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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

              HEALTH COVERAGE FOR FAMILIES LEAVING WELFARE

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 16, 2000

                               __________

                             Serial 106-111

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
68-979 DTP                  WASHINGTON : 2001
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of May 9, 2000, announcing the hearing..................     2

                               WITNESSES

Library of Congress, Congressional Research Service, Jean Hearne, 
  Specialist in Social Legislation...............................    14
Health Care Financing Administration, Cindy Mann, Director, 
  Family and Children's Health Programs, Center for Medicaid & 
  State Operations...............................................    25

                                 ______

Families USA, Ronald F. Pollack..................................    36
Florida Department of Children and Families, Don Winstead........    70
Health Management Associates, Vernon K. Smith....................    59
Indiana Family and Social Services Administration, Kathleen 
  Gifford........................................................    74
Henry J. Kaiser Family Foundation, and Commission on Medicaid and 
  the Uninsured, Barbara Lyons...................................    40
Mathematica Policy Research, Inc., Marilyn Ellwood...............    32
Oklahoma Health Care Authoriy, Lynn Mitchell, M.D................    80
Stark, Hon. Fortney Pete, a Representative in Congress from the 
  State of California............................................     9

                       SUBMISSION FOR THE RECORD

Community Legal Services, Inc., Philadelphia, PA, statement......    91

 
              HEALTH COVERAGE FOR FAMILIES LEAVING WELFARE

                              ----------                              

                          TUESDAY MAY 16, 2000

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
room  B-318 Rayburn House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE

May 9, 2000

No. HR-20

   Johnson Announces Hearing on Health Coverage for Families Leaving 
                                Welfare

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on maintaining the health 
insurance coverage of children in families leaving the Temporary 
Assistance for Needy Families (TANF) program for work. The hearing will 
take place on Tuesday, May 16, 2000, in room B-318 Rayburn House Office 
Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives from the Administration, 
Congressional Research Service, advocates, researchers, and State 
administrators . However, any individual or organization not scheduled 
for an oral appearance may submit a written statement for consideration 
by the Committee and for inclusion in the printed record of the 
hearing.
      

BACKGROUND:

      
    In 1997, after an increase of about 4.5 million in the previous 
five years, the number of children on Medicaid dropped. Observers 
studying this drop in children's enrollment have determined that it may 
be associated with the replacement of the Aid to Families with 
Dependent Children (AFDC) program by the TANF program in 1996. Before 
1996, families qualifying for the AFDC cash welfare program were 
automatically enrolled in Medicaid in nearly every State. But as States 
transitioned from the AFDC program to the new TANF program beginning in 
1996, the welfare rolls declined rapidly. By 1997, they had declined by 
over 20 percent and by the end of 1999, they had declined by over 50 
percent. Given the close link between enrollment in the cash welfare 
program and enrollment in the Medicaid program, the decline in Medicaid 
rolls after implementation of the TANF program may not be surprising. 
However, the welfare reform law included a requirement that States 
delink the eligibility process for cash welfare and Medicaid and 
required States to provide transitional Medicaid to individuals leaving 
welfare for work.
      
    Recent studies have shown that States can take a series of 
administrative actions to halt and even reverse the decline in 
children's Medicaid enrollment. These administrative actions include 
ensuring that the families leaving the welfare rolls understand that 
they are still qualified for Medicaid, making continued enrollment in 
Medicaid as family-friendly as possible, sending clear and simple 
notices about eligibility and application requirements to families, and 
making announcements and forms available in Spanish and other 
languages.
      
    In announcing the hearing, Chairman Johnson stated: ``When we 
passed the 1996 welfare reform law, we were intent on ensuring that 
children would remain eligible for health coverage after their mother 
left welfare for work. Now we must be certain that States are 
implementing the Federal statutes so that children actually receive the 
coverage to which they are entitled. Our hearing will show that several 
States have already implemented programs that achieve this very 
important goal.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the recent decline in children's 
enrollment in Medicaid and the successful policies that selected States 
are now implementing to reverse the decline.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Tuesday, 
May 30, 2000 , to A.L. Singleton, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Human Resources office, room B-317 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette WordPerfect or MS 
Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at `http://www.waysandmeans.house.gov''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Johnson. Good morning. The purpose of today's 
hearing is to review whether children whose mothers leave 
welfare are getting the Medicaid coverage to which they are 
entitled and, if not, to examine policy and programs to ensure 
that these children continue to receive Medicaid.
    Our previous hearings have established that since the 
enactment of the 1996 welfare reform law, the rolls of TANF 
have declined steadily, that employment by single mothers, 
especially never-married mothers, has increased greatly and 
that poverty has declined every year since 1995. But our 
hearings have also suggested that many eligible children are 
not receiving Medicaid or food stamps. Thus, we want to conduct 
this hearing to focus on documenting the Medicaid problem and 
on possible solutions.
    Let me state clearly that I think the Federal statutes are 
not the problem. Chairman Bliley, John Chafee and I, including 
many others, worked very hard to ensure that no child would 
lose Medicaid coverage as a result of the welfare reform. I 
have not seen evidence that the reason for declining enrollment 
of children is flaws in the Federal statute but, just in case, 
we have asked Jean Hearne of the Congressional Research Service 
to begin our hearing by reviewing the criteria.
    We are also fortunate to have a panel of highly qualified 
witnesses to describe what has happened at the State level to 
contribute to these declines.
    If I have read the reports correctly, the major causes of 
the decline are administrative. Some people that would have 
entered welfare in the past do not now often even join the 
rolls, and many others have left after fairly short stays. It 
is more difficult to ensure that these families know they are 
eligible and to track them so that they can be helped to 
maintain their eligibility.
    We have invited States that have taken the strong 
administrative action necessary to ensure that families know 
that they are eligible and that State procedures make it as 
easy and convenient as possible for them to apply for Medicaid 
and maintain their eligibility once they join the rolls. As we 
will see, these States--Florida, Indiana and Oklahoma--have 
shown that aggressive State action can increase the number of 
children getting coverage.
    I am happy that the administration is here, because I want 
to know what can be done by the Federal Government to ensure 
that all States produce the results that Florida, Indiana and 
Oklahoma have achieved. More specifically, we want to know if 
the administration has demonstrated adequate leadership on this 
issue and whether there are specific actions the administration 
should be taking to increase children's Medicaid enrollment. 
The problem of declining Medicaid enrollment is very, very 
important and, as this hearing will show, can be solved.
    A major reason for conducting this hearing is that Ben 
Cardin and I want to bring national attention to the actions 
that must be taken at the State and Federal level to ensure 
that children continue to get Medicaid coverage. Only by facing 
up to the Medicaid problem and solving it can we be certain 
that the 1996 welfare reform law will continue to fulfill its 
problems. Ben.
                                                       May 15, 2000

Ms. Nancy-Ann Min DeParle
Administrator
Health Care Financing Administration
200 Independence Ave., SW
Washington, D.C. 20201

    Dear Administrator DeParle:
    The nation's Governors consider health insurance a critical support 
for helping low-income families succeed in the workplace by remaining 
healthy, employed, and on a path toward career advancement. We 
recognize that not all families leaving welfare for work start in jobs 
that offer a health insurance benefit or can afford the coverage 
sponsored by their employers. Thus, Governors have implemented 
strategies to inform Medicaid-eligible families leaving welfare, as 
well as those not in contact with the welfare system, about Medicaid's 
availability and how to apply. States have also taken steps to ensure 
the timely and accurate redetermination of families who continue to 
qualify for Medicaid coverage. We would like to share some of these 
state approaches with you and have attached information prepared by the 
National Governors' Association that describes some of the activities 
underway.
    We also appreciate the attention the Health Care Financing 
Administration has given to this issue through its efforts to identify 
promising state practices for Medicaid redetermination and broader 
Medicaid enrollment activities. You may be aware that the Kaiser 
Commission on Medicaid and the Uninsured recently released data showing 
an increase in Medicaid enrollment by 1.4 percent, or 320,000 people, 
between June 1998 and June 1999. There is also evidence to suggest that 
for every child now enrolled in the State Children's Health Insurance 
Program, states are enrolling another child in Medicaid. Thus, about 4 
million more children have access to health insurance coverage today 
than in 1997. Governors' strong efforts can certainly be attributed, at 
least in part, to the Medicaid program's continuous enrollment climb.
    The ``delinking'' of the Medicaid and Temporary Assistance for 
Needy Families (TANF) programs under the welfare reform law of 1996 was 
an added challenge and one states have been working diligently to 
address. Many states updated their automated eligibility systems, 
retrained frontline TANF and Medicaid staff, and expanded outreach and 
promotion efforts to accurately enroll eligible families in the 
Medicaid program who may have been inadvertently overlooked as a result 
of delinking.
    Governors' hard work has been paying off and we believe this will 
be demonstrated in the attached descriptions. Please keep in mind that 
this is by no means a comprehensive list of all initiatives underway, 
nor is it a prescription for state policy and practice. Rather, it 
presents a sampling of strategies states are implementing and options 
for those considering similar efforts.
    Once again, we appreciate your efforts to make access to Medicaid 
for eligible low-income families a priority. We look forward to our 
continued joint commitment to address issues surrounding TANF/Medicaid 
delinking and to find ways to make the lack of health insurance less of 
a barrier for low-income working families.
            Sincerely,

                                       Raymond C. Scheppach

   Aggressive State Actions Contribute to Rise in Medicaid Enrollment

    Governors ``efforts to insure children and families are reaping 
results. A study released last week by the Kaiser Commission on 
Medicaid and the Uninsured showed Medicaid enrollment increasing by 1.4 
percent, or 320,000 people, between June 1998 and June 1999. There is 
also evidence to suggest that for every child now enrolled in the State 
Children's Health Insurance Program, states are enrolling another child 
in Medicaid. Thus, about 4 million more children have access to health 
insurance coverage today than they did in 1997. And, Governors'' strong 
efforts can be attributed, at least in part, to the Medicaid program's 
continuous enrollment climb.
    Following the ``delinking'' of the Medicaid and Temporary 
Assistance for Needy Families (TANF) programs, many states enhanced 
their Medicaid outreach and enrollment efforts, as well as exercised 
new policy options to enroll more families in the Medicaid program. The 
welfare reform law of 1996 severed the link between Medicaid and 
welfare eligibility that, under the prior Aid to Families with 
Dependent Children (AFDC) program, meant all individuals receiving 
welfare payments were automatically eligible families who left TANF 
retained coverage, as well as make coverage available to qualified low-
income families who were never in contact with the welfare system, 
states continue to take steps to improve their Medicaid enrollment 
processes, expand Medicaid promotional efforts, and align Medicaid 
policies to better parallel welfare reform ``work first'' goals. Some 
states have even expanded Medicaid eligibility to cover more low-income 
working families who are not offered health insurance by their 
employers. Others partially subsidize employer-sponsored insurance for 
low-income working families who cannot afford the premiums or co-pays. 
Governors consider health insurance to be a critical support for 
keeping families healthy and on the job, and they are taking innovative 
steps to ensure eligible families receive Medicaid coverage.
    Some approaches states are taking to ensure that lack of health 
insurance coverage does not pose a barrier to self-sufficiency include:
     easing the Medicaid application and redetermination 
processes;
     expanding health insurance outreach and promotional 
campaigns;
     helping employers inform workers about Medicaid;
     updating and streamlining computer eligibility systems;
     training agency staff to improve Medicaid (TMA);
     covering employer-sponsored health insurance premium 
through Medicaid;
     paying employee shares of employer-sponsored coverage with 
TANF maintenance-of-effort (MOE) funds; and
     Offering Medicaid to more low-income working families with 
children.
     Easing the Medicaid application and redetermination 
processes. Many states are simplifying Medicaid application and 
redetermination processes to ensure families are not discouraged from 
seeking Medicaid because of complicated enrollment procedures. States 
are also working to guarantee that eligibility is redetermined 
accurately and in a timely manner. For example, Massachusetts 
administers a shorter, four-page mail-in application for its Mass 
Health program Arizona, Kansas, and Vermont are some of the states that 
no longer require Medicaid recipients to meet face-to-face interviews 
when reenrolling children in Medicaid.
     Expanding health insurance outreach and promotional 
campaigns. Most states promote Medicaid availability and how to apply. 
These outreach efforts include billboards and posters placed where 
eligible families are most likely to see them; print media, radio, and 
television public service announcements; information distributed 
through public and private providers of social services, child-care 
providers, schools, and employers; and Medicaid staff made available to 
enroll people at community events. Delaware sends Medicaid staff to 
enroll eligible families at community fairs, festivals, hospitals, 
medical centers and correctional facilities.
     Helping employers inform workers about Medicaid. 
Employers, particularly small businesses and firms that employ 
individuals at relatively low wages, may find financing employee health 
care to be extremely costly. However, many of these employers may hire 
employees who are eligible for transitional Medicaid (TMA) or that have 
children who qualify for the State Children's Health Insurance Program 
(SCHIP) or another poverty-related Medicaid category. Minnesota informs 
employers about Medicaid availability through mass mailings, 
presentations to small businesses, and job expos, information provided 
to recently laid-off employees, paycheck inserts, and other activities.
     Updating and streamlining computer eligibility systems. 
Many states are updating their information systems to improve the 
extent to which potentially eligible low-income families who are either 
outside the welfare system, diverted from welfare, or have had their 
welfare case closed due to increased earnings or another reason, are 
accurately identified for and enrolled in Medicaid. For example, 
Georgia's online System for the Uniform Calculation and Consolidation 
of Economic Support Services (SUCCESS), screens for an applicant's 
potential eligibility for Medicaid, TANF, and food stamps all at once. 
If an applicant is ineligible for one category of Medicaid, SUCCESS 
will automatically identify other Medicaid categories in which the 
family may qualify.
     Training agency staff to improve Medicaid enrollment. Some 
states are using Medicaid staff to crosstrain staff in other agencies, 
one-stop career centers, community health clinics/treatment centers, 
homeless shelters, and other locations on how to link qualified 
individuals with health insurance coverage. For example Indiana 
retrained TANF eligibility determation staff on the importance of 
ensuringthat families eneroll in TMA after they leave cash assistance. 
As a result, many local offices increased their followup of families 
missing redetermination appointments.
      In additin to improving Medicaid outreach and enrollment 
procedures, several states are also revising Policies to help low-
income working families obtain health insurance.
     Lengthening the period families can receive transitional 
Medicaid. States are using the new flexibility in the welfare law to 
lengthen the period a family may receive Medicaid after going to work 
by disregarding a portion of their earnings from the eligibility 
calculation. For example, a state could disregard all of a Medicaid 
recipient's earnings below a certain level (such as the poverty level) 
for a limited period of time (such as six months). Once this period 
expires, a family becomes eligible for an additional twelve months of 
TMA. New Jersey, North Carolina, and South Carolina are a few of the 
states that have disregarded certain levels of income to provide TMA 
for an additional 12 months.
     Covering employer-sponsored health insurance premiums 
through Medicaid. Some states developed programs under Section 1115 
waivers to subsidize employer-provided health care for families who 
cannot afford the premiums for health insurance offered at work. In 
January 1999, Massachusetts expanded its MassHealth program under a 
Section 1115 Waiver to assist low-income working adults with incomes up 
to 200 percent of the federal poverty level (FPL) to purchase their 
employers' health insurance provided they are working for an employer 
with fifty or fewer full-time employees.
     Paying employee shares of employer-sponsored coverage with 
TANF MOE funds. While federal TANF funds cannot be used for medical 
services does count toward the TANF maintenance-of-effort (MOE) 
requirement if it is consistent with a TANF purpose (such as supporting 
work). A state, therefore, could pay the employee share of employer 
based health insurance for some period of time or up to a specified 
income level for former welfare recipients or even needy families (as 
defined by the state) who have never been on welfare. For example, 
under its new TANF state plan, West Virginia will provide a maximum 
subsidy of $125 a month to help former West Virginia Works Works 
recipients with incomes below 185 percent of the FPL who exhaust their 
TAM purchase health insurance coverage through ther employer for 
themselves and their spouses.
     Offering Medicaid to more low-income working families with 
children. A few states are using welfare law flexibility to expand 
coverage to include low-income working families outside of welfare 
programs who lack affordable health insurance. This is achieved by 
providing more generous earnings disregards not only for Medicaid 
recipients but for applicants as well so that a family that is already 
working may apply and be eligible for Medicaid. In fall 1998, Rhode 
Island's Medicaid program, Rite Care, began disregarding income so that 
working parents with incomes up to 185 percent of the FPL would be 
eligble. The District of Columbia's DC Healthy Families program 
provides coverage for parents and children with incomes up to 200 
percent of the FPL.
      Governors are taking the lead to ensure eligible low-income 
families have access to Medicaid through a wide range of initiatives, 
including eligibility determination, staff training, systems 
enhancements, and outreach. They are also finding ways to make lack of 
health insurance less of a problem for some low-income families by 
partially offsetting employer-offered insurance or expanding temporary 
eligibility for Medicaid. With such efforts to improve Medicaid access 
taking place across tha nation, the trend in rising Medicaid enrollment 
is likely to continue.
      ***The NGA Center for Best Practices will publish a report 
presenting more detailed policy and program options and state examples 
for improving access to Medicaid and transitional Medicaid in the next 
month.
      

                                

    Mr. Cardin. Thank you, Madam Chair. Thank you very much for 
holding these hearings.
    We have talked on many occasions about our concern that 
those eligible for Medicaid be, in fact, enrolled in the 
Medicaid Program, and when you take a look at what has happened 
since welfare reform on Medicaid enrollment, it leads you to 
just one conclusion and that is that the number of children who 
are eligible for Medicaid has declined as a result of the 
Welfare Reform Act, that there is a relationship between 
welfare reform and the number of children who are covered by 
Medicaid.
    The number of poor children covered by Medicaid declined by 
1.3 million between 1996 and 1998, down from 9.1 million to 7.8 
million. This decline far exceeds the reduction in child 
poverty over the same time period or the various projections on 
how many children would be eligible for Medicaid coverage. And 
when you take a look at those that have traded welfare for 
employer-based coverage there has not been the equivalent 
increase. Nearly 30 percent of the children leaving TANF were 
uninsured within 11 months of exiting the rolls. The vast 
majority of these children were statutorily eligible for 
Medicaid.
    Now, when you take a look at what has happened around the 
Nation, I am sure that in some States this has happened because 
of neglect. They have not spent the resources or changed the 
computer programs or went through all that was necessary to 
make sure that we didn't lose children eligibility in Medicaid 
as we implemented the welfare reform proposals. Considering the 
fact that Congress provided 90 percent of the Federal match for 
States' expenditures associated with delinking Medicaid and 
TANF eligibility, this lack of oversight is particularly 
disconcerting. Other States, I am sorry to observe, I think 
intentionally went in the wrong direction by linking the 
eligibility criteria for TANF, Medicaid and food stamps, which 
is clearly inappropriate.
    Madam Chair, in regards to your comments that the Federal 
Government doesn't share in some of this responsibility, let me 
make an observation I think that we do have some culpability in 
this area. When you look at what we have done with immigrant 
families in this Nation, I think we have intimidated a lot of 
people in applying for benefits that they are entitled to.
    Also, I must say that the Federal eligibility critical for 
Medicaid has become increasingly complex over this period of 
time. For example, families that leave welfare for work only 
receive their second 6 months of transitional Medicaid if they 
prove they have incomes of less than 185 percent of the poverty 
level. This additional redetermination places one more barrier 
between families and health coverage. It serves little purpose, 
since very few welfare leavers have obtained incomes twice the 
poverty level within a year of exiting public assistance.
    Madam Chair, 3 years ago, Congress passed the CHIPs program 
on a bipartisan basis to ensure that needy children have access 
to health care. We need to work to ensure that welfare reform 
does not undercut that critical goal.
    Madam Chair, let me just say I look forward to all of the 
witnesses that are going to be testifying today, but I 
particularly want to welcome our colleague and friend Pete 
Stark. He has been one of the real champions in this Congress 
about providing universal health coverage for children, and I 
certainly agree. My only objection is it should be universal 
coverage of health insurance, period.
    I look forward to hearing from all of the witnesses today 
so that we can try to develop strategies that work, look at 
some of the States that have been successful in getting more 
children enrolled in the Medicaid Program that are eligible, 
and try to come out with some bipartisan recommendations to 
make sure that more of our children are covered by health 
insurance.
    Chairman Johnson. Thank you.
    Mr. Stark, it is a pleasure to have you on that side of the 
table.

   STATEMENT OF HON. FORTNEY PETE STARK, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Stark. Thank you, Madam Chair. Thank you for this 
hearing and allowing me to have an opening statement and, 
indeed, to testify.
    My temptation would be--to remind some of my colleagues 
that I was one of, I guess, four or five--all but one Democrat 
who opposed this welfare reform bill, and in the department 
probably three of the leading experts in welfare in the country 
resigned from our President's administration in protest to his 
signing it. But that is done, and it is the law of the land, 
and I don't think that is the issue--the underlying focus of 
the welfare reform bill I don't think is the issue.
    The focus of the welfare reform bill was on adults, and it 
ran all of the way from the extreme, I suppose, from people who 
felt that adults who accepted welfare have the wrong religion 
or they are bad people to extreme liberals like myself who 
think that we ought to give everyone a guaranteed minimum 
income as President Nixon first suggested and then we would not 
have this problem.
    Somehow, the topic of children got lost in all of that, and 
I am going to suggest this morning that it doesn't make any 
difference. Children are not shiftless by birth, and they don't 
make the decisions, and they are not responsible for their own 
health insurance, and you can go on. The kids are a by-product 
of whatever we have done, for better or worse.
    And I don't think that there is any quarrel here, just a 
couple of things that I think we can agree on. I don't think 
that anybody in this room disputes that in today's delivery of 
medical care to not have insurance or be part of a program 
means you don't get first-rate medical care. You may get it 
later at the emergency room. But I think to be uninsured or 
outside of a program like the military or some other program is 
to infer that a child does not get proper medical care.
    And I would further ask you to stipulate with me that every 
dollar we can spend in the first couple years of a chilled's 
life in the aggregate will save the community $5 between the 
time they are 3 and the time they are 20.
    Now the unfortunate thing is that we can't get any budgets 
going for that, but I don't think that there is a physician or 
a person that is involved in health care work that denies that 
we save money as a community. The trouble is that we are not 
required by law to pay for it, so we don't get a budget saving.
    Now we get into an area where there may be some 
disagreement, and you will hear a lot of witnesses talk a lot 
today about why kids--why there are more uninsured kids or, if 
there are not more, I don't think that we are going to get any 
argument that there are somewhere around 10 or 11 million kids 
without health insurance. Is that growing or declining? Either 
way, it is a little bit----
    The bad number is that there are 10 million, give or take a 
million, kids out there without insurance today. Regardless of 
who their parents are or regardless of how you feel that the 
government should intrude in their lives, that is not a good 
thing for our society. It is going to cost us money as a 
society. It is going to cost us productivity. Because kids who 
are sick don't learn, as well as a whole host of things that we 
know are wrong.
    And I am going to suggest that maybe this is a systemic or 
a problem that we can't resolve through a bunch of legislation. 
We have the CHIP program to see if we can bring kids in, and it 
hasn't worked. I have 15,000 kids in my district or the county 
in which my district resides and--who are eligible, we 
estimate, for CHIP; and we have only have a thousand signed up; 
and we can't find the other 14,000. I hear bad program, the 
social service is not doing it, a lot of immigrant families--I 
have heard all of the excuses. Nonetheless, I still have 14,000 
kids not in the program.
    But let's go to us old folks. In SSI we probably don't have 
half--Ron can give me the number. How many eligible for SSI 
participate? Not half. And we have Social Security writing 
Medicare books at a 4th grade level because that is the level 
that they think the understanding is.
    In the QMB/SLMB plan, 60 percent of those eligible get 
their Medicare extra benefits. These are seniors who arguably 
ought to be able to read by the time they are 65. And out of 
the SLMB, which is the people between 100 to 120 percent of 
poverty, only 10 percent of those eligible are signing up. Does 
it come as a great surprise that maybe we are not signing up 
all eligible kids?
    For whatever reason, and it is not just Federal Government, 
some States do better. New York basically kicked kids out of 
Medicaid when they shouldn't have. So you can look around and 
you will hear from the administration and other bureaucrats 
today who say it is everybody else's fault. Fault is a useless 
concept in this regard.
    There are 10 million or 11 million kids without insurance. 
I think we can do something about that. It may not take the 
form that I am about to suggest to you, but I want to suggest 
its fundamental concept is something that this Committee might 
consider.
    Senator Rockefeller and I have introduced a bill called 
Medikids, something like that. Very catchy, Medikids. And it is 
basically Medicare for all children, but the concept grew this 
way. We said we are messing around with all of these programs 
to try to get kids insured, and it isn't working. How about we 
just say that every child, when the child is born, is in a 
program.
    Now, I can hear my good friends on the right saying, whoa, 
that is Big Brother in spades, and it is. But this is merely a 
question of identifying that each child gets medical care 
because--first of all, you charge the parents. Without going 
into details of what Medicaid is, the idea is that it is the 
ultimate safety net. If the parents have group health 
insurance, the kids are out of it.
    It is done through the Tax Code, so you can do it for every 
month or every day that the kids have other insurance, the 
parents don't have to pay. I think it is $20 a month per child. 
That pays a quarter of the child. The cost is a thousand bucks 
a year on average per child to give them, basically, Medicaid-
type benefits.
    We say, wait a minute. If the parents have group insurance 
where they work, as I do with Federal employee benefits, I just 
tack that onto my tax return, and I reduce the thousand dollars 
or the $20 a month that I would otherwise pay. If I am out of 
work for 6 months during the year, my insurance drops, my child 
automatically goes back into the Medicaid Program during that 
period. It is the ultimate fail-safe for a child without other 
insurance being in a program.
    It doesn't cost much the first year because we phase ours 
in starting with all of the children born the first year. The 
second year, we take all of the kids born and 2 years old. So 
it costs a half billion the first year. The kids pretty much 
divide up into $500,000. It costs $500 million the first year, 
and so at the end of the 20th year, you are spending $10 
billion a year. Yes, that costs, and that is the share that the 
parents are not paying through a premium.
    We could vote tomorrow to waive the phone tax and darn near 
pay for this for a long time, just to show you that it would be 
pretty easy to pay for it, and I have not had one letter of 
complaint in the almost 30 years I have been in Congress about 
the phone tax. We are going to waive it tomorrow, and I am just 
suggesting that there is money around at the level of this 
amount if we want to fund health insurance for kids.
    But I want to come back to the underlying concept, and that 
is that all the programs that we have that require application, 
almost every child that goes into an emergency room gets into 
the CHIP program because the hospitals are really tough about 
making sure that they get paid. So they find out whether the 
child will qualify and the parents qualify and get them 
admitted.
    But whether we do it through schools or States or counties, 
it doesn't work. It doesn't work for SSI, it doesn't work for 
QMB or SLMB. In every one of those cases, you can say, they are 
adults. Why should we be Big Brother?
    I am not sure that we have to say that for children. I 
think perhaps on a bipartisan basis we can say that's OK. 
Children--we don't punish them. They are not at fault. If there 
is a reason to have a social contract and it saves the country 
money----
    So I guess what I am saying is, whatever we do, could we 
make the enrollment of children in this program automatic so 
that the default is that the child has the insurance and then 
they have to get out through private insurance or otherwise? 
And that, basically, is the basis of what I am urging on my 
colleagues today.
    We can solve this problem. I don't think we are going to 
solve it with a new kind of rule or program or getting after 
whether it is Health and Human Services or whether it is the 
State Social Services Commission. Whether it is in Louisiana or 
Wisconsin or Maryland or Connecticut, I don't think--it differs 
in every state. We could resolve that problem somehow right 
here if we could come forward with a program that says from the 
git-go every child is in. Now State, you get them out. That is 
a different issue, and that is the basis of my testimony.
    Thank you for letting me plead my case, Madam Chair.
    [The prepared statement follows:]

Statement of Hon. Fortney Pete Stark, a Representative in Congress from 
the State of California

    Madam Chairman and Members of the Subcommittee:
     Families leaving welfare for work are among the 
most vulnerable in America. They deserve the best we can give 
them. Yet study after study shows that states have not done 
well by these fragile families, particularly when it comes to 
Medicaid.
     A 1999 Families USA study found that as of 1997, 
an estimated 675,000 parents and children lost Medicaid 
coverage and became uninsured as a consequence of welfare 
reform. An October 1999 report by the Center on Budget and 
Policy Priorities found that between 1996 and 1998, the number 
of poor children covered by Medicaid fell by 1.3 million, with 
only about half of that decline attributable to the drop in the 
number of children living in poverty. And from 1995 to 1998, 
monthly Medicaid enrollment declined by 12% in California, 18% 
in Florida, and 29% in Wisconsin, according to work by Marilyn 
Ellwood of Mathematica policy Research.
     We also know that overall, the number of children 
who have any source of health insurance is not increasing, a 
despite enactment of the State Children's Health Insurance 
Program in 1997.
     Some of the witnesses today will point out that in 
some states, Medicaid enrollment drops appear to be slowing or 
halting. But will 11.1 million children lacking health 
insurance in 1998 and far higher rates of uninsurance among 
non-elderly adults, we still have a long way to go.
     Advocates and researchers point out that virtually 
all children in families leaving welfare remain eligible for 
Medicaid or CHIP, as do many of their parents. This is because 
most states now extend coverage to children in families with 
incomes up to 200% of the poverty line, and most families 
leaving welfare are taking low-wage jobs that are well below 
this level, Also, parents taking low-wage jobs that do not 
offer health insurance should remain eligible for Transitional 
Medicaid coverage. But many are instead being erroneously 
terminated.
     Many of these terminations appear to be a case of 
benign neglect by states. Advocates charge they have failed to 
adequately train caseworkers, provide information to 
recipients, or revise computer systems on the issue of 
continuing Medicaid eligibility for individuals leaving, 
losing, or in some cases, being diverted from cash welfare.
     There is no good excuse for these failures, since 
the 1996 welfare law provided states with $500 million to help 
them figure out how to delink the AFDC program is extremely 
generous, at 90%, states have still drawn down only $125 
million of this funding. This suggests that the Administration 
needs to require that this money gets spent on programs that 
result in clear information being disseminated to families 
about their Medicaid eligibility, that streamline application 
procedures, and that make parents aware that even if they 
become ineligible for Medicaid assistance, their children in 
all likelihood can continue to be covered.
     Advocates are finding that in too many cases, 
caseworkers are not telling families that they are still 
eligible for Medicaid even if they are not receiving cash 
assistance. Under law, families have a right to file a Medicaid 
application and have it processed within 45 days. This 
information should be made part of the standard,routine 
assessment of all families who are leaving welfare, Local 
welfare offices have a fundamental responsibility to get this 
basic information out to all families, many of whom have heard 
about the welfare law's restrictions and assume they also apply 
to Medicaid.
     On the issue of improper diversion, the infamous 
New York City experience simply must not be repeated or 
tolerated. Until advocates raised concerns, city officials were 
effectively prohibiting individuals applying for cash 
assistance from also applying for health insurance and food 
stamp benefits during their first office visit. This illegal 
and thoroughly despicable practice was only stopped when a 
judge issued an injunction ordering the city to cease and 
desist.
     The consequences of failing to ensure that 
eligible families continue to have coverage under Medicaid are 
serious, because these individuals are at high risk of becoming 
uninsure. Analysis by the Center on Budget and Policy 
Priorities that is based on state leaver studies finds that in 
most states, fewer than one in six children and parents who 
have left welfare are enrolled in private coverage. These 
studies also show that more than one in five children are 
uninsured after leaving welfare. The situation for their 
parents is worse, with close to half of parents in leaver 
studies lacking coverage. This results in unmet medical needs 
that are documented in some of the state leaver studies. This 
results in unmet medical needs that are documented in some of 
the state leaver studies.
     The federal government has an obligation to 
reverse these dismal trends. And while there are many ways of 
making incremental improvements, such as guaranteeing 
transitional Medicaid for a full year, there are also bolder 
steps that we can take.
     For our kids, I believe that the most 
straightforward way to accomplish the goal of providing all 
children with health insurance is to create a federal fallback 
program for all children who have no other source of coverage. 
That's the aim of a proposal I introduced on May 4 with Senator 
Rockefeller, the ``MediKids Health Insurance Act of 2000.'' 
It's a simple bill that would provide children not enrolled in 
any other health insurance program with benefits that would be 
similar to those available to children under Medicaid now. 
Children could still get their health benefits through their 
parents' employer, Medicaid, or CHIP. But all children would 
have the permanent safety net of the MediKids program.
     I hope that my colleagues on both sides of the 
aisle will join me in support of this proposal, which over time 
could become a universal health insurance program for children 
like Medicare is for seniors and desabled people.
     Thank you for allowing me to testify today.
      

