

a plan for your employees but you should also tell some of those 

employees that they have the right to go pick their own plan. I 

would suggest to you that with SCHIP, we can offer to the parents 

of the kids who need help a refundable tax credit, a block of money, 

and say to them, take this money and go buy health insurance coverage that meets your needs, a healthcare plan that you choose for 

your children, a healthcare plan that you pick with the doctors you 

like, and if you do not like how it performs, you can fire that plan. 

If you are not pleased with the way the doctors or the nurses or 

the labs or the hospitals treat you, you can get rid of that plan and 

do something else. We can do that. The bill I have proposed every 

year says we are going to give you a refundable tax credit to every 

single American. It would cover every single child in America and 

every single child in SCHIP and we can afford it because we are 

already spending that money in emergency rooms and in other clinics but the issue for America is, are we going to move toward more 

third-party control by employers or plans or the government or are 

we going to move toward patient-driven care? 

15 

I would suggest that this is the discussion we should be having, 

and I personally believe that if you put patients in charge of their 

own healthcare, then not only will costs come down because consumers buy the most efficient care they can afford but quality will 

go up, because if patients can fire a doctor that isn’t doing a good 

job for them or a plan that isn’t doing a good job for them or a lab 

that didn’t get the answer back quick enough, if patients can hold 

the deliverer of that service to them accountable, then you will get 

better quality as well as lower prices, and I think that is what we 

ought to be talking about. That is the healthcare plan that as a Republican I favor and it ought to be funded by the government for 

everybody who can’t get that care. I pushed it every year since I 

got here. It has largely been adopted by John McCain in his proposal, and I think we need to start looking at something broader 

than one more little program for one more little niche group that 

needs help, and we can help all Americans and certainly we can 

help all American children. 

I thank the gentleman, and I yield back. 

Mr. PALLONE. Thank you. 

I recognize the gentlewoman from California, Ms. Solis. 

OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. SOLIS. Good morning, Mr. Chairman and to our witnesses, 

a very prestigious panel. 

I happen to have a different take on what is occurring and what 

is being presented to us. I don’t believe that the President is being 

very—how can I say—satisfactory, in my opinion, in his treatment 

of children. In fact, I think that his proposals that he is presenting 

are misguided. In my State of California, we are seeing that 6.7 

million individuals who are currently on Medicaid may be affected 

by these proposals that he plans to implement. And in a district 

like mine in East Los Angeles and the San Gabriel Valley where 

70 percent of the population are minorities, we have a very vast 

number of young children under the age of 6 that are currently not 

even enrolled in any form of healthcare coverage. 

So I ask who is to care for our children? Who is to speak up for 

them? And last year, yes, we did discuss and debate a proposal 

that I was very much in favor of, the CHAMP Act, which I believe 

would have helped extend care to these vulnerable children in my 

district. Currently right now in my district, the SCHIP program 

serves 19,000 children. But 18,000 children in my district are still 

left without any form of healthcare. Look at those numbers. Those 

are things that I think the American public really wants to see us 

discuss. I believe that we should respect States’ rights in the administration of these programs because there has to be flexibility 

provided for each States’ goals and objectives. The goals of California may be very different from the goals of Washington State 

and Ohio. California certainly has its challenges, and I think that 

CMS’ proposals are very cruel. I don’t think that it is fair to punish 

children or individuals who are disabled. I don’t think it is fair to 

punish children who are just starting out in their lives. We are trying to couple education with health. I would hope that the expanVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
16 

sion of the SCHIP program and Medicare programs will continue 

to grow. In a district like mine that is part of the L.A. Unified 

School District, which is the second largest school district in the 

country, we face many challenges. It is disheartening for many of 

us to have to go home and say that while we continue to try to 

speak up on behalf of our constituents, that somehow the President 

and his Administration don’t think that it is appropriate to provide 

coverage for these vulnerable populations. 

And in California, I would like to say we are a bit progressive. 

We like to provide incentives so that we can do more outreach to 

many of these vulnerable populations, but I see that my governor, 

Arnold Schwarzenegger, has his hands tied. He can’t expand outreach. He can’t reach the vulnerable populations that need assistance. So while yes, we want to provide coverage to all low income 

individuals, we don’t even have half of the individuals in my own 

district currently enrolled, and I am sorry to say that more are 

going to be left out. 

I will submit my statement for the record and really want to 

hear from our governors here because I think we should find a solution. I think we should put families and children first, and especially those that are disabled and need our assistance. I think that 

is what I was voted into office to do. I look forward to hearing your 

statements. 

Thank you, and I yield back. 

[The prepared statement of Ms. Solis follows:] 

STATEMENT OF HON. HILDA L. SOLIS

Mr. Chairman, thank you for convening this hearing today. 

Children face many barriers to health care. 

Yet rather than increase coverage, President Bush continues to issue misguided 

policies that will result in more uninsured children and individuals with disabilities 

and overall reduction of access to care for vulnerable individuals enrolled in Medicaid. 

CMS’ ill-advised rules affect 6.7 million individuals in California’s Medicaid program alone. 

More than 170,000 individuals in my district are Medi-Cal beneficiaries and in 

East LA alone, at least 1 of every 4 persons received health coverage through the 

Medi-Cal program. 

Despite Healthy Families (SCHIP in California), which serves more than 19,000 

children in my district, 18,000 children are still uninsured! 

CMS’ regulations will reverse any progress that we have made and almost ensure 

these children and vulnerable populations do not receive care. 

This is particularly troublesome for communities of color. 

69% of Medi-Cal beneficiaries in my district are Latino and another 18% are 

Asian. 

Congress must protect Medicaid and SCHIP. 

We must also do better for children who are eligible for public programs. 

7 in 10 uninsured Latino children are eligible for public programs such as MediCal and Healthy Families, but language and cultural barriers may delay or block 

enrollment. 

We must increase outreach and enrollment efforts, and one way to do this is to 

support community health workers, also known as promotoras. 

They work in all communities and provide a wide array of services, such as health 

education, advocacy, and enrollment in health insurance programs. 

However, the Administration is taking away funding for outreach and enrollment. 

The Los Angeles Unified School District will likely lose at least $7 million in funding for outreach and enrollment activities and referral to Medi-Cal eligible services. 

That is why my colleagues from the Congressional Hispanic Caucus and I sent 

a letter to the Administration on September 25, 2007 urging CMS to reconsider its 

August 17th directive. 

17 

We must also protect our safety-net hospitals and providers from CMS’ cuts. 

They provide essential care to individuals who have few options and train our future health professionals. 

Unfortunately, with its regulations and directives, CMS is denying the wishes of 

states and barring families from health care. 

I look forward to addressing these issues and to improving the health of our children, individuals with disabilities, their families, and our communities. 

Mr. PALLONE. Thank you. 

The gentlewoman from Colorado, Ms. DeGette. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you, Mr. Chairman. I want to add to the 

many plaudits being heaped on our former colleague and my 

former seatmate, Governor Strickland, who was sitting next to me 

in 1997 when we passed the first SCHIP bill out of this Committee, 

and at that time the SCHIP bill was really a bipartisan effort. We 

had President Clinton in the White House. We had Newt Gingrich 

as Speaker of the House. And the SCHIP bill was really an effort 

to help the States find state-based solutions to insuring children 

who were just above the level of poverty. 

So imagine my surprise last year when we went to reauthorize 

the SCHIP program and it suddenly became a big political football 

with the White House and the Congress. Because in truth, the 

State-based solutions that we enacted in 1997 were solutions that 

worked for many years and all we really needed was a way to improve on the efficiency of the system and to give the States more 

resources so they could target those kids who needed it. 

All of these horror stories that we heard about when we were 

doing the reauthorization were things that were mainly waivers 

that had been instituted by the Bush White House to allow States 

to cover these children. 

And so we were really dismayed, everybody has talked about it, 

about this August 17th directive that limited States’ ability to 

cover children in families above 250 percent of the federal poverty 

level, and you know, right now in Colorado we don’t cover children 

above this level but I talked to some people about States that have 

a higher cost of living, like the Chairman’s state, New Jersey, 

where in New Jersey and New York a family of four can often pay 

up to $20,000 in insurance premiums. So you tell me, if you have 

a family that is making $40,000, which is 250 percent of poverty, 

and they are paying half of that in insurance premiums, what 

choice are they going to make? The choice they are going to make 

is to go without insurance because they can’t afford housing, food 

and insurance. 

That is why we have to give the States flexibility on SCHIP and 

that is why in any reauthorization we need to make sure that we 

balance that. We don’t want to be insuring rich children. Their parents should pay for their insurance. But we do need to make sure 

that of the 9 million kids in this country who are eligible for 

SCHIP right now under the current rules that we can cover all 

those kids because it is just like Congresswoman Eshoo said, how 

can I as a Member of Congress take two children who are in the 

18 

same economic situation and play God and say you get health insurance, you get well baby insurance but you have to go to the 

emergency room. It is unconscionable and we should not be doing 

this as the greatest country in the world. 

Mr. PALLONE. Thank you. 

I recognize the gentlewoman from Illinois, Ms. Schakowsky. 

OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, and I too want to 

welcome all of our governors here today. Governor Strickland, you 

know how these opening statements go. I am going to make mine 

as short as possible and speak on behalf of, although not authorized by my governor in Illinois, where we have a strong SCHIP and 

Medicaid program and he has fought to improve coverage in our 

State by increasing our income threshold and making healthcare 

affordable to every child in the State through his program. It covers immunizations and doctor visits and many other health services such as hospital stays and prescription drugs and vision care 

and dental care and important devices such as eyeglasses and asthma inhalers. 

We have a really good program in Illinois. We are proud that we 

have so many children that are covered but its future is now 

threatened by these cruel and shortsighted regulations that will affect the health of thousands and thousands of Illinois children, and 

that is just the fact of this August 17th directive. It will force 

many, many children in our country to lose access to healthcare 

and undo State programs. That is just the fact of the matter. 

Under this directive, it is unbelievable to me that States would be 

required to let children who lose private coverage languish for an 

entire year before accessing public coverage. It would require 

States to cover 95 percent of children from families under 250 percent of the poverty level before meeting the needs of other children, 

and that may sound good on paper but actually that is a very unrealistic goal, and it is going to make it impossible to help other children who absolutely need the care. 

And so I really look forward—I have read your testimony and I 

am also involved in this other hearing so I will be in and out but 

I appreciate the suggestions that you made and look forward to 

hearing your testimony. 

Thank you. I yield back. And I would like to put the rest of my 

statement in the record. 

[The prepared statement of Ms. Schakowsky follows:] 

STATEMENT OF HON. JAN SCHAKOWSKY

Thank you, Mr. Chairman. I also want to thank each of the governors for being 

here today. We appreciate your time and your interest in this critical issue. 

All of you know how important it is to provide children with quality health coverage and most of your testimonies will illustrate just how critical it is that we not 

undermine the State Children’s Health Insurance Program. I strongly support 

SCHIP and Medicaid, as does my governor, Rod Blagojevich. He has fought to improve coverage in our state by increasing our income threshold and making 

healthcare affordable to every child in the state through his All Kids program. 

Governor Blagojevich’s All Kids program covers immunizations, doctor visits, and 

many other healthcare services such as hospital stays, prescription drugs, vision 

care, dental care, and important devices such as eyeglasses and asthma inhalers. 

19 

We have a good program in Illinois but its future is and the health of thousands 

of children are threatened by these cruel and short-sighted regulations. 

Yet as we move forward in Illinois, this Administration seems bent not just on 

throwing up barriers but even on undoing some of the progress we have made. So 

now, rather than capitalizing on what we’ve already accomplished, we are spending 

valuable time defending these successful programs against the Administration’s 

harmful regulatory cuts. 

The August 17th directive will force children to lose access to healthcare and undo 

State’s progress. As we head toward recession, families are going to have an even 

more difficult time getting medical care for their children. Employer coverage is declining, and premiums and out-of-pocket costs are rising. SCHIP and Medicaid are 

essential for filling in the gaps. Under this directive, states would be required to 

let children who lose private coverage languish for an entire year before accessing 

public coverage. It would also require states to cover 95% of children from families 

under 250% of the poverty level before meeting the needs of other children—an unrealistic goal. 

The Administration claims that their objective is to reach the lowest-income children—but let me tell you what would truly accomplish that goal: the SCHIP legislation that was sent to the President’s desk repeatedly—legislation that would have 

rewarded states for increasing their enrollment, not penalized them. 

I look forward to confronting these issues and again thank our witnesses for being 

here. 

Mr. PALLONE. So ordered. 

Ms. Hooley. 

OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Ms. HOOLEY. Thank you, Mr. Chair, and I thank our distinguished guests for being here today, one from a neighboring state 

and the other a member that I served with. Welcome to all of you. 

The State Children’s Health Insurance Program and Medicare 

and Medicaid play a vital role as a healthcare safety net for children and low-income families. As our economy continues to appear 

headed toward a recession, it is more critical than ever to ensure 

that the lifelines of coverage for our most vulnerable children continue to provide robust healthcare coverage. In Oregon, we have 

over 115,000 uninsured children. This is simply unacceptable in 

this day and age. Like every debate that costs money, it is all 

about how we want to spend our money, what are our priorities. 

And when I look at healthcare for children, it seems to me it has 

to come to the top of our list. 

While a bipartisan coalition of colleagues in the House and the 

Senate passed multiple bills to expand SCHIP to 4 million more 

children, the President and a minority of the House blocked that 

commonsense legislation. Very disappointing. Oregonians and 

Americans across this country deserve better than stale, partisan 

warfare. Instead, the Administration has systematically sought to 

create barriers to coverage often defying bipartisan congressional 

opposition through its use of rulemaking authority. State flexibility—and I used to serve in the State legislature, I know how important that State flexibility is—has been I think a keystone of the 

success of SCHIP. 

I am disappointed that the Center for Medicare and Medicaid 

Services directive severely limits States’ ability to expand their 

SCHIP program and reverses gains in covering uninsured children 

already made. The directive establishes unattainable requirements 

for States that wish to cover children with family incomes above 

20 

250 percent of the federal poverty level. A State wishing to do so 

would have to enroll at least 95 percent of all children eligible for 

Medicaid and SCHIP under 200 percent of the federal poverty 

level. No means-tested programs like Medicaid or SCHIP have ever 

been able to achieve those unrealistically high targets. Great goals, 

just hard to achieve. 

Unfortunately, the August 17th directive is only one of the problems States face as they fight to keep their children covered. The 

six Medicaid regulations that will cost States more than $13 billion 

over the next 5 years will have an equally devastating impact. Limitations on reimbursement for public providers and elimination of 

graduate medical education would have a devastating impact on 

Oregon Health and Science University. As Oregon’s only medical 

school, OHSU would be forced to scale back its training of the next 

generation of physicians with the cuts to GME and public providers. 

I am also concerned with significant new limitations on targeted 

case management. These services provide critical assistance in 

helping Medicaid beneficiaries meet their medical, social and educational needs. The meth epidemic in Oregon has produced an increased need for foster care because addicts often lose custody of 

their children. These children often face significant psychological 

trauma and need the types of services currently provided by targeted case management. If the interim final rule is implemented, 

these children will not receive the services that they so desperately 

need. 

I look forward to learning more from the governors today about 

how the CMS directive and regulations will impact children in 

their States. 

Thank you, Mr. Chair, for having this committee hearing. 

Mr. PALLONE. Thank you. 

The gentleman from Washington, Mr. Inslee. 

OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. INSLEE. Thank you. I would like to welcome my current governor, Governor Gregoire, and my former roommate, Ted Strickland, back to Congress. I have to say it has been kind of interesting 

listening to this lavish praise over my former roommate, Governor 

Strickland. I am sure some of that is deserved, at least a portion, 

but I am proud that Ted has been a great governor of the State 

of Ohio. Ted, we really have enjoyed seeing you helping your folks 

in Ohio. We are proud of you. 

