United States General Accounting Office

GAO Report to the Ranking Minority Member,

Subcommittee on Children and Families,

Committee on Labor and Human

Resources, U.S. Senate

January 1996 HEALTH INSURANCE

FOR CHILDREN

State and Private

Programs Create New

Strategies to Insure

Children

GAO/HEHS-96-35

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-259618 

January 18, 1996

The Honorable Christopher J. Dodd

Ranking Minority Member

Subcommittee on Children and Families

Committee on Labor and Human Resources

United States Senate

Dear Senator Dodd:

Since 1987, the number of children covered by employment-based health

insurance has decreased, and, by 1993, more than 9.3 million children

lacked health insurance. Studies have shown that uninsured children are

less likely than insured children to get needed health and preventive care.

Lack of such care can adversely affect their health status throughout their

lives.

In the mid-1980s, several states began using state and other nonfederal

funds to develop health insurance programs for children who were caught

in the uninsured gap between private insurance and Medicaid, the

federal/state program that insures some low-income people. In addition to

state efforts, Blue Cross/Blue Shield organizations throughout the United

States developed privately funded programs to insure children. At the

same time, the federal government and many states expanded eligibility

for Medicaid, the primary source of insurance for poor children.1

The 104th Congress is considering legislation making the Medicaid

program into a block grant, limiting the growth of program expenditures,

and removing most guarantees of eligibility for coverage and requirements

for states to cover services. Such restructuring could give states

significantly more flexibility in how they provide insurance to children.

In light of these developments, you asked us to examine emerging state

and private efforts to insure children who are not eligible for Medicaid and

whose families are not able to purchase private coverage. Specifically, you

asked us to provide information on (1) enrollment, costs, funding sources,

and annual budgets of these state and private programs; (2) the strategies

these programs have used to manage costs while providing children access

to health care; and (3) program design elements that have facilitated

program implementation.

1

Health Insurance for Children: Many Remain Uninsured Despite Medicaid Expansion

(GAO/HEHS-95-175, July 19, 1995).

Page 1 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

To answer these questions, we visited six programs in five states: two

privately funded programs—the Alabama Caring Program for Children and

the Western Pennsylvania Caring Program for Children—and four

state-funded programs—the Florida Healthy Kids Program,

MinnesotaCare,2

 New York’s Child Health Plus Program, and

Pennsylvania’s Children’s Health Insurance Program.3

 We selected

programs that had at least 2 years’ operational experience at the time of

our visit and that represented a variety of approaches in diverse

geographic areas. (See app. II for more detail on specific programs.)

For each program, we reviewed relevant program documents and

interviewed program officials, participating insurers or managed care

organizations, and physicians. We also interviewed officials from the

Department of Health and Human Services’ Health Care Financing

Administration (HFCA), which administers the Medicaid program, and

representatives from children’s advocate organizations in program states.

We analyzed other information, including information collected by the

National Governor’s Association, on programs to insure children. We

performed our work between November 1994 and October 1995 in

accordance with generally accepted government auditing standards.

Results in Brief In the mid-1980s, states and private organizations began developing health

insurance programs to increase health care access for children. By 1995,

14 states and at least 24 private-sector organizations had such programs.

The number of children enrolled in the six programs we visited ranged

from more than 5,000 to more than 100,000. Unlike state Medicaid

programs, which operate as open-ended entitlements funded in part by the

federal government, these programs operated within fixed and often

limited budgets and were funded by various nonfederal sources, such as

dedicated state taxes and private donations. To better target their

resources, the state- and privately funded programs restricted eligibility

for subsidized services to low-income, uninsured, or underinsured

children. Regardless, limited budgets compelled five of the six programs to

cap enrollment at times and to place eligible children on waiting lists.

2

MinnesotaCare began as a state-funded program and is classified as such in this report. However, the

children participating in the program were transferred to Medicaid on July 1, 1995, as part of

Minnesota’s Medicaid 1115 waiver.

3

We also visited Maine’s Medicaid program, which now covers children of similar ages and family

incomes as did the Maine Health Program, a state-funded program that is no longer in existence.

