For Release on Delivery

Expected at 10:00 a.m.

Wednesday, July 12, 2000

GAO/T-HEHS-00-152

CHILDREN WITH

DISABILITIES

Medicaid Can Offer

Important Benefits and

Services

Statement of William J. Scanlon, Director

Health Financing and Public Health Issues

Health and Human Services Division

Testimony

Before the Committee on the Budget, U.S. Senate

United States General Accounting Office

GAO
Page 1 GAO/T-HEHS-00-152

Mr. Chairman and Members of the Committee:

We are pleased to be here today as you explore the possibility of allowing

some families with children with disabilities the opportunity to purchase

Medicaid coverage. Almost 1 million children with disabilities receive

Medicaid coverage because of their eligibility for the Supplemental

Security Income (SSI) program. Additional children with disabilities also

qualify for Medicaid under other criteria, such as medically needy

programs for persons with high medical expenses or the Katie Beckett

option, which allows coverage of children who would be Medicaid eligible

if they resided in an institution.

Concerns have been raised that some children lose Medicaid coverage

when family incomes increase and they cease to be SSI or Medicaid

eligible. Other children with disabilities reside in families with incomes

that exceed SSI and Medicaid requirements and may have limited access

to other sources of health insurance. For children with special health care

needs, access to health insurance is particularly important to assure

access to services. Children with special health needs are three times as

likely to be ill, almost three times as likely to miss school due to illness,

and use over five times as many annual hospital days as other children.

They are also twice as likely to have unmet health needs as children in the

general population. Without access to proper preventive health care and

treatment services, these children are at risk for greater incidence of

complicating illnesses and hospitalization.

The proposed Family Opportunity Act of 2000 (S. 2274) would create a

new state option to allow parents who have a child with a severe disability

or a potentially severe disability to purchase health care coverage for the

child through the Medicaid program. Today, my remarks will focus on (1)

what role Medicaid plays currently in providing health care coverage for

children with disabilities, (2) the extent to which private insurance offers

coverage of needed services for children with disabilities, and (3) the

benefits and services available to children under the Medicaid program.

My comments are based on our prior work in Medicaid, SSI and private

insurance; a list of related reports follows the text of my comments.

In summary, Medicaid generally covers children with disabilities who

receive SSI benefits. In December 1999, almost 850,000 children were

receiving SSI payments. These children represent 18 percent of the 4.7

million children with chronic physical or mental conditions of which

children with severe disabilities are a subset. Despite the extent of

Medicaid’s coverage,

Children With Disabilities: Medicaid Can

Offer Important Benefits and Services
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 2 GAO/T-HEHS-00-152

–In 1999, over 120,000 children who met the requirements for disability,

were initially denied eligibility when they applied or later had their

benefits suspended because their family’s income or resources had

exceeded SSI limits.

–SSI eligibility rules can create a bias towards institutional care for

children with disabilities because the income and resources of parents of a

child with disabilities are excluded in determining eligibility once a child

has been in an institution for more than 30 days.

–Limited mental health coverage in parents’ private insurance plans can

create an incentive to use a foster care arrangements as a means of

obtaining or maintaining access to Medicaid eligibility and services. In

many cases, children with psychiatric needs—the basis of eligibility for

over 27 percent of children in 1999–have access to private health

insurance but this insurance may have limited mental health coverage. By

becoming wards of states’ child welfare systems, they can obtain or

continue their Medicaid eligibility.

Several options exist for states to expand coverage for children with

disabilities or special health care needs in Medicaid besides the link to SSI

eligibility. In particular, “spend down” options can result in children being

sporadically eligible for Medicaid, and states’ expansions of eligibility for

certain categories of children with disabilities may not be available to all

children, even if they meet the eligibility and income requirements.

Private health insurance is often not available and can be a more limited

option for many children with disabilities. In particular, families with

children with special health care needs whose income rises above the

maximum threshold allowed for SSI and Medicaid often have limited

options for obtaining private health insurance that will cover the services

the children need. Many of those leaving SSI and Medicaid work in lowerwage jobs that often do not have access to group coverage or may find

their share of premium costs unaffordable. While the Health Insurance

Portability and Accountability Act of 1996 (HIPAA) guarantees that certain

children have access to individually-purchased health insurance without

exclusions for pre-existing conditions, this coverage is also likely to be

unaffordable for many. For those individuals who do obtain private health

insurance coverage, the benefits provided may be limited so that some

services that are important for children with disabilities are not covered.