Governor Gregoire, I want to thank you for coming here to continue your long career in children’s health starting with your efforts to prevent kids from being addicted to tobacco and your great 

work as an attorney general, and now I want you to know we are 

going to continue every way we can to help you in our efforts with 

the problems we have had of not funding States that have moved 

forward as we have under your leadership and others. As you 

know, our bill did solve that problem. We had a total solution until 

the President vetoed this bill. We are going to make additional efforts to solve that problem and we will engage CMS in this latest 

battle and I hope we will succeed so that you can continue your 

21 

great career on this, and we look forward to your comments. 

Thanks for being here. 

Mr. PALLONE. Thank you, and that concludes the opening statements by members of the subcommittee. So we will now turn to our 

panel, and they have been listening to us now for an hour. I want 

to welcome you again, and let me introduce the various members 

of the panel. Starting to my left is the Honorable Chris Gregoire, 

who is the Governor of Washington. And second is of course the 

Honorable Haley Barbour, the Governor of Mississippi. Third is 

Governor Deval Patrick, Governor of Massachusetts. And then we 

go to Governor Sonny Perdue from Georgia, and finally Governor 

Ted Strickland, former member of this Committee, the Governor of 

Ohio. 

Now, the way our rules are, we have 5-minute opening statements that become part of the hearing record and each witness 

may in the discretion of the committee submit additional brief and 

pertinent statements in writing for inclusion in the record later. So 

I just want to begin with Governor Gregoire for an opening statement. Thank you for being here again. 

STATEMENT OF CHRIS GREGOIRE, GOVERNOR OF 

WASHINGTON 

Governor GREGOIRE. Thank you, Mr. Chair, for the opportunity 

to be here, and Ranking Member Deal and all the members of the 

Committee. I am honored to make our presentation on behalf of the 

people of the great State of Washington today. 

In my home State of Washington, we set a goal. Our goal is all 

children covered by health insurance by the year 2010. We are well 

on our way but we cannot do it alone so I come before this Committee to ask you to work with us, to work with the governors of 

our respective States to provide healthcare to America’s children. 

Covering children we believe is a moral imperative but it also 

brings with it very important societal benefits and it makes a 

strong economic case. 

I chaired a Blue Ribbon Commission on Health Care Costs and 

Access in my home State. It was a bipartisan commission charged 

with delivering a 5-year plan to provide access to safe, high-quality, 

affordable healthcare to all Washingtonians. During that process 

we learned a lot about the healthcare system, its challenges, its opportunities, its people and its impact. We agreed that healthcare is 

a shared responsibility, virtually a three-legged stool balanced between government, business and individuals, and in the case of 

children, the parents. 

First we learned that healthy children are far more likely to succeed in school and in life and that the health of the next generation 

is critically important to the future of our country. Healthy children learn better. They grow better and they have a better chance 

to succeed in life. 

Second, we heard from practitioners, pediatricians at one of our 

country’s first-class institutions in children’s health, the Seattle 

Children’s Hospital and Medical Center. Their testimony was made 

clear to us that it is far more costly to taxpayers for children to 

access routine medical care via the emergency room than having 

the kind of insurance that the SCHIP program provides. 

22 

Third, that by the time children receive care in the emergency 

room, it is often too late. Their healthcare conditions are more severe, the consequences to the child much more painful and the cost 

to society much greater. We also know that uninsured children 

sometimes can cause other children to get sick in the classroom 

they are in because their care has been delayed. 

So what is Washington State doing? Last year I signed a comprehensive bill that truly lays a strong foundation to ensure that 

all children living in Washington State have health insurance coverage by the year 2010. We raised the eligibility rate for all children’s programs to 250 percent of poverty and we anticipate enrolling half of the remaining uninsured under that limit this biennium. 

We allowed for an active outreach effort to ensure that over the 

next 18 months all eligible are contacted and cared for. We increased our reimbursement rates for pediatricians by nearly 50 

percent on January 1, 2008, knowing full well that health insurance without providers is not going to make it happen so we want 

to make sure that they have access to providers. We intend to increase our eligibility rate for all children by legislation to 300 percent of poverty on January 1, 2009. We provided for a reimbursement system so that families above 300 percent of poverty who still 

cannot afford to purchase health insurance on the private market 

will be able to buy children’s coverage from Medicaid at the State’s 

full cost, that to go in effect January 1, 2009, and we established 

a framework and track measures to improve the healthcare system 

for children and tie future rate increases to providing a medical 

home for our children to improve their health status. 

As I mentioned, our coverage is based on the three-legged stool. 

Dependent on eligibility levels in Washington, parents are participating in the cost of their child’s care. For example, with respect 

to SCHIP, unlike Medicaid, SCHIP families pay a monthly premium, currently $15 a month for each child up to a maximum of 

three children, and when our eligibility level increases from 250 to 

300 percent in January, the family participation rate will increase. 

What Washington is achieving is really quite remarkable. Our 

uninsured rate for children has dropped significantly. Eighty-four 

thousand more children have access to healthcare today than they 

did in 2005. By our own State survey, we are covering 94 percent 

of our children below 200 percent of poverty today. While we may 

disagree with the Center for Medicare and Medicaid Services as to 

the data that they use, nonetheless, we have made extraordinary 

efforts to cover all children. Our State’s insurance programs for 

children currently provide coverage to 583,000 children. Another 

1.2 million are covered by private insurance, most employer plans. 

Despite that success, 70,000 children in our State are still without 

coverage. 

Medicaid and SCHIP provide the backbone for covering uninsured children. To truly cover all those children and throughout the 

Nation, we need a partnership with the Federal Government and 

we need to ensure that that same unity of purpose as was passed 

in 1997 is present today. I want to thank my congressional delegation—Jay Inslee is here today—and through their attempts to reauthorize SCHIP, they have been stalwarts. Because we have been an 

early leader in healthcare for our children, one of the handful of 

23 

States to raise Medicaid eligibility to 200 percent prior to the enactment of SCHIP, we have been punished ever since by a longstanding inequity that prevented the State from using its full allotment of SCHIP funds. By delegation work, you cleared that problem up and I want to thank you for that. 

Without SCHIP reauthorization, our partnership to achieve our 

goal will fail. We need that partnership. Based on the August 17th 

letter through CMS that was sent to State health officials announcing new requirements, those requirements which have been described to you today together with eight other States I am challenging that rule. If allowed to go forward, 8,100 children in Washington State will not receive coverage. 

Why am I bringing legal action based on the rule? Picture a single mother with two children trying to make ends meet with an annual income of $45,000 a year, just over 250 percent of poverty, 

and imagine how she is going to pay in Seattle, Washington, for 

lodging, for food, for clothing, for transportation and still have 700 

to 900 a month to buy health insurance. That is roughly one-fourth 

of her income. This problem does not go away if we go to 300 percent of poverty in Seattle or for that matter in eastern Washington. 

In fact, it even makes things more desperate. By CMS measurements, no State that I know of will comply with the August 17th 

guidance. The effect of the rule intended or otherwise is to preclude 

the States from covering these children in low-income households. 

One of the justifications for the August 17th letter is known as 

crowd-out. The crowd-out argument suggests that by making public 

health coverage affordable, families will drop private insurance and 

enroll in SCHIP, but in our State we have structured a program 

to get at that very issue by creating an employer-sponsored insurance program. When cost-effective, we keep otherwise Medicaid-eligible families in private insurance, paying the premium assessments for parents’ employer plans to keep those kids in their employer plans and avoid them having to come onto Medicaid and 

SCHIP. 

In discussing the need for a stronger partnership between the 

States and the Federal Government, I would be remiss if I did not 

mention the frustration that my colleagues and I share with respect to a number of Medicaid regulations being pursued by the 

Administration around targeted case management, graduate medical school education, school-based services and coverage of rehabilitative services, to name a few. Joining as we did in our annual 

winter meeting just this past weekend, governors are showing a 

united front in our opposition to these CMS regulations that will 

cause significant harm to our children, our seniors, persons with 

disabilities while shifting greater and greater costs to the States, 

an estimated $15 billion over 5 years. States simply cannot shoulder these costs. I urge you to place a moratorium on these regulations. 

As Governor, I face challenges like you do at the federal level in 

developing a budget. There is no question we are in struggling 

times and that we are having to absorb ever-increasing costs of 

healthcare, families, employers and government alike, but in Washington I want to let you know that we are driving down the cost 

of healthcare, driving up the quality. We are making the 

24 

healthcare system more affordable and accountable to improve results to actually improve the health and the health outcomes of all 

Washingtonians but kids come first. Washington State is committed to preparing them for the very best that they can be with 

the tools, the education and the health that they need to succeed 

and to be productive members of our society. We need your help. 

I would ask you to put a moratorium on the August 17th letter and 

to proceed with the reauthorization of SCHIP. Our children need 

you very much. 

Thank you, Mr. Chair and members of the Committee. 

[The prepared statement of Mr. Gregoire follows:] 

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Mr. PALLONE. Thank you, Governor. 

Next is Governor Haley Barbour. You are recognized. 

STATEMENT OF HALEY BARBOUR, GOVERNOR OF MISSISSIPPI 

Governor BARBOUR. Mr. Chairman, thank you and Congressman 

Deal, members of the committee. I am going to try to stay within 

the 5 minutes but remember, I talk slower than the rest of them. 

Together between SCHIP and Medicaid, we have about 625,000 

people in Mississippi that are served. SCHIP is a very important 

part of that. Our SCHIP program in Mississippi covers only children at or under 200 percent of the federal poverty level. It is built 

to the 1997 law and that is all that we cover, and that is one reason that we are very concerned about the bill that was passed last 

year and was vetoed. The current distribution formula for Mississippi consistently shortchanges our State. Even though we only 

cover children under 200 percent of poverty, the current formula 

doesn’t provide enough money to pay the federal share for even 

half of the children in Mississippi who are under 200 percent of 

poverty. 

Mississippi’s total costs of covering 63,000 children in SCHIP is 

$133 million. Under the current law, the Federal Government pays 

83 percent of that. We have the highest match rate in the country. 

Thank you very much. It means the Federal Government should be 

giving us $111 million to cover the federal share for SCHIP but our 

State’s SCHIP allotment for fiscal year 2008 was $61.7 million, 

leaving us $50 million short of the full federal share, even for the 

children that are signed up and this has been the case from the 

beginning. The formula shortchanges us very badly. And for years 

Congress and members of our delegation and the Administration 

have allowed us to depend on redistributed funds from other 

States. These redistributions were possible because other States 

weren’t spending their whole allocation on children under 200 percent of poverty. However, when those States starting getting waivers where they could cover adults and we have States where more 

than half the people covered under SCHIP are not children, that 

redistributed pool of money got soaked up. Thus far, because of a 

lot of hard work by a lot of people, even though we are tremendously shortchanged, we have been able to scramble around and 

get the federal money for the federal share to cover these children. 

We have never turned anybody away from SCHIP, even though we 

got shortchanged. 

The bill that Congress sent to the President last fall wouldn’t 

have funded Mississippi’s SCHIP program at an amount adequate 

just cover the children under 200 percent of poverty. It would 

though have allowed other States to greatly expand coverage so 

here we are, the poorest State in the country, getting shortchanged. 

I can’t support a bill that doesn’t give Mississippi enough money 

to fulfill even the original intent of the program while other States 

get to expand their programs to cover higher income children and 

even adults who don’t have children. Even with the additional 

money that Congress provided for SCHIP in last year’s bill, under 

the proposed formula we would still be shortchanged. According to 

the U.S. Census Bureau 2006 survey, there are 71,851 children in 

40 

Mississippi under 200 percent of poverty that don’t have healthcare 

coverage either from Medicaid or from SCHIP. 

With few exceptions, these children are eligible for SCHIP. To 

cover them all, Mississippi should receive a federal allotment of 

$232 million a year. Last year’s wouldn’t have given us but $142 

million, leaving us $90 million short, still nearly 40 percent shortchanged by the bill. Even if we got 100 percent from the Child Enrollment Contingency Fund, we would still be shortchanged by 27 

percent to cover all our children. 

Again, I can’t support a bill that shortchanges my State, the children of my State under 200 percent of poverty. We are not talking 

about covering middle-class children. We are not talking about covering adults. I can’t be for a bill that shortchanges us for doing the 

basics. 

I would like to mention the big thing you all can do for us: fix 

the formula. Fix the formula where States like mine get enough 

money to pay for their poor children, for the under 200 percent of 

poverty. 

I would like to mention the Medicaid rules. We think that the 

Medicaid rule for changing the definition of public hospital is a 

very bad idea. Our Medicaid program was crowding out spending 

on higher education when I became governor as was noted in a 

Brookings Institution study. We have gotten control of Medicaid 

spending. Our problem now is, every time we get control of spending, the Federal Government disallows part of our State share so 

we are $90 million in the hole, not because we haven’t controlled 

spending. We are $90 million in the hole because they told us this 

won’t count anymore, part of it because of public hospitals. So we 

don’t like changing the public hospital definition, and for us also 

the idea that changing the rule for graduate medical education is 

not a Medicaid issue. It wouldn’t hurt Medicaid. It would hurt our 

Medicaid program. Our University Hospital has about 200 residents a year. It is the biggest provider of healthcare to Medicaid 

and SCHIP beneficiaries in the State, and if you took that $15 million away from the medical center for graduate medical education, 

you would be taking away the people that provide care. 

So I wanted to share our views on SCHIP. I don’t know how 

many other States are like us. But I also did want to put my oar 

in the water that we appreciate you all putting a moratorium last 

year on reducing the provider—you know, they wanted to reduce 

the provider fee where it could be 6 percent and you all limited the 

reduction to 51⁄2 percent. It would certainly suit us if you would do 

that for some of these changes and rules which we don’t really 

think are necessary or well thought out. 

Thank you, Mr. Chairman. I am sorry I ran over. 

[The prepared statement of Mr. Barbour follows:] 

STATEMENT OF GOVERNOR HALEY BARBOUR

Mr. Chairman, Congressman Deal, and members of the subcommittee: 

I am happy to be before you today to discuss important issues surrounding the 

State Children’s Health Insurance Program and Medicaid. Together, these two programs provide health coverage to approximately 626,000 Mississippians and they 

are an essential component of our health care safety net, especially for our most vulnerable children. 

41 

I thank you for your continued work on the reauthorization of the SCHIP program. As you proceed, I ask you to remember the intent of the SCHIP program: to 

cover low-income uninsured children. 

That’s what we are focused on in Mississippi. Our SCHIP program covers only 

children at under 200% of the Federal Poverty Level. For a family of four, this 

means an annual income of less than $42,400. 

For several years, the current distribution formula has resulted in Mississippi 

being consistently shortchanged. Flaws in the formula have resulted in an inequitable distribution of funds and a redistribution allotment has been needed to cover 

costs. The current formula does not provide enough money for even half of the children in Mississippi below 200% of the federal poverty level. 

In Mississippi, the total cost of covering the 63,000 kids in our SCHIP program 

is $133 million. According to current law, the federal government is supposed to pay 

83% of these costs, which means the federal government should be giving us $111 

million for SCHIP. But our state’s SCHIP allotment for federal Fiscal Year 2008 is 

only $61,687,048, leaving us $50 million short. 

In past years, to make up this difference, we have depended upon redistributed 

funds from other states. These redistributions from other states were possible because their allocation was more than they needed to run their SCHIP program. 

Not surprisingly, instead of sending that money back to Washington, other states 

started expanding their SCHIP programs. Instead of covering low-income children, 

as Congress intended when you created the program, other states began covering 

adults, even adults that did not have any kids! 

Since then, the pool of funds available to be redistributed to states such as mine 

has shrunk and we are faced with significant shortfalls and much uncertainty. 

The bill Congress sent to the President last fall would not have funded Mississippi’s SCHIP program at an amount adequate to cover all children at or below 

200% of the federal poverty level, even though it would have allowed other states 

to expand coverage. I cannot support a bill that does not give Mississippi enough 

money to fulfill the original intent of the program while allowing other states the 

opportunity to expand their programs to cover higher-income children and adults 

who don’t have any children. 

Even with the additional money Congress proposed for SCHIP, the proposed formula still causes serious concern for those of us charged with actually administering 

the program. According to the U.S. Census Bureau 2006 survey, there are 71,851 

children in Mississippi under 200% of the Federal Poverty Level who are uninsured. 