However, this report focuses solely on programs that were state- or privately funded at the time of our

visit.

Page 2 GAO/HEHS-96-35 New Strategies to Insure Children
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To manage their costs, the programs used several strategies. Some limited

services covered, but all covered basic preventive and outpatient services.

Some of the programs that did not provide inpatient care relied on

Medicaid to provide this service. Other cost-management strategies

included patient cost-sharing through premiums and copayments,

enrolling children in managed care, and using competitive bidding to

select insurers.

The six programs were designed to attract both providers and families.

Most operated, at least partially, through nonprofit or private insurers,

which enabled the programs to use existing provider payment systems and

physician networks and to offer near-market reimbursement

rates—features that appealed to insurers and providers. For patients, the

programs guaranteed access to a provider network, had simple enrollment

procedures, and took specific steps to avoid the appearance of a welfare

program. Moreover, initial surveys suggested that children in these

programs increased their access to and appropriate use of health care.

Background Health insurance helps children obtain health care. Children without

health insurance are less likely to have routine doctor visits, seek care for

injuries, and have a regular source of medical care. Their families are more

likely to take them to a clinic or emergency room (ER) rather than a private

physician or health maintenance organization (HMO).4,5,6 Children without

health insurance are also less likely to be appropriately immunized—an

important step in preventing childhood illnesses.7,8

During the 1980s, employment-based health insurance—the most common

source of health coverage for Americans—decreased. By 1993, more than

39 million Americans lacked any type of health insurance. Almost

4

Barbara Bloom, Health Insurance and Medical Care: Health of Our Nation’s Children, United States

(Hyattsville, Md.: Advance Data from Vital and Health Statistics, National Center for Health Statistics,

No. 188, 1990).

5

David L. Wood and others, “Access to Medical Care for Children and Adolescents in the U.S.,”

Pediatrics, Vol. 86, No. 5 (1990), pp. 666-673.

6

Mary D. Overpeck and Jonathan B. Kotch, “The Effect of U.S. Children’s Access to Care on Medical

Attention for Injuries,” American Journal of Public Health, Vol. 85, No. 3 (1995), pp. 402-404.

7

Charles N. Oberg, “Medically Uninsured Children in the United States: A Challenge to Public Policy,”

Pediatrics, Vol. 85, No. 5 (1990), pp. 824-833.

8

David U. Himmelstein and Steffie Woolhandler, “Care Denied: U.S. Residents Who Are Unable to

Obtain Needed Medical Services,” American Journal of Public Health, Vol. 85, No. 3 (1995), pp. 341-344.

Page 3 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

one-quarter of these people were children, despite the relative

affordability of providing insurance for children.9

Uninsured children are generally children of lower-income workers.

Lower-income workers are less likely than higher-income workers to have

health insurance for their families because they are less likely to work for

a firm that offers insurance for their families. Even if such insurance is

offered, it may be too costly for lower-income workers to purchase.10 In

1993, 61 percent of uninsured children were in families with at least one

parent who worked full time for the entire year the child was uninsured.

About 57 percent of uninsured children had family income at or below

150 percent of the federal poverty level.

Recognizing the need to provide insurance for children, the federal

government and the states expanded children’s eligibility for Medicaid, a

jointly funded federal/state entitlement program. Beginning in 1986, the

Congress passed a series of Medicaid-expansion laws that required states

to provide coverage to certain children and pregnant women and gave

states the option to expand eligibility further.11 Many states opted to use

this approach instead of funding their own programs, because expanding

Medicaid allowed them to get matching federal funds. As of April 1995, 37

states and the District of Columbia had expanded coverage for infants or

children beyond federal requirements. In addition to these expansions,

between 1991 and August 1995, five states implemented Medicaid

demonstration waivers, some of which included coverage expansions to

some uninsured children. Between 1989 and 1993, Medicaid expanded

from covering 14 percent of U.S. children (8.9 million) to 20 percent

(13.7 million). Nevertheless, many uninsured children remain ineligible for

Medicaid.