                                

    Chairman Johnson. Thank you. I think the concept of opt-out 
rather than opt-in is an interesting one. I think we have to 
have that choice in Medicaid rather than Medicare because the 
coverage is broader in Medicaid.
    Mr. Stark. Our bill is the Medicaid benefits. And we 
anticipate, quite frankly, the kids would drop out of Medicaid. 
It would eventually go away and become this by default.
    Chairman Johnson. You have the additional problem of how 
much you draw family coverage out from under the private 
sector. My experience with Medicaid as a program to provide 
health insurance for children has not been encouraging, and the 
depth of the antagonism of working parents to have their kids 
in a federally funded program has surprised me. When we visited 
Florida, this Subcommittee, we asked the workers specifically 
about that, and they preferred to wait until they could qualify 
for their employer-provided plans.
    We have taken quite a bit of time, and I don't want to 
defer the other panels, but these are the kinds of problems 
that we would have to deal with to go to an opt-out.
    Mr. Cardin. If the Chair would yield, the next witness will 
be testifying that 55 percent of the Nation's children who live 
in poverty are covered by Medicaid--which means 45 percent are 
not. An overwhelming majority of those kids are not covered by 
any other insurance. It underscores when you have an 
affirmative obligation to enroll there are an awful lot of 
children that are not getting covered. It underscores the 
importance of your testimony.
    Chairman Johnson.  Mr. Watkins.
    Mr. Watkins. I would like to say, Madam Chair, I 
understand, and I have been going through an experience 
somewhat by choice. And I say that because my wife and I just 
brought a little family up to our area, two daughters, 4 and 6. 
I thought it would be great if we would help them get a job 
where they had health care, and we did. We got them a job. I 
even signed them a note to try to get them a place to live so 
they can start having a home. They were there less than 2 
months, and this past month they made the decision that they 
were not going to be there. This is the first time these 
children had insurance. It is the first time--we would have 
seen that they got a college education. But they opt out to go 
back.
    Let me say I grew up in dirt-poor poverty, and I understand 
lots of time the thinking, but I don't know, a lot of it is by 
choice. I don't know how we work that through. Because little 
Jeanette and little Isabel, their future is really going to be 
affected.
    Mr. Stark. But it wasn't the kids' choice.
    Mr. Watkins. But the parents' choice. They had no care or 
concern for their own children. They had a home and health 
insurance coverage--for the first time ever. It was the parents 
that just----
    So I don't know how you get there sometimes with a lot of 
this. You want to make sure you are able to help lift them out 
of this living condition, you know. Are you poor white trash? 
We all know education is the greatest way to lift people out of 
poverty, so if you can just make it so that they don't want to 
get out of it--you have to have some kind of incentive for them 
to come out of it. I don't know. My wife and I work with all 
kinds of situations.
    Mr. Stark. My only sense is, if we can't deal with the 
parents, ought we to punish those kids if we can provide them 
health insurance for the kids or health care. Think of it that 
way. We require that they be vaccinated if they go to school. 
Put the parents aside. For whatever reason, the parents are not 
fulfilling the role as you and I see it. But I don't think 
anyone of us would disagree that we would prefer that those 
kids got medical care.
    And I am suggesting a structure so that the parents don't 
have to apply. If they are kids and they are there, they have 
got a way to get their medical care so when they walk into a 
clinic the clinic knows that the little kids--they know that 
there is health insurance there so they get their vaccination 
or treatment.
    Mr. Watkins. I see where you are coming from, but the 
incentive for them to get out of it, for the parents to want 
them to get out of that condition--I want to help them crawl 
out of that, and I can work with you to try to figure out a 
way. Thank you.
    Chairman Johnson. Thank you.
    I would like to call Jean Hearne, Specialist in Social 
Legislation, Congressional Research Service.
    I want to say that the law does currently actually require 
States to cover--which means to me that the States could be 
registering at birth if they wanted to--requires States to 
cover all children under age 6 and any pregnant woman up to 133 
percent of poverty and all children up to 17 under a hundred 
percent of poverty. Next year, it will be 18 and after that 19. 
There is a mandate in place, and to some extent we are 
struggling with the problem of mechanisms rather than statute.

  STATEMENT OF JEAN HEARNE, SPECIALIST IN SOCIAL LEGISLATION, 
      CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS

    Ms. Hearne. Good morning, Chairman Johnson and Members of 
the Committee. My name is Jean Hearne, and I am a Specialist in 
Social Legislation of the Congressional Research Service. This 
morning I am going to provide a brief overview of the major 
ways in which children can obtain coverage under the Medicaid 
Program.
    The Medicaid Program offers a generous package of health 
care services for certain groups of low-income persons. 
Historically, program eligibility was linked to actual or 
potential receipt of cash assistance under a welfare program. 
However, beginning in the eighties, through a series of 
legislative changes, the Medicaid Program was expanded to 
provide protection for other groups of individuals with no ties 
to the welfare system. This trend culminated with the 1996 
welfare reforms that formally delinked eligibility for Medicaid 
from the receipt of cash assistance for certain covered groups.
    The requirements of Federal law, coupled with decisions by 
individual States in structuring their Medicaid Programs, 
determine who is actually eligible in a given State. In 
general, Federal law places limits on the categories of 
individuals that can be covered and establishes specific 
eligibility rules for each category. Over 50 distinct 
population groups are included in the law as potentially 
eligible.
    Within these parameters, States are given additional 
options. In 1998, States reported that the Medicaid Program 
covered 20.8 million children and young adults under the age of 
21. This group includes 55 percent of the Nation's children who 
live in poverty and about 19 percent of all children in the 
U.S.
    The primary pathways to Medicaid for low-income children 
are the following four:
    First, children and families who meet the financial and 
categorical rules under the State's former AFDC Programs in 
effect on July 16, 1996, are eligible for Medicaid even if they 
do not qualify for cash grants under the new TANF programs. 
This categorical group was created as part of the welfare 
reform legislation to ensure that all low-income families that 
would have qualified for Medicaid under the old AFDC Program 
continue to qualify for Medicaid after welfare reform. States 
were given the flexibility to alter the income and resource 
standards and methods; and, as of 1999, a number of States have 
done so in order to realign Medicaid eligibility with 
eligibility for the new TANF programs.
    The second major pathway is children receiving Supplemental 
Security Income. Subject to one important exception, States are 
required to cover all children receiving SSI, a major pathway 
to Medicaid coverage for children with special health care 
needs. The major exception occurs in so-called 209(b) States. 
Those States use more restrictive income or resource standards 
or definitions of disability than are used in the SSI Program. 
If a State chooses the 209(b) option, it must also allow 
individuals to spend down into Medicaid eligibility by 
deducting incurred medical expenses from income. In 1998, 11 
States had elected the 209(b) option.
    The third major pathway to Medicaid for children is through 
one of the three poverty-related groups. These are children who 
qualify for Medicaid even though they are not enrolled in TANF 
or SSI.
    First, States are required to cover children under age 6 
and pregnant women who are in families with income below 133 
percent of the poverty level.
    The second poverty-related group is a mandatory coverage 
group for children under the age of 17 living in families with 
income below poverty. This group is being phased in 1 year at a 
time so that all children under 19 and living in poverty will 
be eligible for Medicaid in 2002.
    The last poverty-related group is an optional group of 
infants and pregnant women in families with income below 195 
percent of poverty. Last year, 41 States and the District of 
Columbia chose to extend coverage to some or all pregnant women 
and infants in that category.
    The final major pathway is through section 1902(r)(2) and 
section 1115 demonstration waivers. Section 1902(r)(2) is a 
Medicaid provision that allows States flexibility in defining 
methods for counting income and resources for some categories 
of Medicaid eligibles. Section 1115 demonstration waivers allow 
States to test new approaches for providing health care 
coverage. While the two provisions are very different from each 
other, they bear one major similarity. They are used by States 
to allow a significant number of individuals to obtain Medicaid 
coverage who would otherwise not qualify for the program.
    In 1999, there were 26 States altogether that have extended 
Medicaid to some children in families with income or assets too 
high to otherwise qualify through the use of one of those 
provisions.
    While the four pathways I described represent the major 
routes to Medicaid eligibility for children, there remain a 
number of other eligibility categories in use by States through 
which smaller numbers of children obtain their benefits. Many 
of those groups represent unique categories of children and 
sometimes entire families that have been singled out in the 
statute for protection against the high cost of health care. 
Those groups are summarized in my written testimony.
    Thank you.
    Chairman Johnson.  Thank you very much, Ms. Hearne.
    [The prepared statement follows:]

Statement of Jean Hearne, Specialist in Social Legislation, 
Congressional Research Service, Library of Congress

                              Major Routes

    The Medicaid program provides coverage for a generous 
package of health care services for certain groups of low-
income persons. Historically, program eligibility was linked to 
actual or potential receipt of cash assistance under a welfare 
program. However, beginning in the 1980's, through a series of 
legislative changes, the Medicaid program was expanded to 
provide protection for other groups of individuals with no ties 
to the welfare system. This trend culminated in the welfare 
reform legislation of 1996 (the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 or PRWORA) when the 
Aid to Families with Dependent Children (AFDC) program was 
replaced by the Temporary Assistance for Needy Families (TANF) 
program. In establishing TANF Congress formally de-linked 
eligibility for Medicaid from the receipt of cash assistance 
for certain covered groups.
    The requirements of federal law, coupled with decisions by 
individual states in structuring their Medicaid programs, 
determine who is actually eligible in a given state. In 
general, federal law places limitations on the categories or 
groups of individuals that can be covered and establishes 
specific eligibility rules for each category. Over 50 distinct 
population groups are included in the law as potentially 
eligible. Within these parameters, states are given additional 
options. For example, the Medicaid statute allows states to 
choose the upper age limit for certain optional categories of 
children (up to age 18 or 19 or 20 or 21). States then create 
the precise definition of this pathway. Contributing to the 
complexity of the Medicaid program are financial criteria. 
Medicaid is a means-tested entitlement program. To qualify, 
applicants' income and resources must be within certain limits, 
most of which are determined by states, again within federal 
statutory parameters. Further complicating this picture is the 
flexibility states have in defining countable income and 
assets. Consequently, income and resource standards vary 
considerably among states, and different standards apply to 
different population groups within a state. In general, 
individuals in similar circumstances may be automatically 
eligible for coverage in one state, be required to assume a 
certain portion of their medical expenses before they can 
obtain coverage in a second state, and not be eligible at all 
in a third state.
    The result of all of the flexibility is an unfathomably 
large number of eligibility ``pathways'' onto the Medicaid 
program. The specific criteria of each pathway may vary from 
state to state and some children could qualify for Medicaid 
through more than one in any given state. The following 
testimony will attempt to simply describe only the most 
important pathways to Medicaid for children defined as either 
those that cover the largest number of children or that cover 
the largest number of children with special health care needs. 
The accompanying written testimony will include a more complete 
description of eligibility pathways for children.
    In 1998, states reported that the Medicaid program covered 
20.8 million children and young adults under the age of 21. 
This group includes 55% of the nation's children who live in 
poverty and about 19% of all children in the U.S. The primary 
pathways to Medicaid for low-income children are the following 
four:

Persons who would be eligible for cash assistance under the old 
AFDC program.

    Children (and families) who meet the financial and 
categorical rules under the states' former AFDC programs (in 
effect on July 16, 1996) are eligible for Medicaid even if they 
do not qualify for cash grants under the new Temporary 
Assistance for Needy Families (TANF) program. This categorical 
group was created as a part of the welfare reform legislation 
enacted in 1996 to ensure that certain low-income families do 
not lose their Medicaid eligibility as a result of welfare 
reform. For this group, PRWORA gave states the flexibility to 
adjust the 1996 income and resource standards in three ways: 
states may lower their income standards, but not below those 
used for AFDC on May 1, 1988; states may increase their income 
and resource standards by an amount that is no more than the 
percentage increase in the Consumer Price Index (CPI); or 
states may use less restrictive income and resource 
methodologies than those in effect on July 16, 1996.
    The 1996 income standards for AFDC programs are well below 
the current federal poverty level (FPL). For example, the AFDC 
payment standards in effect on July 16, 1996 range from about 
14% of the current FPL in Alabama to nearly 86% in Connecticut. 
The median level nationwide relative to the current definition 
of poverty is about 44%.\1\ In addition, for most eligibility 
categories in most states, individuals must have resources 
(also called assets) valued at less than a specified amount 
(typically $1,000 for an adult with one or more dependent 
children) to be eligible for Medicaid. In 1996, most states 
excluded from this calculation the family's home and up to 
$1,500 equity value in an automobile. In addition, states were 
permitted to exclude basic maintenance items essential to day-
to-day living, such as clothing and furniture.
---------------------------------------------------------------------------
    \1\ See Appendix Table 1 in Schneider, etal.: Medicaid Eligibility 
for Families and Children. Washington, DC: The Kaiser Commission on 
Medicaid and the Uninsured, September, 1998
---------------------------------------------------------------------------
    But a number of states have established more generous 
standards for determining Medicaid eligibility than those in 
place in 1996. As of 1999, twelve states have taken advantage 
of the flexibility offered under welfare reform to re-align 
Medicaid eligibility with eligibility for the new TANF 
programs.\2\ They have done so by using less-restrictive 
methods for calculating income and/or resources. In doing so, 
those states effectively raised income and resource standards 
in determining eligibility for Medicaid. An example of this is 
a state that disregards any income in excess of the AFDC 
payment standard in effect in July of 1996 for determining 
Medicaid eligibility for TANF recipients.
---------------------------------------------------------------------------
    \2\ See States' Implementation of Selected Medicaid Provisions of 
the Personal Responsibility and Work Opportunities Reconciliation Act 
of 1996. A joint project of the Center for Law and Social Policy and th 
Center on Budget and Policy Priorities, January 2000.

---------------------------------------------------------------------------
Children Receiving Supplemental Security Income (SSI).

    Subject to one important exception, states are required to 
cover all children receiving SSI, a major pathway to Medicaid 
coverage for children with special health care needs. In 1999, 
over 850,000 blind and disabled children received SSI, and 
participation in the Medicaid program among this group is 
expected to be close to 100% since a person becomes entitled to 
Medicaid benefits upon being found eligible for SSI without any 
additional action required. While this is not a large group of 
Medicaid children, Medicaid represents a very important source 
of funding for the care of this special needs population.
    Unlike the former AFDC programs or today's TANF programs, 
income and resource standards for SSI do not vary by state. 
Parents' income is considered when determining SSI eligibility 
and benefits for children. SSI requires some of the income of 
ineligible family members (i.e., parents) be deemed available 
to meet the basic needs of children before extending 
eligibility to those children.
    The major exception to automatic coverage for SSI 
recipients occurs in so called ``209(b)'' states. States may 
elect the option, described in section 209(b) of the Social 
Security Act Amendments of 1972, allowing them to use income 
and resource standards that are no more restrictive than those 
in effect in 1972. If a state chooses the 209(b) option, 
though, it must also allow individuals to ``spend down,'' that 
is to deduct incurred medical expenses from income in 
determining Medicaid eligibility. In 1998, 11 states had 
elected the 209(b) option for Medicaid, applying more 
restrictive income and resource standards and/or methodologies 
than those applicable under SSI.

Poverty-Related Children.

    Another major pathway to Medicaid for children is through 
one of three poverty-related groups. These are groups who, 
prior to welfare reform, did not qualify for cash welfare 
assistance. The first group is a mandatory coverage group -that 
is, states are required to extend coverage to children under 
age 6 and pregnant women who are in families with incomes below 
133% FPL.
    The second poverty-related group is another mandatory 
coverage group for children born after September 30, 1983 
living in families with income below poverty. This group is 
being phased-in one year at a time so that all children under 
17 and living in poverty are eligible for Medicaid in this 
federal fiscal, those under age 18 will become eligible in 
fiscal year 2001, and those under age 19, in fiscal year 2002.
    The last poverty-related group includes infants (under age 
1) and pregnant women who are in families with income between 
133% and 185% of the FPL. This group is considered an optional 
eligibility category. Last year, 41 states and the District of 
Columbia had extended coverage to some or all pregnant women 
and infants in this category.

Section 1902(r)(2) and Demonstration Waivers.

    The Medicaid statute includes a number of provisions that 
provide states with additional flexibility. Two of those 
provisions include one that provides states flexibility in 
defining methods for counting income and assets (authorized 
under Section 1902(r)(2) of the Social Security Act), and 
another that allows states to create demonstration projects 
(authorized under Section 1115 of the Social Security Act) to 
test new approaches for providing health care coverage. The two 
provisions are very different from each other, but they bear 
one major similarity--they are sometimes used by states in ways 
that allow a significant number of individuals, who would 
otherwise not qualify for the program, to obtain Medicaid 
coverage.
    Section 1902(r)(2) and Section 1115 have been present in 
statute for many years, but the use of those provisions to 
extend coverage to individuals not otherwise eligible for 
Medicaid grew in popularity among the states during the 1990s. 
Although precise numbers are not available, a significant 
number of children are covered through these two mechanisms. 
This number could potentially grow even larger over time. 
(Medicaid data do not track children qualifying for Medicaid as 
a member of one of these groups, so estimates of their number 
are not available.)
    Section 1902(r)(2) of the Social Security Act allows state 
Medicaid programs to submit a state plan amendment to use more 
liberal methods for calculating income and resources for some 
categories of Medicaid eligibles. Most states that have chosen 
to implement Section 1902(r)(2) have done so only for children. 
In addition, most states using the flexibility created by 
Section 1902(r)(2) do so by disregarding certain types or 
amounts of income to extend Medicaid to children in families 
with earnings that are too high to qualify for one of the other 
eligibility groups, or have assets that exceed allowable 
levels.
    Demonstration waivers are authorized in Section 1115 of the 
Social Security Act. Under this provision, states are able to 
waive some Medicaid requirements to create demonstration 
projects that promote the objectives of the Medicaid statute. 
Through a fairly cumbersome application process, a number of 
states have used such waivers to enact broad-based and 
sometimes state-wide health reforms. Demonstrations under this 
provision need not be statewide. A number of the demonstrations 
extend comprehensive health insurance coverage to low-income 
children (among others) who would otherwise not be able to 
obtain Medicaid.
    In 1999, there were 12 demonstration projects operating 
under Section 1115 to extend Medicaid to populations not 
otherwise eligible for the program and 26 states altogether 
that use either Section 1902(r)(2) or a demonstration waiver to 
extend Medicaid to children in families with income or assets 
too high to otherwise qualify.
    While the above pathways represent the major routes to 
Medicaid eligibility for children, there remain a number of 
other eligibility categories in use by states through which 
smaller numbers of children obtain their benefits. Many of the 
following groups represent unique categories of children (and 
sometimes entire families) that have been singled out in the 
statute for protection against the high cost of health 
insurance or health care.

                          Additional Pathways

AFDC-related groups:

    Transitional Medical Assistance. An increasingly important 
eligibility group for families with children is called 
``transitional medical assistance'' or TMA. TMA was created to 
address the concern that the loss of Medicaid for individuals 
who could successfully obtain employment would provide a 
disincentive to seek and to keep jobs. States are required to 
continue Medicaid for six months for families that were covered 
by Medicaid under the welfare reform provisions (Section 1931) 
in at least three of the last six months preceding the month in 
which the family lost such assistance due to increased hours of 
employment, increased earnings of the caretaker relative, or 
the family member's loss of a time limited earned income 
disregard. States have the option of extending Medicaid 
coverage for an additional six months for families that were 
covered during the entire first 6-month period, and are earning 
below 185 % of the poverty line. The provisions authorizing 
transitional medical assistance for the above groups sunset as 
of September 30, 2001.
    A small additional group of TMA eligible persons are those 
who lose Medicaid coverage under Section 1931 because of 
increased child or spousal support. Families eligible for this 
4-month extension must have been receiving Medicaid under 
Section 1931 in at least 3 of the preceding 6 months.
    Other AFDC-related Groups. While the AFDC program no longer 
exists, a number of Medicaid eligibility groups that are tied 
to the states' former AFDC rules remain in existence. These 
rules continue to apply today because of the PRWORA provision 
requiring Medicaid coverage for people who would have qualified 
for the former AFDC programs. Among those mandatory coverage 
groups are certain job opportunities and basic skills (JOBS) 
participants; and certain children for whom adoption assistance 
agreements were in effect or for whom foster care payments were 
being made under Title IV-E of the Social Security Act.
    ``Ribicoff Children". As with the medically needy, 
``Ribicoff children,'' named for the former Senator that 
sponsored legislation authorizing coverage for this group, is a 
coverage path that is gradually diminishing in importance as 
more children are included under the poverty-related coverage 
categories. Ribicoff children are children under 21 who meet 
income and resource requirements for AFDC but who otherwise are 
not eligible for AFDC. Included in this category are often 
children who are in state-sponsored foster care, or who are 
institutionalized or inpatients in psychiatric facilities.
    Ribicoff children must be under the age of 21. Because they 
may be older than children qualifying as a poverty-related 
child (through age 18 in 2002), the Ribicoff pathway may remain 
an important optional category for older children even after 
the poverty-related categories are fully phased in.

SSI-related groups

    Recipients of State Supplemental Payments (SSP). Many 
states, recognizing that the SSI benefit standard may provide 
too little income to meet an individual's living expenses, 
supplement SSI with additional cash assistance payments. States 
that choose to offer state supplemental payments (SSP) may also 
offer Medicaid coverage to those SSP recipients who would be 
eligible to receive SSI but for income. In 1999, all but 7 
states provided some amount of supplementary payments. In some 
of those programs, certain children who do not receive SSI 
qualify for SSP and Medicaid through the SSP pathway.
    Optional Coverage of Institutionalized Persons Under a 
Special Income Level--the 300% Rule. States have another option 
for covering certain individuals with incomes too high to 
qualify for SSI or SSP. These persons must (1) require care 
provided by a nursing home or other medical institution, (2) 
meet the states's resource standard, and (3) have income that 
does not exceed a specified level. Medicaid law requires that 
income for these persons be no more than three times the basic 
SSI payment level. For 2000, the limit was $1,536 per month (3 
multiplied by the SSI benefit of $512).
    Optional Coverage of Noninstitutionalized Disabled 
Children. For a child under the age of 21 and living at home, 
the income and resources of the child's parents are 
automatically considered available for medical care expenses, 
that is, they are ``deemed'' to the child. If the same child is 
institutionalized, however, after the first month away from 
home, the child no longer is considered to be a member of the 
parents' household and only the child's own financial resources 
are considered available for care. The child then is able to 
qualify for Medicaid. This policy has resulted in some children 
remaining in institutions even while their medical needs could 
be met at home. This situation was dramatized in 1982 by the 
case of Katie Beckett, a ventilator-dependent child who was 
unable to go home because she would no longer have been 
eligible for Medicaid. Medicaid law contains a provision that 
allows states to extend Medicaid coverage to certain disabled 
children under 18 who are living at home and who would be 
eligible for Medicaid if in a hospital, nursing facility, or 
intermediate care facility for the mentally retarded and as 
long as the cost of care at home is no more than institutional 
care.
    Children Receiving SSI as of August 22, 1996. In addition 
to delinking Medicaid from the receipt of cash assistance, the 
PRWORA also established a new definition of childhood 
disability for receipt of SSI benefits. Under the new 
definition, some children would lose their SSI and Medicaid 
eligibility as well. In 1997, Congress created a Medicaid 
requirement that states continue Medicaid coverage for those 
disabled children who were receiving SSI on the date of 
enactment of PRWORA.

Other Pathways to Medicaid

    Medically Needy. The medically needy are persons who fall 
into one of Medicaid's eligible categorical groups but have 
income that is too high qualify to for coverage under that 
group. States can choose to cover the medically needy by 
setting income standards for this group that are no higher than 
133.33% of the state's AFDC payment standard (medically needy 
income standard) in place on July 16, 1996 (or as subsequently 
modified). Individuals (or families) qualify for this category 
by having income that falls below that medically needy 
standard, or by incurring medical expenses that, when 
subtracted from income, result in an amount that is lower than 
the medically needy income standard. Persons qualifying for 
medically needy coverage must also meet the states' AFDC 
resources standards.
    Children can obtain Medicaid coverage through this 
eligibility pathway if the child resides in a state that elects 
to offer medically needy coverage. However, this eligibility 
path is becoming less significant as a route for children 
because of the major expansions for children in poverty-related 
groups as described above. Some families with older children or 
with very large medical expenses, who are otherwise ineligible 
for Medicaid may still qualify for medically needy coverage.

Optional Coverage of Persons Needing Home and Community-Based 
(HCB) Care.

    States have an option of covering persons needing home and 
community based services, if these persons would otherwise 
require institutional care that would be paid for by Medicaid. 
These services are provided under waiver programs authorized in 
Section 1915(c) of Medicaid law. The programs, often referred 
to as home and community-based care waiver programs, require 
states to make special application to HCFA for the programs 
they wish to operate. With approval, they may provide a wide 
variety of nonmedical, social, and supportive services that 
have been shown to be critical in allowing chronically ill and 
disabled persons to remain in their homes. States are using 
waiver programs to provide services to a diverse long-term care 
population, including children, the elderly, and others who are 
disabled or who have chronic mental illness, mental retardation 
and developmental disabilities, and AIDS. With an approved HCB 
waiver program, states may cover persons needing home or 
community-based care on the basis of being medically needy or 
meeting the 300% rule, without deeming the income of other 
family members available to the qualifying person. This is 
especially important for children with special care needs who 
are able to live at home with their parents only if they can 
receive Medicaid support.

Targeted Low Income Children Authorized under the State 
Children's Health Insurance Program (SCHIP).

    SCHIP was established by the Balanced Budget Act of 1997 
under a new Title XXI of the Social Security Act. The program, 
while completely separate from Medicaid, allows states to 
access SCHIP funds to cover targeted low-income children 
through private health insurance that meets specific standards 
for benefits and cost-sharing, or through their Medicaid 
programs, or through a combination of both.\3\ SCHIP is 
included here, because many states have, in fact, extended 
Medicaid coverage to targeted low-income children, albeit they 
pay for that coverage with Title XXI funds.
---------------------------------------------------------------------------
    \3\ Under limited circumstances, states have the option to purchase 
a health benefits plan that is provided by a community-based health 
delivery system, or to purchase family coverage under a group health 
plan as long as it is cost-effective to do so.
---------------------------------------------------------------------------
    Title XXI defines SCHIP-eligible children as those who are 
not eligible for Medicaid or covered under a group health plan 
or other insurance and in families with incomes that are 
either: (1) above the state's Medicaid financial eligibility 
standard but less than 200% of the federal poverty level, or 
(2) in states with Medicaid income levels for children already 
at or above 200% FPL, within 50 percentage points over the 
state's current Medicaid income eligibility limit for children. 
Within those broad statutory requirements, each state can 
define the group of targeted low-income children who may enroll 
in SCHIP.
    As of January 1, 2000, the Health Care Financing 
Administration had approved SCHIP plans for all 50 states, the 
District of Columbia and five territories. Twenty-four states 
use Medicaid expansions, 15 have state programs, and 17 combine 
a Medicaid expansion and a separate state program.