With rare exception, all of these children likely are eligible for Medicaid or SCHIP. 

In order to cover all children under 200% of the federal poverty level eligible for 

SCHIP, Mississippi would require a federal allotment of $232 million. But under the 

proposed new formula, Mississippi’s FY 2008 allotment would have been $142 million. In other words, our state would still be shortchanged by $90 million, or nearly 

40%. Even the ‘‘Child Enrollment Contingency Fund’’ you included in the bill for 

states that significantly increase enrollment only would provide a maximum of an 

extra $28 million, leaving us 27% underfunded. 

Again, I cannot support an SCHIP bill that shortchanges Mississippi to such a 

degree we cannot even provide insurance to all our children at 200% of federal poverty level, but that allows wealthy states to provide insurance under SCHIP to children in families with an income of $85,000/year. 

To that end, I agree with the guidance issued by CMS on August 17, 2007, which 

will ensure that before states expand their SCHIP coverage beyond 250% of the Federal Poverty Level, they should have enrolled at least 95% of the eligible children 

in their state below 200% of the Federal Poverty Level in either Medicaid or SCHIP. 

I urge you to enact an SCHIP reauthorization bill which will provide states like 

Mississippi the federal support necessary for us to enroll all of our eligible kids. 

In addition to SCHIP, I am glad to have the opportunity today to visit with you 

about the status of our state’s Medicaid program. Since I have been Governor, we 

have made significant progress in saving Medicaid for the nearly 600,000 Mississippians who rely on it. We have enacted reforms because we know it is wrong for a 

family to work hard at two or three jobs, to raise their kids and pay for their 

healthcare, and then have to turn around and pay extra taxes so others who are 

able to work and take care of themselves choose not to but instead get free 

healthcare at taxpayers’ expense. That’s not right. 

Under my Administration, the Division of Medicaid checks people’s eligibility faceto-face, and the Medicaid rolls have decreased. This drop is what you should expect 

when the number of people employed has increased by more than 50,000 as it has 

in the last four years in Mississippi. 

42 

We’ve changed our prescription drug program to better utilize generic drugs. 

That, along with Medicare Part D, is saving taxpayers tens of millions of dollars 

on pharmaceuticals with no negative effect on beneficiary health. 

But even with these common-sense, successful savings efforts, our Medicaid budget faces a large shortfall this year. This is primarily because the federal government 

has forced us to stop using certain funds to cover the state Medicaid match requirement. 

For example, we have to replace the $90 million of state match that was previously provided by public hospitals through an inter-governmental transfer program. Considering the fact that our state appropriation for Medicaid is $513 million 

for the current fiscal year, this is a significant budget challenge. 

Now, CMS is proposing more changes to the state-federal relationship that will 

have additional fiscal consequences. Given the strait-jacket of federal rules on how 

we can run our Medicaid program, these changes, if allowed to proceed, will likely 

result in reduced reimbursement rates for providers or reduced services for the 

beneficiaries. This morning, I will highlight two rules changes that would be especially harmful to the Mississippi Medicaid program. 

First, CMS has issued a rule which changes the definition of a public hospital, 

thereby putting new restrictions on payments to hospitals in my state. In effect, this 

rule change would eliminate hospitals from the governmental classification if they 

are non-profit corporations that receive a government appropriation. The result 

would be that our county-owned public hospitals, mostly in rural areas, would be 

negatively impacted. This would be another $90 million hit to our Medicaid program. 

Congress has approved a moratorium that delays implementation of this rule 

until May 25, 2008. CMS should either reconsider this rule, or Congress should act 

again. 

Secondly, CMS has proposed to eliminate Medicaid payments for Graduate Medical Education. In an attempt to justify this proposal, a CMS official testified on November 1, 2007, to the House Committee on Oversight and Government Reform that 

training doctors ‘‘is outside the scope of Medicaid’s role, which is to provide medical 

care to low-income populations.’’ 

In the case of the University of Mississippi Medical Center, the GME program 

makes it possible to train 200 residents a year and it has proved to be an effective 

physician retention program. If a doctor does his or her residency in Mississippi, 

there is an 85% chance he or she will live and practice in Mississippi afterwards. 

Having doctors in under-served rural areas is necessary for there to even be a 

Medicaid program. Enacting the CMS proposal would cost the University of Mississippi Medical Center $15 million in FY 09 and would threaten future access to 

care. 

In addition, the University Medical Center is our state’s largest Medicaid provider. If the GME program is eliminated, UMC’s ability to provide care for our Medicaid beneficiaries will be threatened. 

Thank you again for allowing me the opportunity to be here today. I look forward 

to any questions you may have. 

Mr. PALLONE. Thank you, Governor. 

Mr. Markey has asked to introduce the Governor of Massachusetts. Mr. Markey. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

Governor Deval Patrick of Massachusetts has dedicated himself 

and Massachusetts to the implementation of a universal health 

care system for our State. He is a visionary leader. It is our honor 

to have him before the Committee today. Welcome, Governor. 

STATEMENT OF DEVAL L. PATRICK, GOVERNOR OF 

MASSACHUSETTS 

Governor PATRICK. Thank you, Congressman Markey, and thank 

you for the honor of the introduction and your presence here, and 

thank you, Mr. Chairman and Congressman Deal and also to 

Chairman Dingell and Congressman Barton, I guess, who just had 

to step out, all the members of the Committee for convening today’s 

hearing. This is an enormously important issue or Massachusetts 

43 

and for the Nation in terms of both our public health and our economy. 

A child with quality healthcare is a child with a better chance 

in every aspect of life. The Rand Corporation’s 2005 report entitled 

‘‘Children at Risk’’ found, for example, that access to healthcare 

through regular well-child visits enables early developmental 

screenings and encourages parental behaviors to assist all facets of 

child development: physical, cognitive, emotional and social. Quality healthcare enables children to better engage as students and 

fosters better lifelong health outcomes. These differences can set 

the course for life. 

That is why SCHIP is a national success story. It is an important 

tool for fulfilling a most fundamental responsibility for any civilized 

society: to help parents give every child the care and support they 

need to reach their highest potential. Though there are differences 

on just what shape reauthorization should take, I do want to acknowledge and thank you for the broad bipartisan support in the 

Congress for continuing the SCHIP program. 

In Massachusetts, SCHIP also plays an important role in our 

Healthcare Reform Initiative, as Congressman Markey referred. 

Healthcare Reform in Massachusetts is a mosaic of approaches and 

programs and contributions: individual contributions, employer 

contributions. The State has stepped up its funding and its contribution, obviously the Medicaid waiver and SCHIP, and at the 

center of it all is the private insurance market. Though these are 

still early days, we are only in the early weeks of the second year 

of implementation. Our reform plan has already been very successful. Three hundred thousand adults and children who were uninsured last year are insured today, reducing our uninsured population by almost half. Free care utilization has dropped. Between 

federal fiscal years 2006 and 2007, our uncompensated care pool 

saw roughly 9 percent fewer inpatient discharges and 12 percent 

fewer outpatient visits. A recent report by the Massachusetts Hospital Association shows that a number of hospital low-income uncompensated care accounts has decreased by 28 percent since October 2004 and there are initial signs of a leveling off in overall system healthcare costs with premiums for subsidized programs increasing at an average of 5 percent, less than half what increases 

in the general market have been. 

As part of our partnership with the Federal Government, SCHIP 

has been an indispensable part of our plan. The Centers for Medicare and Medicaid Services agreed to permit Massachusetts to expand SCHIP to children at or below 300 percent of the federal poverty level. I just want to pause here because that was an agreement we reached with CMS as a part of developing this mosaic for 

our own plan. As a result, Medicaid and SCHIP enrollment has 

grown by 40,000 children including 18,000 newly eligible because 

of the expansion from 200 to 300 percent of the federal poverty 

level. CMS’s approval of the Massachusetts SCHIP rules 2 years 

ago was a crucial part of the success we are experiencing today and 

I am happy to add that we have achieved that success without having residents use SCHIP to substitute for private coverage. In other 

words, the anti-crowd-out provisions are working. 

44 

I am here to ask you not to undermine our success. That is why 

the August 17th CMS guidance letter is so troubling for my State 

and for our goals with healthcare reform. We are in the process of 

creating seamless, integrated, market-based coverage for all individuals and families across the Commonwealth. Our success depends on the stability and reliability of the commitments the Federal Government has made to us. A retreat in any of those commitments could have devastating effects on our progress, particularly 

our ability to cover families who have no affordable options in the 

unsubsidized private marketplace. 

The August 17th CMS directive imposes new enrollment, administrative and procedural requirements that impair the Commonwealth’s Medicaid and SCHIP programs. Though couched as guidance by CMS, there are in fact significantly new requirements for 

States like Massachusetts that cover children over 250 percent of 

the federal poverty level. They are particularly worrisome in our 

case because we have a specific agreement with CMS on which we 

relied in designing and implementing our reforms. 

Specifically, the August 17th directive may prevent us from covering eligible children who are not yet enrolled. They will inevitably lead to delays in care for many children while eligibility nuances are worked out. Unless the Congress acts, many families will 

be discouraged from enrolling in SCHIP all together. More costly 

emergency rooms will replace the pediatrician’s office for families 

in need of care for a sick child with the consequent upward pressure on overall system costs. Not only are these the very outcomes 

we are trying to avoid but they would represent a giant step backward in one of the most successful innovations in healthcare reform 

in the country today, if I may say so myself. Indeed, as a practical 

matter in Massachusetts, this directive would leave thousands of 

children between 250 and 300 percent of the federal poverty level 

uninsured while their parents are covered by other features of our 

federally approved healthcare reform. This inconsistency compromises an otherwise comprehensive coverage strategy. 

So I want to be as clear as I can. Without continued federal support for and flexibility within the SCHIP program, healthcare reform in Massachusetts and I believe in other States is in jeopardy. 

Given the benefits to children, to families and to our economy, and 

the many salient lessons to be learned from Massachusetts and 

other States on solutions that could work nationally, it is hard for 

me to understand why we would seriously consider limiting or reducing the reach of either the Commonwealth agreements with 

CMS or the SCHIP program as a whole. 

I ask you to give reauthorization of SCHIP another try before the 

end of this Congress. Our success in enrolling low-income children 

means our federal SCHIP allotments have not been sufficient and 

I am grateful that Congress has consistently addressed this shortfall issue for my State. However, the instability caused by the absence of a reauthorization bill creates problems in long-term planning for the program in Massachusetts and other States across the 

country, as I think you must appreciate. 

At a minimum, I join my fellow governors here in asking you to 

rescind CMS’s August 17th guidance letter on SCHIP. 

45 

And finally, I want to briefly make a point about several other 

CMS Medicaid regulations to which my colleagues have referred 

that have been put forth in the past year which will also affect 

healthcare reform in Massachusetts. CMS has issued seven new 

Medicaid regulations that will shift between $13 and $15 billion in 

costs from the Federal Government to the States, and we simply 

cannot afford it in Massachusetts. 

The regulations restrict how Medicaid pays for hospital services 

and graduate medical education—we have very similar concerns in 

Massachusetts as Governor Barbour has expressed in Mississippi 

for those reasons—outpatient services, school-based health services, 

services for individuals with disabilities and case management 

services. 

Congress has thankfully delayed some of these regulations but 

they will soon take effect if you do not overturn or further postpone 

them. Without your actions, States will be forced to make choices 

that are more than just unpleasant but wasteful, costly, impractical 

and ultimately harmful to our common interests and good personal 

and economic health. So while you are at it, I urge Congress to rescind CMS’s new regulations on Medicaid as well. 

I thank you very much for convening the hearing and for allowing me the extra time. 

[The prepared statement of Mr. Patrick follows:] 

STATEMENT OF GOVERNOR DEVAL L. PATRICK

Good morning. Thank you, Mr. Chairman, Congressman Deal, and all the Members of this Committee for convening today’s hearing. This is an enormously important issue for Massachusetts and for the Nation in terms of both our public health 

and our economy. 

A child with quality healthcare is a child with a better chance in every aspect 

of life. The Rand Corporation’s 2005 report entitled ‘‘Children at Risk’’ found, for 

example, that access to health care through regular well-child visits enable early developmental screenings and encourage parental behaviors to assist all facets of child 

development: physical, cognitive, emotional and social. Quality healthcare enables 

children to better engage as students and fosters better lifelong health outcomes. 

These differences can set the course for a life. 

This is why SCHIP is a national success story. It is an important tool for fulfilling 

a most fundamental responsibility for any civilized society: to help parents give 

every child the care and support they need to reach their highest potential. Though 

there are differences on just what shape reauthorization should take, I want to acknowledge and thank you for the broad, bipartisan support in the Congress for continuing the SCHIP program. 

In Massachusetts, SCHIP also plays an important role in our Healthcare Reform 

initiative. 

Healthcare Reform in Massachusetts is a mosaic of different programs, contributions and approaches. Though these are still early days (we are only in the early 

weeks of the second year of implementation), our reform plan has already been very 

successful. 300,000 adults and children who were uninsured just a year ago are insured today, reducing our uninsured population by about half. Free care utilization 

has dropped. Between federal fiscal years 2006 and 2007, our uncompensated care 

pool saw roughly 9% fewer inpatient discharges and 12% fewer outpatient visits. A 

recent report by the Massachusetts Hospital Association shows that the number of 

hospital low-income uncompensated care accounts has decreased by 28% since October 2004. And there are initial signs of a leveling off in health care costs, with premiums for subsidized programs increasing at an average of 5%, roughly half what 

increases in the general market have been. 

As part of our partnership with the federal government, SCHIP has been an indispensable part of our plan. The Centers for Medicare & Medicaid Services (CMS) 

agreed to permit Massachusetts to expand SCHIP to children at or below 300% of 

the federal poverty level. As a result, Medicaid and SCHIP enrollment has grown 

by 40,000 children, including 18,000 newly eligible because of the expansion from 

46 

200% to 300% of the federal poverty level. CMS’ approval of the Massachusetts 

SCHIP rules two years ago was a crucial part of the success we are experiencing 

today. And I am happy to add that we have achieved that success without having 

residents use SCHIP to substitute for private coverage. (The so-called ‘‘anti-crowdout’’ provisions are working.) 

I am here to ask you not to undermine this success. That’s why the August 17th 

CMS guidance letter is so troubling for my state and for our goals with Healthcare 

Reform. We are in the process of creating seamless, integrated, market-based coverage for all individuals and families across the Commonwealth. Our success depends on the stability and reliability of the commitments the federal government 

has made to us. A retreat in any of those commitments could have devastating effects on our progress, particularly our ability to cover families who have no affordable options in the unsubsidized private marketplace. 

The August 17th CMS directive imposes new enrollment, administrative and procedural requirements that impair the Commonwealth’s Medicaid and SCHIP programs. Though couched as ‘‘guidance’’ by CMS, they are in fact significant new requirements for states, like Massachusetts, that cover children over 250% of the federal poverty level. They are particularly worrisome in our case, because we have a 

specific agreement with CMS on which we relied in designing and implementing our 

reforms. 

Specifically, the August 17th directive may prevent us from covering eligible children who are not yet enrolled. They will inevitably lead to delays in care for many 

children while eligibility nuances are worked through. Unless the Congress acts, 

many families will be discouraged from enrolling in SCHIP altogether. More costly 

emergency rooms will replace the pediatrician’s office for families in need of care 

for a sick child—with the consequent upward pressure on overall system costs. Not 

only are these the very outcomes we are trying to avoid; but they would represent 

a giant step backward in one of the most successful innovations in healthcare reform in the country today. Indeed, as a practical matter in Massachusetts, this directive would leave thousands of children between 250% and 300% of the federal 

poverty level uninsured while their parents are covered by other features of our federally-approved Healthcare Reform. This inconsistency compromises an otherwise 

comprehensive coverage strategy. 