9

Personal health care expenditures per capita for children were $737 in 1987 (the most recent national

data available)—one-sixth those of the elderly. VHI-Lewin, a health care consulting firm, estimated

that the United States could implement a Medicare-type system of coverage for children using existing

public and private coverage plus an increase of $5.7 billion—an increase of 0.4 percent over current

national health spending. See Robert G. Hughes, Tania L. Davis, and Richard C. Reynolds, “Assuring

Children’s Health As the Basis for Health Care Reform,” Health Affairs, Vol. 14, No. 2 (1995), pp.

158-167.

10GAO/HEHS-95-175, July 19, 1995.

11The Omnibus Budget Reconciliation Acts of 1986 (P.L. 99-509), 1987 (P.L. 100-203), 1989 (P.L.

101-239), and 1990 (P.L. 101-508) and the Medicare Catastrophic Care Amendments of 1988 (P.L.

100-360).

Page 4 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

State- and Privately

Funded Programs

Improved Children’s

Coverage

Beginning in 1985, states and private entities began to fund programs that

provided insurance for children who were ineligible for or not enrolled in

Medicaid and did not have private or comparable insurance coverage.12

The programs we visited varied in several respects, but all were limited in

how many children they could cover by the size of their budgets, which

depended on their funding sources. Every state had substantially more

uninsured children than children enrolled in one of these programs.

Almost all of these programs have had to restrict enrollment and develop

waiting lists of children who could not enroll because of insufficient

funding. To target their funding, most programs restricted enrollment to

low-income, uninsured children not enrolled in Medicaid.

Programs Varied in Several

Respects, but All Provided

Coverage Through Set

Budgets

In 1995, 31 states had either a publicly or privately funded program that

provided health insurance coverage for children.13 (See app. I for a list of

these states.) Fourteen states had publicly funded programs that provided

insurance for children, which generally relied heavily on state funding. In

1994, these programs enrolled from 39 to 98,538 children and had budgets

ranging from about $240,000 to about $71.5 million.

In addition to state-level efforts, the private sector developed voluntary

insurance programs supported through philanthropic funding. The best

known of these are the Caring Programs, sponsored by 24 Blue Cross/Blue

Shield organizations in 22 states. The Caring Programs, which served more

than 41,000 children in 1994, ranged in size from 400 to almost 6,000

enrolled children and had budgets from $100,000 to $4.3 million.

The four state- and two privately funded programs that we visited varied in

enrollments and funding sources. They provided insurance coverage to

between 5,532 and 104,248 children under set yearly budgets. Much of the

state programs’ funding came from state general revenues, cigarette or

tobacco taxes, or health care provider taxes; counties; and foundations

and other private-sector entities. The private programs each received

funding from Blue Cross/Blue Shield and from private individuals and

organizations.

12For other discussions of these programs, see Ian T. Hill, Lawrence Bartlett, and Molly B. Brostrom,

“State Initiatives to Cover Uninsured Children,” The Future of Children, The Center for the Future of

Children, Vol. 3, No. 2 (Los Altos, Calif: 1993); Patricia Butler, Robert L. Mollica, and Trish Riley,

Children’s Health Plans, National Academy for State Health Policy (Portland, Maine: 1993);

Christopher DeGraw, M. Jane Park, and Julie A. Hudman, “State Initiatives to Provide Medical

Coverage for Uninsured Children,” The Future of Children, The Center for the Future of Children, Vol.

5, No. 1 (Los Altos, Calif: 1995).

13Much of this information comes from Deborah F. Perry, “Innovative State Health Initiatives for

Children,” Stateline, National Governor’s Association (Washington, D.C.: 1995).

Page 5 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

The programs’ costs, covered services, and premium subsidies also varied.

Moreover, four of the programs operated statewide, but Florida Healthy

Kids and the Western Pennsylvania Caring Program for Children operated

only in certain counties. (See table 1.)