Other Considerations.

    A final provision, already mentioned above, deserves some 
elaboration. In establishing the post-welfare reform link to 
Medicaid for individuals who would be eligible for AFDC under 
the rules in effect in 1996, the PRWORA gave states the 
flexibility to adjust the methods used for calculating the 
amount of income and resources an applicant has available to 
them. More specifically, Section 1931(b)(2)(C) allows states to 
use more generous income and resource methods than those used 
for determining eligibility for AFDC in 1996. This provision is 
parallel in structure to Section1902(r)(2). A recent survey of 
Medicaid eligibility practices following welfare reform 
suggests that many states use section 1931(b)(2)(C) to create 
methodologies that are parallel to those used under the states' 
TANF programs. In other words, while PRWORA delinked Medicaid 
and AFDC, it created a provision that allows states to ``re-
link'' eligibility for those programs.
    In the near term, the flexibility afforded by Section 
1931(b)(2)(C) is not likely to become a major pathway for 
children to travel to the Medicaid program. Children with 
income too high to qualify for cash assistance have a number of 
other pathways to Medicaid. On the other hand, this provision 
may hold important promise for extending coverage to the 
parents of children who have fewer alternative pathways to 
Medicaid or for simplifying Medicaid eligibility while at the 
same time qualifying entire families to coverage -an option 
that could help to raise participation in a program that has 
become increasingly complex for states to administer and for 
qualifying family members to navigate.

                Major Pathways to Medicaid for Children

1. Children Eligible for Cash Assistance Under the AFDC Program.

    Children (and families) who meet the financial and categorical 
rules under the state's former AFDC programs (in effect on July 16, 
1996) are eligible for Medicaid even if they do not qualify for cash 
grants under the new Temporary Assistance for Needy Families (TANF) 
program. This group was created as a part of the 1996 welfare reform to 
ensure that all low-income families that would have qualified for 
Medicaid under the old AFDC program continue to qualify for Medicaid 
following welfare reform. Many states use a provision allowing 
flexibility in calculating income and resources for this coverage 
group. As of 1999, twelve states have taken advantage of this 
flexibility to re-align Medicaid eligibility with eligibility for the 
new TANF programs.

2. Children Receiving Supplemental Security Income (SSI)

    Subject to one important exception, states are required to cover 
all children receiving SSI, a major pathway to Medicaid coverage for 
children with special care needs. The major exception to automatic 
coverage for SSI recipients occurs in so called ``209(b)'' states. 
Those states use income and resource standards that are no more 
restrictive than those in effect in 1972. If a state chooses the 209(b) 
option, though, it must also allow individuals to ``spend down'' into 
Medicaid eligibility. In 1998, 11 states had elected the 209(b) option.

3. Poverty-Related Children.

    Another major pathway to Medicaid for children is through one of 
three poverty-related groups. These children qualify for Medicaid even 
though they are not enrolled in TANF or SSI:
    a) States are required to cover children under age 6 and pregnant 
women who are in families with incomes below 133% FPL
    b) In 2000,states are required to cover children under age 17 
living in families with income below poverty. This group is being 
phased-in one year at a time so that all children under 18 and living 
in poverty will be eligible for Medicaid in 2001, and all children 
under age 19 will be eligible in 2002.
    c) States can choose to cover infants (under age 1) and pregnant 
women who are in families with income below 185% FPL. Last year, 41 
states and the District of Columbia had extended coverage to some or 
all pregnant women and infants in this category.

4. Section 1902(r)(2) and Demonstration Waivers.

    Section 1902(r)(2) (of the Social Security Act) is a provision that 
allows states flexibility in defining methods for counting income and 
resources. Demonstration waivers allow states to test new approaches 
for providing health care coverage. The two provisions are very 
different from each other but both are often used by states in ways 
that allow a significant number of individuals to obtain Medicaid 
coverage who would otherwise not qualify for the program. In 1999, 26 
states used Section 1902(r)(2) and demonstration waivers to extend 
Medicaid coverage to children in families with income or assets too 
high to otherwise qualify.
      

                                

    Chairman Johnson. In your folder is a summary of the 
pathways for your reference. The thing that strikes me is that 
we actually, under the law, are covering essentially all 
children or will be in the next year or two under a hundred 
percent of poverty and all children under 6 under 133 percent 
of poverty. And, as I read your testimony, roughly half the 
States through the 1902(r)(2) waiver possibility are serving 
people above 133 percent of poverty. Why then is it--does it 
appear to be true that 45 percent of kids in poverty aren't 
participating? Is that an administrative problem? Is that a 
legal problem? How much has to do with the 24 States that are 
not using 1902(r)(2) waivers and therefore are seeing poor 
families that have high assets or higher assets than the law 
allows cut out of the program? Do you have any idea about who 
that 55 percent is?
    Ms. Hearne. My understanding is that there are a large 
number of reasons that children and their parents don't enroll 
who may otherwise be qualified for the program, including 
administrative difficulties and concerns that the program still 
maintains some welfare stigma for some families.
    Another thing to keep in mind, while States have these 
other flexibilities in the law, many of them use them in very 
modest ways, so there may not be large-scale expansions in 
those States under the two options.
    Chairman Johnson. Thank you.
    Mr. Cardin.
    Mr. Cardin. Thank you very much for your testimony.
    Have you noticed any differences among the States or are 
some States using some of their demonstration authority or 
seeking demonstration authority or doing things that are more 
creative in an effort to get more children enrolled in their 
Medicaid Programs?
    Ms. Hearne. My understanding is that there are lots of 
different approaches that States are using. I can't really 
recite any of those now, although I understand that there will 
be----
    Mr. Cardin. We have some other panelists who will be 
talking about that. If you look at the statistics, and I 
understand that you have looked at the statistics, you have 45 
percent of the children below poverty not enrolled in Medicaid.
    Ms. Hearne. Right.
    Mr. Cardin. And those 45 percent would be eligible to 
participate in the Medicaid Program?
    Ms. Hearne. Right.
    Mr. Cardin. We don't know about the other pathways as to 
how successful we have been. I am sure that there are 
additional children who would fall under the other pathway that 
have not enrolled. But that is a significant number of children 
who have not enrolled. Do we have any idea how many of those 
children have no health insurance?
    Ms. Hearne. I don't have that with me, but I can obtain 
that number and get back to your staffperson.
    Mr. Cardin. I appreciate that.
    Ms. Hearne. I would guess that it is more than 50 percent.
    Mr. Cardin. It would be useful if we can get that number.
    Do you have the numbers that fall under the different 
pathways as to eligibility?
    Ms. Hearne. Medicaid reporting data does not clearly 
distinguish how children qualify for the program. So States 
report in kind of big buckets of kids that you can't really 
separate out into these pathways.
    Mr. Cardin. Do you have any idea as to--I assume that the 
pathway for income eligibility is the largest single category?
    Ms. Hearne. The two major categories are kids qualifying on 
the basis of formerlly receiving AFDC or receiving TANF now, 
and the second are the poverty-related--the three groups.
    Mr. Cardin. Do you know how many children who are eligible 
because of receiving TANF before would not be eligible under 
the current income categories?
    Ms. Hearne. No, I don't.
    Mr. Cardin. You don't have that information.
    Thank you very much. There are some other questions that I 
am going to want to try to get information back from you, but 
if it is all right, Madam Chair, I will try to do that by 
written questions to you.
    Just one last comment. As I listened to your testimony, it 
was anything but easy to understand--if I am a person trying to 
get my child covered and you give me this pathway list, it is 
not easy for me to understand whether I am eligible or not. So 
relying on the family to know whether they are eligible for 
Medicaid, if a State puts out this pathway, here it is, figure 
it out, you are going to have a lot of people that never get 
into the Medicaid system. You are not dealing with a group that 
is sophisticated with these sections of the Code or the income 
levels that are the different poverty levels. I do think part 
of the problem is the complexity that we put into the Code that 
we need to take a look at.
    Thank you.
    Chairman Johnson. Are there other questions?
    Mr. Watkins. I would like to make a comment. The stigma of 
welfare is probably, in a great majority of the cases, a lot of 
them, but you have to reach down and say, number two, there are 
a lot of parents--the example that I just went through a while 
ago, there are parents that are irresponsible. I don't think it 
is a lack of love but lack of knowledge or understanding or 
alcohol or drugs or other cases.
    As Ben indicated, thinking here of how--I am wondering if 
you can tie them with education. When they hit the age of five 
and go into school, education is the best way to lift them out 
of poverty and try to get something working along that line; or 
with the paycheck, if they can go to work, their kids would be 
small. But the stigma of welfare still affects a lot of people 
from not doing it, but maybe working with education and keep 
them in school--it is a big problem.
    Chairman Johnson. Thank you.
    Mr. McCrery.
    Mr. McCrery. Ms. Hearne, you may not be prepared to answer 
this question, but I see you are a specialist in social 
legislation. Can you tell us what the poverty rate in the 
United States has done in the last say 5 years?
    Ms. Hearne. It has risen some over the last 5 years, but, 
currently, it is just over $14,000 for a family of----
    Mr. McCrery. No, the percentage of the population that is 
living in poverty in the United States, has that percentage 
gotten greater in the last 5 years or are there fewer people as 
a percentage of our population?
    Ms. Hearne. I don't have that number with me, but I can get 
back to you this afternoon.
    Mr. McCrery. Thank you.
    Chairman Johnson. Mr. Stark.
    Mr. Stark. Thank you, Ms. Hearne. You may know the answer 
to this and maybe we should, but the transitional Medicaid 
assistance, as you know, sets a year before we have to 
reauthorize TANF, so we have a year in which people would not 
have the transitional Medicaid assistance, right?
    Ms. Hearne. That is correct.
    Mr. Stark. Any idea why we did that? How much would it cost 
to extend that so we keep the traditional Medicaid assistance 
until we reauthorize TANF?
    Ms. Hearne. I haven't seen a CBO cost estimate of that 
expansion.
    Mr. Stark. I am told that it is maybe 300 million or 400 
million bucks.
    How about the legislative history, how we ended up that 
way?
    Ms. Hearne. I don't know the answer to that.
    Mr. Stark. It does cause a problem for one small group of 
people. Do you have any recommendations? Do you have any idea 
how many people are apt not to be covered because of that?
    Ms. Hearne. My understanding is that that second 6-month 
period is not used that extensively because it is fairly 
administratively onerous. So, to that extent, it may not be 
quite as lively used as one would hope.
    Mr. Stark. OK. What does that mean in terms of the number 
of people?
    Ms. Hearne. I don't know the number.
    Mr. Stark. Madam Chair, maybe our staff at some point could 
enlighten us, but we do have kind of a glitch there.
    Chairman Johnson. We do have a glitch there.
    As you can guess and as I know, the issue was money. And we 
did take $500 million and put it in a special fund to give 
States a 90-10 match to deal with the administrative cost. This 
issue, once you delink benefits, you are going to have new 
administrative things.
    Looking ahead, we preferred to use the money that way 
because that would give us time to see what were the problems. 
And we are seeing what those problems are, and through this 
hearing we will begin to look at the administrative issues. We 
certainly will deal with it.
    It is not unlike the problem we just met with--that we just 
dealt with in the welfare-to-work program, where, actually, the 
administrative definitions meant that the program wasn't 
serving the populations that we intended it to serve.
    I think the complexity of this extension is going to have 
to be one of the issues that we have to look at. But at the 
time we did welfare reform, it was more important to give 
States money to deal with the administrative costs and 90/10 
split which we didn't do in the whole program in order to try 
to guarantee that the benefits would flow knowing that it would 
be a more complicated problem.
    Mr. Stark. Knowing that the Chair is aware of this problem, 
I will sleep better.
    Mr. Cardin. It is interesting, I think the Chair is 
correct, we really wanted to help the States in the 
administrative side, but it is somewhat disappointing when you 
take a look at the results on enrollment in Medicaid that the 
performance numbers are certainly very, very disappointing. So 
here we are. We took money away from providing extra help to 
families that are trying to play according to rules and coming 
off of welfare, and they need some help because the job doesn't 
provide the health insurance, and we did that so the States 
would have an easier time in dealing with the transition 
problems in moving from AFDC to TANF, and now we don't--have a 
large number of children who are without any health insurance. 
Something went wrong.
    Chairman Johnson. Thank you very much. I appreciate your 
factual foundation, Mr. Hearne.
    Chairman Johnson. I would like to call the first panel, 
Cindy Mann, Director, Family and Children's Health Programs 
Group, HCFA Center for Medicaid and State Operations; Marilyn 
Ellwood, Senior Researcher, Mathematica Policy Research; Ronald 
Pollack, Executive Director, Families USA; Barbara Lyons, Vice 
President, Commission on Medicaid and the Uninsured, Kaiser 
Family Foundation. Thank you for being here.
    It has been a significant disappointment to many of us that 
there has been this collapse in the provision of Medicaid 
benefits to eligible children, and we will start with Cindy 
Mann.

STATEMENT OF CINDY MANN, DIRECTOR, FAMILY AND CHILDREN'S HEALTH 
 PROGRAMS, CENTER FOR MEDICAID & STATE OPERATIONS, HEALTH CARE 
                    FINANCING ADMINISTRATION

    Ms. Mann. Good morning, Chairman Johnson, Congressman 
Cardin and Subcommittee members. I appreciate the opportunity 
to share some of our observations from HCFA and concerns about 
how welfare reform has affected Medicaid enrollment and to tell 
you what HCFA has been doing to promote enrollment among low-
income families with children who are eligible for Medicaid.
    Let me start this morning by saying that there is good news 
and bad news. Let me start with the good news.
    The good news is that I agree with the Chair, which is that 
when Congress and the President worked on the final details of 
the welfare law they understood that Medicaid coverage was 
going to be impacted by the welfare changes that were being 
considered at the time, and they took a very important step to 
protect Medicaid eligibility for families with children. This 
happened, in large part, because of Chairman Johnson's strong 
interest and concern. She played a very central role in 
ensuring that guarantee in the final bill.
    The second piece of good news, which is related to the 
first piece of good news, is that the provision adopted in the 
bill that was crafted by Congress to delink Medicaid 
eligibility from welfare eligibility can and does work. And I 
think we have examples of some States that have demonstrated 
that it can and that it could work and that it should work with 
proper attention and implementation. In fact, we have enough 
good news from the American Public Human Services Association 
and the NGA that, in collaboration with HCFA, we are having a 
best practices conference on June 9 on this matter to share 
information on how to implement this provision as effectively 
as possible.
    The third aspect of the good news, which is often 
overlooked, is that the provision that created the delinking 
provision in the welfare law that established this guarantee 
provides States with some new options--some important new 
options that have bearing on the conversation that we have had 
so far this morning.
    One, it gives States some new options to simplify Medicaid 
eligibility; and, second, it gives States the option to provide 
Medicaid coverage to a broader group of low-income working 
families; and many States have already started to take 
advantage of those options.
    I don't know if people here have picked up the healthy 
families application in the District of Columbia, but D.C. now 
covers, under this new provision, families up to 200 percent of 
poverty, and it does so in a simple, two-page form, basically 
using a gross income standard. It has collapsed many of its 
categories that Jean went through and created a simpler program 
for families and children.
    Other States have taken similar steps to expand coverage to 
low-income working families. Wisconsin has done so. Missouri 
has done so. Rhode Island and Connecticut have adopted 
legislation and are planning to implement, as has New York, 
Ohio, and California. So, there are a lot of new opportunities 
available to States under the delinking provision, but, of 
course, the story is not all good news.
    Implementation problems do appear to have contributed to a 
decline in Medicaid enrollment among parents and children in 
some States. We are greatly concerned about instances in which 
Medicaid-eligible children and parents may have lost coverage.
    To help you understand a little bit about what is 
happening, let me first try and explain, in practical terms, 
how Medicaid and welfare eligibility worked before the 
delinking and how it is supposed to work now.
    Since the beginning of the Medicaid Program, as you 
probably are aware, Medicaid eligibility for families was 
linked to eligibility and receipt of cash assistance. If you 
were on AFDC, you were on Medicaid; and if you were a family 
with children and you weren't receiving AFDC, for the most 
part, you simply weren't eligible for Medicaid. Medicaid came 
as an appendage, essentially, of your AFDC entitlement, and, 
so, when your AFDC case closed, so did your Medicaid case, in 
most cases, because it would have ended as a family unit.
    Since the late eighties, that story has changed somewhat 
because of the new pathways to eligibility that have been 
created particularly for children and for pregnant women. 
However, there was no independent pathway to Medicaid 
eligibility for families with children until the delinking 
provision was established in 1996. Until then, welfare was the 
only route to Medicaid coverage for a family in most States or 
certainly the predominant route.
    Part of that function of linkage between welfare and 
Medicaid is not eligibility linkage, but a systems linkage. 
Because Medicaid came along with AFDC, States had no reason to 
set up a separate infrastructure in their States to determine 
Medicaid eligibility for families because that eligibility rose 
or fell with eligibility determination for cash assistance. And 
that actually is part of the problem that we are facing now in 
terms of implementing delinking.
    Right now, what has to happen is, when a family applies for 
Medicaid and TANF and the agency determines that the family is 
not eligible for TANF, or the family is diverted to another 
service and doesn't need TANF, or the family decides to 
withdraw the application from TANF, Medicaid eligibility should 
still be determined independently. And the delinking provision 
ensures that there is a category, in the law, for that 
eligibility to be determined, but that is not necessarily how 
systems worked before 1996.
    Similarly, when a cash assistance case closes, eligibility 
for Medicaid does not necessarily end because of the loss of 
cash assistance. Whether it is because a parent has gone to 
take a job or whether a family has hit a time limit or for any 
other reason, the cash assistance is closed. Medicaid needs to 
be determined independent of eligibility for cash assistance 
based on the resources and the income limits established in 
each State.
    You will hear from my colleagues on the panel today about 
some of the data that we have been looking at to tell us what 
has been happening in States, and I will defer to them largely 
on the data. I will tell you that the data that HCFA collects, 
the 2082 data from States, shows that while overall Medicaid 
enrollment has pretty much held steady, that there has been a 
decline for families with children, a slight decline, and that 
Medicaid enrollment for kids during the last 3-year period has 
declined for children and adults by about 2.1 percent and for 
children it has remained basically level after having dropped 
in 1996.
    The national numbers, though, I would really caution you 
mask considerable variation across States. You will see when 
you look at State-by-State enrollment data that some States 
have seen their enrollment rise robustly and some States have 
seen their enrollment decline significantly, and you will hear 
from the State panelists later about the situations in their 
States.
    There are a lot of reasons for those fluctuations. Some of 
them are the immigrant-related issues that were talked about 
earlier. Some are related to a drop in the poverty rate and 
rise in incomes and the availability, at least in some 
localities, of private insurance coverage. Some are systems 
problems with respect to cash assistance and delinkage.
    Let me turn to what HCFA has done.
    Chairman Johnson. If you can summarize. We want to get 
through everybody.
    Ms. Mann. We have been very concerned about this issue. We 
have issued considerable guidance since the 1996 law was 
enacted. In late 1996, the President instructed HCFA to do 
eligibility reviews in every State to look at this issue, and 
those reviews started last fall and have been continuing. We 
have looked at State-by-State eligibility policies and 
practices with respect to this issue. We have also been urging 
and working with Congress to help continue to make available 
that $500 million to help States finance the cost of systems 
changed for delinking.
    On April 7, we issued guidance to all States directing them 
to look at their policies and their practices and to determine 
whether anybody had been improperly terminated and, if so, to 
reinstate coverage for those individuals. And the letter also 
directs States to consider their computer systems and ensure 
that those systems do not improperly terminate coverage and to 
streamline their redetermination systems.
    I am pleased to say that the guidance--no State has 
actually thanked us for the guidance--has been well-received by 
States. They have said that it provides some clear instructions 
to them and that they truly do believe that if people have been 
improperly terminated that they indeed should be reinstated to 
coverage.
    We look forward over the next few months to working with 
States as our reviews are completed and as States move forward 
in implementing this guidance to ensure that the problem which 
has been identified by this hearing is a problem that we can 
put behind us and ensure that all eligible families have 
coverage.
    Chairman Johnson. Thank you.
    [The prepared statement follows:]

Statement of Cindy Mann, Director, Family and Children's Health 
Programs, Center for Medicaid & State Operations, Health Care Financing 
Administration

    Chairman Johnson, Congressman Cardin, distinguished 
Subcommittee members, thank you for inviting me to discuss the 
impact of welfare reform on Medicaid. President Clinton has 
continued to stress the importance of ensuring that everyone 
who is eligible for Medicaid is enrolled, and we greatly 
appreciate this opportunity to discuss our actions and 
concerns.
    The historic welfare reform law, along with the new State 
Children's Health Insurance Program created in 1997, has 
enabled States to greatly expand health care coverage 
eligibility and help more low-income people make the transition 
from welfare to work. It broke the link between cash assistance 
programs and eligibility for Medicaid. It also explicitly 
guaranteed that children and families who would have qualified 
for Medicaid through receipt of cash assistance would continue 
to be eligible for Medicaid.
    Overall national statistics on Medicaid enrollment are 
encouraging, but there is variation among States. The most 
recent statistics from all States show that total Medicaid 
enrollment is about the same now as it was before welfare 
reform. However, we know that many eligible families are not 
enrolled; and we share your concern about instances in which 
State practices have resulted in eligible individuals losing 
health care coverage.
    We have taken a series of actions to ensure that States 
comply with the welfare reform law and address its impact on 
Medicaid enrollment. Most recently, we instructed all States to 
review Medicaid terminations and re-enroll improperly 
terminated individuals. We also asked States to ensure that 
their computer systems and eligibility processes have been 
modified so that families eligible for Medicaid do not 
inappropriately lose coverage when their eligibility for cash 
assistance ends.
    Last year we worked with Congress to ensure the continued 
availability of the $500 million fund created to help States 
afford needed changes.
    The President, in addition to aggressively promoting SCHIP 
outreach efforts, has proposed several additional steps to 
further expand health care coverage among low-income families 
and strengthen programs that provide health care for the 
uninsured. And we are committed to continuing to work with 
States to ensure that no eligible individuals are denied 
Medicaid coverage.

                               Background

    Congress and the President together kept the pledge to 
``end welfare as we know it'' through the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996. 
This historic law broke the link that made families 
automatically eligible for Medicaid if they received cash 
assistance through the Aid to Families with Dependent Children 
program, which was replaced with the Temporary Assistance for 
Needy Families (TANF) program
    The link was broken because we all knew that welfare 
programs were changing, and neither Congress nor the 
Administration wanted those changes to result in the loss of 
health care coverage. At the insistence of the President, 
Chairman Johnson of this Subcommittee, and many other members 
of Congress, great care was taken to assure that Federal law 
continued to guarantee Medicaid eligibility for children and 
families who formerly qualified for Medicaid through receipt of 
cash assistance. Health care coverage can be critical in 
helping people make the transition from welfare to work and 
keeping them healthy so that they can work. This is especially 
important in entry-level jobs that may not provide employer-
based health insurance.
    Thus, the welfare reform law requires that States must 
still provide Medicaid to all people who would be eligible for 
welfare under the State's Aid to Families with Dependent 
Children plan that was in effect on July 16, 1996, prior to the 
enactment of the welfare reform legislation.
    They also must provide Medicaid to children who lost 
Supplemental Security Income cash assistance when disability 
rules changed, as well as other statutorily defined groups, 
including low-income elderly and disabled people.
    The 1996 law also gave States new options for providing 
Medicaid coverage to low-income working families. This was 
followed by a regulation issued by HCFA in 1998 allowing States 
to cover parents in two-parent families. The Balanced Budget 
Act of 1997 (BBA) built upon the welfare law changes and 
created the State Children's Health Insurance Program (SCHIP), 
which gives States wide flexibility in providing health care 
coverage to children in families that earn too much to qualify 
for Medicaid but not enough to purchase private sector 
insurance. The BBA also gave States two new Medicaid options--
presumptive eligibility for children and 12-month continuous 
eligibility--to improve coverage among poor families.
    These changes have created important opportunities for 
States to provide health care coverage to low-income families 
as they move off welfare and into the workforce. States have 
responded with eligibility expansions, simplified enrollment 
procedures, and creative outreach campaigns. The result is that 
millions more low-income children and parents are now eligible 
for coverage through Medicaid or the new SCHIP program.

Meeting Challenges

    The delinking of welfare and Medicaid has created 
challenges and opportunities in ensuring that those who are 
eligible for Medicaid coverage get and retain it. Acknowledging 
the new administrative burden on States that might result from 
delinking, the welfare reform law included $500 million for 
enhanced matching funds to help States cover the increased 
costs, such as outreach, associated with delinking welfare and 
Medicaid. Since enactment of welfare reform, we have worked 
with States and others to undertake substantial efforts to 
improve Medicaid outreach and increase the participation of 
eligible children and families.
    Consistent national data on Medicaid and SCHIP coverage for 
families leaving welfare does not yet exist, although this will 
continue to be an important area of research being funded by 
the Department of Health and Human Services (HHS). The most 
recent statistics show that, overall, total Medicaid enrollment 
has fluctuated only slightly, dropping in 1997, rising in 1998, 
and is now about the same--41.4 million--as it was before 
welfare reform. Among low-income adults and children 
nationally, Medicaid enrollment declined slightly by about 2.1 
percent (620,000 individuals) during the three-year period from 
1995 to 1998. Among children, it peaked at 20.5 million in 
1996, then remained relatively level in the following two years 
at 20.1 million in 1998 for a total enrollment drop of 1.3 
percent (270,000).
    HHS-funded studies show significant state-to-state 
variation in enrollment trends, with Medicaid enrollment rates 
for adults ranging from 24 to 76 percent three months after 
leaving cash assistance, and enrollment dropping further by as 
much as 10 to 20 percent in the year after leaving.
    Improvements in the economy, such as that we have enjoyed 
for the past six years, contribute to rising incomes and 
falling welfare and Medicaid caseloads. It is also important to 
note that overall, the number of people under the poverty level 
who are uninsured has not increased since 1996 and the poverty 
rate has declined. One particularly encouraging finding is that 
the number of non-disabled adults enrolled in Medicaid 
(primarily parents and pregnant women requiring TANF benefits) 
actually increased in 1998. And, at the same time, more than 2 
million children are now enrolled in SCHIP.
    As Marilyn Ellwood notes in her testimony, people losing 
Medicaid when leaving cash assistance has always been an issue, 
even before the passage of welfare reform. Other research, 
dating back to the 1980s, has shown that people who leave 
welfare often return to the cash assistance rolls. This 
``cycling'' pattern of cash assistance usage has also 
contributed to periodic losses of Medicaid coverage, both for 
the adults and for their children.
    In this context, Ellwood's finding that in 1995 between 49 
percent and 65 percent of adults who left cash assistance were 
not enrolled in Medicaid after six months is not surprising, 
even if it is disappointing. In the five states she studied, 
the turnover rate for adults ranged between 26 and 40 percent.
    Breaking Medicaid's link with cash assistance, along with 
the guarantee of Medicaid for certain families with children 
regardless of cash assistance status and Medicaid expansions, 
should help to reduce cycling on and off Medicaid. This will 
help allow Medicaid to operate more effectively as a health 
insurance program. By and large, thanks to Transitional Medical 
Assistance, the 1996 eligibility guarantee, and recent 
eligibility expansions, people leaving cash assistance are 
eligible for Medicaid. Our challenge now is to ensure that the 
law is implemented properly and that Medicaid eligibility is 
based on a family's income and assets, and not on their status 
as welfare recipients.