So, I want to be as clear as I can be. Without continued federal support for and 

flexibility within the SCHIP program, Healthcare Reform in Massachusetts and 

elsewhere is in jeopardy. Given the benefits to children, to families and to our economy, and the many salient lessons to be learned from Massachusetts and other 

states on solutions that could work nationally, it is hard for me to understand why 

we would seriously consider limiting or reducing the reach of either the Commonwealth’s agreements with CMS or the SCHIP program as a whole. 

I ask you to give reauthorization of SCHIP another try before the end of this Congress. Our success in enrolling low-income children means our federal SCHIP allotments have not been sufficient. I’m grateful that Congress has consistently addressed this short-fall issue for my state. However, the instability caused by the absence of a reauthorization bill creates problems in long-term planning for the program in Massachusetts and other states across the country. 

At a minimum, I join my fellow governors here in asking you to rescind CMS’ August 17th guidance letter on SCHIP. 

Finally, I want briefly to make a point about several other CMS Medicaid regulations that have been put forth in the past year which will also affect Healthcare 

Reform in Massachusetts. CMS has issued seven new Medicaid regulations that will 

shift $15 billion in costs from the federal government to states. We simply cannot 

afford it. 

The regulations restrict how Medicaid pays for hospital services, graduate medical 

education, outpatient services, school-based health services, services for individuals 

with disabilities, and case management services. 

Congress has delayed some of the regulations, but they will soon take effect if you 

do not act to overturn or further postpone them. Without your action, states will 

be forced to make choices that are more than just unpleasant, but wasteful, costly, 

impractical and ultimately harmful to our common interests in good personal and 

economic health. 

So, while you are at it, I urge Congress to rescind CMS’ new regulations on Medicaid as well. 

Thank you again for convening today’s hearing and for the opportunity to offer 

our views. I am happy to try to address any questions you may have. 

Mr. PALLONE. Thank you, Governor Patrick. 

47 

Mr. Deal would like to introduce the governor of Georgia. 

Mr. DEAL. Thank you, Mr. Chairman. 

I am indeed pleased to have my governor, Governor Sonny 

Perdue, and our First Lady, Mary Perdue, with us today. I had the 

great honor of serving with Governor Perdue when we were both 

State senators in the Georgia legislature. He rose through the 

ranks of leadership there and is now serving his second term as the 

governor of our State as I believe his colleague Mr. Barbour is serving his second term as governor of his State. So we are pleased to 

have him here today. Our legislature is in session so I don’t know 

whether he is just relieved that we got him out of town or whether 

he is anxious to return, but I do appreciate him taking the time 

to be with us on this very important issue. We welcome you. 

STATEMENT OF SONNY PERDUE, GOVERNOR OF GEORGIA 

Governor PERDUE. Thank you and good morning, Mr. Chairman 

and to my Congressman, Mr. Deal, and other members of the committee. Thank you very much for the opportunity to come before 

you today to discuss the progress that I believe we have made in 

Georgia in covering our State’s uninsured children and more specifically the reauthorization of the State Children’s Health Insurance Program nationally. 

As most of you know, SCHIP is an issue about which I have been 

very vocal. I have been vocal because in Georgia this is a program 

that has worked. Ten years ago Congress made the health of our 

children a priority. A Republican Congress and a Democratic President worked together to create SCHIP, a federal-State partnership 

that would offer the children of low-income, hardworking parents 

the healthy start in life that they deserve. 

I have been vocal because SCHIP is a success. I think nationally 

and I know in Georgia it works. It works because it promotes 

shared responsibility, shared between a family doing what it can 

and a compassionate public. SCHIP is not simply a government 

handout. It is not for unemployed families on welfare. It helps the 

children of working parents who not only pay their taxes but also 

pay premiums for the insurance that these children receive. 

In Georgia, we have maintained that shared responsibility and 

integrity in our program by verifying income and citizenship for 

each of our applicants. We require monthly premiums for coverage, 

and yes, like anything else in life, there are consequences for failing to pay premiums. 

I have been vocal because I know that the families who buy coverage through SCHIP want for their children what we all want for 

our children. They simply want them to have an annual checkup, 

to get basic immunizations, get regular screenings just like your 

children receive and my children receive. 

In Georgia, we have been successful in providing basic preventative treatment. Roughly 90 percent of our young children enrolled 

in Georgia’s SCHIP program—we call it PeachCare for Kids—for at 

least 10 months received the immunizations to prevent debilitating 

diseases and over 80 percent had a medical home, a family primary 

care doctor. 

I have been vocal because it is a program that works, a program 

that has a 10-year record of proven success and faces extinction beVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
48 

cause we cannot agree on how to continue. I believe if SCHIP were 

a snail darter or a purple bank climbing mussel, we would be suing 

the Federal Government under the Endangered Species Act. In the 

last 2 years, a growing number of States have been forced to appeal 

to our federal partners to fund the federal share just so that we 

could continue through the end of the year. Watching this, wondering how they will afford the rising costs of healthcare, are the 

working parents of millions of our Nation’s children. 

Georgia has done very well in implementing SCHIP. In fact, we 

have done too well. In fact, we have been penalized for it as Governor Barbour indicated in Mississippi. We have enrolled so many 

children in SCHIP that our percentage of uninsured children has 

dropped dramatically. And because of this flawed funding model 

that partially bases States’ allotments on the number of uninsured 

children, Georgia along with our neighbors in Mississippi and 

North Carolina, are facing growing shortfalls. 

Think of this: the better you are at implementing SCHIP, the 

less funding you receive. If our State was 100 percent successful 

and reached all uninsured children, the funding next year would be 

drastically cut because no children would be uninsured. Imagine if 

we used the same logic on our education system. A school that was 

tasked with reducing the dropout rate and who achieved their goal 

of graduating 100 percent of their students would be rewarded with 

significantly less funding the next year. That just doesn’t make 

sense. 

The current funding formula is also flawed because it hurts fastgrowing States like Georgia by lagging behind in factoring quickly 

changing population numbers. 

In our 2007 fiscal year, the Federal Government was using population numbers from 2004, 2003 and as far back as 2002. Ladies 

and gentlemen, Georgia has grown by almost 1 million people since 

2002. We need data that is reflective of the actual population and 

need. 

I have been vocal about SCHIP because this formula flaw threatens the great progress that we have made. I want to thank my 

good friend, Congressman Nathan Deal, and others for their efforts 

along with Congress for addressing the funding shortfall while discussions continue on reauthorization of this important program. 

These debates give you the opportunity to revisit issues like this 

flawed formula, and I ask that you address it in any new bill 

signed into law. 

I have been disappointed that the ongoing debate in Congress 

over the size of the program has completely overshadowed the 

great success that the last 10 years have seen. Equally overshadowed is our opportunity to recalibrate the program to better 

target funding to States and programs that need it. There are several lessons and principles I would like to share with you as your 

discussions continue. 

The key principle of SCHIP is that children should always be the 

top priority. Our resources must focus first on children. This is not 

the case in every State right now. Some States have expanded their 

programs to include health insurance for other groups, even childless adults, but the goal of this program all along was to provide 

49 

an answer to an insurance need for our most vulnerable population: low-income children. 

It is a grave mistake to expand taxpayer-funded insurance to a 

level that undermines personal responsibility for those who are 

able to purchase private insurance on their own. By focusing funding and enrollment efforts on low-income children, we are reaching 

those most in need and those who have no other options. There is 

a point of diminishing returns when you create a program that becomes so large that States can’t afford to participate. 

As governor of a State with a constitutional requirement for a 

balanced budget, I recognize that we simply do not have unlimited 

funds for SCHIP. Today we are in an uncertain economic environment where some States face daunting revenue shortfalls. Balancing State budgets means not everyone can continue to enroll 

uninsured children, and a program expansion will only cause less 

participation, enrollment caps or benefit reductions. 

With a balanced budget on a yearly basis, a growing State match 

in a year of revenue shortfalls means cutting funding elsewhere. 

Additionally, knowing that States including our State of Georgia 

have had to struggle to anxiously persuade Congress to fund the 

program as originally conceived, how can we be confident that the 

money will be available to match an expanded program. While 

Georgia stood ready to meet our State obligations, we ran out of 

federal funds. What do you think happened then? The citizens of 

Georgia turned to us and the State to insure that PeachCare would 

continue to cover their children. We had made a promise together 

and Georgia was left to keep it alone, borrowing funds from other 

sources to continue our program’s operation while Congress and 

the Administration debate it. 

Reauthorization of SCHIP allows us to revisit a program that is 

a nationwide success. It allows us to reevaluate what has worked 

well and what has not. It gives us an opportunity to update an over 

a decade-old formula that we as a Nation have outgrown, and to 

make sure that we do not forget the mandate of the program: to 

ensure the health of our Nation’s low-income children. 

Is more funding needed? Yes. Both Congress and the Administration recognize that. But I am very concerned that the vast 

unsustainable expansions will harm the long-term viability of the 

good program we have now. By focusing funding on low-income 

children and retargeting a distribution formula that has not 

changed in a decade, States will continue to make progress in 

reaching and insuring our children. 

As I have said many times, I am grateful that America is a very 

compassionate Nation. We must continue to take care of our most 

vulnerable citizens. SCHIP is a success story. It is a program that 

has proven to work. The proof is in the millions of children who 

would not have otherwise had vaccinations, would go without treatment for earaches and sore throats, without diagnosis of chronic 

diseases such as diabetes and asthma. 

I have been vocal because there is no doubt in my mind that this 

is a program that must be preserved with its original intent in 

mind. 

Thank you again for giving us the opportunity to testify, and I 

will be happy to address any questions you have. 

50 

[The prepared statement of Mr. Perdue follows:] 

STATEMENT OF GOVERNOR SONNY PERDUE

Good morning, Mr. Chairman, and members of the Committee. Thank you for the 

opportunity to come before you today to discuss the progress we have made covering 

our nation’s uninsured children—more specifically, reauthorization of the State 

Children’s Health Insurance Program (SCHIP). 

As most of you know, SCHIP is an issue about which I have been very vocal. I 

have been vocal because this is a program that works. 

Ten years ago Congress made the health of our children a priority. A Republican 

Congress and a Democratic President worked together to create SCHIP, a federalstate partnership that would offer the children of low-income, hard-working parents 

the healthy start in life they deserve. 

I have been vocal because SCHIP is a success. It works. And it works because 

it promotes shared responsibility—shared between a family doing what it can and 

a compassionate public. 

SCHIP is not a government handout. It is not for unemployed families on welfare. 

It helps the children of working parents who not only pay their taxes, but who also 

pay premiums for the insurance their children receive. 

In Georgia we’ve maintained that shared responsibility and integrity in our program by verifying income and citizenship for each of our applicants. We require 

monthly premiums for coverage. And like anything else in life, there are consequences for failing to pay premiums. 

I have been vocal because I know that families who buy coverage through SCHIP 

want for their children what we all want for our children. They simply want to have 

an annual check-up, to get basic immunizations, and to get regular screenings, just 

like my children received and your children received. 

In Georgia, we’ve been successful in providing basic preventative treatment: 

roughly 90% of our young children enrolled in Georgia’s SCHIP Program-PeachCare 

for Kids-for at least 10 months received the immunizations they needed to prevent 

debilitating diseases, and over 80% had a primary care doctor. 

I have been vocal because a program that works, a program that has a ten year 

record of proven success, faces extinction because we can’t agree on how to continue. 

If SCHIP were a snail darter or a purple bank climbing mussel, we would be 

suing the federal government under the Endangered Species Act! 

In the last two years a growing number of states have been forced to appeal to 

our federal partners to fund their share—just so that we could continue through the 

end of the year. Watching this, wondering how they will afford the rising costs of 

health care, are the working parents of millions of our nation’s children. 

Georgia has done well in implementing SCHIP. We’ve done too well—in fact, 

we’ve been penalized for it. We’ve enrolled so many kids in SCHIP that our percentage of uninsured children has dropped dramatically. 

And because of a flawed funding model that partially bases states’ allotments on 

the number of uninsured children, Georgia, along with our neighbors like Mississippi and North Carolina, are facing growing shortfalls. 

The better you are at implementing SCHIP, the less funding you receive. If a 

state was 100% successful and reached all eligible uninsured children, its funding 

the next year would be drastically cut—because no children would be uninsured. 

Imagine if we used this same logic in our education system: a school that was 

tasked with reducing their drop-out rate and who achieved their goal of graduating 

100% of their students would be rewarded with significantly less funding the following year. This just doesn’t make sense. 

The current funding formula is also flawed because it hurts fast-growing states, 

like Georgia, by lagging behind in factoring quickly-changing population numbers. 

In our 2007 fiscal year, the federal government was using population numbers 

from 2004, 2003 and as far back as 2002. Folks, Georgia has grown by almost a 

million people since 2002! We need data that is reflective of the actual population 

and need. 

I have been vocal about SCHIP because this formula flaw threatens the great 

progress we have made. I thank my good friend Congressman Nathan Deal for his 

efforts, along with Congress for addressing the funding shortfall while discussions 

continue on reauthorization of the program. 

These debates give you the opportunity to revisit issues like this flawed formula, 

and I ask you now to address it in any bill signed into law. 

51 

I have been disappointed that the ongoing debate in Congress over the size of the 

program has completely overshadowed the great success the last ten years have 

seen. Equally overshadowed is our opportunity to re-calibrate the program, to better 

target funding to states and programs that need it. There are several lessons and 

principles I would like to share with you as your discussions continue. 

The key principle of SCHIP is that children should always be top priority. Our 

resources must focus first on children. This is not the case in every state right now. 

Some states have expanded their programs to include health insurance for other 

groups, even childless adults. But the goal of this program all along was to provide 

an answer to an insurance need for our most vulnerable population: low income children. 

It is a grave mistake to expand taxpayer funded insurance to a level that undermines personal responsibility for those who are able to purchase private insurance 

on their own. By focusing funding and enrollment efforts on low income children, 

we are reaching those most in need, those who have no other options. 

There is a point of diminishing returns when you create a program that becomes 

so large that states can’t afford to participate. As Governor of a state with a constitutional requirement for a balanced budget, I recognize that we simply do not 

have unlimited funds for SCHIP. 

Today we are in an uncertain economic environment where some states face 

daunting revenue shortfalls. Balancing state budgets means not everyone can continue to enroll uninsured children and a program expansion will only cause less participation, enrollment caps or benefit reductions. 

With a budget balanced on a yearly basis, a growing state match in a year of revenue shortfalls means cutting funding elsewhere. 

Additionally, knowing that states, including our state of Georgia, have had to 

struggle anxiously to persuade Congress to fund the program as originally conceived. How can we be confident that money will be available to match an expanded 

program? 

While Georgia stood ready to meet our state obligations, we ran out of federal 

funds. What do you think happened then? The citizens of Georgia turned to us to 

ensure that Peach Care would continue to cover their children. 

We had made a promise together, and Georgia was left to keep it alone; we were 

borrowing funding from other sources to continue our programs operation while 

Congress and the administration debated. 

Reauthorization of SCHIP allows us to revisit a program that is a nationwide success. It allows us to reevaluate what has worked well and what has not. 

It gives us an opportunity to update the over a decade-old formula that we as a 

nation have outgrown, and to make sure we do not forget the mandate of the program—to ensure the health of our nation’s low-income children. 

Is more funding needed? Yes. Both Congress and the administration recognize 

that. But I am very concerned that vast, unsustainable expansions will harm the 

long term viability of the good program we have now. By focusing funding on low 

income children and re-targeting a distribution formula that has not changed in a 

decade, states will continue to make progress in reaching and insuring our children. 

As I have said many times, America is a compassionate nation. We must continue 

to take care of our most vulnerable citizens. 

SCHIP is a success story. It’s a program that is proven to work. The proof is in 

the millions of American children who would have otherwise gone without vaccinations, without treatment for earaches and sore throats, without diagnosis of chronic 

diseases such as diabetes and asthma. 

I have been vocal because there is no doubt in my mind that this program must 

be preserved with its original intent in mind. Thank you again for giving me the 

opportunity to testify. I am happy to address any questions you may have. 

Mr. PALLONE. Thank you, Governor. 

I was going to look around for somebody from Ohio to introduce 

you but after you and Sherrod left we couldn’t find anybody of your 

caliber on the Committee, so we just have to go without it. I recognize the governor, Governor Strickland. 