Table 1: Characteristics of the Six Programs

Program name, type,

and implementation

date

Enrollment,

7/95

Cost per child

per month Funding sources

Annual

budget,

1994 (in

millions)

Covered

services

Premium,

copayment, and

deductible

Alabama Caring

Program for Children

(private, 1988)

5,922 $20.00 Private donations,

Blue Cross/Blue Shield

$1.7 Outpatient

only

No premium, some

copayments, no

deductibles

Western Pennsylvania

Caring Program

for Children (private,

1985)

5,532 70.60 Private donations,

Blue Cross/Blue Shield

4.3 Outpatient;

limited

inpatient

No premium, some

copayments, no

deductibles

Pennsylvania’s

Children’s Health

Insurance Program

(state, 1993)

49,634 62.60 State cigarette tax,

premium payments,

insurer donations

21 Outpatient;

limited

inpatient

Sliding scale

premium, some

copayments, no

deductibles

New York’s Child

Health Plus Program

(state, 1991)

104,248 54.71 State Bad Debt and

Charity pool raised

through hospital

assessments and

premium payments

55 Outpatient

only

Sliding scale

premium, some

copayments, no

deductibles

Florida Healthy Kids

Program (state, 1992)

15,254 46.50a State general revenue

funds, several types

of county funds,

school board funds,

premium payments

8.8 Outpatient

and inpatient

Sliding scale

premium, some

copayments, no

deductibles

MinnesotaCare (state,

1992)

44,689 53.00 State and federal

Medicaid funds,

premium payments

36.6b Outpatient

and inpatient

Sliding scale

premium, no

copayments, no

deductibles

aFor Volusia County.

bMinnesotaCare’s budget included services for child and adult participants.

Unlike state Medicaid programs, which operate as open-ended

federal/state entitlements, all the programs we reviewed operated within

limited and fixed budgets. These budgets did not allow them to cover most

of the uninsured children in their states. The private program budgets

were limited by the amount that could be raised by corporate donors, such

as Blue Cross/Blue Shield, and individual donors. The state-funded

Page 6 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

programs had larger budgets, but they, too, were limited by the amount of

funding states were willing to devote to insuring children.

All the states in which these programs operated had more uninsured

children than children enrolled in the programs.14For example, New York’s

Child Health Plus Program represented a substantial investment for the

state in children’s health coverage—$55 million—and it had the largest

enrollment: 104,248. But in 1993, New York State had almost half a million

uninsured children. Other programs could only cover a small fraction of

their uninsured. For example, Alabama had 156,000 uninsured children in

1993, and its Caring Program covered 5,922 in 1995—only about 3 percent.

MinnesotaCare had the highest ratio of enrolled children in 1995 to

uninsured children in 1993: 44,689 to 76,517, or 58 percent.

Lack of funding forced all the programs we visited (except Minnesota’s) to

restrict enrollment at times and to relegate children who applied for the

program to waiting lists. According to child advocates and officials of

these programs, restricting enrollment and developing waiting lists

undermine program credibility. In addition, Florida has been unable to

start its Healthy Kids Program in many interested counties because the

program has lacked funding.

Some Programs Limited

Eligibility to Target

Resources to Children

Most in Need

The programs we visited limited program eligibility to cover children most

in need of insurance. Generally, they tried to cover low-income, uninsured

children not enrolled in Medicaid in order not to duplicate existing public

coverage.

Four programs limited eligibility to families on the basis of their income,

although each program’s income eligibility differed. All six were designed

to complement Medicaid coverage for children, since none enrolled

children who had Medicaid coverage and most tried to steer possibly

eligible children to Medicaid first. Four programs required children to be

uninsured, although two allowed children with limited and noncomparable

coverage to enroll. (See fig. 1.)

14The numbers of uninsured children by state are 1993 numbers that we derived from the Bureau of the

Census’ March 1994 Current Population Survey, which was the most recent Census data on uninsured

children available.

Page 7 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Figure 1: Program Eligibility Requirements

Age

Family Income Limit

State Residence

In School

Medicaid

Private Insurance

Alabama Caring Program

for Children

Florida Healthy Kids

Program, Volusia County

MinnesotaCare

New York’s Child Health Plus

Program

Pennsylvania’s Children’s

Health Insurance Program

Western Pennsylvania

Caring Program for Children

Program

c

16-18

0-15

0-5

0-14

0-20

5-19 and

Siblings 3-4

0-18 $9,500

Annually

None

275% of FPL

185% of FPL

235% of FPL

185% of FPL

None

a

b

b

e d

f

Other

Requirements

Not Enrolled In

aAll eligible children in a family must be enrolled.

bEnrollment in other health insurance is allowed as long as the coverage is not equivalent to the

coverage offered under Florida Healthy Kids Program or New York’s Child Health Plus Program.

cChildren must also be enrolled in the National School Lunch Program.

dFederal poverty level.