Working with States

    As mentioned above, there is wide variation among States in 
enrollment trends. Some States have done an excellent job of 
maintaining Medicaid coverage for individuals leaving cash 
assistance rolls. Other States have done an excellent job of 
outreach to individuals eligible for Medicaid or SCHIP. But in 
other States, there have been problems that we are working hard 
to address.
    We are greatly concerned about instances in which 
administrative inaction or improper procedures by States have 
resulted in eligible individuals being denied access to 
Medicaid, or in their losing Medicaid coverage or Transitional 
Medical Assistance that they are guaranteed by law. For 
example:
     Some public assistance staff failed to inform 
individuals applying for cash assistance and Medicaid that they 
could be eligible for Medicaid even if they did not want to 
pursue or were not eligible for cash assistance under TANF;
     Some States have used joint application forms for 
both cash assistance and Medicaid and improperly denied health 
care coverage to individuals who were eligible for Medicaid but 
not eligible for cash assistance; and
     Computer systems in some States improperly removed 
individuals from Medicaid rolls when closing their cash 
assistance cases.
    We have taken and are continuing to take several steps to 
help States adjust to the changes and address specific 
situations in which eligible individuals were denied Medicaid 
coverage. And we are working with States to find new ways to 
reach children and families outside, as well as through, the 
welfare system. Our efforts to help States address these types 
of concerns began shortly after the welfare reform law was 
enacted.
     In 1997 and 1998, we sent a series of letters to 
States that provided guidance on how to comply with the new 
rules and ensure health care coverage for those eligible for 
Medicaid. We also revised our Medicaid manual for States to 
update guidance on the new law.
     In June 1998 we sent a letter specifically 
reminding States of the new rules. Since TANF agencies often 
administer eligibility determinations for the Medicaid program, 
we wrote this letter with the Administration for Children and 
Families and sent it to both TANF and Medicaid agencies.
     In February 1999, we and the National Governors' 
Association launched the Insure Kids Now campaign, with a 
national toll-free number, 1-877-KIDS NOW, that links callers 
to their own State SCHIP and Medicaid programs, and a 
www.insurekidsnow.gov web site.
     In March 1999, we and the Administration for 
Children and Families issued a 28-page Supporting Families in 
Transition guidebook for States with information on getting and 
keeping people enrolled in Medicaid when they are leaving or 
are diverted from welfare.
     Last August, we began conducting site visits to 
all 50 States to review Medicaid enrollment policies and 
systems. We are sharing results with States to help them 
identify best practices and resolve any identified problems.
     Last Fall, we worked with Congress to lift the 
expiration date for States to spend the $500 million set aside 
to help them change systems and conduct outreach to address 
concerns related to delinking of Medicaid and welfare, and in 
January we sent a letter urging States to take advantage of 
this extension.
     Last December, HHS published proposed regulations 
that would take Medicaid and SCHIP enrollment figures into 
consideration when awarding bonuses to States for success in 
welfare reform efforts and issued guidance that States would 
not qualify for performance bonuses unless they certified they 
were in compliance with Medicaid (and Food Stamp) requirements.
     Last month, we sent a letter to all State Medicaid 
Directors with additional guidance on what they must do to 
review Medicaid terminations and re-enroll individuals who were 
improperly terminated. For example, they must review computer 
systems and eligibility processes to ensure that they do not 
improperly deny Medicaid benefits to eligible people. They also 
must review records to be sure children losing SSI benefits 
because of the new disability definition did not lose benefits 
guaranteed them by the BBA, and reinstate anyone improperly 
terminated from Medicaid. The letter also included guidance on 
streamlining processes for reviewing whether individuals are 
eligible to continue receiving Medicaid and ensuring that 
computer systems do not result in improper terminations. 
Several States are already reinstating coverage for improperly 
terminated individuals, and we have received a generally 
receptive response to the April letter from other States.
     On June 9, we will hold a conference with the 
National Governors' Association and the American Public Human 
Services Association on best practices for ensuring that 
eligible individuals are not denied Medicaid coverage.

Next Steps

    To build on these efforts, the President's fiscal 2001 
budget invests $5.6 billion over the next ten years to reach 
and enroll millions of children who are eligible for, but not 
enrolled in, Medicaid or SCHIP. It would:
     provide new options to States to find and enroll 
uninsured children through schools;
     expand presumptive eligibility for children by 
allowing additional sites, such as child care referral centers, 
to immediately enroll low-income uninsured children in these 
programs while their applications are being processed; and,
     require States to make the Medicaid enrollment 
process for children as simple as it is in SCHIP.
    The Administration has also proposed investing $85 billion 
over 10 years to improve health insurance access and 
affordability. This would directly impact the very population 
affected by welfare reform and expand coverage to at least 5 
million additional uninsured Americans by:
     providing a new, affordable health insurance 
option for families through the SCHIP;
     accelerating enrollment of uninsured children in 
Medicaid and SCHIP;
     expanding health insurance options for Americans 
facing unique barriers to coverage;
     strengthening programs that provide health care 
directly to the uninsured;
     expanding Medicaid and SCHIP to include an option 
to cover children through age 20; and
     expanding Medicaid and SCHIP so there is a single, 
simple eligibility standard for low-income families may be the 
best way to overcome the complexity and stigma that have 
limited enrollment.

                               CONCLUSION

    Helping States ensure that all eligible individuals are 
enrolled in Medicaid and SCHIP is an integral part of making 
welfare reform work. Health care coverage can be critical in 
helping families work towards self-sufficiency. Most States are 
addressing the challenges associated with changing eligibility 
rules and systems, and many have developed promising new 
strategies for ensuring that children and families who are not 
receiving cash assistance are properly evaluated for Medicaid 
eligibility.
    We will continue to work with States as they work to 
reinstate individuals who have been improperly terminated, and 
revise computer systems and enrollment procedures to ensure 
that eligible individuals are not denied coverage. And we look 
forward to working with this Congress to enact the President's 
proposals to further expand coverage and health care for low-
income and uninsured Americans. I thank you again for holding 
this hearing, and I am happy to answer your questions.
      

                                

    Chairman Johnson. I would remind our guests that your 
entire statement is included in the record. We have a system of 
a 5-minute red light.
    Marilyn Ellwood.

STATEMENT OF MARILYN ELLWOOD, SENIOR FELLOW, MATHEMATICA POLICY 
            RESEARCH, INC., CAMBRIDGE, MASSACHUSETTS

    Ms. Ellwood. Thank you, Madam Chairman and Members of the 
Committee, for the opportunity to talk with you today.
    My name is Marilyn Ellwood. I am a Senior Fellow with 
Mathematica Policy Research. Over the last 2 years, I directed 
two studies analyzing the relationship between welfare and 
Medicaid, and I want to briefly talk about those.
    In the first study, we used Medicaid administrative data in 
five States to see if families leaving welfare were staying on 
Medicaid. That table is included at the end of the testimony 
that I have provided.
    If you look at it, you will see that we found that many 
welfare leavers were not saying on Medicaid. In fact, 3 months 
after leaving welfare, close to half or more of the children 
and the adults in every State had also left Medicaid. We 
expected that many of the parents wouldn't stay on Medicaid, 
but we were very surprised to see the result for children, 
given all of the other pathways to coverage that States have.
    In the second study, I visited five States, interviewing 
Medicaid and welfare staff at both the State and local levels 
to see if there were policy or operational problems that might 
be contributing to declines in Medicaid enrollment. I want to 
review three findings from that effort.
    First, welfare staff are having trouble understanding how 
their responsibilities for Medicaid fit into welfare reform, 
especially with all of the talk about welfare and Medicaid 
being delinked. This is a big problem since Medicaid Programs 
still really depend on welfare staff to educate families about 
the Medicaid Program. Welfare staff are pivotal to making sure 
that families who are formally or informally diverted from 
welfare know that they can apply for Medicaid.
    They also need to help families leaving welfare for work 
continue on the Medicaid Program. Yet the staff I talked to are 
struggling with these responsibilities because they don't quite 
understand how the welfare program can be pushing people out 
the door while the Medicaid Program wants to keep them in. And, 
in fact, one person said to me that Medicaid was really not 
part of welfare reform since staff don't get credit for keeping 
people on Medicaid.
    A second finding is that Medicaid rules are getting more 
and more complicated over time, from Federal legislation, State 
decisions and, in some instances, litigation. More than one 
welfare staffer said, I have given up trying to explain 
Medicaid to people. It is too complicated. Many States have 
dozens of different Medicaid eligibility groups, each with 
their own set of rules.
    I think both welfare reform and CHIP have contributed to 
this complexity. As an example, to implement the Medicaid rules 
associated with welfare reform, California sent 120 pages of 
instructions to the counties. As another example, in some 
States with separate CHIP programs, one child in a family is 
covered under Medicaid while the second child in that same 
family will only qualify for the separate SCHIP program. We 
should all imagine the difficulty of explaining that to a 
parent.
    A third finding is that State Medicaid Programs also have a 
host of administrative problems--lengthy application forms, 
face-to-face meeting requirements, office hours that don't fit 
the schedules of working people, and poorly performing computer 
systems. The redetermination process can be just as time-
consuming as the initial application and, as a result, 
retention is a major issue. Many families simply drop off the 
Medicaid rolls each month when they fail to complete needed 
forms, even though they continue to qualify.
    What can be done to fix these problems? I think States are 
really hoping that SCHIP outreach efforts will help them 
address Medicaid enrollment declines. And no doubt they will 
help some, but I think it will take a lot more than that.
    One of the first things I think needs to be done is that 
Medicaid needs to be part of the welfare reform agenda. And 
since welfare is the doorway to which many families first get 
onto the Medicaid Program, as part of this you might think of 
having State welfare programs track the proportion of families 
leaving welfare who qualify for Medicaid or work-related health 
insurance and let that be one of the measures of welfare reform 
success.
    We also need to make the eligibility process simpler, and 
an obvious place to start would be simpler rules for Medicaid. 
In particular, Medicaid rules for the very poorest families 
should not be more complicated than the rules States use for 
higher income children under the CHIP program. It doesn't seem 
fair for CHIP to be easier than Medicaid.
    As a final comment, I think State Medicaid Programs need to 
rethink their mission similar to the rethinking that guided 
welfare reform efforts, but Medicaid's mission could be quite 
different from welfare reform. For States that are really 
serious about reducing the number of uninsured, a fair measure 
of Medicaid success would be the extent to which they enroll 
all low-income children and families in Medicaid that qualify 
and keep them enrolled as long as they don't have access to any 
other form of affordable health insurance.
    Thank you.
    [The prepared statement follows:]

Statement of Marilyn Ellwood, Senior Fellow Mathematica Policy 
Research, Inc.

    Thank you, Madame Chairman and members of the committee, 
for the opportunity to talk with you today. My name is Marilyn 
Ellwood. I am a Senior Fellow with Mathematica Policy Research 
in Cambridge, Massachusetts. In my very first job out of 
college, I worked as a member of the eligibility staff with the 
DeKalb County Welfare Department in Georgia. That was in 1967, 
the year Medicaid was first implemented. A few years after that 
I moved on to a research job, and, over the last twenty-five 
years, I have done many studies of the Medicaid program, with 
several focused on eligibility issues. Recently, when it became 
apparent that Medicaid enrollment was beginning to decline, I 
directed two studies analyzing the relationship between welfare 
and Medicaid.
    In the first study, my colleague Carol Irvin and I used 
Medicaid administrative data for 1995 from five states 
(Alabama, California, Florida, Michigan and New Jersey) to see 
if families leaving welfare stayed on Medicaid. All of these 
states were already showing declines in welfare and Medicaid 
enrollment in 1995, even though they were at different points 
with regard to welfare reform. The table included with this 
testimony shows that in each of these states, many welfare 
leavers did not stay on Medicaid and were at risk of becoming 
uninsured. Across the five states, from 49 to 67 percent of 
adults were no longer enrolled in Medicaid three months after 
leaving AFDC. The results for children were not much different. 
Three months after leaving AFDC, the proportion of children not 
enrolled in Medicaid ranged from 47 to 58 percent across the 
states. While we expected a sizable proportion of parents 
leaving welfare might not continue on Medicaid, this result was 
no expected for children, given the availability of the 
poverty-related expansions in all the states. This pattern is 
troubling, since other researchers have found that while not 
all persons leaving welfare and Medicaid lose their insurance 
coverage, a significant number of welfare leavers become 
uninsured. It is worth noting that the rates of the uninsured 
have not gone down over the last few years.
    In the second study, I visited 5 states (California, 
Colorado, Florida, Minnesota, and Wisconsin), interviewing 
Medicaid and welfare staff at both the state and local levels, 
to see if there were policy or operational problems that might 
be contributing to declines in Medicaid enrollment. Let me 
review three findings from that effort. First, welfare staff 
are struggling with their responsibilities for Medicaid, now 
that the link between Medicaid and welfare has been severed. 
Second, Medicaid rules have become so complicated that welfare 
and Medicaid staff, as well as families, have trouble 
understanding them. Third, Medicaid eligibility is plagued by a 
host of administrative problems, ranging from lengthy 
redetermination forms to poorly designed automated eligibility 
systems.

Challenges in Severing Welfare and Medicaid

    The first finding is that welfare staff are having trouble 
understanding how their responsibilities for Medicaid fit into 
welfare reform. Even though welfare and Medicaid have been 
severed, state Medicaid programs are still incredibly dependent 
on welfare staff to educate families about differences in 
welfare and Medicaid rules. Welfare staff are pivotal to making 
sure families who are formally or informally diverted from 
welfare apply for Medicaid, and they are also responsible for 
helping families who no longer receive welfare benefits 
continue on Medicaid. Yet, many welfare staff struggle with 
these responsibilities, because Medicaid priorities for 
maintaining or even expanding enrollment can seem to conflict 
with the objectives of reducing welfare dependency. Focus 
groups and surveys are showing that many families do not 
understand that welfare and Medicaid rules are different, and 
that many believe that the new welfare rules, like time limits 
and work requirements, apply to Medicaid as well. It appears 
that helping families maintain health insurance coverage has 
not been a priority in welfare reform. Indeed, several welfare 
staff reported that Medicaid was not a priority, since they did 
not get ``credit'' for signing families up for Medicaid.

Complexity of Medicaid Rules

    A second finding is that Medicaid rules have become 
incredibly complicated over time as a result of federal 
legislation, state decisions, and in some instances, 
litigation. Though well intentioned, there rules make 
eligibility difficult to understand. More than one welfare 
staffer said, ``I've given up on trying to explain Medicaid to 
my clients. . .it's just too complicated.'' Many states have 
dozens of different Medicaid eligibility groups, each with its 
own set of rules. Both welfare reform and the State Children's 
Health Insurance program, or SCHIP, have contributed to this 
complexity. To implement the new Medicaid rules associated with 
welfare reform, California sent 120 pages of instructions to 
countries. As an example of the complexity, in some states, one 
child in a family will quality for Medicaid, while another in 
the same family will not, although the second child will 
qualify for the separately administered SCHIP program. Imagine 
trying to explain that to a parent.

Medicaid Administrative Issues

    A third finding is that state Medicaid programs also have a 
host of administrative problems, including lengthy application 
forms, face-to-face meeting requirements, and office hours that 
do not fit with the schedules of working families. The 
redetermination process can be just as time consuming as the 
initial application. As a result, retention has become a major 
issue. Many families simply drop off the Medicaid rolls each 
month, when they fail to complete needed forms, even though 
they may continue to qualify. Making matters worse, the 
automated eligibility systems in many states (which handle 
applications for Medicaid, welfare and food stamps) are 
woefully inadequate--in part because they are primarily 
designed and operated to meet welfare, not Medicaid, needs. 
Systems errors have sometimes led to families being erroneously 
terminated from Medicaid. Medicaid administrative staff report 
that the management of these automated systems is beyond their 
control, and that Medicaid needs are never a top priority. They 
especially complain about the systems-generated notices and 
other correspondence sent to applicants and beneficiaries about 
Medicaid. Notices often include so many legalisms and acronyms 
that it is difficult for a family to know if they are still on 
Medicaid or not. One worker said that she finally told her 
clients to quit reading the notices and just call her instead.

Potential Solutions

    What can be done to fix these problems? States are hoping 
that SCHIP outreach efforts will help them address Medicaid 
enrollment declines. But, it will take a lot more than that. To 
start, concern about Medicaid needs to become a welfare 
priority, since welfare continues to the doorway through which 
many families first become enrolled in Medicaid. Welfare staff 
need to focus on educating families about how Medicaid works. 
Getting families on Medicaid and helping to keep them on, as 
long as they qualify, needs to become a part of welfare reform 
objectives. As part of this, state welfare programs could be 
strongly encouraged, or even required, to track the proportion 
of families leaving welfare who continue on Medicaid or qualify 
for work-related health insurance.
    We also need to make the eligibility process easier. An 
obvious place to start would be simpler rules for Medicaid. In 
particular, Medicaid rules for the poorest families should not 
be more complicated than the rules states use for higher income 
children in their SCHIP programs. Other steps to improve the 
eligibility process include shorter application and 
redetermination forms, easier to understand notices, and 
greater use of mail and telephone. States should also consider 
improvements to their automated eligibility systems, using the 
enhanced federal matching funds available thought the welfare 
reform legislation for systems improvements.
    As a final comment, I think Medicaid programs need to 
rethink their mission, similar to the rethinking that guided 
welfare reform efforts. Participation rates would improve if a 
key measure of program success became enrolling all low-income 
families in Medicaid that qualify and keeping them enrolled, as 
long as they do not have access to any other form of health 
insurance. However, for this to happen, states will have to 
become comfortable with the idea that Medicaid might become a 
long-term program of health insurance for many of the working 
poor.
[GRAPHIC] [TIFF OMITTED] T8979.001

      

                                

    Chairman Johnson. Mr. Pollack.

 STATEMENT OF RONALD F. POLLACK, EXECUTIVE DIRECTOR, FAMILIES 
                              USA

    Mr. Pollack. Good morning. I am delighted to join this 
distinguished panel to focus on the losses of health coverage 
that resulted from welfare reform.
    About a year ago, Families USA released its first report 
about the impact of welfare reform on health coverage, and we 
found that approximately 1 million people in the period from 
1995 to 1997 lost coverage in Medicaid, and about 675,000 of 
those people became uninsured.
    More recently, we issued a report based on data received 
from the States. We looked at 12 States, the 12 States with the 
largest number of uninsured children: Arizona, California, 
Florida, Georgia, Illinois, Louisiana, New Jersey, New York, 
North Carolina, Ohio, Pennsylvania and Texas. We looked at the 
interaction between CHIP and welfare reform, and we found that 
there are significant improvements in outreach being undertaken 
in the CHIP program which we thought was very optimistic.
    But, as Cindy Mann said, there is some good and bad news. 
The bad news is that the losses in Medicaid in these States 
exceeded the gains that were made in the CHIP program. I want 
to give you some examples.
    There were several States that were winners that added 
children. There were several States that were losers. The three 
States with the largest losers were--first Texas which lost 
193,400 children from public coverage, 14.2 percent. California 
lost 121,788, or 4.2 percent. Ohio lost over 40,000.
    There were some winners as well. There were net gains in 
some States. North Carolina added almost 79,000 children. New 
York added almost 51,000 children. Louisiana added over 35,000 
children.
    The net effect in these 12 States was that there were about 
755,000 children who gained admission to the CHIP program, but 
there were 975,000 children who lost Medicaid coverage. So 
there was a net loss of 220,000 children.
    I think we are probably now at a position where the CHIP 
gains are probably netting out so more children are many added 
than we are losing. But, obviously, when CHIP was enacted in 
1997, our purpose was to try to make sure that 3 to 4 million 
children would be added to the rolls so, instead of at that 
time 10 million children being uninsured, we should be closer 
to 6 million. Unfortunately, today there are 11 million 
children who are uninsured, of which 7.5 million children are 
below 200 percent of the federal poverty line.
    But if I leave you one message here, it is that--if there 
is a mixed dream about children, with some good and some bad--
coverage for parents is a real nightmare. We will be releasing 
a report next month that will take a look at the 15 States with 
the largest number of uninsured adults, and there--unlike 
children, for which there is a safety valve, namely the CHIP 
program--there isn't much of a safety value for adults. And so, 
as they get dropped from the Medicaid rolls, they don't have a 
cushion to make sure that there are reductions in such losses.
    I can share the figures for one State, Florida, which is by 
no means the worst, but if is a State whose figures we already 
relased. In Florida, we looked at the coverage of parents from 
the period of January 1996 to December 1999, and the figures we 
received from the State of Florida was that almost 83,000 
parents lost Medicaid coverage. And this is very important 
because low-wage workers, who are the group that we are really 
focusing on, don't do very well in the employer-based system we 
have today.
    If you look at the statistics, you'll see that less than 
half of those who work below $7 an hour in income receive an 
offer of coverage through their employers. That does not mean 
that they get coverage. They have an offer of coverage.
    What makes it more troublesome is that, for low-wage 
workers, they actually have to pay a higher amount in premiums 
than higher-paid workers. I am not saying that they pay a 
higher percentage of their income. I mean they pay higher 
dollars in premiums. And so they suffer a double blow. They are 
less likely to get coverage offered; and to the extent that 
they have it offered in the workplace, they pay a higher 
amount.
    Let me leave you with this one statistic. In two-thirds of 
the States, 32 States to be exact, if you are a parent and you 
work at the minimum wage, $5.15 an hour, you are considered to 
have too much income to qualify for Medicaid if you work full 
time. That really is not much of an incentive to move from 
welfare to work.
    I look forward to talking later with you about what are 
some of the administrative and legislative solutions that can 
be implemented so that--both with respect to children and 
parents--we can show some improvements in these troubling 
developments. Thank you.
    Chairman Johnson. Thank you very much, Mr. Pollack.
    [The prepared statement follows:]

Statement of Ronald F. Pollack, Executive Director, Families USA

    Madam Chairwoman and Members of the Committee:
    Thank you for inviting me to testify today. Families USA is 
a national non-profit organization dedicated to the needs of 
health care consumers. We have been engaged in research and 
advocacy about the impact of TANF changes on the Medicaid 
program for some time. As an organization that focuses 
exclusively on health care issues, we have not been engaged in 
any evaluations of the successes and failures of welfare reform 
except for the issue we are here to discuss today--the impact 
that these changes have had on families' insurance status.
    In May of 1999 Families USA released a report titled 
``Losing Health Insurance: The Unintended Consequences of 
Welfare Reform.'' This study was prompted by reports we began 
receiving from around the country of Medicaid declines for low-
income families. Our analysis found that, as of 1997, 
approximately 675,000 parents and children lost Medicaid 
coverage and were uninsured because of changes associated with 
welfare reform. In October 1999 we released a subsequent report 
titled ``One Step Forward, One Step Back: Children's Health 
Coverage after CHIP and Welfare Reform.'' This report examined 
the 12 states with the largest number of uninsured children and 
found that children's enrollment in federal-state health 
programs (Medicaid and SCHIP) declined by 2 percent between 
1996 and 1999. While SCHIP enrollment was increasing during 
this period, these gains were offset by reductions in 
children's Medicaid coverage--largely due to welfare reform.
    We believe that there are three ways that eligible families 
are not receiving the Medicaid coverage to which they are 
entitled. The first is when people move from welfare to work. 
Most people making this move wind up in entry-level jobs that 
provide minimal salaries and no health care coverage. After 
they leave welfare, most parents should remain eligible for 
Transitional Medicaid (TMA) coverage--and their children are 
most likely still eligible for Medicaid or SCHIP. Yet many of 
these families are not receiving federally supported health 
coverage after their TANF case is closed. These terminations--
many of which are clearly erroneous--are happening in 
significant numbers. Washington State alone identified 
approximately 100,000 family members who lost their Medicaid 
when their TANF case was closed.\1\ As families start to meet 
their time limits in TANF, this problem may become even more 
severe unless states move quickly to address it.
---------------------------------------------------------------------------
    \1\ ``Thousands Owed Medicaid,'' Spokesman Review, Spokane, WA, 
September 15, 1999.
---------------------------------------------------------------------------
    Second, when families apply for welfare, they are often 
diverted from filing an application as part of the states' 
attempts to reduce cash assistance. Many families and some 
caseworkers are unaware of the fact that families are still 
eligible for Medicaid even if they are not receiving cash 
assistance, and that families have a right to file a Medicaid 
application and have that application processed within 45 days.
    And finally, the significant publicity around welfare 
restrictions has convinced many families that they are no 
longer eligible for Medicaid, and, as a result, many families 
are not coming to welfare offices to apply for cash assistance 
and/or Medicaid. A recent study of families eligible for or 
receiving Medicaid by the Kaiser Commission found that over 70 
percent believed there are time limits on Medicaid, even though 
this is not true.
    While outreach and simplification efforts in SCHIP and 
children's Medicaid will help to reach some of the children who 
lost coverage due to welfare reform, the intent of the SCHIP 
legislation was to reduce the number of uninsured children--not 
to compensate for welfare reform losses. SCHIP would be even 
more successful if a large part of its enrollment growth was 
not simply compensating for losses among lower-income Medicaid 
children.
    Moreover, these efforts will do nothing to address the 
significant numbers of parents who are losing Medicaid coverage 
inappropriately. Families USA is currently working on a report 
that examines states' own data with respect to parents who lost 
Medicaid between January 1996 and December 1999. Our 
preliminary findings indicate that these numbers will be 
dramatic. In Florida alone, where we have already released our 
data, enrollment of low-income parents dropped by 82,682 during 
this time period. We know from work done by the Urban Institute 
and others that only about one-fourth of parents moving from 
welfare to work have employer-sponsored health insurance so it 
is fair to assume that the vast majority of parents who lost 
Medicaid are now uninsured. Many of these parents should have 
received Transitional Medicaid (TMA) for at least six months if 
they left Medicaid due to increased earnings. If they did not 
have increased earnings, then they are most likely still 
eligible under the Section 1931 family coverage category.\2\ 
For far too many parents, the reward for moving from welfare to 
work is the loss of their health insurance coverage.\3\
---------------------------------------------------------------------------
    \2\ P.L. 104-193 created the Section 1931 eligibility category for 
families based on income and resource standards established by each 
state and that eligibility is unaffected by the receipt of cash 
assistance.
    \3\ The only scenario under which a parent could properly lose 
their Medicaid, because of a TANF sanction, is in a state that has 
elected to terminate coverage for parents who fail to meet work 
requirements. Only 13 states have adopted this work sanction. Children 
cannot be sanctioned in any situation.
---------------------------------------------------------------------------
    I would like to turn now to ways these problems could be 
addressed at the federal and state levels. As you know, the 
Health Care Financing Administration (HCFA) issued guidance on 
April 7th to the states about reinstatement of erroneously 
terminated families, requirements related to the 
redetermination process, and the need to fix computer systems 
that have not been properly delinked. We believe that HCFA 
should enforce this guidance and the requirements of Section 
1931 aggressively, and we urge Members of Congress to 
communicate with their Governors that they expect the federal 
law to be upheld.
    States must also move aggressively to fix problems 
associated with delinking cash assistance from Medicaid. With 
prodding from advocates, a few states--namely Washington, 
Pennsylvania, and Maryland--have developed comprehensive plans 
to reinstate families wrongfully terminated and to fix problems 
in their computer systems that are causing illegal 
terminations. We believe that Washington State, in particular, 
is a good model for other states to look to as they develop 
their plans to comply with the HCFA guidance. Washington State, 
as I mentioned, had a significant problem with erroneous 
terminations, but after negotiating with advocates, agreed to 
reinstate these families and alter their computer systems to 
prevent the problem from reoccurring.
    Money is already available to the states to fix many of 
these problems. Last year Congress extended the life of the so-
called ``Medicaid-TANF delinking fund'' which was created in 
the welfare reform legislation to help states cover costs 
associated with delinking. These funds can be used by states to 
pay for reprogramming computer systems, training caseworkers, 
and doing outreach. Most states still have considerable sums 
remaining in their allotments, and most activities are funded 
at a 90/10 federal/state match.
    States must also turn their attention to simplifying and 
streamlining outreach and enrollment procedures in their 
Section 1931 family coverage Medicaid category as they have 
done in their child-only Medicaid category. In general, states' 
requirements for enrollment in family-coverage Medicaid are 
significantly more onerous than requirements for child-only 
Medicaid. For example, only 8 states still have an assets test 
for their child-only Medicaid category, but 40 have an assets 
test in their Section 1931 category. This creates a barrier for 
parents and their children who are enrolling through the 
Section 1931 family-coverage category. The good news is that 
many simplification efforts for children and their parents do 
not require changes in federal law; states are able to do so 
already.
    Also, states should take advantage of the opportunity 
created by Section 1931 to expand their eligibility levels for 
low-income parents. Currently eligibility levels for parents 
are extremely low. In almost two-thirds (32) of the states, 
parents are deemed to have too much income to qualify for 
Medicaid if they are working full time at the minimum wage 
($5.15 per hour). The median state eligibility standard for 
parents is at 61 percent of the poverty level. Nine states have 
already expanded eligibility, and others are currently 
considering similar expansions. Beyond the obvious benefit of 
allowing parents to remain eligible as they move to low-paying 
jobs, these expansions also effectively break the historical 
link between Medicaid and welfare. And research has shown that 
covering parents will result in more children getting covered.
    Finally, while the statutory requirements of Section 1931 
are clear, we believe there is much more Congress can do to 
ameliorate the situation and create incentives for families to 
go to work. The first is to extend and simplify Transitional 
Medicaid, which is due to expire on September 30, 2001. Current 
statutory reporting and eligibility requirements are complex, 
burdensome on families, and confusing. We believe that the best 
way to reform TMA would be to require 12 months of continuous 
coverage when a family leaves Section 1931 Medicaid due to 
increased earnings. This would ease state administration and 
greatly simplify outreach and education efforts. An additional 
year of health coverage is the least we can do for families 
making the difficult transition from welfare to work.
    Second, Congress should extend certain options, like 12-
month continuous eligibility, to parents. Currently, states are 
only permitted to offer 12-month continuous eligibility to 
children. This would allow a state to enroll the whole family 
for 12 months with no separate redetermination for parents 
needed.
    And finally, we believe that the high levels of uninsurance 
among low-wage working families will not be addressed until 
Congress takes action to extend coverage to all families below 
200 percent of poverty. Employment-based coverage for low-wage 
working families is often not offered and, if it is, it is 
often unaffordable. Only 43 percent of employees working for $7 
or less per hour are offered health benefits by their employer. 
And in firms where the typical wage is less than $7 per hour, 
the average monthly employee contribution for the lowest-cost 
employer plan is $130 per month as compared to firms where the 
typical wage is more than $15 a hour where the average monthly 
employee contribution required is $84.
    Covering these families would be most efficiently 
accomplished through an expansion of the Medicaid and CHIP 
programs similar to the FamilyCare proposal in the President's 
budget this year. We urge you to consider such an expansion to 
provide essential support to low-wage working families who are 
struggling to make ends meet.
      

                                

    Chairman Johnson. Ms. Lyons.