While private insurance generally covers acute health care services for

children, Medicaid usually offers a more comprehensive package of

benefits that includes the use of services designed for chronic and long

term care needs. Medicaid managed care programs, which a number of
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 3 GAO/T-HEHS-00-152

states have or are implementing for children with special needs, may have

the capability to more comprehensively address their extensive and

complex needs than private health insurance plans that serve few persons

with such needs. In particular, managed care plans may link beneficiaries

to a regular case manager and a care provider, thereby improving

coordination and continuity of care.

Although there is no consensus definition, children with special health

care needs often have a serious physical or mental disability (such as

cerebral palsy or mental retardation), a chronic medical condition (such as

diabetes or asthma), a requirement for significant amounts of medical care

or services (such as around-the-clock nursing care), or a combination of

impairments. For example, a child with autism can experience

developmental delays and behavior problems, and a child with cerebral

palsy may also have quadriplegia. Researchers estimate that there are

approximately 4.7 million children with special health care needs who

experience limitations in activities such as school or play because of

chronic physical or mental conditions.

The Congress established the SSI program, which is administered by the

Social Security Administration (SSA), in 1972 to provide cash payments to

aged individuals and blind and disabled adults and children with limited

income and resources. Children may qualify for SSI if they meet the

applicable SSI disability, income, and financial asset requirements. To be

eligible, a child must be younger than 18 and must have a medically

determinable physical or mental impairment that results in marked and

severe functional limitations. These impairments (1) can be expected to

result in death or (2) have lasted or can be expected to last for a

continuous period of not less than 12 months. A segment of the 4.7 million

children with an activity limitation have disabilities severe enough to meet

their standard.

In addition, the child’s family must have limited income and assets.1 A

child’s family meets the SSI income requirements if his or her parent’s

countable income is below the maximum SSI limits (see table 1). Once a

child is on the SSI rolls, eligibility continues until (1) death, (2) the family’s

economic resources no longer meet SSI’s eligibility requirements, (3) SSA

determines that the child’s medical condition has improved to the point

that he or she is no longer considered disabled, or (4) SSA determines that

1The definition of childhood disability is found in 42 U.S.C. 1382c(a)(3)(C)(i). SSA considers the

parent’s income and assets when deciding whether a child qualifies for SSI.

Background
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 4 GAO/T-HEHS-00-152

the child, upon reaching age 18, is not disabled according to adult

disability criteria.

Table 1: Countable Income and Resources, and Principal Income

Exclusions for SSI

Requirement Countable income or

resources (after exclusions)

Principal exclusions to

countable income or resources

IncomeaBelow $512 a month for oneparent family (excludes

allowances for parent and other

children)

Below $769 per month for a

two-parent family (excludes

allowances for parent and other

children)

$20 per month of most income

$65 per month of wages and onehalf of wages over $65

food stamps

home energy/housing assistance

Resources (property

and other assets a

person owns)

$2,000 for a one-parent family

$3,000 for a two-parent family

the home a person lives in

a car, depending on need

burial plots and funds up to $1,500

for funeral expenses

life insurance with face value of

$1,500 total for family member(s) a

Most states offer supplements to SSI and a person’s income can be higher and still

qualify. State SSI supplemental recipients are usually eligible for Medicaid.

Source: SSA A Desktop Guide to SSI Eligibility Requirements (Baltimore, MD.: Social

Security Administration, January 2000) http://www.ssa.gov/pubs (cited July 6, 2000).

The Medicaid program, a federal-state entitlement program that finances

health care for certain low-income individuals, also provides assistance to

children with disabilities.2 The federal government pays a proportion of a

state’s Medicaid expenditures that ranges from 50 to 83 percent depending

on each state’s per capita income. In 1998, Medicaid spent about $177

billion to provide health insurance coverage to over 40 million Americans,

over half of whom were children.

Most states’ Medicaid programs offer a wide array of therapies and

services that are important for children with special health care needs.