STATEMENT OF HON. TED STRICKLAND, GOVERNOR OF OHIO 

Governor STRICKLAND. Thank you, Mr. Chairman and Ranking 

Member Deal and all of my former colleagues on this great SubVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
52 

committee on Health. I am here today to talk about SCHIP, Medicaid and the unfortunate failed partnership between CMS and the 

States, especially the State of Ohio. But first I would like to thank 

you and others on this committee for the bipartisan work you have 

done to give those least among us access to healthcare. Your work 

on SCHIP is greatly appreciated, and I hope that we can continue 

to work together to get this vital program reauthorized. 

Last spring in Ohio, I as a Democratic governor joined with 

Ohio’s Republican House and Senate and we passed a budget that 

passed through both chambers and the conference committee processes almost unanimously. No dissenting votes in the Senate and 

only one dissenting vote in the House of Representatives. And in 

that bipartisan budget, we agreed that a priority of our State was 

to ensure that all of Ohio’s uninsured children had access to 

healthcare. Therefore, we funded SCHIP coverage from 200 to 300 

percent of the federal poverty level and also we authorized a Stateonly program to allow children above 300 percent of the federal 

poverty level to buy into an insurance program. I signed that budget on June 30, but then came the memo on August 17, not a new 

law or a new rule but a memo from CMS that severely limited 

what States could do under SCHIP, and because of that memo, the 

provisions in Ohio’s historic bipartisan budget that were consistent 

with the Bush Administration’s previous SCHIP and Medicaid policy came to a halt, and at that moment 20,000 children in Ohio between 200 and 300 percent of the federal poverty level were 

doomed to remain uninsured and they remain that way today. 

This memo I believe is a true violation of the State-federal partnership that is SCHIP. We had no warning and there was no process to debate the impact of this major change that so negatively affects uninsured children in States like Ohio where we have made 

them a priority. In fact, it is more than a violation of a partnership. 

I believe it is a violation of authority. CMS took this action unilaterally outside the normal rulemaking process, not only denying 

input from the States but also denying input from even you, the 

Members of Congress. 

Knowing that CMS was now rejecting our State plan amendments that covered children up to 300 percent under SCHIP, we 

decided to take another route. If there was one thing I knew from 

serving on this committee, it was that there was flexibility for 

States when it came to Medicaid, and there were other States that 

have been able to cover kids up to 300 percent. So while we were 

forfeiting the enhanced federal match under SCHIP, we knew what 

we had to do to get these kids covered: apply for the expansion 

under Medicaid, and that is exactly what we did. But in December, 

we got a denial letter from CMS. We were the first State to be officially denied Medicaid coverage for children up to 300 percent of 

the poverty line. The stated reason given to us: that we didn’t 

apply for the expansion under SCHIP. That was the stated reason. 

But we all knew what would have happened if we had applied 

under SCHIP. The reason we were denied was not based in law or 

administrative rule. I believe the real reason we were denied is 

that we had found a legal and a legitimate way around their August memo. 

53 

Unfortunately, this August memo isn’t the only thing that CMS 

is doing that exceeds their authority. Because CMS wants to enact 

policies that are contrary to the will of this Congress, they are 

going around you and issuing other devastating rules and directives. I applaud you for placing a temporary moratorium on some 

of these lawless policy changes and I hope this moratorium will be 

extended. I would also ask that you pass language that would overturn the August 17th memo and expressly prohibit such significant 

unilateral policy changes in the first place. 

Before I close, I would like to ask you to consider Medicaid fiscal 

relief for the States. Ohio is struggling with both increased unemployment and Medicaid caseloads. Though Ohio faces a budget 

shortfall, we have committed to living within our means and investing in what matters. In a bipartisan way, Ohio has clearly stated in our budget that the uninsured, especially uninsured children, 

matter. So they will continue to be our priority and I ask that the 

Medicaid recipients continue to be a priority of this Congress. I ask 

that you vote to supplement help for our States, Medicaid help, as 

you vote for the supplemental funding in Iraq and Afghanistan. I 

want you, when that bill passes to help Afghanistan and Iraq, to 

also include in that bill supplemental Medicaid spending for the 

States. 

Mr. Chairman, I appreciate being here today, appearing before 

this, the greatest committee and the greatest subcommittee of the 

Congress. I look forward to working with you. It is good to see all 

of my former colleagues. I will be happy to answer any questions 

you may have of me. 

[The prepared statement of Mr. Strickland follows:] 

STATEMENT OF GOVERNOR TED STRICKLAND

Mr. Chairman, Ranking Member Deal, and my former colleagues of the Subcommittee on Health, it is my honor to be sitting on the other side of this committee 

room today to talk with you about the state-federal partnership that makes Medicaid and SCHIP. I want to begin by thanking many of you and the majority leadership of Congress who have worked on a bipartisan basis to reauthorize SCHIP. It 

is unfortunate that the President has twice vetoed these measures, but I hope that 

Congress will continue to press this issue until the program is reauthorized. 

As Governor of the State of Ohio, I have come to know well how the administrative actions of a federal agency can scuttle the carefully developed and negotiated 

bipartisan agreements that state legislatures reach to provide health coverage for 

those who need it most. I am here today to talk about three major topics: 

1. The Center on Medicare and Medicaid Services (CMS) August 17 directive is 

a blatant attempt to thwart the will of Congress and its apparent extension to Medicaid is without any basis in law. The result in Ohio is that 20,000 uninsured children with family incomes between 200 and 300 percent of the federal poverty level 

remain uninsured; 

2. There is a clear need for a congressional prohibition on CMS regulations and 

directives that either exceed its authority or violate legislative intent. Recently the 

U.S. Department of Health and Human Services (HHS) has gone so far as to propose giving the Secretary of HHS authority to overrule any decision by its Departmental Appeals Board; and 

3. The urgent need for Congress to enact legislation providing enhanced Federal 

matching funds to states such as Ohio that are experiencing both an economic 

slump and increasing Medicaid caseloads and to reject the President’s ill-conceived 

Medicaid budget proposals. 

Ohio is currently facing tough economic times and Ohio families are struggling 

with the increased costs of food, energy, and other everyday expenses. For many of 

these struggling families Medicaid or SCHIP provides a lifeline that most could not 

do without. That is why I believe that the President could not have picked a worse 

54 

time to propose cuts in Medicaid funding and to limit state flexibility to offer assistance to families and their children as well as others who depend on these vital programs. The improper denial of Ohio’s bipartisan plan to cover more children under 

Medicaid, the failure to increase federal Medicaid matching funds during this economic downturn, the score of proposed CMS Medicaid regulations that violate legislative intent and the President’s proposed federal budget will result in fewer children having access to health care coverage and to health care services. This is a 

tragedy for Ohio’s uninsured children and their families, for the State of Ohio, and 

for this country. I believe that Congress must take action now to overturn policies 

that violate congressional intent and/or the law and should prohibit the administration from adopting similar policies or regulations going forward. 

OHIO’S EXPERIENCE IN EXPANDING HEALTH CARE FOR UNINSURED CHILDREN

When I was elected Governor 16 months ago, I traveled across the State of Ohio 

and in the course of those travels I met scores of families who were without 

healthcare coverage. What was particularly disturbing to me was the fact that there 

were approximately 156,000 Ohio children without health insurance. I knew children without access to health care coverage were more likely to go without preventive care, and to face delays in getting treatment. I also understood that a lack of 

health care coverage could hamper a child’s ability to get a good education. 

I met a small business owner from Shelby County. I would not consider him poor 

by any means, but certainly not wealthy. His son was diagnosed with Leukemia 

when he was only 18 months old. Happily, this youngster was treated and is now 

ten years old. But because commercial health insurers are reluctant to cover children with a medical history of Leukemia or other serious diseases, this man cannot 

afford to buy insurance for his son. 

I met a single mother from Van Wert, Ohio. Her two children are enrolled in 

Ohio’s SCHIP program. She told me she refused a promotion at work because the 

extra salary will not be enough to buy health insurance for herself and her children. 

And the increase in salary will put her over the income limit for SCHIP coverage. 

Numerous Ohio families find themselves in these same situations. These folks 

have done nothing wrong. They are just working and trying to get ahead. And yet, 

they are victims of a system that fails to meet their needs, is lacking in compassion, 

and defies common sense. 

To address this, I worked with the Ohio General Assembly to enact a historic, bipartisan biennial budget that was passed with only one dissenting vote. This budget 

funded coverage under Ohio’s State Children’s Health Insurance Program to Ohio 

children whose parents make up to 300 percent of the federal poverty line. For a 

family of three, for example, that’s an annual family income of about $52,800. We 

projected an additional 20,000 children would receive health care coverage under 

this initiative. Ohio acted in good faith and we believed our proposal was consistent 

with the Bush administration approach to Medicaid and SCHIP, an approach often 

touted by former Bush HHS Secretary Tommy Thompson who provided states with 

great flexibility in terms of deciding who got what benefits under Medicaid. 

We were trying to help children like Emily Demko, a little 3-year-old girl in Albany, Ohio whose story we learned about through Voices for Ohio’s Children. Margaret Demko and her husband, of Albany, Ohio (near Athens) waited a long time 

to become parents—nine and a half years of hoping and undergoing fertility treatments. Finally, in 2004, Margaret gave birth to Emily by emergency C-section after 

36 hours of labor. The couple had no idea that their baby would be born with any 

difficulties, but nine hours after birth, Emily was transferred from the regional hospital where she was born to Columbus Children’s Hospital. Doctors suspected a congenital heart defect, respiratory problems and Down Syndrome. 

After six days in the Neonatal Intensive Care Unit, the final diagnosis was Down 

Syndrome. And so Emily, whom her mother describes as ‘‘a happy, healthy little girl 

with some extra chromosomal material,’’ was sent home. The couple rapidly decided 

that Emily’s special needs and a lack of appropriate child care in Athens County 

meant that it would be best for their family if Margaret stayed home to care for 

Emily. She left her job, and that ended the family’s health coverage. Margaret’s husband, a self-employed contractor with fluctuating income, has no access to employerbased insurance. 

Being without health coverage ‘‘took awhile to sink in,’’ Margaret says, especially 

while adjusting to life with a new baby and learning everything she could about 

Down Syndrome. But when it did, Margaret applied for Medicaid for Emily; she received coverage beginning in the fall of 2005. Emily began speech, physical and occupational therapy at Columbus Children’s Hospital and made great progress. 

‘‘Therapy helped Emily learn to walk before the age of 2,’’ reports Margaret, ‘‘which 

55 

is unusual for a child with Down Syndrome. Her manual dexterity is almost ageappropriate and she has recovered from other issues typical for children with Down 

Syndrome.’’ 

But in early 2007, Emily’s Medicaid coverage was up for redetermination, according to Margaret, and she was told by a new case worker that her husband’s income 

was $300/year over the limit for Emily’s coverage to continue. And so, in March 

2007, Emily became uninsured. ‘‘Emily needs insurance to cover her therapy,’’ says 

Margaret, ‘‘and for the ordinary care that all children need. Her therapy costs $479 

each week, and it helps foster the skills that will give Emily the best ability she 

can develop. I want my daughter to become a self-sufficient, productive member of 

society—she, and other people with Down Syndrome, is capable of that. Therapy 

helps make that happen, but we need health insurance to help pay for it.’’ 

When I was in these esteemed halls and on this committee, we debated numerous 

times the need for uninsured children like Emily Demko to have access to health 

care coverage. It was this committee that served as a driving force behind enacting 

the original State Children’s Health Insurance Program (SCHIP) legislation in 1997. 

I am proud to have supported a policy change resulting in millions of uninsured 

children having access to well child visits, immunizations, doctor visits, and hospital 

stays. Without SCHIP, many working parents would not be able to afford health 

care services for their children. So after garnering virtually unanimous and bipartisan support of the Ohio General Assembly to expand Ohio’s Medicaid/SCHIP program to serve children with incomes between 200 and 300 percent, I fully expected 

that CMS would quickly approve Ohio’s state plan amendment to accomplish this. 

But I was wrong, just a few months after we passed our budget the federal government would unilaterally change the rules of the game. 

We submitted our state plan amendment to the CMS on September 28, 2007 and 

asked for approval of our plan to expand Medicaid eligibility for children with incomes between 200 and 300 percent of the federal poverty level. On December 20, 

we received a letter from the CMS turning down our request to expand eligibility. 

The stated reason for the denial was that we had not requested the enhanced 

SCHIP match rate for our expansion. Put another way, we had not asked the federal government for enough money. Now I have only been Governor of the State of 

the Ohio for a little over a year, and I have to tell you this is the first and only 

time we have been told by the federal government that the reason they are saying 

‘‘no’’ is that we have not asked them for enough money. 

But this clever bureaucratic maneuver was really just an attempt to apply the August 17 SCHIP guidance to Ohio even though we were applying under Medicaid and 

not SCHIP. Because CMS knew that if we had applied for the same expansion 

under SCHIP at the higher federal match rate, they would have also turned us 

down, and it would not be because we did not ask them for the right amount of 

money, it would have been because neither Ohio nor any other state can meet the 

August guidance. To this day, Ohio has seen nothing in federal law that would prevent us from covering children in Medicaid at any income level using the 1902 (r) 

(2) income disregards as long as we are willing to provide the requisite state match. 

So while the bureaucrats may have congratulated themselves on their clever maneuver, nearly 20,000 children remain uninsured and 3-year-old Emily Demko is still 

without health insurance. 

Of course, the State of Ohio has not stood still as a result of this federal rejection. 

I have met personally with HHS Secretary Michael Leavitt to make our case and 

our staff within the Ohio Department of Job and Family Services have worked with 

CMS to recently submit a state plan amendment under SCHIP to cover children 

with incomes between 200 and 250 percent of the federal poverty level. We have 

not received word yet from CMS whether or not this plan will be approved. At the 

same time, we are consulting with Ohio’s legislative leadership regarding how we 

can offer coverage to those children with incomes between 250 and 300 percent of 

the federal poverty level. Emily Demko fits in this category. 

Ohio has filed an administrative appeal of the CMS denial of our original proposal 

to extend Medicaid coverage to children between 200 and 300 percent of the federal 

poverty level. At the same time, we have not ruled out further legal action pending 

the outcome of the administrative appeal. 

A much better alternative would be for Congress to legislate a prohibition on enforcement of the August 17 guidance until larger SCHIP reauthorization issues are 

settled. Congress has already wisely approved moratoriums on other proposed CMS 

regulations, but any effort to extend those moratoriums should be expanded to include a moratorium on the August 17 guidance. Congress thought they were maintaining the status quo on SCHIP when they passed the extension last year, but 

CMS’ denial of Ohio’s expansion shows it is not interested in maintaining the status 

quo and as a result, we are in danger of seeing the unraveling of state Medicaid 

56 

and SCHIP coverage for children. In addition, the President’s Medicaid budget proposals show the administration wants to further expand the number of children covered by the guidance to those with incomes between 200 and 250 percent of the federal poverty level. Such an approach could prevent Ohio and other states from offering access to coverage to thousands of uninsured children. 

PROPOSED CMS REGULATIONS WILL WEAKEN OHIO’S HEALTH CARE SYSTEM

In 2007 the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services issued a number of Medicaid regulations that have enormous consequences for states and millions of Americans served by the Medicaid program. Many of these regulations alter long-standing Medicaid policy, but they have 

been proposed without any corresponding legislative action. CMS estimated just six 

of these regulations could result in an estimated $12 billion reduction in federal 

Medicaid spending over the next five years. In our view these are really budget cuts 

disguised as regulations. 

We applaud Congress for wisely implementing a moratorium on several of these 

regulations that CMS has attempted to implement. We believe Congress must now 

act quickly to expressly prohibit implementation of these burdensome and ill 

thought out regulations. Without such action, costs will simply be shifted to states 

and local governments that are already being hard pressed by a weakened economy. 

It is not just state Medicaid programs that will be affected by these cuts. The impact 

will be felt by our schools, child welfare agencies, colleges and universities, and 

many others. 

For example, one of these regulations deals with the issue of targeted case management. 