  STATEMENT OF BARBARA LYONS, PH.D., VICE PRESIDENT, HENRY J. 
     KAISER FAMILY FOUNDATION, AND DEPUTY DIRECTOR, KAISER 
            COMMISSION ON MEDICAID AND THE UNINSURED

    Ms. Lyons. Thank you for the opportunity to testify on how 
welfare reform has affected Medicaid coverage of low-income 
families.
    I am Barbara Lyons. I am Vice President of the Henry J. 
Kaiser Family Foundation and Deputy Director of the Kaiser 
Commission on Medicaid and the Uninsured. The Commission is a 
major initiative of the Kaiser Family Foundation and conducts 
analysis on health care coverage and access issues facing the 
low-income population.
    Today I want to emphasize several findings that have 
emerged from studies that we have conducted.
    First, Medicaid is an important source of health coverage 
for low-income families. In fact, Medicaid is the only source 
of health coverage for the poor. When poor families don't have 
Medicaid, they are generally uninsured, suffer worse access to 
care and poorer health outcomes.
    Our research shows that families understand the importance 
of Medicaid coverage, low-income parents overwhelmingly think 
that Medicaid is a good program and that Medicaid coverage 
helps them access doctors and helps them pay for prescription 
drugs when their children are sick.
    In recognition of the important health benefits of Medicaid 
coverage, policy efforts have been directed at expanding the 
program's reach beyond its initial welfare origins to more 
broadly support low-income families. However, the recent 
declines in Medicaid coverage are cause for concern. Between 
1995 and 1997 the number of kids and parents who had health 
insurance through Medicaid fell by over 1.6 million, including 
500,000 children. These declines were steepest for welfare 
reform-related enrollees and were not offset by increases in 
coverage through other Medicaid categories.
    Our research has identified four factors that have 
contributed to these declines.
    First, there is confusion over the Medicaid rules. As we 
heard earlier, they are confusing. The recent policy changes 
that have occurred have resulted in misunderstanding among low-
income families about whether they qualify for Medicaid and, 
importantly, whether welfare rules also apply to Medicaid 
coverage. Many parents incorrectly believe that Medicaid 
benefits are time limited and only available to families 
receiving welfare, not working families.
    Second, inappropriate administrative action has, as Marilyn 
Ellwood referred, resulted in ineligible families losing 
Medicaid coverage. Updating computerized eligibility systems to 
reflect current policy has been a major challenge for the 
States and in the interim some families have received incorrect 
information which has resulted in the loss of Medicaid 
coverage.
    Third, the Medicaid enrollment process is often not 
accessible to working families. The major barriers to Medicaid 
enrollment reported by parents are hurdles in the 
administrative process. Lengthy application forms, required 
face-to-face interviews at offices and substantial 
documentation requirements are significant barriers that deter 
low-income families from initiating and completing Medicaid 
application. The Federal rules here are minimal, leaving States 
with substantial opportunities to simplify enrollment, but 
States have often been slow to implement the streamlined 
procedures that are necessary when working families are 
applying for Medicaid.
    Finally, many families who succeed in getting through the 
enrollment process initially subsequently lose coverage despite 
the fact that they continue to be eligible.
    Our most recent data, which will be discussed in the next 
panel, shows an upturn in Medicaid enrollment in 12 out of 21 
study States during last year. Some States have expanded 
eligibility, engaged in outreach, improved enrollment 
procedures to successfully reach more low-income families 
eligible for Medicaid and CHIP. Despite these gains, Medicaid 
enrollment in June, 1999, remained below June, 1997, levels in 
most States.
    In conclusion, I want to emphasize that Medicaid plays a 
critical role in ensuring access to care for low-income 
families. Reaching Medicaid's full potential as a health 
coverage program remains a critical challenge. To accomplish 
this goal, Medicaid needs to be viewed as a health insurance 
program for working families. The legislative authority is in 
place to make Medicaid and welfare policy work together to 
assure that low-income families are not penalized by losing 
their Medicaid when they go to work. If these efforts are broad 
and successful, the number of uninsured could be substantially 
reduced.
    Thank you for the opportunity to testify today.
    [The parpered statement follows:]

Statement of Barbara Lyons, Ph.D., Vice President, Henry J. Kaiser 
Family Foundation, and Deputy Director, Kaiser Commission on Medicaid 
and the Uninsured

    Thank you for the opportunity to testify on how the 
Temporary Assistance for Needy Families (TANF) program has 
affected Medicaid coverage of low-income families. I am Barbara 
Lyons, Vice President of the Henry J. Kaiser Family Foundation 
and Deputy Director of the Kaiser Commission on Medicaid and 
the Uninsured. The bipartisan Commission, a major initiative of 
the Kaiser Family Foundation, conducts analysis and sponsors 
research on health care coverage and access issues facing the 
low-income population.
    Medicaid coverage is an important source of health 
insurance coverage for low-income families and helps them 
obtain needed health care services. Welfare reform has 
unfortunately contributed to unintentional declines in Medicaid 
enrollment and increased numbers of uninsured Americans. These 
gaps in Medicaid's coverage can be remedied and states 
currently have the tools to fix these problems in Medicaid 
coverage for low-income families. I will address the role that 
Medicaid plays for low-income families, the recent declines in 
Medicaid enrollment, and problems in assuring Medicaid coverage 
that resulted from welfare reform.

Medicaid is an Important Support for Low-Income Families

    Medicaid is a major health coverage program for low-income 
people that is jointly financed by the federal and state 
governments and administered by the states within broad federal 
guidelines. Today, Medicaid covers 41 million Americans, 
including 21 million low-income children (nearly 1 in 4 of all 
children in the U.S.). Medicaid is the primary source of health 
coverage for the poor, covering 41 percent on the non-elderly 
population (Figure 1). Because Medicaid does not cover all the 
poor and covers fewer near-poor with incomes between 100 and 
200 percent of poverty, almost a third of the poor and near-
poor are uninsured. Without Medicaid, the number of uninsured 
would be much higher because employer-based health insurance is 
often not available or affordable for low-income working 
families.
    The consequences of being without health coverage are far 
reaching for both children and adults. National surveys 
document that children who are uninsured are much less likely 
to have regular physician check-ups and to get needed 
medications, eyeglasses, mental health services and dental 
care. Uninsured children are 70 percent more likely than those 
with insurance to go without medical care for common childhood 
conditions such recurring ear infections and asthma. Uninsured 
children are also 30 percent less likely to receive medical 
treatment for injuries than those with health coverage. 
Uninsured adults face even greater barriers to care, often with 
serious health consequences.
    Having Medicaid coverage makes health care accessible for 
low-income families. Poor children with Medicaid use health 
care services at rates comparable to children with higher 
incomes and private coverage, while uninsured poor children lag 
far behind (Figure 2). When families lose Medicaid and become 
uninsured, they are far more likely to have problems getting 
care than those who have continuous Medicaid coverage (Figure 
3).
    Families understand the importance of Medicaid coverage. 
The Kaiser Commission has conducted extensive survey and focus 
group research on low-income families. Overwhelmingly, this 
research shows that nine out of 10 low-income parents think 
that Medicaid is a good program. Low-income parents appreciate 
Medicaid because it provides access to health care services and 
is affordable. They know that Medicaid will help access doctors 
and pay for prescription drugs when their children are sick. 
Medicaid helps assure that children get a healthy start in life 
and that low-income working families are not saddled with 
burdensome medical bills.
    In recognition of the value of Medicaid coverage, the 
federal government broadened eligibility criteria for children 
and pregnant women in the late 1980s. Eligibility for children 
and pregnant women is now based on family income related to the 
federal poverty level, rather than welfare criteria (Figure 4). 
States are required to cover pregnant women and preschool 
children in families with incomes below 133 percent of poverty 
and school-age children below 100 percent of poverty, with 
coverage for older teenagers (age 16 to 18) continuing to be 
phased in. By September 30, 2002, all poor children through age 
18 will be eligible for Medicaid.
    Medicaid is integral to efforts to assure access to health 
care services for low-income families in all states. Recent 
policy efforts have been directed at expanding the program's 
reach beyond its welfare origins to more broadly support low-
income working families. These changes resulted in an 
additional 11 million low-income people, primarily children, 
being covered by Medicaid during the early 1990s. Medicaid's 
role emerged as an essential building block to expand coverage 
to reach low-income families who otherwise would be without 
health coverage and to stem the rise in the uninsured.

Recent Declines in Medicaid Coverage

    The number of Medicaid enrollees grew steadily throughout 
the early 1990s increasing from 28.9 million in 1990 to 41.7 
million in 1995 due primarily to increased coverage of children 
and pregnant women. Reversing these gains in expanding coverage 
to low-income families, Medicaid enrollment has declined in 
recent years with an erosion in Medicaid's protections for low-
income families (Figure 5). Since 1995 Medicaid enrollment has 
declined, dropping to 40.6 million in 1997.
    Between 1995 and 1997 the number of children and parents 
who had health insurance through the Medicaid program fell by 
about 1 million, while the number of uninsured increased. 
During this period, total annual Medicaid enrollment fell by 
5.5 percent for adults and 1.4 percent for children (Figure 6). 
Medicaid participation fell the most steeply for welfare-
related beneficiaries. The number of Medicaid beneficiaries 
receiving cash assistance fell by 13 percent for adults and 11 
percent for children from 1996 to 1997. Some individuals losing 
cash assistance remained enrolled in Medicaid under other 
eligibility categories, but not enough to offset the decline in 
cash assistance related enrollment (Figure 7).
    The decline in Medicaid enrollment was unexpected--given 
the continued implementation of Medicaid eligibility 
expansions--and of concern, in the face of continued increases 
in the number of uninsured. Several recent studies examining 
the decline in Medicaid enrollment have identified welfare 
reform policies, obstacles in Medicaid eligibility and 
enrollment systems, and high employment rates as prominent 
reasons.
    These trends emphasized the need to have timely Medicaid 
enrollment data. Based on states' own monthly Medicaid 
enrollment reports, the most recent data shows an upturn in 
Medicaid enrollment in 12 out of 21 study states between June 
1998 to June 1999. These increases are, in part, related to 
eligibility expansions under Medicaid and CHIP to reach 
children at higher incomes, as well as efforts in some states 
to inform families about health coverage available through 
Medicaid and the new Children's Health Insurance Program (CHIP) 
and to make children's enrollment easier. Despite this recent 
upswing, Medicaid enrollment in June 1999 remained below June 
1997 levels in all but six (Arkansas, Florida, Indiana, 
Massachusetts, New Mexico and Oklahoma) of the 21 study states 
(Figure 8).

Welfare Reform and Health Coverage of Low-Income Families

    In enacting welfare reform, Congress did not alter the 
entitlement to Medicaid and intended to preserve Medicaid 
coverage. The new law says that states are required to continue 
to cover families who meet the welfare eligibility requirements 
in effect in the state as of July 16, 1996 and allows states to 
expand Medicaid to cover more low-income families. Prior to 
TANF, families receiving cash assistance were automatically 
enrolled in the Medicaid program.
    The new law ``delinked'' eligibility for welfare and 
Medicaid, so receiving cash assistance now has no bearing on 
Medicaid eligibility. Instead, eligibility for low-income 
families is based on a new Medicaid category, Section 1931, 
that replaces the ``AFDC-related'' category. TANF beneficiaries 
are eligible for Medicaid, as are families who are not 
receiving welfare but meet Medicaid's eligibility rules. In 
addition, families leaving welfare to work are entitled to 
Transitional Medical Assistance (TMA) for 6 to 12 months. Many 
children in low-income families who are not receiving welfare 
are likely to be eligible for coverage through Medicaid's 
poverty-related categories or CHIP. Thirty-four states now 
provide coverage to children up to at least 200 percent of 
poverty through Medicaid or CHIP and today all states are 
required to provide Medicaid to children under poverty up to 
age 16.
    Although fewer families are now applying for welfare, they 
may still be eligible for Medicaid for themselves or their 
children. Moving families from welfare to the workforce may 
have reduced the need for cash assistance, but has not 
eliminated the need for help with health insurance coverage. 
The availability of Medicaid is of vital importance to low-
income working families because health insurance is expensive 
and insurance coverage or help in paying the premiums is not 
often provided by their employers. A key challenge is how to 
assure Medicaid coverage for eligible families who are no 
longer applying for cash assistance, as well as those who are 
transitioning from welfare to work.
    Analysis by the Urban Institute shows that many parents who 
have left welfare have obtained low-wage jobs concentrated in 
service, sales and trade industries--the sectors least likely 
to provide job-based health coverage. These families often face 
serious struggles providing food for their families and paying 
their housing costs. A significant portion of parents who left 
TANF have disabilities or health conditions that may affect 
their ability to succeed in the workplace if they lose health 
coverage. Families leaving welfare are often not able to retain 
health coverage; 40 percent of women and 25 percent of children 
previously on Medicaid were uninsured one year later (Figure 
9). Similar difficulties in securing health coverage are also 
faced by families with low-wage workers who have not received 
welfare assistance.
    Although states also can extend greater Medicaid coverage 
to working parents to help assure family coverage, in most 
cases, adult eligibility remains tied to the welfare rules. 
Income levels for adults are often set considerably below the 
federal poverty level and restrictive asset tests are commonly 
employed. In 32 states, a parent working full-time at a minimum 
wage job would not be eligible for Medicaid, even if they lack 
access to employer-based coverage. Thus, efforts to cover 
children at higher income levels have not often translated to 
their parents, resulting in coverage disparities within 
families.
    The wide variation across states in Medicaid's eligibility, 
combined with differences in the availability of employer-based 
coverage, has led to wide differences in the uninsured rate 
among the states. State uninsured rates for their low-income 
populations (less than 200 percent of poverty; $27,300 for a 
family of three in 1998) range from a low of 15 percent in 
Vermont to 45 percent in Arizona and Texas. Despite the 
Medicaid expansions and efforts to broaden coverage for 
children, in 1998 nearly 8 million low-income children were 
uninsured. Fifteen states have over 27 percent of low-income 
children without any health coverage (Figure 10).

Problems in Assuring Medicaid for Eligible Families after 
Welfare Reform

    Welfare reform resulted in a dramatic restructuring of 
goals in state welfare offices. Great emphasis was placed on 
securing employment and diverting families from cash 
assistance. This new focus resulted in a transformation of the 
case worker's role. Priorities shifted from determining 
eligibility for cash benefits to promoting employment among 
potential applicants. As this major redirection of welfare 
offices was occurring, considerably less attention was devoted 
to assuring that Medicaid coverage was reaching eligible 
families. Confusion about Medicaid eligibility rules, gaps in 
state information systems, and hurdles in the enrollment 
process precludes eligible families in many states from 
receiving Medicaid coverage.
    These barriers to Medicaid enrollment can be surmounted 
under current law and some states have made progress in 
overcoming these problems. However, more effort needs to be put 
toward making Medicaid accessible as a health coverage program 
for low-income families. The Health Care Financing 
Administration (HCFA) has recently issued guidance that 
clarifies the steps that states must take to assure that 
eligible families are not losing out on Medicaid coverage in 
the face of welfare reform.

Confusion over Medicaid Rules

    Changes to welfare, as well as immigration, policy have 
resulted in confusion among low-income families about whether 
they qualify for coverage. A national survey of low-income 
parents, conducted by the Kaiser Commission last year, revealed 
considerable misunderstanding about current Medicaid 
eligibility rules. Many parents believed that Medicaid benefits 
were time limited, not available to working or two parent 
families, and limited to families receiving welfare (Figure 
11). Interviews conducted by Commission staff with case workers 
in three cities also revealed lack of understanding of Medicaid 
eligibility rules among case workers and little agency support 
to navigate these rules to assure Medicaid coverage for 
eligible families, despite an appreciation among the workers of 
the importance of Medicaid coverage. If the workers are 
confused, it is not surprising that many low-income families 
are confused as well.

Inappropriate Administrative Action

    Due to the complexity of eligibility rules, most states 
depend heavily on their automated eligibility computer systems 
to process applications for Medicaid and welfare. Yet, these 
systems were often designed to meet welfare, not Medicaid, 
eligibility needs and, in some cases, incorrect information has 
been transmitted to enrollees about their Medicaid eligibility 
when the two programs were ``delinked.'' State computer systems 
have sometimes automatically closed families' Medicaid cases 
when their welfare cases were closed, although states are 
required to separately determine whether or not a family is 
eligible for Medicaid under any eligibility category before 
terminating Medicaid coverage for any member of the family.
    Because changing computer systems takes time, some states 
have employed temporary stop-gap measures, such as supervisor 
review of all TANF cases being closed, to avoid erroneous 
Medicaid terminations. The recent HCFA guidance outlines the 
specific steps that states must take to assure their computer 
systems are not inappropriately terminating Medicaid coverage. 
There is federal money available through Medicaid 
administrative funds, as well as the TANF $500 million fund, 
that states have used to varying degrees to update their 
computer systems.

Medicaid Enrollment Processes Are Not Accessible to Working 
Families

    With the increased emphasis on work, Medicaid application 
and enrollment processes need to be designed with working 
families in mind. For most workers who have job-based coverage, 
the enrollment process is facilitated by the employer. In 
contrast, to obtain Medicaid coverage for themselves or their 
children, low-income parents may have to take time away from 
work or other responsibilities to apply for Medicaid. Lengthy, 
complicated enrollment forms, required face-to-face interviews, 
and substantial documentation requirements are significant 
barriers that deter low-income parents from initiating and 
completing the Medicaid enrollment process (Figure 12). In 
addition, many working parents do not want to go to a welfare 
office to obtain health coverage for their family.

    Hurdles in the Medicaid enrollment process often stand in 
stark contrast to efforts underway to facilitate CHIP 
enrollment. The implementation of streamlined enrollment 
procedures under CHIP has spurred a number of states to take 
similar action in their Medicaid programs for children (Figure 
13). While a number of states now allow mail-in applications 
for children applying only for Medicaid or CHIP benefits, more 
lengthy applications and face-to-face interviews with staff are 
required in most states if parents or entire families are 
seeking Medicaid coverage. Federal requirements are minimal 
leaving states with substantial opportunities to simplify 
family eligibility and enrollment processes, but states have 
often been slow to implement streamlined procedures when 
families are applying for Medicaid coverage. This disparity in 
application processes for families may result in the poorest 
families facing the most stringent rules to obtain Medicaid.
    Many families who succeed in getting through the Medicaid 
enrollment process, subsequently lose coverage, despite 
continuing eligibility. Federal rules require an annual re-
determination that can often be done by mail. However, many 
states assess eligibility more frequently and require families 
to complete lengthy forms, go to the welfare office in person 
for an interview, and furnish many documents. Simplifying this 
process would help eligible families stay continuously covered.

Families Outside the Welfare System Are Left Out of Medicaid

    The dramatic drop in families receiving cash assistance 
means that many uninsured low-income families may be eligible 
for Medicaid assistance, but have little connection to the 
welfare system. Historical enrollment approaches that rely on 
the welfare system as the primary route to Medicaid are not 
sufficient and may be counterproductive. New vehicles that 
reach and enroll eligible low-income families where they are--
at work, school or day care--are needed.
    Reaching these families is increasingly important, in light 
of welfare strategies that focus on diversion and work, as well 
as the recent burst in job growth that has led to greater 
employment, but not necessarily linked to health coverage. Only 
54 percent of low-wage workers ($7 per hour or less) are 
offered health insurance coverage through their jobs compared 
to 96 percent of higher-wage workers (Figure 14). When health 
coverage is available, the monthly employee contribution for 
family coverage is considerably higher in businesses that 
employ many low-wage workers. Thus, low-wage workers may be 
unable to afford family coverage.
    In this environment, the challenge to states is to make 
concerted efforts to inform eligible families about Medicaid, 
work with community-based organizations and employers to reach 
and enroll children and their parents, and implement the 
changes necessary to facilitate the enrollment process and keep 
families continuously covered. Barriers that impede Medicaid 
enrollment clearly exist today, but are not inherent to the 
program. These problems have practical, feasible solutions that 
all states can implement.

Conclusion

    We need to recognize the important role that Medicaid plays 
today in assuring access to health care for the low-income 
population. Despite gaps in coverage, Medicaid is the major 
source of health coverage for children and parents in low-
income families. Reaching Medicaid's full potential as a health 
coverage program for low-income families remains a critical 
challenge. Concrete steps need to be taken to assure that low-
income families who are eligible for Medicaid can obtain 
Medicaid coverage, whether they are currently receiving 
welfare, are transitioning from welfare to work or have no 
connection to the welfare system.
    To accomplish this goal, Medicaid needs be and operate as a 
health insurance program for working families that is distinct 
from welfare assistance. The legislative authority is in place 
to make Medicaid and welfare policy work together to assure 
that low-income families are not penalized by losing access to 
Medicaid coverage when they work. If these efforts are broad 
and successful, the number of uninsured in the United States 
could be substantially reduced.
    Thank you for the opportunity to testify today. I welcome 
any questions.
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    Chairman Johnson. Thank you all very much for your 
testimony, and I certainly look forward to the testimony of the 
next panel so we can get a better insight as to what mechanisms 
are having an effect on overcoming the problem of delinking. I 
think delinking in the end was certainly the right answer.
    Certainly one of the problems with the old welfare program 
was it kept people on welfare because they needed medical 
coverage, and we don't want to get back to that, although 
clearly we do want to realize the potential of all of the 
coverage laws that we have on the books to provide coverage.
    According to the law, any child under poverty is eligible 
for coverage up to 17, 18, 19 and pregnant women and children 
up to 133 percent, and the disappointing enrollment--I was very 
interested in my colleague from California's comment in his 
county. We certainly have experienced the same thing in 
Connecticut. How do we get the current programs to be more 
effective in people's lives?
    And I want to congratulate the administration, Ms. Mann, 
for a lot of different initiatives, and I was glad you ran them 
all down. I think all of the dialog between you and the States 
culminating in regulations that do clarify a number of things 
go to some of the problems that Ms. Ellwood alluded to.
    I would like to ask Ms. Ellwood a couple of things. I want 
to keep it brief, because we want to get to the next panel and 
be done before noon.
    On the issue of complexity, is there any difference between 
those 26 States that have used the more comprehensive waiver 
and some States that have better integrated CHIP with Medicaid?
    I ask this question because there was a Rockefeller 
Institute study on how welfare reform was working, and it was 
on the early efforts, and it was very clear to me--in fact, 
quite stark--that those States that had totally cross-trained 
people to eligibility for benefits and also work and employment 
issues were doing a far better job of helping women move from 
welfare to work but also a much better job in supporting their 
families.
    Is there any conjunction between the States that deeply 
integrated their bureaucratic approaches and those who use the 
waiver system and this issue of complexity? In other words, are 
those States using waivers? Are those States cross-training 
doing much better in terms of providing Medicaid benefits to 
people who come into the welfare to work system or not?
    Ms. Ellwood. I'm sorry, I don't think that I can answer 
that. Perhaps Cindy, you know that.
    Ms. Mann. I think there is a mix of strategies, and I 
actually think the next panel will identify some of the mix.
    What I have seen that works in States is, on the one hand, 
integration of the staff so that Medicaid is part of the 
welfare reform message, that they know the rules. On the other 
hand, some States have found that outstationing Medicaid 
eligibility so that they are very separate and independent, not 
to the exclusion of the welfare office.
    The other thing is the importance of systems changes. We 
have seen a lot of States with very antiquated systems, and 
their computer systems have not kept up with the changes. 
Whereas some States have what are called cascading systems that 
trickle through the various categories with Medicaid and ensure 
that benefits are maximized and families have the support.
    Chairman Johnson. Mr. Pollack?
    Mr. Pollack. I think there are different methods of systems 
integration that could help this problem.
    First, integrating CHIP and Medicaid is very important, 
having the same application process, shortening the 
application. In California, there was--Congressman Stark would 
know--a 28, 29 page application. It has been shortened to two 
pages.
    Mr. Stark. But it is twice as complicated in two pages as 
it was in 28.
    Mr. Pollack. More efficiently complicated in shorter pages. 
We certainly can do more to tie people into the school feeding 
programs. A lot of those people are eligible. We certainly can 
do more on things like presumptive eligibility where programs 
like WIC and Head Start can certify people on a temporary 
basis. In short, there are some systems changes that I think 
can help this problem.
    Chairman Johnson. Thank you.
    Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. And I thank you for 
your testimony, and I appreciate what you are doing.
    There seems to be here a major disconnect between good 
policy and incentives for good policy. If welfare reform is to 
succeed, it is not just the cash assistance. We need to deal 
with the earned income tax credit to make work pay, we need to 
deal with child care so families have safe and affordable 
places for their children to be, and we also have to have 
health insurance.
    I was struck by the comment you made that people in the 
welfare departments get recognized for people getting off 
welfare but they don't for enrolling people in Medicaid. We 
took some steps in the TANF performance bonus to reward States 
that have better performance on enrolling families in food 
stamps and Medicaid, and I think that is the type of 
initiatives that we are going to need to take a look at. 
Because, frankly, I served for many years in the State 
legislature and know the pressure that is on the State Medicaid 
directors. It is fine for them to say let's correct our 
computer programs, but if that is going to mean a larger 
expenditure of State funds, the budget director is going to 
give them a bit of a fit.
    Ms. Mann, I noticed that you had to send a directive out to 
the States saying, look, if you knock people off 
inappropriately, you have to put them back on. My question is, 
why do you knock them off inappropriately? It is one thing to 
say that families leaving welfare may not understand the rules 
concerning Medicaid eligibility, but our States should 
certainly understand the rules, and it should not take 4 years 
to correct a computer program that is knocking people off of 
receiving the health care that they deserve and are entitled 
to.
    The point that Mr. Stark made, we require people to enroll 
and then we not only make it difficult for them to understand 
it and difficult to enroll but then we knock them off. We take 
action that prevents them from getting these benefits.
    I would hope that we could figure out ways to really 
incentivize our States to do a much better job, to provide some 
financial incentives, to provide clear direction that we think 
children being enrolled in Medicaid is one of our goals or 
getting children health insurance is one of our goals, and it 
should not have to be in a waiver program, that we can get a 
simplified form that families can understand and fill out. 
There should be other ways to get to simplified approaches for 
families to understand that they are eligible for the Medicaid 
Program or the CHIP program. We should be a lot more seamless 
than we are right now so we get children health insurance so 
that welfare can succeed, getting families secure in a work 
environment.
    Ms. Mann, I appreciate your comments.
    Ms. Mann. I want to make it clear, Congressman, that States 
do have the flexibility under current law and don't need a 
waiver to simplify their application process, and many States 
have done so with children, but not necessarily with families 
with children, and that's where the welfare link has been the 
problem. There are a few States, Utah is one, Indiana is one, 
where the application for families with children has been 
simplified as well, but it is the exception not the rule.
    But the flexibility is provided under Federal law, and 
States don't need a waiver in order to accomplish that. You are 
right. That is a critically important part of the challenge 
ahead.
    And the other point is what Ms. Ellwood raised, States that 
have simplified the application process have not necessarily 
simplified the redetermination process. It is easier for some 
kids to get into the program, but then it is difficult to 
maintain eligibility.
    Mr. Cardin. If they can do it and some States aren't doing 
it, maybe you need a club rather than an incentive.
    Mr. Pollack. Two points. We talked earlier about the $500 
million that was designed to help make the transition, but, 
unfortunately, a good number of the States have not used this 
money. And the Chair appropriately said there is a very 
favorable Federal-State match, 90 to 10, but to date only about 
25 percent of those dollars have been spent by the States. A 
lot of States have not pulled that money down.
    Second, I want to get back to a point that Mr. Watkins made 
earlier. There is a clear relationship between children's 
coverage and what the parents do. We know there is always a 
relationship between what happens to kids and what happens to 
parents.
    At some point, we are going to have to take cognizance of 
the fact that when parents do not get enrolled in these 
programs because there are very different eligibility standards 
for those parents it will have some impact on whether the 
children enroll. If you can put the children in the same 
program with the same eligibility standards, you have a much 
better chance of improving our outreach to the children because 
it means that the parents get enrolled at the same time.
    I know that is going to require some legislation or the 
States are going to have to make use of the current Medicaid 
matching formula. I think we need to provide some more dollars 
to the States to give them an incentive to make sure that the 
parents' eligibility standards match the eligibility standards 
for children.
    Chairman Johnson. Thank you.
    Mr. McCrery.
    Mr. McCrery. Mr. Pollack, you mentioned that low-wage 
employees pay more in premiums for their insurance than high-
wage employees. Do you know how our tax system treats low-wage 
employees vis-a-vis health insurance versus high-wage 
employees? Do you have any thoughts on that?
    Mr. Pollack. Well, there is no question that our current 
tax system does provide a greater tax break in terms of the 
treatment of employer-provided coverage for those at higher 
income brackets. There is no question that is true. That tax 
break is a regressive tax break. You are right about that.
    But the point I was trying to make there is different. I 
think all of us expect that low-wage workers pay a higher 
percentage of their incomes on premiums because the 
denominator, their incomes, are lower. But, in fact, the 
numerator is actually higher. That is a rather startling 
finding.
    Mr. McCrery. One reason is our convoluted insurance market. 
Most low-wage employees work for small businesses, and small 
businesses are in a different insurance market than GM or PGP 
or IP so they have to pay more for their insurance than those 
big companies and generally their margins are lower so they 
can't afford to pay as great a share of the premium as the 
largest companies. So it is a cascading effect that all falls 
on the low-wage employee to his detriment.
    Mr. Pollack. Mr. McCrery, you are right about that point.
    I want to emphasize that these findings that the low-wage 
workers pay a higher amount of money on premiums, that is 
irrespective of whether they are in small employment situations 
or larger employment situations. If you keep those things 
constant, you will still find that those companies which 
essentially hire low-wage workers require those workers to pay 
more in premiums.
    Mr. McCrery. That may be as well. But in addition to the 
tax system disadvantaging low-wage employees whose employers 
provide them insurance, it certainly disadvantages those whose 
employers who don't provide them insurance?
    Mr. Pollack. Sure.
    Mr. McCrery. Because they have to buy their own insurance 
on the individual market. Not only do they pay higher premiums, 
they get no tax deduction and no exclusion from wages for 
purchasing that insurance, so they are really disadvantaged.
    I say all of this to not take away from the focus of this 
hearing, because I think it is important to try to understand 
what is happening with respect to Medicaid and welfare reform, 
but I come from a State, Louisiana, who has for decades 
provided free health care, Charity Hospital in Louisiana, and 
anybody who wants health care can get it if they can get to 
Charity Hospital. We also have a fairly high Medicaid 
enrollment in Louisiana. We have done a pretty good job in 
getting people enrolled in Medicaid and keeping them enrolled, 
but a lot of our health indicators are down at the bottom.
    I think the answer is not, generally speaking, to get more 
people into Medicaid, more people into a government health care 
program. The answer is to raise the income level of people to 
get people out of poverty, which we are succeeding in doing.
    I have the statistics that I asked about from the Census 
Bureau. The poverty rate among children has come down every 
year for the past 5 years. For the last year we have available 
is 1997--I am sorry, 1998, and 18.9 percent of children were in 
poverty, and that is too many, but it is the first year since 
1980, since 1980, 20 years ago, that the poverty rate for 
children has been significantly below 20 percent. We are making 
progress. We are doing the right things I think to extricate 
folks from the bad health environment.
    I believe that we ought to focus on getting people real 
insurance, private insurance; and to do that we ought to 
reexamine our tax system and the way we treat poor people in 
this country through the tax system and low-income workers 
particularly through the tax system. Reallocate what we are 
already spending through the tax system to help people who need 
help to get private insurance. I think people with private 
insurance are more likely to get preventive care and go to the 
doctor than they are if they are on a government program or if 
they have just available a free clinic or a Charity Hospital 
like we do in Louisiana.
    Mr. Pollack. Mr. McCrery, your comment about using the tax 
system for the population at large, I think can be an 
interesting discussion. For the lower income population, 
however, I don't think that the tax system is the most 
efficient way of expanding coverage. It may be at some point on 
the income scale--I don't know what that arbitrary figure is. 
At some arbitrary figure we may want to encourage people to 
obtain employer-based coverage through changes in the tax code. 
But to lower income people, many of whom don't pay taxes, it 
makes little sense.
    Mr. McCrery. Let me interject, because we have to go vote. 
You misunderstood. I don't mean to use the tax system, I mean 
to recoup the money from folks like you and me and give it to 
low-income workers to get them insurance.
    Mr. Watkins. [Presiding.] Let me say I am chairing this 
because Ms. Johnson is voting. Mr. Stark.
    Mr. Stark. I want to thank the panel for their 
contribution, particularly Families USA and the Kaiser Family 
Foundation, Mathematica and for the work that they do in trying 
to keep us informed.
    I must say, Ms. Mann, that health and human services 
continues to--somebody over there must have that stamp with 
happy face, happy face. How anybody can call the fact that we 
still have 10 million kids uninsured encouraging? There has to 
be another word. Encouraging ought to be stricken from the 
bureaucratic vocabulary over there, because it is not 
encouraging at all. You may have to support a bankrupt welfare 
reform bill, but it really falls--it becomes almost ludicrous 
to have Health and Human Services come back here time after 
time and never once--never once in this administration since 
1992 have they ever come back and said things are not so good.
    I hate to tell you, except for the stock market, things are 
getting worse and particularly for children, and your 
department won't admit it or won't see it.
    Now how the hell we are supposed to solve a problem if the 
administration department that is charged with overseeing it 
can't see the problem and figures that they can make the 
problem go away by just saying it is OK through, first of all, 
almost childish research? I have talked to a dozen families 
around the country. That is not research. And to come and tell 
us, because the Medicaid enrollment has dropped by 1.3 percent, 
we have encouraging results makes our job difficult.
    We are just not getting--we get it from nongovernmental 
organizations, a much better look at what is going on; and it 
is disappointing that the executive branch of the government 
comes back and paints over, glosses over the problems. We are 
never going to solve them, and I hope that you can take this 
back right on up to Secretary Shalala. To put a happy face on 
the almost obscene treatment and condition of children which is 
getting worse through a program that our administration 
supported is difficult. I would like to think that we could 
admit at some point that we may have made some mistakes and set 
about correcting them, but if we cannot see the mistakes, we 
are never going to do it.
    Mr. Watkins. I have just one comment. We have a short-term 
goal, short term because of welfare reform, but in the long 
term we should be trying to get the income level up in this 
country and the insured and get them off. That is the thing. We 
don't want to get a welfare health system established.
    I think there is a short-term and a long-term phase of this 
whole program. I hope we are in a short-term and long-term 
phase, and they are two different types of objectives.
    I guess at this time you are dismissed, and we will take 
the second panel. Chairwoman Johnson is going to be back in a 
moment; and, if not, I am going to miss the vote.
    I want to take the prerogative as the Chair to start from 
my left to your right. Ms. Mitchell, being from my home State, 
I want to make sure that I get back in time for her testimony 
and all of the good things that are happening in Oklahoma, but 
some things that I want to visit about.
    So, Mr. Winstead, would you like to start?
    First, I may need to recess until she gets back. Why don't 
we recess. She is on her way back, and I will go vote, and I 
will be back.
    [recess.]
    Chairman Johnson. [presiding.] Mr. Cardin will be here 
shortly, because of the constraints of the day. Let us begin.
    The second panel is Dr. Vernon Smith, who is the Principal 
of Health Management Associates from Lansing, Michigan; Don 
Winstead, Welfare Reform Administrator, Florida Department of 
Children and Families; Kathleen Gifford, Assistant Secretary, 
Indiana Office of Medicaid Policy and Planning; and Lynn 
Mitchell, Oklahoma State Medicaid Director.
    I appreciate your being here. It is impossible to evaluate 
the problems with Federal policy without hearing from the 
people like you that are out there trying to make the programs 
work. So, Dr. Smith, if you will begin.