Physical, occupational, and speech therapies, as well as rehabilitative and

case management services, are all common benefits offered to most

2In addition to Medicaid and SSI, other federal programs provide services to children with disabilities,

including the Special Education and Early Intervention under the Individuals With Disabilities

Education Act (IDEA); and the Children With Special Health Care Needs program under title V of the

Social Security Act. For more information on these programs, see Medicaid Managed Care: Challenges

in Implementing Safeguards for Children With Special Needs (GAO/HEHS-00-37, Mar. 3, 2000) and SSI

Children: Multiple Factors Affect Families’ Costs for Disability-Related Services (GAO/HEHS-99-99,

June 28, 1999).
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 5 GAO/T-HEHS-00-152

Medicaid eligible individuals. While limitations may be imposed on the

receipt of such services, Medicaid provides children a special entitlement

to health care through the provision of Early and Periodic Screening,

Diagnostic and Treatment (EPSDT) services. Established in 1967, the

central principles behind EPSDT are those of prevention–to locate lowincome children, assess their health status at key points, and provide care

to identify, control, or correct physical and mental health problems.

Among other requirements, EPSDT mandates that states cover any service

or item that is medically necessary to correct or ameliorate a child’s

condition, regardless of whether the service or item is otherwise covered

under a state Medicaid program.3

The Family Opportunity Act of 2000, S. 2274 introduced by Senators

Grassley, Jeffords, Kennedy, Harkin, Reed, and Moynihan would allow

states to permit families with children that meet the SSI definition of

disability but whose income exceeds a state’s Medicaid eligibility standard

to “buy-in” to Medicaid. Families would pay a state-established premium

that could be up to the full cost for the Medicaid buy-in. Premiums could

not exceed 5 percent of income for those at or below 300 percent of

poverty and 7.5 percent of income for those between 300 and 600 percent

of poverty. The bill would also

• allow states to include children receiving hospital psychiatric services in

the state’s home- and community-based services (HCBS) waiver

programs,4

• establish a demonstration program to extend Medicaid to children with a

disability that is not yet severe enough to meet SSI’s definition but would

be expected to become so without health care, and

• establish family-to-family health information centers to provide technical

assistance and information to families about health care programs and

services available for children with special health needs.

3The statutory requirements of EPSDT are in 42 U.S.C. Section 1396d(r).

4Under Section 1915(c) of the Social Security Act, the Secretary of Health and Human Services may

waive certain provisions of the Medicaid statute to provide home and community based services.
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 6 GAO/T-HEHS-00-152

Most children counted by Medicaid as disabled—approximately 1 million

in 1997—qualify for Medicaid coverage because they are receiving SSI

benefits.5 States may link eligibility for Medicaid with SSI in one of three

ways. First, the law allows automatic Medicaid eligibility when a person

becomes entitled to SSI. Thirty-two states and the District of Columbia

have elected this option. Second, in 7 states, SSI recipients are eligible for

Medicaid, but they must file a separate application with the state agency

that administers Medicaid. Third, the remaining 11 states do not use SSI

eligibility, but have chosen their own Medicaid eligibility criteria for

individuals with disabilities.6

In December 1999, the SSI program covered close to 850,000 children with

disabilities, a number that represents 18 percent of the over 4.7 million

children estimated to have special health care needs and experience

limitations in activities such as school or play because of chronic physical

or mental conditions. Only some of these 4.7 million children have

limitations or disabilities severe enough to meet SSI’s definition of

disability. Thus, SSI may cover more than 18 percent of children with

severe disabilities,7 but the proportion it actually covers is not currently

known.

Many children with disabilities are ineligible—or lose SSI eligibility—

because of family income. In 1999, 14,900 children with disabilities applied

for SSI and were deemed disabled; however, they did not receive benefits

because their families’ income or resources were too great. Of these 14,900

children, 72 percent were denied because their families had excess

income, while 28 percent had excess resources. During the same year,

113,400 children who had been receiving SSI were suspended from the

program because their families’ income or other resources grew to exceed

5Many eligibility categories for Medicaid do not identify whether individuals have disabilities; thus

other children with disabilities receiving Medicaid may not be included in this count of 1 million.