The Deficit Reduction Act (DRA) of 2005 contained a section to clarify the Medicaid definition of case management when covered as a Medicaid state plan service. 

This clarification intended to curb improper billing of non-Medicaid services to the 

Medicaid program. CMS issued an Interim Final Rule (IFR), effective on March 3, 

2008, to implement this section of the DRA. Ohio is concerned CMS is using this 

IFR as a vehicle to eliminate administrative case management as an option for the 

1915(c) Home and Community-Based Services (HCBS) waiver programs through 

which states provide less-expensive community care as an alternative to more expensive institutional care. Waiver case managers are key to assuring waiver consumer health and safety, and cost-effective community service delivery. The elimination of administrative case management goes well beyond the congressional intent 

of the DRA and will have a devastating impact on several of Ohio’s 1915c HCBS 

waivers. 

Though the proposed rules do not specifically address HCBS waivers, CMS has 

gone on record stating their intention that states will no longer be permitted to 

choose to provide case management as an administrative activity under an HCBS 

waiver. Historically, administrative case management combined what the IFR now 

defines as case management, such as designing and coordinating service plans, with 

certain Medicaid administrative activities, sometimes referred to as gate keeping activities. Gate keeping includes such activities as pre-admission review, prior authorization and eligibility determination. Ohio questions CMS’ authority to extend the 

provisions for state plan services as contained in the Deficit Reduction Act to other 

forms of case management, including case management services provided through 

a 1915(c) waiver or under an administrative reimbursement mechanism. 

CMS is differentiating case management from administrative activities, and indicating any willing, qualified provider may furnish case management, whereas only 

the state Medicaid agency can perform administrative activities. The provision prohibiting case managers from serving as gatekeepers will limit their ability to effectively coordinate services and manage program costs, especially as part of an HCBS 

waiver program. Limiting administrative functions such as level of care determinations, service plan approval and prior authorization of waiver services to only Medicaid state agency staff will have a major impact on access, efficiency and cost. 

An advantage of administrative case management is the state’s ability to limit 

providers to entities having expertise in serving an HCBS waiver’s target population. For instance, in Ohio’s PASSPORT HCBS Waiver that serves more than 

27,000 elderly consumers, a network of 13 PASSPORT Administrative Agencies 

(PAAs), located in the state’s 12 Area Agencies on Aging as well as one not for profit 

agency, operate the program regionally and provide administrative case management to PASSPORT waiver consumers. Ohio has used administrative case management in the PASSPORT waiver for 24 years with approval from CMS. The PAAs 

currently employ approximately 550 licensed social workers and registered nurses 

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trative case management, the PAAs will be forced to lay off their current case managers. 

The IFR requires a consumer have only one Medicaid case manager, and most individuals in Ohio’s Medicaid HCBS system have only one. However, Ohio’s system 

also supports the use of an inter-disciplinary approach, when consumer needs cross 

delivery systems. Requiring a consumer to have only one Medicaid-funded case manager may result in an individual receiving case management services from a case 

manager inexperienced in serving certain populations or needs. Case managers will 

need to expand their expertise and devote extra time to manage across all service 

delivery systems and providers. This will result in the need for smaller case loads 

to accommodate an increase in case management intensity, which will lead to increased program operation, costs. 

The IFR allows individuals to decline case management services in contradiction 

to CMS’ HCBS waiver program requirements. HCBS waiver provisions require each 

participant receive services furnished under a comprehensive plan of care clearly delineating the consumers’ needs. Creating such a plan is a case management function 

under a HCBS waiver. If the case manager has no role in developing, coordinating 

and monitoring a comprehensive plan of care, Ohio can neither responsibly manage 

waiver program costs nor assure participating consumers’ health and safety. 

Historically, to avert the possibility of conflict of interest, Ohio has prohibited direct care service providers from also providing case management. The IFR allows 

direct service providers to also furnish case management, inviting the possibility of 

self-dealing. 

Ohio also is concerned about the new 60-day limitation introduced in the IFR on 

coverage of community transition coordination, a state plan case management service component, consisting of all the tasks involved in helping an institutionalized individual relocate to the community. Currently, Ohio’s MR/DD targeted case management service, provided as a state plan service and not as an HCBS waiver service, 

covers community transition during the last one hundred eighty days (180) of an 

individual’s stay in an institution. This amount of coverage is consistent with CMS 

policies issued in response to the Olmstead court decision. In some cases, 180 days 

is not enough time to put into place all the necessary community supports to effectively transition an individual from an institution to a community setting. Moreover, 

the IFR requirement that FFP is not available until the consumer leaves the institution and is receiving medically necessary services coordinated by a community 

case management provider, coupled with the IFR requirement that a consumer can 

decline case management services, creates a disincentive for community-based case 

management providers to deinstitutionalize individuals. 

CMS projects the IFR will produce Medicaid cost savings. With potentially many 

new agencies and individuals providing case management and with the loss of key 

oversight for Medicaid waiver spending, it is simply not possible to achieve the savings CMS assumes in its impact statement. This is even more evident by the fact 

that if administrative case management is eliminated in favor of targeted case management, states like Ohio will be able to bill case management at the higher FMAP 

rate. Ohio projects an increase in CMS expenditures of $5 Million from this change 

alone. Ohio believes the changes will result in an additional increase in costs due 

to increased staffing needs, decreased controls, and significant changes to information technology systems to accommodate a fifteen minute billing unit, newly introduced in the IFR. For example, for Ohio’s waiver for the elderly, such changes may 

result in increased costs of over $6.1 million (all funds) to accommodate the regulatory provisions. 

CMS indicates the only entity impacted by the proposed regulations is the state. 

In Ohio, these regulations, especially if applied to 1915(c) waivers, impact local entities currently responsible for case management activities whether the activity is currently conducted as an administrative function or as a service. 

As I mentioned at the beginning of my testimony, we are also concerned about 

proposed HHS/CMS regulations published in the Federal Register on December 28, 

2007 entitled Revisions to the Procedures for the Departmental Appeals Board and 

Other Departmental Hearings which would significantly weaken the Departmental 

Appeals Board (DAB) and cause a wholesale revision of the current method of resolving disputes between states and the federal government. Congress commissioned 

the DAB to give states a method of seeking review of Secretarial decisions and made 

a conscious decision not to give the Secretary the authority to review any decision 

by the DAB. The regulations seek to undo current practice and propose to give the 

Secretary the power to overturn decisions by the DAB. In this instance the Secretary is asking to be both the judge and the jury. The proposed regulations go even 

further by forbidding the DAB from invalidating any federal decision if such a decision runs contrary to published or even unpublished guidance. This means that 

58 

states could be held accountable to follow rules or guidance that was never properly 

released or were released without any proper notice. This is yet another example 

of HHS and CMS seeking to act in a way that is contrary to the law, and to well 

established notions of due process and fair play. 

Another area of concern is the administration’s regulations that would wipe out 

Medicaid reimbursements for Graduate Medical Education (GME). The regulations 

declare that state Medicaid programs ‘‘must not include payments for graduate medical education to any provider or institution or include costs of graduate medical 

education as an allowable cost under any cost-based payment system.’’ The Association of American Medical Colleges (AAMC) has filed comments that the rules ‘‘represent a major and abrupt reversal of long standing Medicaid policy.’’ They also contend the rules could have a negative impact on the health care system. According 

to the AAMC, teaching hospitals represent 20 percent of all hospitals, and 42 percent of all Medicaid discharges. Ohio’s teaching hospitals will lose millions of dollars 

if these regulations and or proposals are allowed to proceed and it will undercut 

their ability to train the next generation of physicians who will be called upon to 

treat our Medicaid consumers. 

Other regulations of concern include those on rehabilitation services, school-based 

services, hospital cost limits, and provider taxes. Each of them has the potential to 

undermine the state’s health care system and limit access to health care. 

FEDERAL FISCAL RELIEF NEEDED TO AVERT MEDICAID CUTS

It is clear to me that Ohio’s economy is struggling, with both unemployment and 

Medicaid caseloads increasing. As of December 2007, our Medicaid caseloads were 

22,821 over our budgeted projections and there is every reason to believe that our 

Medicaid caseloads will continue to exceed budgeted levels. When we started to see 

these caseload numbers rise we delayed planned increases in the Medicaid rates for 

community providers and hospitals, and also delayed restoration of adult dental 

benefits, which was eliminated by my predecessor. Since that time, we have decided 

to proceed with the planned rate increase for community providers and to restore 

adult dental benefits, but we were unable to afford a planned rate increase for hospitals. Even though Ohio faces a biennial budget shortfall of $733.4 million we are 

committed to living within our means and investing in what matters to Ohio, and 

what matters in this instance is access to health care coverage for children and 

other vulnerable populations. 

BUSH MEDICAID BUDGET PUTS CHILDREN, FAMILIES, AND PERSONS WITH

DISABILITIES AT RISK

According to the American Public Human Service Association, the budget sub- mitted by President George Bush seeks to cut Medicaid spending by $17.3 billion 

over the next five years, and over half of these cuts are the result of simply reducing 

the federal financial participation in Medicaid expenditures. The administration is 

proposing to reduce federal financial participation for the following activities: • Compensation or training of skilled professional medical personnel (and their direct support staff) of the state Medicaid or other public agency; •Preadmission screening and resident review for individuals with mental illness 

or mental retardation who are admitted to a nursing facility; • Survey and certification of nursing facilities; 

• Operation of an approved Medicaid Management Information System (MMIS) for 

claims and information processing; •Performance of medical and utilization review activities or external independent 

review of managed care activities; • Operation of a state Medicaid fraud control unit (MFCU); 

•Family planning services; 

•Targeted case management; and 

• Medicare Part B Premium Costs (Q1 Program Match Rate). 

There is no justification for these proposals, and many of them defy common 

sense. The federal government should be encouraging states to do more in areas like 

fraud prevention, preadmission screening for nursing facilities, automation, and 

health information technology, not less. 

Another area of concern in the President’s Medicaid budget is the proposal to extend the August 17 guidance to children whose families have incomes between 200 

and 250 percent of the federal poverty level. States would be required to enroll 95 

percent of their eligible Medicaid and SCHIP child populations with annual family 

income less than 200 percent of the federal poverty level. States failing to comply, 

and we do not know of any state that could comply with this standard, are subject 

to a 1% reduction in their federal financial participation rate. 

59 

We are also opposed to another apparent proposal placing new limits on how 

states calculate a family’s income for purposes of qualifying for Medicaid or SCHIP. 

Most states, including Ohio, determine family income by deducting a certain portion 

of income (through earned income disregards) to account for work related expenses 

and child care. If these new budget provisions/rules are allowed to go into effect, 

it is virtually certain many Ohio children who are eligible today would no longer 

be eligible for our state children’s health insurance program and would find themselves uninsured. 

Finally, it is not clear to us the President’s budget contains sufficient funding to 

either expand the program to serve additional eligible children in Ohio or to even 

serve all the Ohio children who currently depend upon the program. 

In closing, I want to end my testimony where I started, by calling on Congress 

to assert its rightful authority over the Medicaid and SCHIP programs and to prohibit CMS from enforcing the August 17 directive; to prohibit CMS from promulgating regulations, directives or guidance that either exceed their authority or violate legislative intent; and to immediately pass legislation providing enhanced Federal matching funds to states such as Ohio that are experiencing both an economic 

slump and increasing Medicaid caseloads and finally to reject the Presidents Medicaid budget proposals which, if passed, would have the effect of reducing access to 

health care for thousands of Ohioans. 

Thank you again for the opportunity to testify I would welcome any questions that 

you may have. 

Mr. PALLONE. Thank you, Governor Strickland. Thank you to all 

of you. We are now going to take some questions from the Members 

of Congress, and I will recognize myself initially for 5 minutes. 

I wanted to ask Governor Gregoire, I know that some governors 

have raised the concern that if CMS lets States like Washington 

cover uninsured children in families with incomes above $35,200, 

or 200 percent of the federal poverty level, that other States won’t 

have enough money for their own programs. That is the concern. 

But in my view, a robust SCHIP reauthorization would solve that 

problem. The bill that the President vetoed, the Children’s Health 

Insurance Program Reauthorization Act—we call that CHIPRA— 

not only fully funded every State’s SCHIP needs but provided additional payments when States enrolled additional eligible but uninsured children. Now, I know that Governor Barbour and I may disagree on how our formula would have worked and I hope that 

maybe we can have a later discussion to clear that up, Governor, 

but the purpose of these SCHIP changes was to ensure that States 

didn’t have to fight with each other for money to help children in 

need and that children in one State didn’t have to hope that another State’s children remain uninsured to get help. So I just wondered if you could, Governor Gregoire, to comment on those issues. 

Governor GREGOIRE. Thank you, Mr. Chair, and what you just 

said is the absolute impression that I have of the bill that was put 

before the President. We are a contributing State to the likes of 

Mississippi because we have been penalized since the inception of 

SCHIP in 1997 because we already were covering children within 

200 percent of poverty. So we have never expended our allotment 

for SCHIP funds. Those funds have gone elsewhere. So what you 

did in your reauthorization in my opinion is, addressed the issues 

that have been raised here this morning to include my State where 

the formula was a penalty to us and to address the issues that my 

colleagues have raised where they weren’t sufficient in their allotment. 

I would encourage Congress to yet again pass the reauthorization 

of SCHIP. It allowed the States to do what these children absoVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
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lutely needed, gave us the necessary flexibility but most importantly, Mr. Chair, I believe it adequately funded what is called for 

in SCHIP throughout the country. 

Mr. PALLONE. Well, I know that the Administration is proposing 

essentially capping the program so that States can’t cover uninsured children and families with incomes above the $35,000 a year, 

and then simply taking money away from States who can’t meet 

arbitrary targets. But how does that compare with the CHIPRA 

bill? Which approach is better for States who wish to cover children 

and the children who remain uninsured, in your opinion? 

Governor GREGOIRE. We again believe that the idea of covering 

children under 200 percent with the August 17th letter is a means 

by which we will not be able to raise our coverage above that 

threshold to 250 and hopefully ultimately to 300 percent. And 

while the Nation has dramatic differences in terms of income levels, depending upon where you live, yes, in New Jersey and New 

York and California but also I will tell you in a State like Washington State, we are being penalized by uninsured children who are 

absolutely low income. Their families are struggling so again what 

has come forward to us through that August 17th letter is virtually 

a guarantee that we can’t move forward. The participation rate 

that has been called for there, to this day we do not have adequate 

information as to how that is to be addressed. We believe we meet 

it but we have no indication. New York met it by CMS standards 

and then was denied because it didn’t meet it. So that is why the 

rulemaking process is so important, which was avoided here, and 

that is why we brought suit. But again, what you did and what you 

put before the President, in our estimation, was the exact right 

thing for the States. 

Mr. PALLONE. Well, thank you. 

You know, Governor Strickland, you mentioned the possibility of 

increasing the federal share of Medicaid funding. I think you know 

that in 2003 Congress enacted a stimulus package that provided 

States fiscal relief to help with their budget shortfalls, and one of 

those was an increase in the federal share of Medicaid funding for 

States that didn’t roll back Medicaid coverage during the downturn, and we know that that assistance did help protect health coverage and assisted in the States’ economy. I think I mentioned in 

my opening statement that myself, Mr. Dingell, Peter King and 

others on a bipartisan basis, we recently introduced a bill to provide a temporary increase in Medicaid funds to States during this 

current recession, and I just wanted you to comment, not just yourself but anybody on the panel, whether you believe that that State 

fiscal relief is important and how a temporary boost in Medicaid 

funding would help your State. You don’t all have to comment but 

if anyone would like to. I will start with Governor Strickland since 

you mentioned it. 

Governor STRICKLAND. Well, thank you, Mr. Chairman, and we 

have already—I have already reduced State spending by $730 million due to the economy and budget shortfall in Ohio, and we face 

a possible shortfall over the 2-year period of $1.9 billion. So we are 

taking drastic steps to try to keep our budget in balance as my 

friend, Sonny Perdue, indicated that he must do as well. 