Page 8 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

eChildren whose family incomes are between 150 and 275 percent of FPL cannot have had

insurance for the 4 months before applying for MinnesotaCare and cannot have had access to

employer-paid insurance for the 18 months before applying for MinnesotaCare.

f

The maximum eligible age will increase by 1 year each year on October 1, until the maximum age

of 17 is reached in 1996.

Two programs—New York’s Child Health Plus and Florida’s Healthy

Kids—covered uninsured children at any income level as long as their

families paid the full premium costs. These two programs also extended

coverage to insured children if their health insurance was not comparable

to what the programs offered.15 In western Pennsylvania, state- and

privately funded programs developed eligibility criteria to minimize

duplication of coverage. The three children’s health insurance programs in

western Pennsylvania—Medicaid, the state-funded Children’s Health

Insurance Program, and the privately funded Western Pennsylvania Caring

Program for Children—in combination provided coverage to children

under 6 with family income at or below 235 percent of FPL16 and to children

from 6 to 19 with family income below 185 percent of FPL. The Western

Pennsylvania Caring Program for Children changed its eligibility criteria

after the Children’s Health Insurance Program was developed to

complement its coverage and provide coverage for children that it did not

cover. (See fig. 2.)

15Insurance with benefits consistent with New York’s Child Health Plus benefit package and with

payments and/or deductibles consistent with insurance industry standards is considered equivalent.

However, policies that omit certain of the Child Health Plus benefits or that impose greater

cost-sharing requirements on enrollees than does Child Health Plus can be deemed equivalent.

16The Caring Program, which predated the Children’s Health Insurance Program, provided insurance to

children up to age 19 who were at 150 percent of FPL and who were not covered by Medicaid. When

the Children’s Health Insurance Program was created, the Caring Program changed its eligibility

criteria to insure children aged 6 to 19 at 185 percent of FPL. When the Children’s Health Insurance

Program eligibility expanded in 1994, the Caring Program changed eligibility criteria again, insuring

children aged 15 to 19 at 185 percent of FPL who were not covered by the Children’s Health Insurance

Program or the Medicaid program.

Page 9 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Figure 2: Health Insurance Eligibility for Children in Western Pennsylvania

250

225

200

150

125

100

75

50

25

0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Age

Income as a Percentage of Federal Poverty Level

No Coverage

Medicaid Coverageb

Children's Health

Insurance Program

Coveragea

Western

Pennsylvania

Caring

Program

for

Children

Coverage

175

Note: To be eligible for any of these programs, other applicable program eligibility requirements,

such as state residency, must be met.

aThe law increases the eligible age for this program every year on October 1; the maximum

eligible age of 17 will be reached in 1996.

Page 10 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

bIn this chart, Medicaid coverage includes expansions based on age, poverty level, and eligibility

related to receipt of Aid to Families with Dependent Children (AFDC). Medicaid expansions

require states to provide Medicaid coverage to children up to age 6 with family income at or

below 133 percent of FPL and to poor children aged 6 or over born after September 30, 1983,

until all children living in poverty up to age 19 are covered in October 2002. States could expand

eligibility further, which Pennsylvania did for infants. For children older than 13, this figure shows

Pennsylvania’s Medicaid income eligibility for a family of three in 1994 who received AFDC,

according to the Maternal and Child Health Update, National Governors’ Association,

March 1995. Eligibility for AFDC ends at age 18 or, at state option, at age 19 if the child is a

full-time student. Other children, such as disabled children or children with very high medical

expenses, may be eligible for Medicaid coverage but are not included in this simplified chart.