6Under Section 1902(f) of the Social Security Act, states are allowed to use their 1972 assistance

eligibility rules in determining Medicaid eligibility for individuals with disabilities, rather than SSI

eligibility. The 11 states that have chosen this option are known as “section 209(b)” states, after the

Section of the Social Security Amendments of 1972 that established it. SSI recipients not eligible for

Medicaid in Section 209(b) states must be allowed to “spend down” and become eligible after their

income is lowered to the Medicaid eligibility level.

7Nearly 70 percent of children receiving SSI lived in households where the average monthly income

was less than $1,000. The most common type of unearned income was public income-maintenance

payments, which includes Temporary Assistance for Needy Families (TANF), Department of Veterans

Affairs payments based on need, and other governmental programs. No income information is

available for the 114,970 children with no parents. Appendix I has selected characteristics of children

receiving SSI.

Children With

Disabilities Most

Frequently Qualify for

Medicaid Because of

Eligibility for SSI

Retaining Medicaid

Eligibility Through SSI Can

Be Problematic
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 7 GAO/T-HEHS-00-152

program limits.8 Most of those children, 94 percent, had family incomes

that were too high, while 6 percent were in families with excess resources.

Some of these children may still qualify for Medicaid because of federal or

state eligibility expansions discussed below.

SSI eligibility rules can create a bias towards institutional care for children

with disabilities as a means of obtaining Medicaid coverage. SSI eligibility

rules do not count the income and resources of parents of a child with

disabilities once the child has been in an institution for 30 days. Parents

who are not poor, but who cannot afford to meet the financial and medical

needs of a child with disabilities, may place the child in an institution to be

eligible for Medicaid coverage. Approximately 8,200 children with

disabilities receiving SSI (less than 1 percent) resided in institutions

during the period October 1997 to September 1998.

Limited mental health coverage in parents’ insurance plans can result in

some children being placed in foster care arrangements as a means of

obtaining or maintaining access to Medicaid eligibility and services.9

Among the children that qualified for SSI, over 27 percent were identified

as having psychiatric disorders. A recent study reported that in 27 states,

custody relinquishment has occurred as a means of ensuring that children

receive Medicaid mental health services.10 In many cases, these children

have access to health insurance, but have limited mental health coverage

in private insurance plans; however, by becoming wards of states’ child

welfare systems, they can obtain or continue their Medicaid eligibility.

8SSI cash benefits stop upon suspension; however, a child can reapply at any time if family income or

resources again decrease below the SSI requirements. For data on SSI suspensions, see SSI Annual

Statistical Report 1999 (Baltimore, MD: Office of Research, Evaluation, & Statistics, June 2000), pp. 57-

58.

9Children in federally funded foster care or children with special needs in federally funded adoption

assistance programs are eligible for Medicaid. Additionally, children in state funded foster care or

adoption assistance programs can, at the state’s option, also be eligible for Medicaid benefits.

10 See Relinquishing Custody: The Tragic Result of Failure to Meet Children’s Mental Health Needs

Bazelon Center for Mental Health Law, Washington, DC: March 2000.
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 8 GAO/T-HEHS-00-152

While Medicaid eligibility expansions have increased the potential for

children living in poverty or near poverty to receive Medicaid benefits,

problems remain, particularly for children in families with incomes slightly

higher than those allowed by Medicaid. In addition to federal mandates

expanding Medicaid eligibility for children,11 many states have

implemented optional medically needy and home and community based

services programs that also expand eligibility and are important to

children with special health care needs. While significant, these

expansions can result in episodic Medicaid coverage or have limited

availability for children with special health care needs.

Under the medically needy option, states can extend Medicaid coverage to

children who are disabled but would not qualify because their family’s

countable incomes are too high. However, when medical expenses are

deducted from their incomes, the remainder falls below state established

thresholds for being medically needy.12 As of 1998, 35 states and the

District of Columbia had elected to offer coverage to medically needy

individuals. While providing care during times of financial stress, families

with incomes just over the Medicaid income requirements can bounce in

and out of Medicaid eligibility, depending on the medical needs of the

child. Episodic conditions—such as acute asthma—can be especially

problematic as expenses can vary greatly, thus affecting a child’s eligibility

for Medicaid.