61 

Before the first stimulus package was enacted by this Congress, 

I called the leadership of both parties and I called the leadership 

in the Congress from Ohio. I talked to Mr. Boehner, and at that 

time I urged him to make Medicaid relief a part of the stimulus 

package in an effort to help the States. He indicated to me that he 

did not think that would be a part of the initial stimulus package 

but he also indicated to me that he thought this body would rather 

soon be dealing with a supplemental bill to provide the funding for 

Iraq and Afghanistan, and he said perhaps—no commitment but 

perhaps what I was asking for would be considered as a part of 

that supplemental measure. I would certainly hope so. The people 

of Ohio and of America are suffering greatly because of the current 

state of the economy, and as this body considers additional financial support for Iraq and Afghanistan, it seems hugely appropriate 

to me that they would also consider the needs of the American people and the needs that the States are facing and grant us some relief by increasing the FMAP allotment. 

Mr. PALLONE. Thank you. My time has run out but I don’t want 

to preclude if anybody else wants to comment on that, you can. If 

not, we will—go ahead, Governor. 

Governor BARBOUR. Thank you, Mr. Chairman. It happens that 

I became governor in 2004, the year after the FMAP was plussed 

up, and of course, I can tell you, if you all got some extra money 

lying around, we would like to have it. But I will tell you the unintended consequence is that my predecessor took $200 million and 

spent it on Medicaid recurring expenses with that one-time money 

and the next year we had to figure out how we were going to replace that $200 million. So we are not ever going to look a gift 

horse in the mouth but it is a little bit of moral hazard if you spend 

the money on recurring expenses and the economy doesn’t come 

back the next year. 

Mr. PALLONE. Thank you. 

I will move on to Mr. Deal. Oh, I am sorry. Mr. Barton is recognized for questions. 

Mr. BARTON. Thank you, Mr. Chairman. I am a little bit surprised but I would be happy if Mr. Deal wants to. 

My questions are more generic. I mean, I respect these governors 

and what you have to do. My first question is, I assume that each 

of you operate under a balanced budget. Is that correct? So we have 

a little bit different system up here, as Governor Strickland knows. 

We have been working to try to hold our deficit down but CBO 

projects that this year is going to go back up. So even though Governor Barbour says if you have any money laying around, send it 

to Mississippi, our problem is how to distribute the money that we 

have. So my generic question is, what is wrong with the basic 

premise that SCHIP, one, should be a State-federal partnership, 

and two, should be for children between 100 and 200 percent of 

poverty? And why should we go above that? I understand the governor of Washington stated that you need better data. You might 

quibble with 95 percent but why shouldn’t we try to cover with 

whatever money we have those children in that bracket before we 

go above that? What is wrong with that? 

Governor BARBOUR. Well, Mr. Chairman, obviously in my State, 

we don’t try to cover anybody above 200 percent of poverty but we 

62 

don’t get enough money to cover the ones under 200 percent of poverty, and I will say it is hard for us to understand why the formula 

would give us half of what it takes to cover all the eligible children 

and other States, wealthier States, in fact, can go up the ladder, 

cover a lot of adults, even adults without children. I came to just 

share my information with you but we focus on exclusively people 

under 200 percent of poverty, children. 

Mr. BARTON. I understand the formula fight. We have formula 

fights on this committee all the time. I could say, if I wanted to 

be mean to you, that Congressman Pickering just hasn’t done a 

very good job of fighting your fight, but I am not going to do that 

because he is retiring and he is a good man. So I understand that 

the big States and the industrialized States have a different idea 

what the formula ought to be than the rural States and the small 

States but I want to try to pin down this what is wrong before we 

go above 200 percent that we have some criteria to cover people, 

children in this case, between that 100 and 200 percent. And then 

as Governor Strickland points out, if a State wants to go above 

that, apparently his State did and found funding for it, and I don’t 

have any problem if people in the Buckeye State want to do it on 

their own but why should we give federal dollars until every child 

in America or 90 or 95 percent of them are covered? 

Governor STRICKLAND. I think you ask a legitimate question, but 

I think there are just practical considerations. There is a reason 

why apparently no State meets the current expectations of CMS, 

and so I think that indicates that it is not because the States aren’t 

reaching out and aren’t trying to enroll these kids, and I guess the 

answer that I would give to your question is that every child without health insurance that cannot achieve it or attain it because of 

costs or because of family income, every child is deserving of 

healthcare coverage, and so simply because States may not be able 

to reach the criteria that has been set by CMS does not mean that 

the children that the States are trying to reach and cover are not 

worthy of this coverage. 

Mr. BARTON. What is the reason, Governor? Why can’t a State 

reach 95 percent or 90 percent? What is the structural reason that 

that is not an achievable goal? 

Governor STRICKLAND. Well, I think there are many reasons that 

may differ from State to State but I don’t believe that the fact that 

not a single State to my knowledge has reached this criteria means 

that the States aren’t trying to do this outreach and to reach these 

children. But the fact remains that even the children that we are 

wanting to provide coverage to are needy kids. I mean, they are 

kids without health insurance, and they are from families that are 

working families but for a variety of reasons just simply cannot afford the coverage. So I don’t see a legitimate way to make a distinction between one child’s need of health insurance coverage and another child’s need of health insurance coverage if both of those children or all those children are without coverage and it is through 

no fault of their parents but simply because they can’t afford it. 

Mr. BARTON. Governor Patrick, did you want to comment? 

Governor PATRICK. I just wanted to make a couple comments 

about our experience in Massachusetts. First of all, 96 percent of 

the children we cover are at 200 percent or below. There is a slidVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
63 

ing scale of subsidy for kids at 200—between 200 and 300 percent, 

and I want to make a point about process here because as we were 

developing—and I say we meaning my Republican predecessor and 

in partnership with the Democratic legislature—these health reform components, we reached agreement with CMS on this structure. So the August 17th guidance takes that element of the agreement on which we relied away, and that is very, very troubling for 

us in terms of being able to sustain—— 

Mr. BARTON. But you said you got 96 percent covered so why 

would CMS not approve Massachusetts’ petition if you are at 96 

percent? 

Governor PATRICK. Well, you should talk to CMS about that, and 

if CMS is here, I hope you will, but if the August 17th guidance 

stands, then we have about a $19 million bill that we weren’t expecting based on the agreements that we have been living with. I 

would just make one other broad point. We are all of us sensitive 

to your premise of the question about having to—because we have 

to balance budgets every year. We are all sensitive to the fact that 

there is not a lot of money lying around, but I do ask that the Congress and the committee consider what I have been asking our own 

legislature to consider, which is the cost of inaction. There are costs 

associated by not doing these things, and one of the costs in Massachusetts, one that we have begun to moderate down, is the systemwide impact of having primary care delivered in emergency rooms 

rather than in a pediatrician’s office, and I know you appreciate 

that. 

Mr. PALLONE. Please go ahead, but we do have to keep going because I don’t think you can stay here all day, but go ahead. 

Governor PERDUE. To briefly answer Mr. Barton’s question, this 

is a voluntary program. You cannot force parents to participate. We 

have—we are at 235 percent. We have—most of our population is 

under 200 percent of poverty. But even with a modest premium, as 

long as parents have a culture that they can walk into any emergency room when they need care and get it, then they won’t even 

pay a modest premium to cover their insurance. They don’t value 

it the way we value it. 

Mr. BARTON. So—— 

Mr. PALLONE. Thank you. I am sorry. 

Mr. BARTON. I will yield back. So if we adopted a rule that if coverage is offered and the family rejects it, say in writing, that would 

count as an attempt. I mean, if we took who is actually covered 

plus the parents who refuse coverage and add those numbers, that 

would satisfy the rule. 

Mr. PALLONE. I have got to move on. I am sorry. Because I know 

all of you can’t stay. 

Mr. Dingell is recognized. 

Mr. DINGELL. Thank you. 

I would like to commend the governors for their very fine statements and tell them how much I appreciated their presence and 

their assistance to the Committee. 

This first question is to Governor Barbour. Your comment at 

page 4 at the top of the page, ‘‘The better you are at implementing 

SCHIP, the less funding you receive. If a State is 100 percent successful and reached all eligible uninsured children, its funding next 

64 

year would be drastically cut because no children would be uninsured.’’ Governor, that is a very legitimate complaint and I want 

to commend you for it. I would note here that your concerns I think 

were met by the bill which the committee reported out and which 

passed the House on several occasions. First of all, it increased the 

total funding from $25 billion by adding an additional $35 billion 

so it went up to $60 billion. Second, it would more than double the 

current allotment to Mississippi by giving them a $235 million increase. Third, it would give bonus payments to your State for enrolling new and low-income children. Four, it would make contingency payments available to your State where you would enroll 

more uninsured children and exceeded your allotment of children 

to be reached. And last, it would give rebasing, which appears to 

be a very major concern of yours, by having every 2 years the 

States’ number be based on actual spending so that if Mississippi 

enrolls all of those uninsured kids, their allotment will be rebased 

on a higher number and that will help you to account for more children and to provide better services to your people. Does that address the concerns that you have expressed to us? 

Governor BARBOUR. Mr. Chairman, let me first of all say they 

retyped this with bigger type so I could read it so the pagination 

that you gave me, I couldn’t—it isn’t on the top of page 4 on this 

old eyes copy. But to answer your question, what you all have proposed is certainly an improvement over where we are now but we 

don’t turn away any child that shows up and wants to sign up for 

SCHIP who is eligible but we don’t go out and try to recruit them 

because today we don’t get enough money to pay for the new ones. 

Mr. DINGELL. Your complaint about today, Governor, is a very legitimate one. I am talking about the future and the changes that 

we were trying to make in the bill which was vetoed by the President. I want to address your concerns and I want to make sure, 

Governor, that we have done so. 

Governor BARBOUR. It certainly is an improvement, Mr. Chairman. We believe at the end of the day we would still be shorted 

27 percent. I would be glad for my staff to sit down with your staff 

and crunch those numbers but that is what we believe, that at the 

end of the day it would be a shortfall of 27 percent even if we stay 

at nothing but children under 200 percent of poverty. 

Mr. DINGELL. Governor, thank you. 

Governor BARBOUR. Thank you, sir. 

Mr. DINGELL. These questions are to Governor Strickland. Governor, you have talked about CMS and its directives that were 

made. First of all, the first of them says that the Federal Government should no longer help States pay for the cost of Medicaid outreach and enrollment activities by school employees, particularly 

when States have found this to be a very effective way to find and 

enroll uninsured children. The directive also said that the Federal 

Government should no longer pay States for the costs of services 

to children and adults with mental illness, even if the States believe these services would help reduce unnecessary institutionalization. And last of all, their directive says the Federal Government 

should no longer pay States for the salaries of interns and residents in teaching hospitals that serve the States’ Medicaid patients. Do you favor those actions, Governor? 

65 

Governor STRICKLAND. Mr. Dingell, I think those actions are outrageous. I have heard from our hospitals. I have especially heard 

from our children’s hospitals. Ohio is a state with just marvelous 

children’s hospitals and they are very concerned about the graduate medical education issue. That is why we are asking and we 

have asked unanimously—I think there has been one dissenting 

vote among the National Governors Association of both political 

parties—that a moratorium be placed on these decisions. It is estimated that they could cost the States $13 billion over 5 years. The 

States I can tell you simply cannot tolerate that kind of financial 

burden and so it is our hope—and I think I am speaking unanimously here for the governors of both parties that it is our hope 

that a moratorium will be placed on these changes and that they 

will not be allowed to go into effect. 

Mr. DINGELL. Those concerns are set forth in the letter of September 17 by Governor Spitzer and Governor Schwarzenegger of 

New York and California and also the one on February 26 by the 

National Governors Association signed by Governors Pawlenty and 

Rendell and Corzine and Douglas. Is that right? 

Governor STRICKLAND. That is right, Mr. Chairman, and if it has 

not already happened, I would ask unanimous consent that this— 

that these letters you referred to be made a part of the permanent 

record. 

Mr. DINGELL. You beat me to it. I ask unanimous consent that 

those be inserted into the record. 

Mr. PALLONE. So ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. DINGELL. You know how this place works. My time has expired, Mr. Chairman. I thank you. 

Mr. PALLONE. Thank you, Mr. Chairman. So ordered. 

Mr. Deal. 

Mr. DEAL. Thank you, Mr. Chairman. 

First of all, I would like to ask—because there is confusion as to 

what the August 17th letter actually does, I would like to insert 

a response letter from Dennis Smith from CMS to Ranking Member Mr. Barton dated January 22 that I think does help clarify 

some of the ambiguity that may have existed. 

Mr. PALLONE. So ordered. 

[This information was unavailable at the time of printing.] 

Mr. DEAL. Mr. Chairman, before I ask a question, let me sort of 

set the stage for it because I think that one of the great opportunities we have is when a piece of legislation has a sunset date such 

as SCHIP did that we have an opportunity to review it and its 10- 

year history and decide what things about it need to be changed. 

I think we have had one in particular that has been highlighted 

by Governor Barbour and by Governor Perdue in particular and 

that is the formula problem. It is the ultimate catch-22 where a 

child who would have been uninsured but for being enrolled in 

SCHIP no longer counts in your formula for the allocation. That is 

just something that definitely has to be addressed. 

The other problem we have is data, that is, Governor Perdue alluded to the fact that we are being counted against 2002 data. We 

need a data system and I think all the governors would agree that 

we need a data system. The governor from Washington has indiVerDate Nov 24 2008 14:34 Apr 08, 2010 Jkt 037690 PO 00000 Frm 00071 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-91 SCOM1 PsN: JIMC
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cated that her statistics indicate one thing, federals don’t. We need 

some consolidated way, a legitimate way to measure how many 

children are uninsured. Now, assuming we can get that reliable 

data for the measurement, I think the basic question that comes 

back to is this on the funding. We ought not to penalize States that 

have done a good job of enrolling the children that were the targets. Assuming we can correct that, then the question becomes, 

well, how do you allocate the money under this SCHIP program so 

that we don’t create a situation of having rich States that can do 

things that poor States can’t do. That is one of the fears that I 

have. One of my concerns about the formula that was in the bill 

that we were presented with is that you start as a baseline the 

amount of money you spent last year when we had some States 

who their baseline, 74 percent of their enrollees were childless 

adults, but that becomes your baseline on which you build for the 

future. To me, that is a crumbling foundation. It should not be the 

foundation for a formula. 

So let me go back to basics on that. Are there any of you who 

disagree with the concept that a State’s allocation under SCHIP 

should be based on the number of children who are below 200 percent of poverty, assuming that we get the numbers right about who 

those are? Do any of you disagree with that proposition, and if so, 

why? 

Mr. PALLONE. Governor Patrick? 

Governor PATRICK. No, Congressman, I don’t disagree with the 

premise as the starting premise. It is just that that is not where 

I think we should stop. I am with you in terms of focusing on the 

poorest children first and on children rather than adults, as we do 

in Massachusetts. I know there are other arguments for that in 

other States. I am with you there. In our own situation, as you 

know, and I just want to come back to it, we have agreements we 

worked with CMS in order to make our healthcare reform work 

and so we want to make sure those agreements are honored in 

order to continue to make that healthcare reform. 

Mr. DEAL. And I understand, Governor Gregoire, your concern 

that you were being penalized because you had already gone with 

the 200 percent. I think all of us agree, that needs to be fixed. Let 

me tell you why I think this is critical, because if we let the formula go up the economic chain and the allocation is based on, let 

us say, 300 percent of poverty, I don’t think Mississippi and Georgia will be able to come up with the money at the State level even 

with the enhanced FMAP to meet their State’s portion to be able 

take advantage of going to 300 percent. Is that a concern? 

Governor PERDUE. Well, it is a concern, as I indicated in my testimony, Congressman Deal, that under a vastly expanded program, 

we may not be able to find the money to match, and frankly, based 

on our last experience of running out of federal money, I would be 

very anxious if we expanded that we would be left out to dry again 

from a funding perspective. So I agree that States like Washington, 

I think Minnesota was one, that may have expanded these populations probably ought to be rectified. They ought to be looking initially at those children under 200 percent and they ought to get 

credit for that in their allocation. I have got a little problem with 

my friend from Massachusetts in that we applied for these waivers 

67 

as well and the spigot was turned off. So not all States are being 

treated equally in the waiver program and I feel very strongly 

about commitments as he does but this has been very much an ad 

hoc position on the waiver process. We tried and we have been denied. 