Programs Managed

Their Costs by

Limiting Benefits and

Using Other Strategies

Health insurance costs for individuals were partially dependent on the

costs of covered medical services, but other factors influenced costs as

well.17 Some programs covered inpatient care and other expensive

services, while others chose to limit or exclude expensive services.

Moreover, the premium costs per child were similar in some of the

programs that covered inpatient care and other expensive services and in

some that limited such services or did not cover them.

In addition to limiting services, state and private programs used other

strategies to manage costs, such as sharing costs with patients and using

competitive bidding and managed care. One factor that did not

significantly increase costs as had been expected by program

administrators was excessive use of health services. On the contrary,

program children’s use of services was similar to that of privately insured

children.

Program Costs Per Child

Varied Based Partially on

Services Covered

The state and private programs’ benefit packages varied from providing

only primary and preventive care and emergency and accident services to

providing a comprehensive range of benefits, including inpatient services.

Costs to provide coverage for children varied from $20 to $70.60 per

month, partly because of the kinds of services covered and the limitations

on those services.

All programs provided a core set of services that program officials cited as

most important for most children. These services included primary and

preventive services—such as well-child visits, immunization, outpatient

surgery, outpatient physician services, and diagnostic testing—and

17Variations in cost may reflect factors other than the services covered, which could include the

regional cost of care, amount of provider payment, competition among providers, age of children

covered, and the use of managed versus fee-for-service care. In addition, reported average costs per

child were not always the full cost per child, since some programs did not include all of their

administrative costs.

Page 11 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

outpatient emergency services. In addition, most programs offered other

benefits, such as mental health services, vision and hearing care, and

prescription drugs. Three of the state- and privately financed programs

also provided some dental services. Officials from several state and private

programs noted that they would like to provide more benefits—such as

dental care, which some cited as a critical preventive service—but did not

want to increase the cost of their program. (See fig. 3.)

Page 12 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Figure 3: Average Cost Per Child Per Month for Services Covered by Programs

MinnesotaCare

Average Cost Per Child Per

Month

Primary and Preventive

Care

Emergency and Accident

Care

Speech Therapy

Physical and Occupational

Therapy

Prescription Drugs

Hospitalization and Inpatient

Physician Services

Mental Health

Substance Abuse

Vision Care

Hearing Care

Dental Care

Home Health Care

Ambulance Services

Durable Medical Equipment

and Prosthetic Devices

Podiatry

Chiropractic Services

Family Planning

Other Services

Costs/Services

a

b

c

c

c c

$20.00 $46.50 $53.00 $54.71 $62.60 $70.60

c c

c c

c

c

c

c

c

c

d d d d d d

Alabama Caring

Program for

Children

Florida Healthy

Kids Program

(Volusia County)

New York’s

Child Health Plus

Program

Pennsylvania’s

Children’s Health

Insurance Program

Western

Pennsylvania

Caring Program

for Children

Page 13 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

aAverage cost reflects the total premium cost, regardless of the funding source, but excludes

program administrative costs.

bPrimary and preventive care services include well-child visits, immunizations, diagnostic testing,

outpatient physician services, and outpatient surgery.

cThese services have specific limitations. See app. II.

dThese programs cover other services. See app. II.

The Alabama Caring Program for Children, which covered outpatient care

only, provided the fewest services and was the least expensive per

child—$20 per month. The other programs reported average per-child

costs ranging from $46.50 to $70.60 per month, and some provided more

benefits than others. Florida ($46.50) and Minnesota ($53) covered many

services, including inpatient and outpatient treatment, prescription drugs,

and physical therapy. Minnesota also covered dental care and inpatient

and outpatient substance abuse treatment. In contrast, New York’s Child

Health Plus Program ($54.71), Pennsylvania’s Children’s Health Insurance

Program ($62.60), and the Western Pennsylvania Caring Program

($70.60) were more expensive, yet they provided either limited or no

inpatient care.