    STATEMENT OF VERNON K. SMITH, PH.D., PRINCIPAL, HEALTH 
            MANAGEMENT ASSOCIATES, LANSING, MICHIGAN

    Mr. Smith. Thank you, Madam Chair.
    My name is Vernon Smith. I am a former Michigan Medicaid 
Director and a Principal of Health Management Associates in 
Michigan. I want to make a couple of key points.
    First, welfare reform was the most significant challenge 
that human services administrators have had to face since the 
beginning of Medicaid in 1965. Medicaid eligibility had always 
been a derivative of welfare eligibility. That changed. States 
had to create new systems for Medicaid eligibility separate 
from welfare. That was much more difficult than anyone 
imagined.
    And as welfare reform was successful, the job of keeping 
eligible persons on Medicaid became more difficult. Medicaid 
had to overcome the misperceptions that the tough new welfare 
reform policies applied to Medicaid also, that Medicaid had 
work requirements or that Medicaid had time limits.
    A year and a half ago, my colleagues at Health Management 
Associates and I conducted focus groups with human service 
administrators and Medicaid eligibility specialists around the 
country. These experts told us that they were very much aware 
of the problems. They had thought through the challenge, and 
they were very committed to trying to make things work better. 
They detailed to us that they already had under way changes in 
policy, simplifications, streamlining of procedures, systems, 
forms. They were initiating outreach often for the first time 
ever for Medicaid to find and enroll persons eligible for 
Medicaid, and they were seeking to change the image of Medicaid 
to reduce the stigma that had come from Medicaid's association 
with welfare over the years.
    They wanted to give Medicaid a chance to support their 
efforts to get people to go to work and keep a job. These 
changes all take time and have taken a good deal of time.
    Our most recent study published last month shows that these 
efforts are beginning to make a difference. We looked at 
Medicaid enrollment in 21 States over the 2 years from June 
1997 to June 1999. In the first year, the year that ended in 
June 1998, enrollment declined in 18 of the 21 States we looked 
at. These 21 States included the 12 largest States plus 9 
others to give some geographic balance. The three States that 
really stood out--and if you were to look at figure 4 attached 
to the testimony--these three States that really stood out were 
Arkansas, Massachusetts and Oklahoma. Each of these States was 
well ahead of its peers with major initiatives to expand 
eligibility and to streamline their eligibility processes.
    In the second year of the study that ended last June, 
enrollment decreased in just eight of the 21 States in our 
study and increased in 13. Barbara Lyons mentioned that the 
study showed increases in 12. After the study was complete, New 
Jersey submitted data that showed that they had a small 
increase rather than a small decrease. The six States with the 
largest annual increases included the three that had increases 
in the prior year--that is to say Arkansas, Massachusetts and 
Oklahoma--plus the States of Florida, Indiana, and New Mexico. 
Again, these three States are among the leaders in adopting 
specific and comprehensive initiatives to expand eligibility, 
changing their procedures, making them simpler and initiating 
comprehensive outreach strategies.
    In the process of adjusting to the delinking of Medicaid 
from welfare, Medicaid has become a very different program than 
it was before. Significantly, over the past 2 years, for the 
first time in its history, the data show that Medicaid has 
become a program in which over half of its beneficiaries are 
not on welfare.
    So, to summarize, welfare reform has had a huge impact on 
Medicaid. However unintended, it has been very significant. 
Second, States are implementing many strategies to address the 
challenges and to improve the chances that those who are 
eligible for Medicaid will remain enrolled or become enrolled. 
Third, the success of these strategies is just becoming 
apparent in the program statistics. And, fourth, what is 
emerging in some States is a more streamlined mainstream health 
coverage program, shedding its image as just the health program 
for people who are on welfare.
    These results are encouraging, particularly in States that 
were early adopters of these strategies, such as the three 
States represented on this panel.
    Thank you.
    [The prepared statement follows:]

Statement of Vernon K. Smith, Ph.D., Principal, Health Management 
Associates, Lansing, Michigan

    Chairman Johnson and Members of the Committee:
    I am Vernon K. Smith. I appear before you today as a 
researcher and consultant with Health Management Associates. 
Over the past two years I have examined current trends in the 
number of persons enrolled in Medicaid and in the State Child 
Health Insurance Programs (S-CHIP programs), and the factors 
influencing the trends. My perspective is that of an economist 
and former Michigan Medicaid director, whose 30-year career as 
a public official in Michigan State government focused on 
health care and Medicaid. I am pleased to be here today to 
discuss with you important issues relating to welfare reform 
and its impact on Medicaid, and especially its impact on the 
number of children and families for whom Medicaid provides 
health coverage.
    My remarks are based primarily on research conducted over 
the past two years that is described in three published 
reports,\1\ as well as ongoing research that will update those 
reports.
---------------------------------------------------------------------------
    \1\ See the following reports supported and published by the Kaiser 
Commission on Medicaid and the Uninsured: The Dynamics of Current 
Medicaid Enrollment Changes, October 1998 (Publication #2111); 
Enrollment Increases in State CHIP Programs: December 1998 to June 
1999, July 30, 1999 (Publication #2153); Medicaid Enrollment in 21 
States June 1997 to June 1999, April 2000.
---------------------------------------------------------------------------
    In enacting the historic welfare reform law four years ago 
(Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996, P.L. 104-193) Congress specifically tried to 
protect eligibility for Medicaid. Medicaid and welfare 
eligibility were ``de-linked.'' The expectation was that 
eligibility for Medicaid health coverage would continue for 
many adults who worked their way off welfare (through the 
``Transitional Medical Assistance'' or TMA) and for most of the 
children (through poverty level categories of coverage for 
children).
    However, when the national data for 1996 were released at 
the end of 1997, the data showed a drop in the number of 
persons enrolled with Medicaid. This was the first drop in 
Medicaid enrollment in over a decade. The drop was particularly 
surprising in the context of the welfare reform guarantees for 
Medicaid eligibility, and even more so in light of the very 
large increases in enrollment that immediately preceded it. The 
annual rates of increase in Medicaid enrollment were 11.3% from 
1990 to 1992, and 5.2% from 1992 to 1995.\2\ Over the seven 
years from 1988 to 1995, the number of persons on Medicaid 
increased by about 50% from about 28 million to almost 42 
million.
---------------------------------------------------------------------------
    \2\ Brian Bruen and John Holohan, Slow Growth in Medicaid Spending 
Continues in 1997, Kaiser Commission on Medicaid and the Uninsured, 
November 1998.
---------------------------------------------------------------------------
    It is a significant public policy issue as to why Medicaid 
enrollment dropped, and whether the sustained drop from 1996 to 
1998 reflected a loss of Medicaid coverage for children and 
families who in fact were eligible to continue their coverage.
    In 1998 HMA conducted focus groups of human service 
administrators and Medicaid eligibility specialists to learn 
what these experts believed to be occurring and why. The 
participants spoke from their personal experience and 
observations of what was happening in their states as welfare 
reform was being implemented. The descriptions led to the 
following conclusions:

 Focus Group Conclusions about the Impact of Welfare Reform on Medicaid

1. In perception, Medicaid remained ``linked'' to welfare.

    Recipients and applicants believed (incorrectly) that the 
new tougher welfare reform policies applied to Medicaid. The 
association with welfare led persons to believe Medicaid also 
was ``temporary assistance,'' with time limits and work 
requirements. The stigma of welfare remained attached to 
Medicaid.

2. Work programs kept persons away from both welfare and 
Medicaid.

    ``Work First,'' ``diversion'' and other jobs programs 
channeled some welfare applicants away from applying for 
Medicaid, even though they may have been eligible for Medicaid. 
The focus on jobs, which was a major culture shift for welfare 
agencies, spilled over to Medicaid. Medicaid was not the 
priority.

3.Complex systems changes were needed to delink Medicaid from 
welfare.

    When adults ``worked their way off welfare,'' 
administrative procedures were not in place to continue 
Medicaid coverage for eligible adults and children. Recipients 
usually did not know to ask about continuing Medicaid.

4. Major changes created confusion.

    New welfare rules created confusion for both recipients and 
eligibility workers. It took time to implement and understand 
new policies that separated Medicaid eligibility from TANF 
eligibility. During this transition, a significant number of 
working poor families believed they were not eligible for 
Medicaid when they actually were eligible.
    Human service administrators and Medicaid eligibility 
specialists told us that, in mid-1998, they were aware that 
their systems were not doing a good job of making sure that 
eligible persons were able to maintain Medicaid coverage. They 
were quick to describe efforts already underway to fix the 
problems and make the systems work better. The focus group 
participants described several key strategies, including:
     Changing the name of the program to distance it 
from the stigma of welfare.
     Creating procedures to notify all persons leaving 
welfare that they or their children may be eligible to continue 
Medicaid coverage, and explaining how to apply.
     Developing specific information and outreach 
strategies to market the program as health coverage.
     Training workers on the new procedures, including 
emphasis on how health coverage supports the success of work 
programs. Our most recent study suggests that in several states 
such changes in policies and procedures are being implemented 
successfully. Together with expansions in eligibility levels, 
these initiatives are having a significant impact. The result 
is that Medicaid enrollment now appears to be increasing in 
many states, even as the number of persons on welfare continues 
to drop.
    Our most recent study is based on analysis of Medicaid 
enrollment trends over the two-year period from June 1997 to 
June 1999. We looked at data for a total of 21 states, 
including the 12 states with the largest Medicaid enrollments. 
Medicaid enrollment in these 21 states represented 73% of the 
total for the U.S. in 1997.\3\
---------------------------------------------------------------------------
    \3\ The 21 states included: AR, CA, FL, GA, IL, IN, IA, KS, MA, MI, 
NJ, NM, NY, NC, OH, OK, PA, TN, TX, UT, WI.
---------------------------------------------------------------------------
    Over the two years for these 21 states, overall Medicaid 
enrollment combined dropped from 23.2 million in June 1997 to 
22.9 million in June 1999, a decrease of 1.3%. In the first of 
these two years, enrollment dropped by 2.7%.
    There are wide variations in specific state experiences 
over this two-year period. It is hard to draw a direct link, 
but the evidence seems to suggest that states with a priority 
on outreach, information, streamlining, training and 
eligibility expansions have been more successful in enrolling 
eligible children and families in Medicaid.
    Key findings from this study include the following:
1. Enrollment Changes over the Year from June 1997 to June 1999

    Medicaid enrollment dropped in 18 of the 21 states in this 
study, over the one-year period ending in June 1998. Only three 
of these 21 states had Medicaid enrollment increases over this 
year. These three states were Arkansas, Massachusetts and 
Oklahoma. These three states were among the first to initiate 
policies to find and enroll persons who were eligible but not 
enrolled in Medicaid, and to implement eligibility expansions 
designed to cover low income uninsured children and families.
    Arkansas: Medicaid enrollment increased by 19% in the year 
ending June 1998 (and by 29% over the two study years). 
Arkansas implemented its ARKids First program to cover children 
to 200% of the poverty level, and also added coverage under a 
family planning waiver for women who had Medicaid coverage 
based on their pregnancy.
    Massachusetts: Medicaid enrollment increased by 23% in the 
year ending June 1998 (and by 32% over the two study years). A 
significant part of the increase was in families, children and 
pregnant women. These groups increased by 33% in the 1997-98 
period and by 48% over the two year 1997-99 period. 
Massachusetts expanded eligibility for working adults and 
children under a Section 1115 waiver under its MassHealth 
program.
    Oklahoma: Medicaid enrollment increased by 10% in the year 
ending June 1998 (and by 26% over the two study years). The 
increase was primarily in families, children and pregnant women 
categories, which increased 16% in the 1997-98 period and by 
41% over the two-year 1997-99 period. Oklahoma expanded 
eligibility for families and children and implemented a major 
outreach initiative to find and enroll eligible children.

2. Enrollment Changes in the Year from June 1998 to June 1999

    Over the 21 study states, Medicaid enrollment increased 
from 22.6 million to 22.9 million, an increase of 1.4%, in the 
year ending in June 1999. Among the 21 study states over the 
year ending in June 1999, enrollment increased in 13 states, 
and continued to decrease in only eight states.\4\
---------------------------------------------------------------------------
    \4\ Enrollment decreased in these eight states: IA, MI, NY, OH, PA, 
TX, UT, WI. Enrollment increased in these 13 states: AR, CA, FL, GA, 
IL, IN, KS, MA, NJ, NM, NC, OK, TN. Note that the report shows NJ as a 
state with a decrease in enrollment. Updated data provided by NJ after 
the report was prepared shows enrollment increased in NJ in the period 
from June 1998 to June 1999.
---------------------------------------------------------------------------
    Over the year ending in June 1999, significant enrollment 
increases occurred in states that implemented significant 
initiatives to improve coverage, streamline systems and find 
eligible adults and children. In addition to Arkansas, 
Massachusetts and Oklahoma, states with significant annual 
enrollment increases in the year ending June 1999 included the 
following:
    Florida: Medicaid enrollment increased by 7%. The number of 
families, children and pregnant women on Medicaid increased by 
11%. Florida streamlined and simplified its application 
process, and increased its focus on Transitional Medical 
Assistance for those leaving TANF.
    Indiana: Medicaid enrollment increased by 23%, including an 
increase in families, children and pregnant women categories of 
32%. Indiana implemented a comprehensive plan that included a 
new name for Medicaid (Hoosier Healthwise), expanded 
eligibility for families, streamlined enrollment, a major 
training and outreach campaign and hundreds of new sites for 
application for coverage.
    New Mexico: Medicaid enrollment increased by 13%, including 
a 31% increase in the number in the category for children and 
pregnant women. New Mexico initiated a major comprehensive 
outreach campaign for ``New MexiKids,'' the state CHIP program, 
with streamlined procedures for Medicaid and CHIP enrollment.

3. The Impact of Medicaid CHIP Expansions on Overall Medicaid 
Enrollment

    A key question is the extent to which children who leave 
welfare are then enrolled in State CHIP programs. To the extent 
children are in Medicaid-expansion CHIP programs (who are also 
in Medicaid enrollment counts) then State CHIP programs account 
for part of the increase in Medicaid enrollment in the year 
ending June 1999. To assess the extent to which Medicaid 
expansion State CHIP program enrollment contributed to the 
increase in overall Medicaid enrollment, data for State CHIP 
programs were obtained for the six month period from December 
1998 to June 1999, and compared to Medicaid enrollment over the 
same six-month period. Of the 21 states in this study, 15 
states had Medicaid expansion CHIP programs. Increases in 
enrollment in these Medicaid expansion State CHIP programs 
directly accounted for 28% of the increase in Medicaid overall 
enrollment in the 21 study states over this six-month period.
    Anecdotal information from state CHIP programs indicates 
that State CHIP programs also have an indirect impact on 
Medicaid, in that a significant percentage of persons who apply 
for State CHIP programs are found eligible for Medicaid. To the 
extent that application procedures are coordinated and 
streamlined by states, such applicants may be easily enrolled 
in Medicaid.

                               Conclusion

    Welfare reform created significant problems of coordination 
between the eligibility systems for welfare and Medicaid. Human 
service administrators and eligibility specialists have been 
aware of these problems, and in many states initiated major 
efforts to address them.
    These efforts have been aimed at improving the image of 
Medicaid, streamlining application and enrollment procedures, 
expanding eligibility levels to extend coverage to children and 
families and targeting outreach toward persons eligible but not 
enrolled in Medicaid.
    The states that have placed a priority on such efforts have 
been successful in enrolling eligible children and families in 
Medicaid. The result in 1999 was a reversal of the three-year 
decline in Medicaid enrollment in many states.
    The major policy, program and system changes that reformed 
welfare fundamentally changed the relationship between welfare 
and Medicaid. The success of ``delinking'' welfare and Medicaid 
is being seen now in states that have stand-alone, streamlined 
and mainstreamed Medicaid-based health coverage programs. These 
Medicaid programs are less burdened by the stigma still 
attached to welfare-based programs, while providing ``health 
insurance'' coverage that supports the success of jobs-focused 
programs of temporary assistance for needy families.
    The good news is that many states have taken action and as 
a result children and families who are eligible for Medicaid 
for their health coverage are now more likely to be enrolled.
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    Chairman Johnson. Mr. Winstead.

   STATEMENT OF DON WINSTEAD, WELFARE REFORM ADMINISTRATOR, 
          FLORIDA DEPARTMENT OF CHILDREN AND FAMILIES

    Mr. Winstead. Thank you, Madam Chair and Members of the 
Subcommittee. I appreciate the opportunity to provide you with 
information about Florida's welfare reform activities and 
issues related to health coverage for families leaving welfare. 
My name is Don Winstead, and I am the Welfare Reform 
Administrator with the Florida Department of Children and 
Families.
    I would like to summarize the key points in my written 
testimony and expand on information that was presented at your 
field hearing on welfare reform in January in Riviera Beach, 
Florida.
    First of all, I would like to mention some brief background 
information about our program in Florida to set the context for 
what we are finding with Medicaid coverage for children. 
Second, I would like to share with you information about what 
we are seeing in enrollment trends. Third, I would like to give 
you some information about some specific strategies we are 
using to try to increase enrollment; and, finally, share some 
recent actions that were adopted in the Florida legislature in 
the 2000 session that just completed on May 5.
    If I can refer to the chart--and I believe there are copies 
of these charts in your folders--first of all, if we look 
overall at the decrease, if you look at the eight States in the 
country that collectively comprise about 60 percent of the 
Nation's caseload, Florida has had the largest caseload 
decrease. Our decrease has been 68 percent through the latest 
period reported, June, 1999; and I have attached material to my 
written testimony that shows that decrease has continued. When 
we focus on the families that are subject to the time limits 
and work requirements, the decrease is even greater.
    Another indication of the transformation that we have seen 
in Florida is how we are using money, and I will just mention 
very briefly--it is a little hard to see on here, but you see 
this line here, in Federal fiscal year 1994, we were spending 
about 80 percent of our total expenditures in this area on 
welfare payments. Now that has dropped dramatically, and the 
thing that we are spending the bulk of our money on are things 
that support work--child care, case management, support 
services. We are investing in supporting work rather than 
merely paying for welfare payments, which is a significant 
transformation for our State.
    I would like to focus on what we have seen in terms of the 
trends for children in our State, and this chart shows two 
trend lines. One is children receiving cash assistance, and 
that is this line. As you can see from when we implemented our 
welfare reform program, the number of children receiving cash 
assistance has declined from 376,000 down to 124,000, a 
significant decrease that mirrors the overall decrease that we 
have seen.
    On Medicaid we did see a decrease from 1996 to 1998. It 
then bottomed out, and we have seen an increase since then so 
that today there are more children in Florida eligible for 
Medicaid than when we implemented our welfare reform program in 
the fall of 1996, in spite of the fact that we have led the 
country among large States in cash assistance caseload 
decrease.
    I have also included some information about adults, and the 
adult story is a bit more complex because of all of the 
different coverage groups. But we are seeing with adults, as 
the cash assistance adults have declined dramatically, we have 
seen some decline in our transitional benefit and TANF-related 
enrollment of adults. But that decline has slowed, and I think 
it indicates to us that we are doing a more effective job of 
sharing information about transitional benefits although the 
pathways, if you will, for adults, there are fewer in our 
program than there are for children.
    I would like to mention now two specific strategies that we 
have used relative to enrolling children. First is to try to do 
a better job of sharing information about transitional 
benefits. I believe in your folder is a copy of a brochure--and 
we actually use two brochures. One is called, Leaving Welfare 
for Work Isn't as Scary as It Seems. In that, prominent in what 
we try to share with people, is information about health 
coverage and the importance of that. We also share information 
about food stamps and the earned income tax credit, about other 
benefits for families that don't require you to be on welfare. 
Because we clearly want to underscore that you don't have to be 
on welfare in order to receive other benefits.
    We have another version of the brochure that is designed 
for low-income families who are not recipients entitled, Have 
You Heard About Benefits for Working Families, again to make 
that same point.
    The other strategy that I think has been an important part 
of what we have done is the simplified eligibility for 
children's health. This covers our Medicaid Program and our 
SCHIP. You can see it is a one-page, front-and-back form.
    And it is significant that it comes with an envelope, and 
the significance of that is that you do not have to come to our 
office in order to become eligible or have eligibility for your 
children determined. You mail it in. There is a brochure that 
you can keep that explains the program. This is mailed in, and 
the entire process is done through the mail so that the person 
doesn't have to enter the office. This gives the family the 
choice. They can come to the office and be served at an 
outposted location or handle the transaction through the mail 
to get health coverage for children.
    My final two points in terms of additional strategies, 
number one, the legislature just authorized, effective July 1, 
presumptive eligibility for children, so we will be 
implementing that Federal option. Second, we expanded 
eligibility for infants from 185 percent of the Federal poverty 
level to 200 percent of poverty in our Medicaid Program. So we 
believe that will also give us an additional tool.
    I will be glad to answer any questions at the appropriate 
time.
    [The prepared statement follows:]

Statement of Don Winstead, Welfare Reform Administrator, Florida 
Department of Children and Families

    Madam Chairman and Members of the subcommittee, I 
appreciate the opportunity to provide you with information 
about Florida's welfare reform activities and issues related to 
health coverage for families leaving welfare. My name is Don 
Winstead and I am the Welfare Reform Administrator with the 
Florida Department of Children and Families.
    In my testimony this morning, I would like to expand on 
information I presented at your field hearing on welfare reform 
on January 24, 2000 in Riviera Beach, Florida. In that 
testimony, I provided information regarding trends in the 
number of children receiving cash assistance in Florida 
compared with the number of children eligible for Medicaid. 
Today, I will provide some additional detail on those trends. I 
will also summarize some of the strategies that we think have 
been important in increasing Medicaid enrollment of children 
and provide information about further efforts we are planning, 
based on state law changes in the recently completed session of 
the Florida Legislature.
    I would like to begin with some background on Florida's 
welfare reform implementation to put my comments on health 
coverage within the broader context of our program.

Background:

    Florida implemented the Temporary Assistance for Needy 
Families Block Grant Program (TANF) in October 1996. Our 
program is called Work and Gain Economic-Self Sufficiency or 
``WAGES.'' Like many states, we have seen a significant decline 
in our cash assistance caseload. If you look at the eight 
largest states that collectively comprise about 60 percent of 
the nation's caseload, Florida's caseload decline has been the 
highest among these large states. From the latest information 
posted on the Administration for Children and Families web 
site, our decline from August 1996 through December 1999 was 
68%. This decline includes both families who are subject to 
time limits and the work requirement and also the children in 
so-called ``child-only'' families, who are not subject to time 
limits.
    When we take the ``child-only'' cases out of the 
calculation and focus on the families with an adult subject to 
the work activity requirements and the time limit, our overall 
caseload decline through March 2000 has been 79%. I have 
attached a caseload summary sheet showing some of the relevant 
data.
    As our cash assistance caseload has continued to decline, 
we have experienced a significant shift in the emphasis of our 
program. Increasingly, we have focused more on the importance 
of transitional benefits and supports to families who have 
moved from welfare to work. To illustrate the scope of this 
change, I will refer to an attached chart showing a comparison 
between our FFY 1994 expenditures on the AFDC/ JOBS program and 
the budget for the comparable programs in the current state 
fiscal year. As you can see, in FFY 1994, about 80 percent of 
the federal and state funds we spent were on welfare payments. 
Today, welfare payments represent a much smaller proportion of 
our program budget and much more of our budget goes to 
activities that support work, such as child care and work 
activity supports. I should emphasize that the child care funds 
shown do not include the child care and development fund. I 
only included child care funds transferred from TANF or paid 
directly out of TANF.
    As this background information suggests, our program has 
undergone a significant transformation since you passed the 
Personal Responsibility and Work Opportunity Reconciliation Act 
in 1996. As we focus on helping families move successfully from 
welfare to work, an important part of this transition relates 
to health coverage, particularly Medicaid.