Mr. DEAL. Right. 

Governor Strickland? 

Governor STRICKLAND. Yes. I don’t think any of us would say 

that the formulas that may injure some States unintentionally 

need to be readjusted and I think my friend from Georgia is correct. These waivers have been either approved or disapproved indiscriminately and so it is probably appropriate that we look at the 

funding allocations, that we look at a consistency across the states 

but I would hope that we wouldn’t remove the flexibility that I 

think we need to have because all of our States are different and 

it is important that we maintain a level of flexibility that gives us 

the ability—— 

Mr. DEAL. I agree with that, and from a very fundamental point 

of view, if the funding is the same basis for determining the formula for every State, if it is the same, and I realize waivers have 

caused all sorts of distortions there, but if the funding formula for 

a State is basically the same funding formula, you know, from my 

point of view, if the State wants to do more, then fine. If they have 

got some money left over that they want to do more with, that 

ought to be their flexibility. But it ought not to be the flexibility 

that every State doesn’t have the option of taking advantage of is 

the point I am making. 

My time is expired. I realize that. 

Mr. PALLONE. Thank you, Mr. Deal. 

The gentlewoman from California, Ms. Solis. 

Ms. SOLIS. Thank you, Mr. Chairman. 

I would like to direct my question to Governor Gregoire, and I 

want to thank you for your earlier comments. We didn’t get to hear 

your testimony regarding the DRA, the Deficit Reduction Act, and 

I noticed some of the problems that your State faced in trying to 

implement the documentation requirements. If you could explain 

what the cost was and if it was worth it? 

Governor GREGOIRE. Yes. Thank you very much for the question. 

As a result of the requirements that were put in place, we hired 

a significant number of employees. We went through thousands of 

people to make sure that we were meeting the requirements for 

citizenship and at the end of the day, after looking at thousands 

and sending millions of dollars for employees to do that, we found 

one person, one person only, a person who was from Canada who 

did not meet the citizenship requirement. So what you did in the 

SCHIP reauthorization is a matched capacity for us to look at Social Security numbers, which would cut back the cumbersome process and cut back the cost to the States dramatically. So that is 

again why we appreciated what you did in the reauthorization and 

would support it again because the strenuous kind of things that 

CMS has us going through are far too costly, the results showing 

virtually nothing. 

68 

Ms. SOLIS. And if you could use that money to provide more coverage, how many more children could you have served? You say in 

your testimony that it cost your state $5 million. 

Governor GREGOIRE. That is again the problem. Washingtonians 

believe that you ought to put the money where its greatest need 

is and where you can get the results, and I can’t answer the specific question of how many more children I could cover. The $5 million to us for those under 200 percent of poverty is a significant 

contribution to the cost of the program. Meanwhile, we are just 

going through bureaucratic procedures and being able to produce 

nothing other than one individual from Canada. 

Ms. SOLIS. So in your case, it was more of an auditing exercise. 

It is actually costing you more money, which you could spend doing 

outreach. Could you use this money to provide assistance to children that are not currently insured? 

Governor GREGOIRE. Absolutely, and again, in the reauthorization, you took care of this in a way that we think meets the criteria, and by the way, the way in which we were doing it previously had already been supported and said was sufficient and 

then along came the new regulation that made us go through a $5 

million process with virtually no results. I would ask you again to 

allow us that flexibility in what was already approved or the requirements for matching Social Security number so we can put the 

$5 million into children’s healthcare. 

Ms. SOLIS. These requirements resulted in extra costs to many 

States that have beenare already overburdened. In fact, because 

some Members of Congress tried to weed out people that aren’t eligible for coverage, they have actually kept people who are U.S. citizens from obtaining assistance. Many U.S. citizens weren’t able to 

show original birth certificates, and we know in Katrina and Mississippi, there were a lot of folks that lost their possessions. Lost 

items also include documentation, and I would like to hear more 

about that from other governors. 

My next question is for the governor from Massachusetts, Mr. 

Patrick. You spoke earlier about your State’s efforts to increase the 

pool of people that are eligible and you have actually provided assistance to folks that make anywhere from $52,000, I believe. What 

would happen if the August 17 directive is made permanent? How 

many people are going to be taken out? 

Governor PATRICK. Eighteen thousand children would be ineligible for benefits, and that is a—there are 6 million people in Massachusetts. There are 400,000—excuse me—40,000 children who 

are covered now under our Healthcare Reform Initiative and 

18,000 of those children would come out, and there are costs associated with that. 

Ms. SOLIS. When we talk about that particular ceiling that you 

have implemented, I know inflation and all that has been factored 

into cost of living. I believe your State has a higher cost-of-living 

than—— 

Governor PATRICK. It is a higher cost-of-living State. We are very 

careful to assure that we are not extending coverage to children 

whose parents have employer-based coverage. We are very sensitive to the crowd-out issues. We also don’t provide the same level 

of public contribution to kids who are in the 250 to 300—in other 

69 

words, it is a sliding scale beyond that because with higher income, 

we expect the families to be able to make a greater contribution. 

Ms. SOLIS. And lastly, for Governor Strickland, I really want to 

thank you for your pointing out that CMS is exceeding their authority. What would happen to Ohio if the August 17 directive is 

implemented? 

Governor STRICKLAND. Well, at a minimum, 20,000 children 

would be excluded, and if I can just take a minute to say that I 

have talked with and tried to work with Secretary Leavitt, a very 

honorable person. He allowed me to come to D.C. to bring my legal 

counsel and my policy people. We sat around the table, and I asked 

him to give me what legal basis he had to deny Ohio doing what 

we chose to do in a bipartisan way, and I think he is unable to provide a legal basis for the decisions that he has made, and we are 

contemplating what actions may be available to us including legal 

action. Quite frankly, I don’t want to do that. I don’t think that 

kind of confrontation and that kind of approach is best but we believe we are asking to do something that we are entitled to do 

under the law, that the Secretary does not have a legal basis for 

preventing us from doing it, and so we may have no other course 

of action other than go to the courts because we think there is no 

legal basis for his decision making. 

Ms. SOLIS. Thank you, Mr. Chairman. I know I have to yield 

back, but thank all of you for being here and testifying. 

Mr. PALLONE. Thank you. 

Ms. DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. In my absence I know many of the members talked about the August 17th 

directive with all of you, and so I am not going to focus on that. 

Instead, what I would simply like to ask each of you starting with 

Governor Gregoire, if you could tell me which of the components of 

the previous SCHIP legislation that you think are important for 

your State to be able to continue to enroll as many of the kids as 

possible. Because one of our great frustrations in Congress is that 

we see 12 million kids right now in this country without health insurance. Nine million of them are probably eligible for some kind 

of government assistance. Part of the challenges that States have 

had, I think, is how do you reach out and get the kids enrolled who 

are not enrolled right now. Because with the first SCHIP program, 

we sort of got the low-hanging fruit. We got the kids that we could 

get into the system and some States have experimented with different—I mean, that is how adults got onto SCHIP because some 

States thought well, if we insure the parents we can get the kids 

in. That is how we were able to streamline some of the applications 

and conform them with the Medicaid application so you could have 

a joint application, and I am wondering if there is something we 

could do as we move forward with the SCHIP reauthorization to 

help you find these hard-to-enroll kids? 

Governor GREGOIRE. Well, what we believe is necessary is a significant outreach program. We want to work through the schools, 

we want to work through social service agencies, so we have begun 

that process, which is probably why in our State we have a 94 percent participation rate. We don’t nor have we ever put adults on 

SCHIP so this is strictly children, and that is why we have been 

70 

able to achieve those goals, those kind of results. But what we need 

is the ability to go out and reach out in a collaborative way with 

all of those groups to make sure that we can get parents who otherwise don’t know about it, find it too cumbersome. The other thing 

we have done in our State is to make it very simple. You make one 

application. Whatever program, we will figure it out for you. We 

don’t make it scary. We don’t make it difficult and we make it convenient to people through the schools or through social service 

agencies. 

Ms. DEGETTE. Governor, that is an interesting point you raised, 

and I will tell you why, because in the second SCHIP bill that we 

passed that the President vetoed, the bill eliminated all outreach 

and enrollment programs for SCHIP. So I guess my follow-up question—the theory was, well, if we give them Medicaid outreach and 

enrollment money, then that will be good enough. Do you think you 

need specific appropriations for SCHIP outreach and enrollment? 

Governor GREGOIRE. Yes. The statement that was made by Governor Perdue earlier is to the point. It is a voluntary program. A 

lot of people don’t know about it, are virtually afraid of it. You need 

to reach out to talk about what it means, how the children can get 

a medical home and how important it is. So outreach efforts are 

the only—— 

Ms. DEGETTE. For SCHIP? 

Governor GREGOIRE. For SCHIP, are the only reason that we are 

at 94 percent today so CMS makes the requirement and then 

doesn’t fund the outreach. It makes it unachievable. 

Ms. DEGETTE. Governor Barbour? 

Governor BARBOUR. Ma’am, I am in kind of the opposite position 

of Governor Gregoire in that one of my predecessors aggressively 

went out to sign up kids for SCHIP in the early days of the program, then found out that our formula shortchanges us so much 

that he had a bunch of people he couldn’t pay for. 

Ms. DEGETTE. So you don’t think we should do outreach if we 

can’t pay for it? 

Governor BARBOUR. No, that is what I was going to say. For 

some reason in my State, according to the Census Bureau, more 

children who are eligible are not signed up than are signed up. 

Ms. DEGETTE. Right. 

Governor BARBOUR. But we don’t have aggressive outreach programs because you all don’t give us through the formula enough 

share to pay for the people that are on the program—— 

Ms. DEGETTE. Well—— 

Governor BARBOUR [continuing]. And you all pay for my 

healthcare budget. If I have to pay 5 times more for an SCHIP 

child, where does that put me in trying to deal with my other 

healthcare issues? Nathan Deal, if I could, said something and I 

want to—and I apologize, ma’am, for taking 30 seconds of your 

time. The first time I ever went to a meeting about Medicaid as 

a governor, I thought I was the only one who was drowning in 

Medicaid. And Tom Vilsack, who was an outstanding governor of 

Iowa, made the point to me, his biggest problem was he couldn’t 

come up with enough money to pay the State share, and if I have 

to pay 5 times the State share for SCHIP, I really am in trouble. 

71 

Ms. DEGETTE. So it is not just outreach and enrollment, it is the 

money to—— 

Governor BARBOUR. Yes. If we had a good formula, we would be 

doing outreach. 

Ms. DEGETTE. Mr. Chairman, I would ask unanimous consent to 

allow the rest of the governors to answer very briefly. 

Mr. PALLONE. Proceed. 

Governor PATRICK. I will be very brief because I think the point 

about the formula, need for formula reform and about outreach 

support is key. I also think flexibility is key. Each of us has different circumstances in our States and both fiscal and practical circumstances, and being able to work out within the confines of 

SCHIP, how to utilize SCHIP in our States and within the right— 

what parameters within the broad parameters are right for us have 

been enormously important for the success of healthcare reform in 

Massachusetts. 

Ms. DEGETTE. Thank you. 

Governor Perdue? 

Governor PERDUE. Thank you, ma’am. Georgia has been an aggressive pursuer of these children ever since the program started. 

We are the ninth-largest State in population. We have got the 

fourth-largest SCHIP population. So we have aggressively pursued 

it through many outreaches but I can assure you, ma’am, that it 

is a disincentive, as Governor Barbour says. When there is not 

enough money to cover the ones that you have on there, it is much 

of a disincentive to try to go find more. 

Ms. DEGETTE. You betcha. 

Governor Strickland? 

Governor STRICKLAND. And I can say that sitting here listening 

to Governor Barbour, he has caused me to feel sympathy for his 

circumstances, and if the formula does to him in his State what he 

describes, then that is a problem and it needs to be addressed, and 

I am very sympathetic to that concern. I wish we could come up 

with some way of enrolling children that was simplified and that 

perhaps could be referred to as the presumed or presumptive eligibility so that if a child was from a family with certain economic circumstances, that child would automatically be considered as enrolled, and I don’t know if we could ever achieve that but I think 

that would be helpful to us in Ohio and probably helpful to other 

States. Certainly it would help us achieve the standard that CMS 

has put forth for us to meet. 

Ms. DEGETTE. And, you know, many States have been successful 

with presumptive eligibility. I think we should look at that. I agree. 

Thank you very much, Mr. Chairman. 

Mr. PALLONE. Thank you. 

I know Mr. Inslee wants to ask questions but we did promise you 

that you would be out of here by noon, so can we take another couple minutes? Is that all right? All right. Why don’t you try to be 

quick? The gentleman from Washington. 

Mr. INSLEE. Briefly. We have had difficulties with this Administration basically ignoring the restraints of the law when they became inconvenient, and I have to tell you that the CMS memo 

looks to me like it is a continuation of that pattern, and Governor 

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ting on your lawyer’s hat for a moment, could you tell us the basis 

of that challenge and what you believe the law should be and is? 

Governor GREGOIRE. Well, Congressman Inslee, there are two 

bases for the lawsuit, and let me just say, we don’t lightly do this. 

We don’t think this is a course of action that we would prefer at 

all and so we first sent a letter asking that they reconsider it and 

then there was a very bipartisan group of governors who sent a letter and there was no consideration, so we felt we were at wits end. 

The basis is, number one, it is a letter that has the force and effect 

of a rule without any rulemaking done whatsoever, and the second 

basis has to do with the authority of HHS and we believe they exceeded the authority granted by Congress and that these are issues 

better left to Congress rather than having them rulemaking beyond 

the authority that has been given them. Those are the bases. Right 

now we are in a motion status with regard to the matter. We have 

a motion for summary judgment. They have a motion to dismiss. 

But again, I regret having to take this action but we didn’t feel we 

had any other course but we would really very much appreciate if 

Congress would have that August 17th letter set aside so that the 

States don’t have to resort to litigation. 

Mr. INSLEE. Thank you. Thank you all. Thank you, Governor 

Strickland, for being an advocate for the solution in the upcoming 

stimulus package. We are going to try to make that happen. Thank 

you. 

Mr. PALLONE. Let me just thank all of you once again. I thought 

this was very helpful in terms of our efforts on SCHIP, Medicaid 

as well as the FMAP that we are proposing. 

I just wanted to say in closing that members can submit additional questions for the record and ask you to answer those. They 

are supposed to do that within 10 days, just so you know, and the 

clerk would notify your offices if that occurs. But thank you again, 

and without objection, this hearing of the subcommittee is adjourned. 

[Whereupon, at 12:08 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

73 

STATEMENT OF HON. EDOLPHUS TOWNS

I want to thank the Chairman and Ranking Member for holding this hearing. 

Furthermore, I would like to extend a special thanks to the Governors that have 

come, today, to testify before this Committee, and provide the benefit of their unique 

insight on this important issue. Providing healthcare coverage to our nation’s uninsured children has been the topic of numerous discussions in this Subcommittee, in 

the full Committee, and on the floor of the House. Despite these discussions, and 

the actions of this Committee and this Congress, our progress toward providing 

healthcare coverage to the millions of uninsured children in this country has been 

reversed through the opposition of the current administration. 

This administration has twice vetoed Children’s Health Insurance legislation; and 

allowed the Centers for Medicare and Medicaid Services to issue an August 17th 

directive which effectively imposes an income eligibility cap in the State Children’s 

Health Insurance Program and Medicaid without authority. The administration’s actions have had a particularly harsh effect on my state of New York, which no longer 

has the flexibility to adapt its Children’s Health Insurance Program to account for 

our high cost of living, high cost of healthcare, and other income factors unique to 

New York relative to other states. I hope that the panel of Governors, before us 

today, can help us further articulate the issues faced by individual states in light 

of this administration’s current policy. 

Thank you, Mr. Chairman and Ranking Member for this opportunity. 

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