Under Section 1915(c) of the Social Security Act, the Secretary of Health

and Human Services may waive certain provisions of the Medicaid statute

to provide home and community based services. Children receiving

Medicaid coverage under an HCBS waiver must, absent home and

community based services, require the level of care furnished in a hospital,

a nursing facility, or an intermediate care facility for individuals with

mental retardation. Income and resource eligibility criteria can, at the

states’ option, be higher for HCBS services. As of June 2000, at least 31

states operate 49 HCBS waiver programs that provide services to children

with disabilities, most commonly serving children with developmental

11 Federal law mandates that all children born after September 30, 1983, in families up to 100 percent

of the federal poverty level are eligible for Medicaid. Additionally, infants and children up to age six

are eligible if residing in families up to 133 percent of the federal poverty level.

12Under this option, a state establishes an income and resource standard and deducts the medical

expenses an individual has incurred over a budget period (not more than 6 months) from the

individual’s countable income. If the recalculated income is less than the state’s medically needy

income standard—and if countable resources are within the state’s medically needy resource

standard—then the child is eligible for Medicaid for the remainder of the budget period. At the end of

the budget period, the individual’s medically needy status must be redetermined for a new budget

period.

Other Avenues to Medicaid

Eligibility for Children

With Special Health Care

Needs Can Also Be

Problematic

Medically Needy Eligibility Can

Result in Episodic Coverage

Home and Community Based

Services (HCBS) Waivers Have

Limits on Eligibility and

Services
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 9 GAO/T-HEHS-00-152

disabilities. While HCBS waivers allow states more flexibility in program

design, they can also limit states’ expenditures by targeting services to

specific populations, geographic areas, or both. In addition, they may have

a cap on the number that can be served. As a result, not all children may

be able to access waiver services.

The Katie Beckett option allows states to offer Medicaid eligibility for

children who live at home and (1) meet the SSI standard for disability and

(2) need a level of care provided by an institution. As of 1996, 20 states and

the District of Columbia used this eligibility category. For the remaining

states that have not employed this option, parents with incomes higher

than the Medicaid threshold that have children with disabilities could face

the choice of placing their child in an institution as a means of obtaining

Medicaid coverage.

Private health insurance is often not available and can be a more limited

option for many children with disabilities. Families with children with

special health care needs whose incomes rise above the maximum allowed

for Medicaid have limited options for obtaining other health coverage that

will cover necessary services. Many families with children with disabilities

who are eligible (or near eligible) for Medicaid work in lower-wage jobs

that may not provide access to group health insurance or may require

premiums and cost-sharing that families find unaffordable. Federal and

state laws guarantee that certain individuals losing group coverage,

including children with special health care needs who lose Medicaid, can

access individually-purchased private health insurance, but this insurance

may be prohibitively expensive for many families. Moreover, even those

who can obtain private health insurance may find that the coverage for

some services relied on by children with disabilities are more limited than

under Medicaid.

Data on the health insurance status of children with disabilities indicates

that group health insurance has been unavailable or unaffordable to many

low-income families. In 1994 and 1995, children with a disability in families

with incomes below the federal poverty level relied predominantly on

Medicaid and other public programs for coverage, whereas only half of

children with disabilities in families with incomes between 100 and 200

percent of the federal poverty level had private health insurance. Almost a

fifth of these children were uninsured. (See table 2.) The State Children’s

Health Insurance Program (SCHIP) enacted as part of the Balanced

Budget Act of 1997 may be providing some of these uninsured children

Most States Do Not Use the

Katie Beckett Option to

Expand Eligibility for Children

With Disabilities

Private Health

Insurance is Often

Not Available and Can

Be a More Limited

Alternative for Many

Children With

Disabilities

Group Health Coverage Is

Unavailable to Many LowIncome Families
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 10 GAO/T-HEHS-00-152

with coverage. Data on how much of a difference SCHIP has made for

children with disabilities are not available.

Table 2: Health Insurance Status of Children With Disabilities, 1994-1995a

Population

(thousands)

Private

coverage

only

(percent)

Public

coverage

onlyb

(percent)

Private and

public

coverage

(percent)

Uninsured

(percent)

Less than 100%

of federal

poverty level

2,984 10.2 68.5 4.5 16.7

100% to 199%

of federal

poverty level

2,946 49.7 28.3 3.9 18.1

200% or more of

federal poverty

level

5,329 87.6 5.8 2.6 4.1

Total 12,455c56.2 29.1 3.5 11.2 a

Data on health insurance status did not stratify children by severity of disability.

b

Includes Medicaid, Medicare, military, Civilian Health and Medical Program of the

Uniformed Services, and other public assistance programs.

c

Columns do not add to total because the total includes children in families with unknown

income.