Medicaid Coverage for Children

    There have been a number of national reports and news 
stories indicating that the decline in welfare caseloads has 
been accompanied by a decline in Medicaid enrollment of 
children. This has been an issue of concern in our state and 
there are a couple of points that I think are important to 
understand. Many of the national articles I have seen rely on 
data through 1997 or 1998. In Florida, we saw a decline in 
Medicaid enrollment after we implemented welfare reform, 
although the decline was not as great as the decline in cash 
assistance. However, since 1998 we have seen a change in this 
trend. Attached is a chart comparing trends in children 
receiving cash assistance with trends in children eligible for 
Medicaid. As you can see, the decline in Medicaid is less than 
the decline in cash assistance, but the number of eligible 
children did decline from 1996 to 1998. Since 1998, the decline 
in cash assistance has continued, but the the trend has been 
reversed in Medicaid and the number of children eligible for 
Medicaid has increased.
    As a technical note, in April 1999 we had a change in the 
age categories within which the Medicaid agency in Florida 
reports their enrollment data. The caseload data prior to April 
1999 reflects children 0 to 17 while the reports since April 
1999 aggregate children age 0 to 18. I've estimated the number 
of 18 year-olds in months from April 1999 forward to show the 
most comparable data. Either way, the number has been 
increasing in Medicaid.
    In Florida, there are more children eligible for Medicaid 
today than when we implemented welfare reform.
    I have also attached information related to Medicaid 
enrollment of adults. Because adult enrollment includes a much 
broader group of people than our welfare reform program, I have 
also shown the number of adults receiving cash assistance 
compared with two categories of adults eligible for Medicaid. 
One category shows adults enrolled in AFDC/TANF and unemployed-
parent Medicaid coverage groups and the other shows total 
Medicaid enrollment of non-elderly adults. We believe the 
decline in the TANF coverage group by only 4% in the past year 
while adults on cash assistance have declined 28% in the same 
time period, indicates that we are making significant progress 
in the area of transitional Medicaid.

Strategies for Medicaid Enrollment

    I would like to highlight two specific strategies related 
to providing Medicaid coverage for eligible children and 
families.
    One critical issue for families leaving welfare is to make 
sure they are informed about their potential eligibility for 
transitional benefits. This issue is not new with passage of 
the TANF legislation. Florida began expansion of Medicaid 
eligibility to non-welfare recipients in the mid 1980's and 
there has been substantial further expansion of coverage groups 
through both state and federal legislation since then. 
Transitional Medicaid and transitional child care were first 
authorized under the Family Support Act of 1988.
    In spite of these expansions, the task of educating people 
that Medicaid eligibility is not tied to cash assistance is an 
ongoing challenge. We have worked with the Southern Institute 
on Children and Families to develop brochures make information 
on transitional benefits more accessible to families. Several 
other states, particularly North Carolina and Georgia were 
instrumental in the development of this material and we learned 
from their experience in adapting the content to Florida.
    We continue to work to refine our notices and other 
marketing material to better inform families about benefits.
    A second effort that has been critical to our enrollment of 
children in Medicaid has been the development of a simplified 
application process for our State Children's Health Insurance 
Program, Florida Kidcare.
    Our simplified application form is used for enrolling 
children in Medicaid and for those who are not Medicaid 
eligible, the same form is used to enroll children under our 
Title XXI program. You will note that the application is one 
page and comes with an envelope. The envelope is important to 
our strategy to increase access to health coverage. Through the 
simplified application, families in Florida can apply for and 
have their children approved for Medicaid or other Kidcare 
coverage groups without the need to ever visit our eligibility 
office. The entire process can be done through the mail. If a 
family wants to come to one of our service centers and apply 
for Medicaid either by itself or in conjunction with an 
application for cash assistance or Food Stamps, they can do so. 
The choice of how to apply is up to the family.
    The simplified application forms are widely available 
through child care centers, schools, community based 
organizations, county health clinics, hospitals, etc. The form 
is also available through the internet at floridakidcare.org.
    Every mail-in application is screened for potential 
Medicaid eligibility. We believe this process has been an 
important part of increasing Medicaid enrollment for children 
and also in encouraging people to think of Medicaid as health 
insurance coverage rather than welfare.

Future Initiatives

    Prior to concluding, I would like to mention several 
additional strategies for increasing health coverage for 
children as a result of recent legislation. The 2000 session of 
the Florida Legislature ended on May 5, 2000. They passed new 
Kidcare legislation and provided significant new state funding 
for expansion of health coverage for uninsured children. 
Medicaid eligibility for infants was expanded from 185% of the 
federal poverty level to 200% of the poverty level. The 
legislature also authorized the implementation of presumptive 
eligibility for children under the state option that was part 
of the Balanced Budget Act. We believe presumptive eligibility 
for children will provide us with an important tool to further 
expand access to health coverage.
    In addition, major legislation was enacted to take the next 
step in welfare reform by merging the governance and operation 
of our workforce system and our TANF-funded work activities. A 
new public-private entity, Workforce Florida, Inc. will have 
jurisdiction over the Workforce Investment Act Programs, the 
Welfare to Work grant, TANF-related work activities and a 
number of other federal and state training and economic 
development programs. We believe this evolution in our 
implementation of workforce programs will enhance our ability 
to provide support for the remaining families who are receiving 
cash assistance and provide support for low income working 
families who have already left welfare or who have not received 
welfare in the past.
    We believe that efforts to strengthen working families and 
reduce the likelihood that they will need welfare in the future 
is one of the keys to further success in implementing welfare 
reform. I would be glad to answer any questions you might have.
    [Attachment are being retained in the Committee files.]
      

                                

    Chairman Johnson. Ms. Gifford.

 STATEMENT OF KATHLEEN GIFFORD, ASSISTANT SECRETARY, OFFICE OF 
    MEDICAID POLICY AND PLANNING, INDIANA FAMILY AND SOCIAL 
                    SERVICES ADMINISTRATION

    Ms. Gifford. Thank you, Madam Chair and Members of the 
Committee, for inviting me here to share Indiana's experience.
    Indiana has achieved success in both welfare reform and 
access to health care. Since welfare reform began in Indiana, 
TANF caseloads have declined by almost 60 percent. In 1999, 
Indiana was cited first in the Nation in TANF job placements, 
but as we implemented welfare reform we saw declines in 
enrollments of families in Medicaid. We have dramatically 
reversed that downward trend.
    As part of our effort to implement CHIP, Indiana launched a 
comprehensive outreach campaign. Enrollment of children in 
Hoosier Healthwise, which is Indiana's Medicaid and CHIP 
program for low-income families and children, has increased by 
almost 60 percent since the outreach campaign began in July, 
1998, from 210,000 children to over 330,000 children. Over 
100,000 of those children who were newly enrolled were without 
health insurance prior to joining Hoosier Healthwise, more than 
our original target of 91,000 derived from census data. 
Enrollments within the low-income families category of Medicaid 
also increased by over 40 percent during this same time period, 
with the rate of increase for parents actually exceeding the 
rate of increase for children in that category.
    At the Indiana Family and Social Services Administration we 
attribute these enrollment successes primarily to three things: 
the commitment of our Governor Frank O'Bannon; second, to the 
teamwork within our very large agency; and, third, because we 
established strong and clear policies at the central office 
level that were then implemented locally through locally 
determined plans.
    One key to a successful outreach effort is to make it a 
priority at the very highest level. Governor O'Bannon charged 
our agency with the responsibility of finding and enrolling 
every eligible child into Hoosier Healthwise. Even after we 
began to see Medicaid budget concerns on the horizon last 
December, due in part to the unexpected strong enrollments, the 
Governor stated that we should shout from the rooftops and that 
the strong enrollments were good news despite the budget 
implications. Governor O'Bannon continues to promote the 
enrollment of all eligible children in Hoosier Healthwise.
    Clear policies were established at the central office level 
to destigmatize the Medicaid Program and simplify the 
enrollment process. We changed our marketing techniques to 
reposition Hoosier Healthwise as a health care program rather 
than a welfare program. We developed a snazzier card. We 
advertised. We simplified the enrollment form. We eliminated 
unnecessary verification requirements, and we established a 
mail-in application unit.
    Also, although Indiana's CHIP program combines a Medicaid 
expansion with a State-designed non-Medicaid Program, both 
parts are fully coordinated and virtually seamless to the 
consumer. Both are marketed as Hoosier Healthwise. Medicaid 
eligible children are enrolled in package A, and CHIP non-
Medicaid eligible members are enrolled in package C. We believe 
that this design has greatly assisted us in our efforts to 
destigmatize Medicaid and simplify the enrollment process.
    Our local implementation strategies included establishing 
over 500 community enrollment centers. Our county directors 
also collaborated with local partners to develop outreach plans 
specifically tailored to their communities.
    Other significant community partners that collaborated with 
us at both the State and local levels included the Wishard 
Hispanic Health Project, the Indiana Minority Health Coalition 
and the Indiana Primary Health Care Association.
    Finally, I would like to take this opportunity to bring an 
important Indiana concern to your attention. Indiana is one of 
only a few States that is likely to expend its entire 1998 CHIP 
allocation before it expires. Despite our enrollment successes 
and the fact that the census data obviously underestimated the 
number of uninsured children, we have now learned that our 2000 
CHIP allocation will decline by 10 percent. We were also 
disturbed to hear that the Senate appropriations Committee 
voted last week to redirect almost $2 billion of unspent CHIP 
allocations for other purposes.
    In light of the decrease in our 2000 CHIP allotment we are 
very hopeful that any unspent CHIP allocations can be used as 
they were originally intended, for reallocations to States like 
Indiana. We have enrolled many more children than we originally 
projected based on the census data. A decrease in funding at 
this time could be detrimental to our efforts.
    That concludes my testimony. Thank you.
    Chairman Johnson. Thank you very much.
    [The prepared statement follows:]

Statement of Kathleen Gifford, Assistant Secretary, Office of Medicaid 
Policy and Planning, Indiana Family and Social Services Administration

    Madame Chairman and Members of the Subcommittee:
    Thank you for inviting me to speak to you today about the 
importance of health insurance in the post-welfare reform 
environment. The coordinated efforts of Congress, the Executive 
Branch and the states have brought critical attention and 
resources to the issue of ensuring the good health of our 
children and your efforts are greatly appreciated.
    Indiana has achieved strong early successes in both welfare 
reform and access to health care. Former Governor and current 
Senator Evan Bayh initiated Indiana's welfare reforms during 
the summer of 1995 with a series of Aid to Families with 
Dependent Children (AFDC) waivers very similar to the federal 
legislation that followed in 1996. Governor Frank O'Bannon has 
continued this welfare reform effort and has seen the State of 
Indiana cited as first in the nation in Temporary Assistance 
for Needy Families (TANF) job placements and sixth in success 
in the workforce, the highest overall rating of any state. 
Indiana's success in welfare reform also has led to significant 
caseload declines, almost 60% since 1994. However, these 
caseload declines were accompanied by smaller declines in 
enrollment of families in Medicaid and Food Stamps. At 
O'Bannon's direction, the State of Indiana has dramatically 
reversed the downward trend in Medicaid enrollment and has 
begun an effort to increase access and education regarding Food 
Stamps. In fact, Indiana was recently highlighted in a report 
of Medicaid Enrollment in 21 States, released by the Kaiser 
Commission on Medicaid and the Uninsured, as the state with the 
highest enrollment increases since 1998.\1\ These enrollment 
increases were a result of the Governor's commitment to 
families and children; teamwork within the Indiana Family and 
Social Services Administration at the state and local levels; a 
strong central policy with local implementation; and Indiana's 
commitment to family-friendly services, prevention and, if 
necessary, early intervention.
---------------------------------------------------------------------------
    \1\ Medicaid Enrollment in 21 States, The Kaiser Commission on 
Medicaid and the Uninsured, April 2000.
---------------------------------------------------------------------------

                   Medicaid Outreach in IndianaS6602

    In the post welfare reform era, it became apparent that to 
encourage Medicaid enrollment the perception of the program would have 
to change from welfare to health care. Accessibility of enrollment 
sites and complexity of application procedures were also a concern. For 
these reasons, Indiana felt it was vitally important to develop and 
implement outreach as a key focal point in increasing Medicaid 
enrollments.
    Governor Frank O'Bannon and the state legislature first expanded 
Medicaid eligibility to Indiana children in the summer of 1997. Later 
that year, Congress passed the Balanced Budget Act of 1997 and brought 
the nation's attention to the troubling issue of uninsured children 
among the poor and working poor in the U.S. In July of 1998, Indiana 
expanded Medicaid eligibility for a second time and was able to use the 
Children's Health Insurance Program (CHIP) funding for both expansions 
of eligibility. At the same time, O'Bannon issued a statewide directive 
that 91,000 uninsured children would be targeted in an aggressive 
outreach campaign over the next 18 months. The campaign encompassed 
three major components: de-stigmatize Medicaid and CHIP services; reach 
out to local communities to find all uninsured children who are 
eligible for Medicaid and CHIP; and simplify enrollment processes.

De-stigmatization of Medicaid

    The de-stigmatization of Medicaid and CHIP was a priority for the 
State. Medicaid was to be converted from a ``welfare program'' to a 
program of health care coverage for persons in need of help in 
obtaining such coverage. In short, Medicaid was made to look as much 
like private coverage as possible. Several strategies addressed this 
priority:
     Medicaid and CHIP became known to the public as ``Hoosier 
Healthwise,'' the name formerly used only for the Medicaid managed care 
program;
     Hoosier Healthwise was advertised with a friendly mascot, 
Dr. Whoosier, an owl that would appear in parades, on frisbees and 
sipper cups and in public appearances with Governor O'Bannon; and
     The customer's Medicaid card became a Hoosier Health Card, 
similar to that used by health plans across the state.
[GRAPHIC] [TIFF OMITTED] T8979.022

Outreach at the Local Level

    Another vital element of increased enrollment is outreach into 
local communities. A key element to this outreach was extending 
outreach beyond state facilities and staff. Prior to 1998, a family had 
to visit a Local Office of Family and Children to apply for Hoosier 
Healthwise. An active effort was initiated to identify and recruit 
alternative locations for enrollment. Soon after the outreach campaign 
began, this effort had resulted in over 500 community enrollment 
centers that volunteered to accept Hoosier Healthwise applications 
across the state, including hospitals, health clinics, child care 
centers and social service providers. At the same time, new mail-in 
applications were available to families through a widely advertised 
toll-free number.
    The Hoosier Healthwise enrollment process was significantly 
simplified to assist families, further de-stigmatize services, and 
encourage participation of local enrollment sites. A fairly complex 
automated eligibility process conducted in a Local Office of Family and 
Children became a single, double-sided sheet for children and pregnant 
women that could be completed in an enrollment center or mailed into 
the DFC. Income verifications were simplified and self-declaration was 
used more frequently. Although enrollment has been simplified and 
enrollment centers are handling part of the application process, the 
integrity of eligibility determination has been important to the State. 
The DFC received HCFA approval to evaluate the quality of the 
enrollment center application process to further improvement in this 
area.
    The outreach effort also included specific strategies to increase 
enrollment among ethnic minorities. The DFC contracted with three 
statewide organizations--the Wishard Hispanic Health Project, Indiana 
Black Expo and Indiana Minority Health Coalition. Posters, brochures 
and applications were translated into Spanish to address the needs of 
the largest non-English speaking population in the state. Additionally, 
the Indiana Primary Healthcare Association participated in monthly 
meetings with the other statewide organizations to ensure services in 
the community were coordinated among all the partners. Outreach funds 
were provided directly to the 92 counties' Local Offices of Family and 
Children to implement the Governor's enrollment directive in a way that 
addressed the unique needs and interests of each local community. 
Communities used remarkable creativity in spreading the word about 
Hoosier Healthwise enrollment: appearing in parades, visiting local 
schools and health providers, and sponsoring special events. This local 
direction and coordination was vital to the State's success.
[GRAPHIC] [TIFF OMITTED] T8979.023

Results

    The outreach campaign was, and continues to be, extremely 
successful. Indiana's enrollment of children in Hoosier Healthwise has 
increased by almost 60% since the outreach began in July of 1998, from 
210,000 to over 330,000. Over 100,000 additional children without 
insurance were enrolled in Hoosier Healthwise, which eclipsed Governor 
O'Bannon's target of 91,000.
    Data Concerns I would like to express Indiana's concerns with the 
data and methodologies used to measure the uninsured population and 
allocate federal resources to serve the uninsured. The increase in 
enrollment of over 100,000 uninsured children during the first eighteen 
months exceeded Governor O'Bannon's original expectations. This was due 
in part to the lack of precision of the Current Population Survey (CPS) 
data that provide the only state-level estimates of uninsured children 
by poverty level. The CPS data indicated a 35% drop in the number of 
children under 200% of poverty between the 1995 and 1998 three-year 
averages for the State of Indiana. This trend seems too extreme to 
reflect reality in any meaningful way, especially when compared to 
other economic indicators.
    The Census Bureau's most recent estimate of uninsured children 
under 200% of poverty for Indiana is 123,000. However, the Census 
Bureau's large margin of error acknowledges the fact that their point 
estimates are questionable. Congress has appropriated more funds to 
enlarge the survey. Still, these point estimates currently are being 
used to determine the CHIP allotments for states. These seemingly 
inaccurate estimates compounded with the precipitous decline in the 
number of children under 200% of poverty in Indiana's CPS data have 
resulted in a projected 10% decrease in CHIP funding for the State in 
2000. Since Indiana is enrolling many more children than the CPS data 
projected, a decrease in funding at this time could be quite 
detrimental to efforts to improve working families access to health 
care. Because of the current inaccuracy of the CPS data at the state 
level, we have commissioned a survey of 10,000 families in Indiana to 
generate our estimates. Preliminary results from the survey will be 
available in June 2000. We would appreciate any flexibility Congress 
could build into the allocation formula to adjust for situations such 
as these.
    In addition, Indiana is one of only 13 states that have or are 
expected to have expended its 1998 CHIP allotment. There is debate 
regarding the prospect of re-allocating the unused funds. States with 
successful enrollment initiatives should not be penalized by delaying 
re-allocations until other states exhaust their allotments. The funds 
should be used by the states that are providing health coverage to 
children now to promote further expansions in enrollment across the 
country. The combined effect of inaccurate CPS figures and declining 
funds at just the time Indiana needs them would be hugely detrimental 
to Hoosier Healthwise.

                   Enrollment of Low-Income Families

    Between 1995 and 1998, Indiana observed declines in low-income 
families' enrollment in Medicaid, as did the nation. The steps we have 
taken to de-stigmatize the program, reach out to local communities and 
simplify enrollment also have had a dramatic effect on the enrollment 
of low-income families. In fact, the Low-Income Families (1931) 
category of Medicaid has increased by over 40% since May of 1998, when 
outreach began. And the rate of increase for parents actually exceeded 
the rate of increase for children in that category. Enrollment in 
Transitional Medicaid has quadrupled since the outreach began. It is 
apparent that fewer families were being served by Medicaid before 1998, 
perhaps due to complexity or stigma; however, family coverage has 
increased dramatically since steps to de-stigmatize the program and 
reach out to communities were taken. Most observers in Indiana feel 
that these de-stigmatization and outreach efforts were effective with 
parents who voluntarily withdrew from Medicaid when they left TANF, 
possibly because it was seen as another type of ``welfare.''
[GRAPHIC] [TIFF OMITTED] T8979.024

    In 1998, the State also made many administrative changes to support 
the de-linking of Medicaid eligibility from TANF. Changes were made to 
the automated system to ensure that no family closed a Medicaid case 
without being informed that they remained eligible. Extensive training 
was conducted with local staff to ensure that families were told about 
the availability and importance of Transitional Medicaid Assistance and 
Hoosier Healthwise for Children. These efforts complemented the general 
outreach efforts that impacted children and families across the state.
    Indiana shares the concern of the Health Care Financing Authority 
(HCFA) that families who are eligible for coverage must continue to 
receive it. And the State looks forward to receiving the results of the 
technical assistance visits conducted by HCFA last fall. However, the 
guidance that was issued in April does not take into account any 
specific state's circumstances or progress since the de-linking of 
Medicaid and TANF. States have not yet been informed of specific 
deficiencies found in the site visits. FSSA supports corrective action 
where necessary to remedy any inappropriate loss of Medicaid coverage; 
however, we believer that a ``one-size-fits-all'' reinstatement 
approach could cause confusion and extreme administrative burdens.

                   Current Initiatives and Next Steps

    As an increasing number of families enter the workplace, 
the role of supportive services including access to quality 
health care has become even more crucial. In addition to health 
care, Indiana has focused on a variety of supportive services 
for working families. As stated earlier, Indiana is committed 
to increasing the level of access and education regarding the 
availability of Food Stamps to low-income families; however, 
simplifying enrollment processes for Food Stamps may be more 
challenging due to the strong focus on eliminating any 
potential eligibility and payment errors.
    Much of the innovation in supportive services for families 
is made possible by the flexibility of TANF block grant funds 
that support many services for working families up to 250% of 
poverty. Funds available for child care vouchers have increased 
from $17 million in 1992 to over $200 million in 2000. Governor 
O'Bannon's commitment to early childhood has allowed for 
increased funding for early intervention and prevention 
services for children at risk of developmental disabilities, 
abuse or neglect. Indiana has focused on the importance of non-
custodial parents in children's lives with increased child 
support collections and Access and Visitation services that 
promote the emotional bond between non-custodial parents and 
their children. Also, through the Fathers and Families 
Initiative, Indiana continues to encourage and support locally 
driven fatherhood programs throughout the state through the 
provision of grants and technical assistance.
    Indiana is committed to vigorous evaluation of welfare 
reform's effects on families and children. As part of the State 
Level Project on Child Outcomes funded by HHS in five states, 
Indiana is currently surveying Indiana's children in families 
affected by welfare reform to determine its effects. Past 
findings of Indiana's experimental welfare reform evaluation 
found that former clients were working at much higher levels; 
however, they were having trouble retaining employment and 
increasing the family's net income. As a result, the State 
implemented an Earned Income Credit for low-income working 
families, enhanced job retention services, and soon will 
implement an income disregard for TANF families in poverty.
    The vast majority of these family services have been 
expanded through the use of TANF federal and Maintenance of 
Effort funds and have allowed the State of Indiana to provide a 
comprehensive set of supports for working families seeking 
economic self-sufficiency. As one of seven states selected by 
the National Governors' Association for their State Policy 
Academy, ``Expanding Opportunities for Low-Income Families to 
Advance in the New Economy,'' Indiana is committed to a 
comprehensive approach to enhance the lives of Hoosier 
families. Indiana's success in promoting access to health care 
will be used as a model for improving access to all of the 
critical supports available to working families.
    Indiana is investigating options for the possible expansion 
health coverage to the parents of children eligible for Hoosier 
Healthwise. A committee of stakeholders (businesses, labor and 
health care providers) has been appointed to look into a wide 
variety of approaches.
    We, in Indiana, are proud of our successful efforts to 
provide coverage to children and working families. We greatly 
appreciate the support provided to us in these efforts by 
Congress and the Department of Health and Human Services and 
look forward to working with you to assure the best in health 
care for every American. Thank you again for this opportunity 
to speak with you today.
      

                                

    Chairman Johnson. Dr. Mitchell.

 STATEMENT OF LYNN MITCHELL, M.D., M.P.H., MEDICAID DIRECTOR, 
                 OKLAHOMA HEALTH CARE AUTHORITY

    Dr. Mitchell. It is my privilege to be here today. My name 
is Lynn Mitchell. I am the Medicaid Director of the Oklahoma 
Health Care Authority, the designated State Medicaid agency in 
Oklahoma. My testimony today reflects Oklahoma's experience and 
views.
    The Oklahoma Medicaid Program serves over 400,000 
recipients, approximately 12 percent of the State's population, 
including 260,000 children and 150,000 adults. The current 
annual budget is $1.7 billion. Since the Authority's creation 
in 1994, we have focused our efforts on achieving efficiencies 
through care and benefit management and on improving health 
care quality, access to care, and availability and use of 
preventive services. By State legislative action effective 
December, 1997, Oklahoma extended eligibility to children and 
pregnant women with family income up to 185 percent of the 
Federal poverty level.
    We also initiated an aggressive and highly successful 
outreach program. The State was aided financially in its 
efforts to extend benefits to uninsured children by your 
enactment of Title XXI, the SCHIP program, for which we are 
very grateful.
    From July, 1997, through March this year, Oklahoma's total 
Medicaid enrollment grew from 282,000 to 404,000 individuals, a 
43-percent increase. During this same time period as TANF rolls 
steadily declined, the Medicaid enrollment for low-income 
children grew from 176,000 to 296,000 people, a 68-percent 
increase.
    I am here to talk briefly about how we increased access and 
reduced barriers to quality Medicaid health care for low-income 
families, especially those families who are moving forward from 
welfare or cash assistance programs.
    In addition to expanding the income eligibility standards, 
Oklahoma made significant changes in the requirements and in 
the manner in which eligibility determinations are made, 
changes that are supportive of working families. The agency 
reduced the Medicaid eligibility application from 17 pages to 2 
pages. The face-to-face interview and the asset test were 
eliminated. The automatic case determination at 6 months was 
changed to a 6-month redetermination process. Income 
declaration was instituted rather than income verification and 
documentation. Medicaid applications were made accessible 
through Department of Human Services county offices, county 
health departments, WIC offices, public libraries, school 
systems, day-care facilities and through the mail by calling a 
toll-free number.
    Perhaps most importantly, the agency had to overcome the 
negative stigmatism of Medicaid, welfare, and cash assistance. 
The program was designed to emphasize personal responsibility 
and destigmatize the negative stereotypes of government 
assistance. This resulted in the creation of the managed health 
care insurance program called SoonerCare.
    An integral part of the agency's success and the aspect of 
our program we are very proud is of Oklahoma's outreach 
initiative. We recognized the need to develop a comprehensive 
outreach campaign to spread the word of available health care 
to eligible individuals. The task was enormous, too enormous 
for one State agency to undertake alone. Therefore, the 
Oklahoma Health Care Authority developed a strong partnership 
with other closely related State and Federal agencies.
    Our partners included the Oklahoma Department of Human 
Services, the Oklahoma State Department of Health, the Oklahoma 
Commission on Children and Youth, the Oklahoma State Department 
of Agriculture, the Oklahoma State Department of Education, and 
the Social Security Administration. The objective was to 
effectively communicate the newly expanded health care service 
to eligible populations and to reduce the number of uninsured 
children in Oklahoma through establishing mechanisms of health 
care delivery.
    We also focused on enhancing and supporting local and 
community-based outreach initiatives. Increased access to 
primary health care services that would result in a healthier 
Oklahoma population was the common goal.
    The Department of Human Services created county-by-county 
outreach plans developed by specialized DHS outreach workers. 
These approaches included increased office hours, attendance at 
special events, public school coordination through the free and 
reduced lunch program and day-care coordination. The Oklahoma 
State Department of Health reached individuals through the WIC, 
Immunization and SoonerStart Early Intervention programs.
    Additional outreach partnerships included collaboration 
with the Head Start program, the Oklahoma Institute for Child 
Advocacy in the implementation of The Oklahoma Covering Kids 
Initiative and through the Oklahoma Commission on Children and 
Youth in two rural pilot communities to demonstrate grassroots 
outreach strategies.
    On behalf of the State of Oklahoma, we are very proud of 
the efficiency and effectiveness of our Medicaid Program. It is 
very humbling that we are becoming recognized as a State that 
is moving in a positive direction. We are appreciative of the 
Federal support to provide and improve health care coverage to 
Oklahoma's working families.
    Thank you for your time and this opportunity.
    [The prapered statement follows:]

Statement of Lynn Mitchell, M.D., M.P.H., Medicaid Director, Oklahoma 
Health Care Authority

    Madam Chairman, committee members, it is my privilege to be 
here today. My name is Dr. Lynn Mitchell. I am the Medicaid 
Director of the Oklahoma Health Care Authority, the designated 
state Medicaid agency in Oklahoma. It is my privilege to also 
serve on the Executive Committee of the National Association of 
State Medicaid Directors. My testimony today reflects Oklahoma 
experiences and views. I am proud to say we are among the 
leading states setting the standard for state Medicaid programs 
that provide health insurance coverage to low-income, working 
families.
    The Oklahoma Medicaid program serves over 400,000 
recipients (approximately 12% of the State's population), 
including 260,000 children and 150,000 adults. The current 
annual budget is $1.7 billion. Since the Authority's creation 
in 1994, we have focused our efforts on achieving efficiencies 
through care and benefit management and on improving health 
care quality, access to care, and availability and use of 
preventive services. By state legislative action effective 
December 1997, Oklahoma extended eligibility to children and 
pregnant women with family income up to 185% of the Federal 
Poverty Level. We also initiated an aggressive and highly 
successful outreach program. The State was aided financially in 
its efforts to extend benefits to uninsured children by your 
enactment of Title XXI, the State Children's Health Insurance 
Program, for which we are very grateful.
    From July 1997 through March this year, Oklahoma's total 
Medicaid enrollment grew from 282,000 to 404,000 individuals, a 
43 percent increase. During this same time period as TANF rolls 
steadily declined, the Medicaid enrollment for low-income 
children grew from 176,000 to 296,000 people, a 68 percent 
increase.
    I am here to talk briefly about how we increased access and 
reduced barriers to quality Medicaid health care for low-income 
families especially those families who are moving forward from 
welfare or cash assistance programs. In addition to expanding 
the income eligibility standards, Oklahoma made significant 
changes in the requirements and in the manner in which 
eligibility determinations are made that are supportive of 
working families. The agency reduced the Medicaid eligibility 
application from 17 pages to 2 pages (one-page front and back). 
The application process time was reduced from 45 days to 20 
days. The face-to-face interview and the asset test were 
eliminated. The automatic case termination at six months was 
changed to a six-month re-determination process. Income 
declaration was instituted rather than income verification and 
documentation. Medicaid applications were made accessible 
through Department of Human Services (DHS) county offices, 
county health departments, WIC offices, public libraries, 
school systems, day care facilities and through the mail by 
calling a toll-free telephone number.
    Perhaps most importantly, the agency had to overcome the 
negative stigmatism of Medicaid, welfare and cash assistance 
participants and programs. The program was designed to 
emphasize personal responsibility and de-stigmatize the 
negative stereotypes of government assistance. This resulted in 
the creation of the managed health care insurance program 
called SoonerCare.
    An integral part of the agency's success and the aspect of 
our program we are very proud of is Oklahoma's outreach 
initiative. To begin, Oklahoma had a large uninsured 
population. We recognized the need to develop a comprehensive 
outreach campaign to spread the word of available health care 
to eligible individuals. The task was enormous, too enormous 
for one state agency to undertake alone. Therefore, the 
Oklahoma Health Care Authority developed a strong partnership 
with other closely related state agencies. Each agency 
committed resources and programs to the outreach effort. 
Responsibilities were outlined through a series of outreach 
task force meetings. Prior experiences with outreach were 
shared in order to focus on the most effective communication 
mechanisms.
    Our state agency partners included the Oklahoma Department 
of Human Services, the Oklahoma State Department of Health, the 
Oklahoma Commission on Children and Youth, the Oklahoma State 
Department of Agriculture and the Oklahoma State Department of 
Education. The objective was to effectively communicate the 
newly expanded health care service to eligible populations and 
to reduce the number of uninsured children in Oklahoma through 
established mechanisms of health care delivery. We also focused 
on enhancing and supporting local, community based outreach 
initiatives. Increased access to primary health care services 
that would result in a healthier Oklahoma population was the 
common goal.
    The Department of Human Services created county-by-county 
outreach plans developed by 47 specialized DHS outreach 
workers. They included innovative approaches to meet the 
community needs. These approaches included increased office 
hours, attendance at special events, community development and 
awareness including speaking engagements, public school 
coordination through the free and reduced lunch program and day 
care coordination. The Oklahoma State Department of Health 
reached individuals through the WIC, Immunization and 
SoonerStart Early Intervention programs. Additional outreach 
partnerships included collaboration with the Head Start 
program, the Oklahoma Institute for Child Advocacy in the 
implementation of ``The Oklahoma Covering Kids Initiative'' and 
through the Oklahoma Commission on Children and Youth in two 
rural pilot communities to demonstrate ``grassroots'' outreach 
strategies.
    The Oklahoma Health Care Authority has designed, developed 
and produced fact sheets, flyers, posters, postcards, public 
service announcements for newspapers, radio and television as 
well as advertisements in movie theaters.
    In addition, we are designated by HCFA as a Pilot Outreach 
Site for its Native American population. We are also 
investigating additional outreach mechanisms such as outdoor 
and mass transit promotions.
    The Oklahoma Health Care Authority is also focused on 
considerations for the long-term Medicaid program to ensure 
local communities have adequate support and local outreach 
initiatives are working in concert with each other. This will 
reduce duplication of effort, maximize lessons learned and 
develop ongoing dialogue and information sharing. We will 
continue to seek ways to track and measure our health care 
program's outreach mechanisms and their effectiveness.
    On behalf of the State of Oklahoma, we are very proud of 
the efficiency and effectiveness of our Medicaid program. In a 
recent Kaiser Commission Study on Medicaid and the Uninsured, 
Oklahoma was identified as being one of just a few states that 
have experienced constant, positive enrollment growth during 
the past two years. It is very humbling that we are becoming 
nationally recognized as a state that is moving in a positive 
direction. We are appreciative of the federal and state support 
to provide and improve health coverage to Oklahoma's working 
families.
    Thank you for this time and opportunity.
      