Source: Based on an analysis of the 1994-1995 National Health Interview Survey on

Disability. See Paul W. Newacheck et al, “Access to Health Care for Children with Special

Health Care Needs,” Pediatrics, Vol. 105, No. 4 (April 2000), pp. 760 to 766.

Many families with children with disabilities whose incomes are–or rise

to–a level above states’ Medicaid income eligibility thresholds have lowwage jobs that often do not offer health insurance benefits. Only 55

percent of low-wage employees paid $7 per hour or less have access to

employer-sponsored health coverage compared to 96 percent of

employees paid $15 per hour or more. Further, even those low-wage

employees who are offered health insurance may not elect to accept the

coverage. Nearly one-fourth (24 percent) of low-wage workers who were

offered health insurance by their employer declined coverage, primarily

due to the cost of having to pay a share of the premiums.13

13Philip F. Cooper and Barbara Steinberg Schone, “More Offers, Fewer Takers for Employment-Based

Health Insurance: 1987 and 1996,” Health Affairs, Vol. 16, No. 6 (1997), pp. 142 to 149.
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 11 GAO/T-HEHS-00-152

For those families of children with disabilities who lose Medicaid coverage

but are not eligible for group health coverage offered by an employer, the

individual insurance market may offer a very expensive alternative. HIPAA

guarantees that individuals losing Medicaid after at least 18 months of

continuous coverage must be offered individually purchased health

insurance without exclusions for preexisting conditions.14 However,

HIPAA does not address the affordability of coverage, and carriers in the

individual insurance market typically deny coverage or charge higher

premiums for individuals with medical conditions, known as medical

underwriting. As a result, the premiums may be prohibitively expensive.

For example, in a prior review of children’s health insurance products, we

found that some carriers deny coverage for children with conditions such

as autism, cerebral palsy, Downs syndrome, emotional disorders, and

epilepsy.15 If required by HIPAA to offer coverage to children with these

conditions and prior Medicaid coverage, the carrier would likely charge

the highest premium allowed by state regulations. For example, in 14

states using the federal rather than state rules guaranteeing access, we

found that HIPAA-eligible individuals with severe diabetes as a preexisting

condition are typically charged at least 300 percent of standard premiums

charged healthy individuals, and as much as 464 percent more.16 Children

with chronic disabilities may have even greater health care needs and

could therefore face premiums that are at least as high as those charged to

adults with diabetes.

More than half of the states have high-risk pools that provide private

health insurance coverage to individuals who are denied individual health

insurance coverage and (in 22 states) HIPAA-eligible individuals. However,

nationwide these pools served fewer than 100,000 people in 1997 and some

have waiting lists for non-HIPAA eligible participants that exceed their

limits on enrollment. A family of a child with disabilities participating in a

high-risk pool would pay for this coverage, but states typically cap the cost

at 150 percent or less of the standard insurance rate for a healthy

individual.

14To be eligible for guaranteed individual insurance coverage through HIPAA, the individual must have

18 months of continuous prior coverage through Medicaid or other group health plans, a gap in

coverage not exceeding 63 days, and not be eligible for other group health coverage.

15Health Insurance for Children: Private Individual Coverage Available, but Choices Can Be Limited

and Costs Vary (GAO/HEHS-98-201, Aug.5, 1998).

16 Private Health Insurance: Progress and Challenges in Implementing 1996 Federal Standards

(GAO/HEHS-99-100, May 12, 1999).

Individually-Purchased

Insurance Can Be an

Expensive Alternative
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 12 GAO/T-HEHS-00-152

For those individuals who do obtain private health insurance coverage–

whether through a group plan, individually purchased plan, or a high-risk

pool–the benefits provided might be limited in some areas that are

important for children with disabilities. While private health insurance

plans typically cover some services important to children with disabilities,

such as physical, occupational, and speech therapy; mental health; and

home health care, these benefits are typically limited and require the

patient to share the costs of services through a deductible, copayment, or

coinsurance. For example, typical mental health coverage in an employersponsored group health plan limits mental health services to 30 hospital

days and 20-outpatient office visit per year and requires the patient to pay

50 percent coinsurance. Further, the benefits for these services are

typically intended for short-term rather than chronic care. For example,

private health plans may only cover care for a short-term period, such as

30 rehabilitative visits within a 60-day period, and require that significant

improvement in the condition be expected. Similarly, health plans typically

make coverage conditional on a determination of medical necessity, and

this may depend on an expectation of improved medical condition. In

contrast, many children with disabilities may require health services to

maintain a given level of ability rather than expecting improvement.

While private insurance generally covers acute health care services for

children, Medicaid can offer a more comprehensive package of benefits

that includes the use of services designed for chronic and long term care

needs. For example, most states offer case management services, which

are designed to assist beneficiaries in getting medical, social, educational,

and other services. Medicaid also offers personal care services, which

provides assistance with basic daily activities such as bathing and

dressing, and intermediate care facilities for individuals with mental

retardation/developmental disabilities. HCBS waivers further expand

Medicaid’s benefit package to include services such as respite care, which

provides relief to the primary caregiver of a chronically ill or disabled

beneficiary.

In contrast to the limits private health plans typically place on many

services valued by children with special health care needs, Medicaid

provides comprehensive services with no or nominal cost sharing by

participants. Moreover, to the extent that states have limitations on

benefits and services under their Medicaid programs, EPSDT provides an

avenue for ensuring that children receive any medically necessary

Private Coverage for

Services Important to

Children With Disabilities

Is Frequently Limited

Medicaid Can Offer a

Comprehensive

Benefits Package for

Children With

Disabilities
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 13 GAO/T-HEHS-00-152

service.17 While evidence exists that certain elements of EPSDT are poorly

implemented, 18 the legislation establishing EPSDT does provide an avenue

for providing coverage to children with disabilities for necessary health

screens and services. Moreover, the standard of care for EPSDT includes

relief of pain and maintenance of a level of health—a contrast to private

insurance policies, which can be structured to deny care if improvement in

conditions do not occur.

Medicaid may also have the capability to more comprehensively address

the care needs of these children than private health plans. Individual

private plans may include very few children with severe disabilities and

thus developing special programs and arrangements for them may not be

economically justified. Medicaid programs, as the major insurer of these

children, may find it advantageous to design specially tailored programs

that both better serve the children and are more efficient. In particular,

since the mid-1990s, states have been increasing enrollment of children

with disabilities in capitated Medicaid managed care programs. While

some concerns exist about the appropriateness of capitated managed care

for these children, well designed and well implemented managed care

programs may have the potential of better serving these children.

Employing sufficient safeguards to assure adequate and appropriate

services can ameliorate these concerns.19 Managed care can potentially

provide benefits for children with disabilities, including linking

beneficiaries to a case manager and a regular care provider and thus

improving coordination and continuity of care.

For families with a child with severe disabilities, particularly those with

incomes and resources that are just above Medicaid thresholds, the ability

to purchase Medicaid coverage could be an important means of obtaining

health care for their children. Precisely because it is the single largest

source of health care financing—public or private—for low-income

individuals with disabilities, Medicaid offers a unique set of benefits and

capabilities. While problems in Medicaid certainly exist – for example,

17 Social Security Act § 1905(r), 42 U.S.C. §1396d(r).

18See Lead Poisoning: Federal Health Care Programs Are Not Effectively Reaching At-Risk Children,

(GAO/HEHS-99-18, Jan.15, 1999) and Medicaid: Elevated Blood Lead Levels in Children (GAO/HEHS98-78, Feb. 20, 1998).

19The Health Care Financing Administration (HCFA) has published interim safeguard requirements for

states mandating enrollment of children with special needs into capitated managed care. HCFA plans

to revise these requirements after conducting studies regarding appropriate safeguards for children

with special needs in managed care. See Medicaid Managed Care: Challenges in Implementing

Safeguards for Children With Special Needs, (GAO/HEHS-00-37, Mar. 3, 2000).

Concluding

Observations
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Page 14 GAO/T-HEHS-00-152

complex eligibility rules and variation across states – it nevertheless can

provide the basis for comprehensive coverage and case management for

children with disabilities.

Mr. Chairman, this concludes my prepared statement. We would be happy

to answer any questions that you or Members of the Committee may have.