                                

    Chairman Johnson. I thank the panel very much for your 
testimony. Actually, your success is quite spectacular; and the 
common elements of focusing on the target population, systemic 
outreach efforts, collaborations, local folks involved makes a 
lot of sense.
    Also, they are not things that the Federal Government can 
do. If you don't do it, we cannot do it. I commend you on that.
    I am wondering how difficult it has been to create 
seamlessness between Medicaid and CHIP and how difficult the 
simplification process has been. I appreciate your bringing the 
application that Florida uses, Mr. Winstead.
    First of all, I am sorry my friend Pete Stark is not here, 
because it is quite interesting how simple this application is. 
Actually, it is adults, children, name, address and Social 
Security number and a little household information on the back. 
You really have simplified at a level that we in Congress have 
certainly not been able to do.
    It is going to be very hard to integrate these programs, 
and also the complexity of doing this nationwide is very hard. 
If you can talk about what are some of the--what were some of 
the things that were easy about the administrative reforms that 
other States could do actually quite rapidly and what are the 
things that are hard and are there any things that we need to 
change the law, recognizing the shoals that plague that 
process.
    Mr. Winstead. If I may, first of all, I think it was very 
difficult in a lot of ways to accomplish some of the things 
that we have. But what we have discovered is some of the 
programs are Medicaid are mind-numbing in their complexity. Our 
attitude is that we need to manage the complexity and not 
delegate it to the families that we serve. We are trying to 
build processes to try to make some of that complexity 
invisible to the families. I think that the application that we 
use for Medicaid and our CHIP program was a big step in that 
direction.
    One of the things that we found and I am sure others have 
found is that one of the real barriers is the stigma associated 
with Medicaid and the association that has built up over the 
years between Medicaid and welfare. That is why we market our 
program as Florida Kid Care. And Medicaid for children is just 
one of the components of Florida Kid Care, but other marketing 
efforts do not use the word Medicaid, and we have tried very 
much to create the message that this is not welfare, this is 
health coverage and tried to make that distinction.
    I think the other thing that I would just like to mention, 
because I have not heard any mention of it this morning, which 
I think is an important part of the discussion, is the Food 
Stamp Program and where that fits in all of this. Many of the 
same families that we are trying to reach through our health 
coverage efforts also may have coverage for food stamps, and 
the fact that many low-income working families don't have to be 
eligible for welfare to also receive assistance from the Food 
Stamp Program is I think an important part of the mix, but also 
part of the complexity and the problem because under Federal 
regulations the Food Stamp Program does require office visits, 
face-to-face contacts with people. So figuring out ways to make 
that benefit accessible so that people don't have to go through 
multiple processes is I think an ongoing challenge.
    Chairman Johnson. I would certainly hope--particularly 
those States that have succeeded in simplifying the health care 
application and the operation of that system and better 
integrating it, and I think it would be very helpful if you 
would get together and make your recommendations as to how we 
can simplify and integrate food stamps.
    The real issue is the change in guidelines and the 
tradeoffs involved, and I think the more that comes from the 
people who are on the frontline, the better that Congress can 
deal with it. It should not be something that the interest 
groups that are in this for different reasons primarily drive.
    So I think your recommendations in that area if you work 
together would be a very powerful lever to help us get going in 
the next session. Everybody knows that needs to be done. 
Everyone dreads the cutouts. There is also a lot of recognition 
that we must complete this move from a cash benefit to a work 
benefit national policy, and that was the goal of food stamps, 
and we really have to, in a sense, regularize everything and 
integrate everything. I would urge you to move on. You have 
done wonderful work in simplifying Medicaid and integrating it 
with CHIP. Is it fair to say that all of you have succeeded in 
integrating?
    Ms. Gifford. I think our program was designed to make it 
all part of Hoosier Healthwise so that the families would not 
necessarily know which one they were applying for.
    Chairman Johnson. Is that true, Dr. Mitchell?
    Dr. Mitchell. SoonerCare is a seamless program where CHIP 
tied onto our own State eligibility expansion, and they just 
happen to coincide at almost the same time.
    Chairman Johnson. Would you put on the record the name of 
your program and the seamlessness and the income guidelines, 
how much you have expanded this, so we have that clear 
information.
    Ms. Gifford. Hoosier Healthwise, we expanded Medicaid 
eligibility up to 150 percent of the Federal poverty level 
across the board for all age categories of children using the 
CHIP dollars.
    Our second expansion, using the CHIP dollars that began a 
few months ago, goes to 200 percent of the Federal poverty 
level, again an expansion of Hoosier Healthwise but a non-
Medicaid expansion.
    Dr. Mitchell. Our program is called SoonerCare, and our 
expansion was 285 percent of the Federal poverty level for 
children through age 17 and pregnant women.
    Chairman Johnson. Dr. Smith?
    Mr. Smith. Well, it is my observation, looking around the 
country, since I am no longer running the program, that many 
States are working very hard to integrate their CHIP programs 
and their Medicaid Programs.
    If you were to look at Badger Care in Wisconsin or look at 
New Mexico's program or MI Child in Michigan, all of these 
programs have names which are not Medicaid. They are designed 
in many cases to make it as seamless as possible so that in 
many cases, in Indiana or Wisconsin, if a child's eligibility 
transfers from CHIP to Medicaid, it is transparent to the 
child. It is an accounting procedure in terms of how the cost 
of program is charged, but it doesn't affect the health care 
for the child.
    Mr. Winstead. Our program is Florida Kid Care. We cover 
children up to 200 percent of the poverty level. For infants, 
Medicaid is up to 200 percent, effective July 1. Then for the 
younger children, 133 percent is Medicaid, and between 133 and 
200 is our Title XXI program. And then for the older children, 
up to 100 percent is Medicaid, and above 100 percent is our 
Title XXI program. But all children are covered up to 200 
percent of poverty.
    Chairman Johnson. Thank you.
    Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair.
    I would like to thank our witnesses. I am particularly 
impressed by the brochure from Florida. I think it does really 
put in terms that people can understand what is available for 
someone who is leaving welfare and is going to work. Although I 
might disagree about one aspect. It isn't as scary as it seems. 
I think it is kind of scary on health coverage today. The 
children have much better rules than the parent do. Too many 
adults are not covered by insurance and are not eligible to be 
covered by insurance, and the transitional Medicaid is 
complicated, and we certainly have not done a very good job on 
that.
    Then you look at the eligibility, 32 States have 
eligibility that if the parent is at minimum wage doesn't even 
qualify for Medicaid which the States could be doing a better 
job there. The States do have significant surpluses. There is 
an opportunity to expand, and yet there has been a reluctance 
by the States to do something to help us I think in welfare 
reform by making it easier and less scary for people to go to 
work.
    The question I have for you, though, is: We have one 
welfare director and three people in the Medicaid Program. What 
is the relationship in the States between the welfare director 
and the Medicaid director and maybe also the budget director 
about trying to put together strategies that really require the 
cooperation of all three of the levels of administration?
    If we are going to make welfare reform work, we have to 
have a close connection with Medicaid. The more you succeed, 
the larger the Medicaid budget is going to be. Success is 
measured by greater State expenditure, which doesn't always get 
the budget director very happy about that policy. I am curious 
about what is the relationship in your various States.
    Ms. Gifford. I think you have put your finger on a crucial 
element of a successful outreach campaign, having that kind of 
cooperation.
    Obviously, we had to work very closely together; and the 
whole process of designing our CHIP program brought together 
interagency, interdivisional representatives and people from 
all around the community. Absolutely, that has been I think 
very important to our success in Indiana, that cooperation.
    We have been confronted in Indiana, because of our success 
in enrollment, with budget issues. I now have budget issues, 
and I kind of held my breath a few months ago communicating 
those issues, wondering what the reaction would be. And I think 
that is the true measure of how dedicated the policy leaders in 
Indiana are that they said, OK, we have budget issues but at 
least it is for a good thing. I continue to have support for 
expansion as far as enrollment despite my budget issues, but 
those are very critical issues that many Medicaid directors 
have to worry about.
    Mr. Winstead. In Florida--and I think my colleague from 
Indiana made an important point earlier about the executive 
direction and the leadership from the top. And I think in our 
State Governor Bush has certainly made a priority, health 
coverage for children. Every Tuesday afternoon the head of our 
agency, the head of the Medicaid agency and the head of health 
meet on Health and Human Services issues. We work very closely 
together, and the budget that was just passed by the 
legislature that the Governor will sign includes over $80 
million appropriated to create over a hundred thousand new 
slots for additional enrollment of children in health coverage. 
So it just needs to be a priority, and the folks involved need 
to work closely together.
    Mr. Cardin. Ms. Gifford, let me at least get a response 
from you. There is some information here in your State that the 
individual who was not receiving cash assistance under TANF but 
was receiving Medicaid, that the clock, 5-year clock was still 
tolling for that individual even though the person wasn't 
receiving benefits under the TANF law. Was that ever the case 
and was it corrected?
    Ms. Gifford. I am not sure that I can answer that question, 
but I can provide that information when I get back to Indiana.
    [The information follows:]

                                  Indiana Family and Social
                                    Services Administration
                                Indianapolis, IN 46707-7083
                                                       July 7, 2000
Honorable Benjamin J. Cardin
House Committee on Ways and Means
1106 Longworth House Office Building
Washington, DC 20515

    Dear Congressman Cardin:

    I am happy to be able to provide a response to the question that 
you posed during my testimony on May 16, 2000 regarding the application 
of federal time limit policies in the Temporary Assistance for Needy 
Families (TANF) Program.
    First of all, it is important to explain that Indiana has been 
operating a welfare reform demonstration project since June 1995. Under 
the terms and conditions of this demonstration, the state applies a 24-
month time limit to a portion of our TANF cash assistance adults. The 
State's time limit does not apply to children.
    Another provision of the State's Demonstration Project allows a 
family to be considered a cash assistance recipient even though the 
family's income is greater than the traditional income limits of the 
program and would otherwise be ineligible for assistance. The State's 
traditional program limits eligible for assistance. The State's 
traditional program limits eligibility to approximately 24% of the 
Federal Guidelines. The welfare reform provision allows a family to be 
considered a receipient even though the family does not received a TANF 
cash assistance provided their income remains below 100% of the Federal 
Poverty Guidelines. These families are referred to as ``zero grant'' 
recipients. The advantage of this provision is to provide their income 
remains below 100% of the Federal Poverty Guidelines. These families 
are referred to as ``zero grant'' recipients. The advantage of this 
provision is to provide a family additional support once the parent 
becomes employed making the transition to work less threatening. ``Zero 
grant'' families receive the full array of employment support services, 
categorical eligibility for Medicaid, child support services at no cost 
and priority for child care support services. Once a family's income 
exceeds 100% of the Federal Poverty Guidelines as a result of new or 
increased earnings, that family becomes elgibile for Transitional 
Medicaid benefits.
    The terms and conditions approved by the Administration of Children 
and Families of the Department of Health and Human Services establish 
that a month during which a family has status as a zero grant family is 
a month of assistance for the purposes of the State's 24 month limit. 
As a component of the State's demonstration, this provision will remain 
in effect until March 31, 2001 when federal approval for the 
demonstration expires. Upon expiration fo the demonstration, the State 
will bring its TANF Program in full compliance with all applicable 
requirements of the TANF Block Grant.
    I appreciate your interest in Indiana's policies and hope that this 
resolves the questions you have regarding this issue. If you have 
additional questions regarding Indians' TANF policies, please feel free 
to contact Char Burkett-Sims, Assistant Deputy Director of the Family 
Resources Bureau. She can be reached by telephone at 317-232-4903 or at 
her e-mail address [email protected]

            Sincerely,

                                          Kathleen Gifford,
                                                Assistant Secretary
      

                                

    Mr. Cardin. I appreciate that.
    Dr. Smith, do you want to respond on your State's 
relationship?
    Mr. Smith. Not speaking for Michigan but looking around the 
country, what I have seen is that many States have discovered 
that Medicaid is one of the biggest supporters of welfare 
reform that there is. If the objective is to get people off of 
welfare and get them into jobs and have them keep those jobs on 
a sustained basis, then the health coverage is one of the 
strongest supports that can be there. And so I think there is 
increasing interest and in a number of States there is explicit 
interest in working together so that these two programs work in 
concert and support each other.
    Mr. Cardin. Dr. Mitchell?
    Dr. Mitchell. In Oklahoma as well we have a very good 
working relationship with our Department of Human Services who 
continues to be our eligibility determination agent in Oklahoma 
and has one particular outreach worker assigned over all of the 
programs so that we don't let anyone drop through any cracks, 
and that has been key in maintaining our numbers.
    Our Governor has been very supportive of our eligibility 
expansion that took place in December, 1997. At the current 
time, however, his focus and the budget office focus has turned 
to paying for those individuals that we have in place and in 
the program currently, and the focus that is very much on the 
forefront right now is paying our providers a more appropriate 
reimbursement for the services that they are providing to our 
Medicaid patients.
    Chairman Johnson. Thank you.
    Mr. Watkins.
    Mr. Watkins. Let me say thanks to the panel. I was very 
impressed also with the Kid Care form. I think it is a very 
nice brochure. I am always trying to figure out how to raise 
money in this good job. I hope that you get a good response.
    Let me say to the panel I have learned a lot today; and, 
Dr. Mitchell, it is great having you here. I hope your time 
allows you to come by my office so we can visit some more.
    Let me state here I understand in Oklahoma we have about 
$110 million of TANF money that we are getting people off of 
welfare and all. I want to visit with you in more detail about 
that. Does Oklahoma spend all of its CHIP funds?
    Dr. Mitchell. We have not currently spent all of our CHIP 
funds, no, sir.
    Mr. Watkins. What percent do you have left?
    Dr. Mitchell. I brought that with me. I will pull it out.
    Mr. Watkins. How have you used those funds?
    Dr. Mitchell. The outreach funds primarily have been used 
for our outreach workers. There were some systems changes that 
were implemented. Primarily, we have used those for the 
outreach workers that have been the key and the integral part 
to making sure that we keep those rolls up and offer the health 
insurance benefit to all those that are eligible.
    Mr. Watkins. You have indicated that you have eliminated 
the asset eligibility.
    Dr. Mitchell. Yes, sir.
    Mr. Watkins. Can you elaborate what you have done on that?
    Dr. Mitchell. Probably somebody who has been in the 
Medicaid business longer can speak to that, but in the past, 
where assets played into the determination of eligibility, that 
has been eliminated. So if someone perhaps was given a piece of 
land and that in the past might keep someone ineligible for 
Medicaid because of that asset, that piece is no longer in the 
determination process.
    Mr. Watkins. You can be land poor, so to speak, with a lot 
of land, but if you don't have a lot of income, you have 
eligibility?
    Dr. Mitchell. That is correct.
    Mr. Watkins. I notice that you have your form down to two 
pages?
    Dr. Mitchell. Yes. We think that has made a substantial 
difference.
    Mr. Watkins. I wish my friend Pete Stark was here to hear 
that. I would like him to hear that Oklahoma did. Most of those 
people in California are from Oklahoma originally from the Dust 
Bowl days.
    Chairman Johnson. They lost their common sense, huh?
    Mr. Watkins. That is correct.
    Dr. Mitchell. One was in the Ponca City area, and I believe 
the other was in the Garfield, I think, area.
    Mr. Watkins. Two of the richest areas of the State.
    Dr. Mitchell. That actually was a competitive bid, and we 
encouraged communities across the State to apply for that bid. 
We stayed clear of it, and those were the two counties that 
were awarded those pilot projects.
    Mr. Watkins. You have two pilots that have been done on a 
competitive bid?
    Dr. Mitchell. Yes, sir.
    Mr. Watkins. That is interesting. How is that?
    Dr. Mitchell. There were some outreach funds shared with 
the Oklahoma Commission on Children and Youth who did the 
administrative function of the pilot project, and through our 
Office of State Finance those bids were let and awarded to two 
communities that bid to show that they could be innovative in 
trying to attract individuals into the Medicaid Program.
    Mr. Watkins. Does it stand to reason if they were two of 
the wealthiest communities in the State that they could 
probably bid for it more than the poverty areas?
    Dr. Mitchell. They did not have to put up the funds. The 
bid process came from using the Federal funds. What they did 
was have to submit their proposal to be awarded the bid.
    Mr. Watkins. Maybe I am a little slow on this. I want to 
look into this more.
    I feel very strongly about the welfare-to-work program. I 
think that reform has been working. We have probably 50 percent 
plus more of our welfare recipients off. That definitely--as we 
all know, we are trying to prevent them from falling through 
the cracks on the Medicaid Program and the health effort 
there--and we should.
    I know that you have done a good job. Let me just ask the 
question here--and, again, I do this from a very sensitive type 
feeling. I want to get people on. I think it is good that we 
are having this effort. But do any of you have--on a long-term 
basis are you coordinating and meeting and working so that they 
will go off one of these days?
    I think it is fine and dandy, but welfare --and welfare has 
a stigma. It has a stigma such that my mother would not allow 
us to go welfare. I worked three part-time jobs because she 
said that is what we are going to do.
    Now Medicaid, we want Medicaid. We have to have it, I agree 
there, but we don't want it to be a way of life. I think just 
giving them everything does not let them face responsibility or 
face reality. Do we have anything in the long term? Short term, 
let's get them on. I hope we have a way to exit this program, 
helping them on that. Are you meeting with any agency that gets 
you there?
    Mr. Winstead. If I may----
    Mr. Watkins. Are you meeting with an agency? If I can get a 
yes or no there.
    Mr. Winstead. Yes, sir. And if I may say, the key thing 
that we are trying to accomplish in Florida is get families off 
of welfare and move to work. You are going to make more money 
on welfare.
    Number two, children that grow up in families that have 
more money and who have working parents are going to do better 
than children who grow up on welfare, which is another way of 
saying long-term, chronic poverty. We have integrated our 
welfare reform efforts within our overall work force efforts, 
so within our work force activities we have a whole series of 
constant interactions with employers, with businesses, with 
economic development interests in Florida looking at incidence 
of health coverage, how it is provided by employers, which I 
think strategically is where we need to head, is more 
integration with the work force.
    Mr. Watkins. Ms. Mitchell, what are we doing in Oklahoma in 
that area?
    Dr. Mitchell. I don't know the answer to that, sir.
    Mr. Watkins. If you don't know the answer, I am worried. 
Because I think you have to be right in the middle of any 
strategy or any effort. Maybe that is one thing that we can 
visit about. I think we are doing wrong if we don't get them on 
Medicaid when we are getting them off, but I think we are also 
doing a disservice if we don't exit this program, try to get 
them gainful employment and work, because that is a way of 
life. It can become a way of life, and we will try to help move 
them off that.
    I am here and I want to say from my personal standpoint I 
am thankful to this day for my mother and for her attitude. 
Because she didn't take the easy way. And I think we have got 
to say, hey, let's help them, but let's make sure that we 
provide a way because that is how in life later on they are 
going to be able to stand on their own two feet. If not, they 
are going to bring their children into the same situation.
    Thank you for the job you do. I appreciate that very, very 
much; and it is a great track record on helping people get off 
welfare and get on Medicaid. I know I am very proud of 
Oklahoma, Dr. Mitchell, and all of you for what you are doing.
    Madam Chair, thank you.
    Chairman Johnson. I thank the panelists for their comments.
    Dr. Mitchell, I would just say to my colleague Mr. Watkins' 
comments about the higher income areas getting the outreach 
grants, over and over again I am really struck with the problem 
that the poor rural regions have in competing in education. 
They don't have the grant writers.
    I have one first selectman in my district who has one 
administrative person. That is her town government. So when I 
get her more rural road money, everybody rejoices. When they 
see that the Federal application is a stack like this, she 
calls me and says, I don't know why you bothered. I have 
schools in my district that don't have a school lunch program 
because they can't handle the administrative costs.
    It would be interesting to look back and see, was the 
application from the poor rural counties, was it lesser quality 
for reasons that they couldn't afford to hire a consultant or 
they didn't have a grant writer on staff? Because it is a 
different problem to outreach in a very poor area than it is to 
outreach to poor people in a higher income region. And 
Connecticut has a lot of that. It is--because of the general 
well-being, it is not hard to find the bottom with welfare, it 
is hard to find the transition. It is not that the other grants 
are not useful, but I would urge you to just note that.
    Mr. Watkins. Madam Chair, you are right. I think a lot in 
the lower income they have to use what money they have for the 
higher percentage of the people so they don't have different 
things to deal with. I am sitting on this Committee for a 
reason, and I am sure interested in my area, which has always 
been noted as the lowest income area in the State, Madam Chair, 
and the highest rate of welfare and poverty. You well know 
that.
    One of the things that I have dedicated my entire public 
life is to try to lift these people out of poverty--they are my 
loved ones, my people throughout the area--and turn some of 
those counties into economic growth area, and I am proud that 
we have done some of that. But it has been a passion working on 
that. We have to make sure that we have a strategy.
    I will be happy to work with you. We will do whatever we 
can to assist, but we have to make sure that we don't overlook 
these areas until we get that done.
    Chairman Johnson. And your accomplishments have been 
spectacular.
    We thank the States and Dr. Smith for bringing a broader 
perspective. We appreciate your help in evaluating this problem 
and determining what to do. Thank you.
    [Whereupon, at 12:35 p.m., the hearing was adjourned.]
    [A submission for the record follows:]

Community Legal Services, Inc., Philadelphia, PA

           Medicaid Protections For Families Leaving Welfare

    Much has been written about the problem of losing tens of 
thousands of families from the Medicaid program when parents 
move from welfare to work. Here are some legislative 
suggestions for Congress to address the problem of Medicaid 
retention. These recommendations grow out of Community Legal 
Services' \1\ considerable experience in addressing this 
problem, both within the state of Pennsylvania and nationally.
---------------------------------------------------------------------------
    \1\ Community Legal Services, Inc. of Philadelphia is a non-profit, 
public interest legal aid firm representing low income people. CLS has 
given a higher priority to safeguarding and reinstating Medicaid 
eligibility for Pennsylvania's and the nation's poor. This paper was 
prepared by Richard P. Weishaupt (215.981.3773) and Jonathan M. Stein 
(215.981.3742).

1. Require use of eligibility information given in the Food 
---------------------------------------------------------------------------
Stamp program.

    Surprisingly large numbers of families participate in the 
food stamp program but do not receive Medicaid benefits. Given 
the rigor of establishing food stamp eligibility, states should 
be required to use existing eligibility information (income, 
alienage, household composition, etc.) often in the same 
agency's files to make a Medicaid determination without a new 
application and face to face interview.

2. Establish presumptive eligibility based on participation in 
the School Lunch Program or the WIC program.

    The Urban Institute has documented that 48.5% of uninsured 
children are in the School Lunch Program and another 19.0% are 
in the WIC program. Both these programs are means tested (free 
school lunch is set at 130% of the federal poverty level, 185% 
for reduced price lunches; WIC requires participants to be 
below 185% of FPL). While these maximums do not exactly 
correspond to Medicaid eligibility levels in most states, most 
families are not right at the eligibility cutoff level. 
Legislation could mandate that those in the programs would be 
automatically eligible for, say 60 days, while a Medicaid 
application was initiated. Temporary eligibility would be 
actuated merely by checking a box on the relevant school lunch/
WIC form.

3. Require all states to afford families mail or telephone 
redeterminations.

    Now that the Medicaid caseload has so many working 
families, it is time to afford those families an option that 
fits with their work schedule. In many communities, people have 
transportation barriers to overcome or are still reluctant to 
be seen at welfare offices; eliminating the need to travel to a 
welfare office will serve to de-stigmatize the program.

4. Require written withdrawals from Medicaid.

    We have seen compelling data that suggests that a great 
number of Medicaid families lose eligibility based on an oral 
``withdrawal'' of benefits. Many of the oral withdrawals are 
misunderstandings or worse; it would be a simple protection to 
require those families who do want to refuse Medicaid to do so 
in writing.

5. Coordinate Medicaid with the CHIP program.

    Although some level of coordination is now in the CHIP 
statute, much could be done to bring these two programs closer 
together. For example, at the time of termination of Medicaid, 
not only should the statute require consideration of other 
Medicaid eligibility routes but the statute should require that 
all terminees be evaluated for the CHIP program prior to 
termination. (This would involve amending Sec.  1925(a)(3)(C).) 
Similarly, all rejected Medicaid applicants should be 
considered for the CHIP program, without further application.

6. Use IEVS to do ex parte redeterminations and verifications.

    Current law requires all states to have an Income 
Eligibility Verification System and to do ex parte 
redeterminations (where the agency looks to its own data 
sources to determine alternative Medicaid eligibility). These 
systems allow states to computer check the accuracy of 
information provided by applicants and recipients, using 
benefits data from federal agencies such as SSA, and, more 
importantly, wage data collected from the state's Unemployment 
Compensation system. Moreover, HCFA has told states that they 
must do redeterminations of eligibility without requiring a 
face to face interview when a family loses Medicaid eligibility 
under one provision but might qualify under another. (For 
example, a welfare recipient who gets a job and is no longer 
eligible for cash assistance will almost always qualify for 6 
months of TMA benefits.) However, this HCFA directive is not as 
helpful as it might be because states insist on wage 
documentation from busy families. States are reluctant to use 
the data contained in IEVS because, although reliable, it is 
usually 3-6 months old.
    A simple statutory revision could allow or require states 
to use this IEVS data rather than insist on paystub 
documentation, which, in a significant number of cases, is not 
available.
    Use of IEVS data could also obviate the need for quarterly 
reporting now required under the TMA program authorized under 
Sec. 1925 of the Act.

7. Mandate computer matches and reinstatement of SSI child 
disability terminees who have not been afforded the protection 
of Sec. 4913 of the Balanced Budget Act.

    There has been disturbing evidence that states like 
Georgia, Louisiana and Kentucky failed to implement Sec. 4913 
that insured the protecting between 50-100,000 former SSI 
children onto Medicaid. The problem has been compounded by HHS/
HCFA failing to obtain a computer match between SSI terminees 
and the Medicaid enrolled to monitor national compliance and to 
order reinstatement of children who were not reinstated. A 
computer match and reinstatement could be done in 30 days and 
is essential to insure uniform implementation of this three 
year old law intended to insure access to health care for 
children who, although not meeting a more strict SSI standard, 
still need health care.

8. Extend coverage for those losing eligibility due to child 
support to make it coterminous to TMA.

    Currently families who receive child support that makes 
them otherwise ineligible for Medicaid, receive an extra four 
months of coverage. We suggest making this identical with the 
coverage afforded under Sec. 1925, i.e., 6 months plus an 
additional 6 months if income is less than 185% of FPL. This 
will simplify the program, encourage child support and insure 
more families.

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