For more information regarding this testimony, please contact William J.

Scanlon at (202) 512-7114 or Carolyn Yocom at (202) 512-4931. John

Dicken and Karen Doran also made key contributions to this statement.

GAO Contacts and

Staff

Acknowledgments
Page 15 GAO/T-HEHS-00-152

Table 3: Selected Demographic Characteristics of the 843,470 Children

Receiving SSI, December 1999

Characteristic Number of children Percentage

Monthly household income not including SSIa

None 223,720 30.7

Under $200 119,040 16.3

$200-399 33,790 4.6

$400-599 41,480 5.7

$600-999 83,310 11.4

$1000 or more 227,160 31.2

Age

0-5 166,750 19.8

6-9 206,780 24.5

10-13 241,400 28.6

14-17 228,540 27.1

Sex

Female 306,890 36.4

Male 536,580 63.6

a

Includes monthly income of households headed by single adults and couples. No parental

income information exists for the 114,970 children with no parents.

Source: SSA, Children Receiving SSI (Baltimore, MD.: Office of Research, Evaluation,

and Statistics, Dec. 1999),

http://www.ssa.gov/statistics/children_receiving_ssi/121999/chreport.pdf (cited July 6,

2000). SSA projected these numbers from a 10 percent sample of children receiving SSI

benefits drawn from its supplemental security record file, Dec. 1999.

Appendix I

Selected Demographic and Diagnostic

Characteristics of Children Receiving SSI,

December 1999
Appendix I

Selected Demographic and Diagnostic

Characteristics of Children Receiving SSI,

December 1999

Page 16 GAO/T-HEHS-00-152

Table 4: Selected Conditions of Children Receiving SSI, December 1999

Diagnostic GroupaNumber of children Percentage

Mental impairments

Mental retardation 291,770 36.9

Other psychiatric 213,060 27.0

Schizophrenia 4,150 0.5

Physical impairments

Diseases of the nervous system and sense

organs

96,750 12.3

Congenital anomalies 41,900 5.3

Diseases of the respiratory system 25,060 3.2

Neoplasms 9,520 1.2

Diseases of the musculoskeletal system and

connective tissues

7,680 1.0

Endocrine, nutritional, and metabolic 6,360 0.8

Injury and poisoning 4,360 0.6

Diseases of the circulatory system 4,070 0.5

Infectious and parasitic diseases 3,010 0.4

Diseases of the digestive system 2,990 0.4

Diseases of the genito-urinary system 2,320 0.3

Otherb 76,790 9.7

Total 789,790 100.0

a

Numbers are based on the children for whom a diagnostic code is

available in SSA’s Supplemental Security Record file.

b

Includes conditions for which a diagnosis has been established but is not

included in SSA’s medical listing of impairments.

Source: SSA, Children Receiving SSI (Baltimore, MD.: Office of Research,

Evaluation, and Statistics, Dec. 1999),

http://www.ssa.gov/statistics/children_receiving_ssi/121999/chreport.pdf

(cited July 6, 2000). SSA projected these numbers from a 10 percent

sample of children receiving SSI benefits drawn from its supplemental

security record file, Dec. 1999.
Page 17 GAO/T-HEHS-00-152

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

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

Medicaid Managed Care: Challenges in Implementing Safeguards for

Children With Special Needs (GAO/HEHS-00-37, Mar. 3, 2000).

Medicaid and Special Education: Coordination of Services for Children

With Disabilities Is Evolving (GAO/HEHS-00-20, Dec. 10, 1999).

SSI Children: Multiple Factors Affect Families’ Costs for Disability-Related

Services (GAO/HEHS-99-99, June 28, 1999).

Private Health Insurance: Progress and Challenges in Implementing 1996

Federal Standards (GAO/HEHS-99-100, May 12, 1999).

Lead Poisoning: Federal Health Care Programs Are Not Effectively

Reaching At-Risk Children, (GAO/HEHS-99-18, Jan. 15, 1999).

Health Insurance for Children: Private Individual Coverage Available, but

Choices Can be Limited and Costs Vary (GAO/HEHS-98-201, Aug. 5, 1998).

Medicaid: Elevated Blood Lead Levels in Children (GAO/HEHS-98-78, Feb.

20, 1998).

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