The programs that did not provide inpatient services or provided only

limited inpatient services often relied on Medicaid to meet enrolled

children’s needs. According to officials from two of these programs, the

families of children who needed hospitalization could qualify for Medicaid

services through medically needy spenddown provisions because of the

cost of the care. Under spenddown, the cost of expensive services, such as

hospitalization, is deducted from family income to determine the child’s

Medicaid eligibility.18 Pennsylvania’s Children’s Health Insurance Program

was planned to shift the costs of inpatient care to Medicaid when possible.

The program covers 3 days of hospitalization, after which families are

required to apply for Medicaid. For families whose children cannot qualify

for Medicaid through spenddown, the Children’s Health Insurance

Program covers up to 90 inpatient days per year.

Patient Cost-Sharing

Added to Most Programs

In addition to limiting benefits, most programs added some patient

cost-sharing provisions. However, they generally kept premiums and

copayments minimal, especially for families in the lowest income ranges.

None of the programs required deductibles. Because most children

18In 1994, the District of Columbia and 31 states, including Florida, Maine, Minnesota, New York, and

Pennsylvania, provided coverage to some medically needy persons. Alabama did not.

Page 14 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

enrolled were from the lowest income brackets, families did not generally

have to contribute much for their children’s care. (See table 2.)

Table 2: Comparison of Family Cost-Sharing Provisions

Program

Income range,

as a

percentage of

FPL

Family premium

contribution per

month per child

by income range

Percent enrolled

by income range Copayments

Service and amount of

copayment

Alabama Caring Program

for Children

$0-9,500a $0 100 Yesb Outpatient services-$5

Florida Healthy Kids

Program

0-130

131-185

over 185

5-20c

13-27c

43-49c

73

14

13

Yes Prescription drugs-$3,

eyeglass lenses-$10,

refractions-$3,

nonauthorized

emergency room

visits-$10

MinnesotaCare 0-150

151-275

4

4-138d

66e

34e

No None

New York’s Child Health

Plus Program

0-159

160-222

over 222

0

2.08

54.71

87

13

<1

Yes Prescription drugs-$1-3,

inappropriate

emergency room use-

$35

Pennsylvania’s Children’s

Health Insurance Program

0-184

185-235

0

39.75-52.64c

95

5

Yes Prescription drugs-$5

Western Pennsylvania’s

Caring Program for Children

0-185 0 100 Yes Prescription drugs-$5

aAlabama uses absolute dollar amounts for income eligibility determination.

bPreferred doctors may require a $5 copayment for some services; however, most doctors waive

the copayment.

cPremium contribution varies by locale or insurer.

dPremium contribution varies by income level within specified range.

eEstimated by program officials.

Cost-sharing provisions varied by program. Family premium payments

priced on a sliding scale based on family income as a percent of FPL were

required by the four state-funded programs. Copayments for some services

were required by three of the four state-funded programs and the two

Caring programs. However, two state-funded programs did not require

families in the lowest income range to pay any portion of the premium.

Page 15 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

All of the state-funded programs expected families with income that

exceeded the lowest income level to pay a portion of their child’s

premium. However, the size of the premium varied for families with

similar incomes. For example, a family with an income at 200 percent of

FPL would pay at least $43 per month in Florida to enroll one child and at

least $39.75 in Pennsylvania, but only $2.08 in New York.

Some advocates expressed concern that premium contributions were too

high for lower-income families in Pennsylvania and Minnesota and that

high premium contributions discouraged these families from enrolling

their children. Florida’s Healthy Kids executive director also commented

that the price of insurance affects enrollment. When the Healthy Kids

premium dropped below $50, she reported, the number of enrollees who

paid the full premium increased.

Two state-funded programs, those in Florida and New York, covered

children at any income level as long as families with income over a

specified level paid the full premium cost. Although this approach enabled

those programs to help any uninsured child, relatively few children were

enrolled when families had to pay all of the premium. New York targeted

its outreach to lower-income families, which might explain why so few

full-premium children enrolled, according to one New York program

official. Florida marketed its program to all children attending public

schools and still had low enrollment of children paying the full premium.

Copayments Added for Some

Services

Most programs did not require program participants to contribute a

copayment for most services. When programs did require copayments,

they were generally $10 or less and applied to those services listed in table

2, such as prescription drugs and vision care. None of the programs

allowed providers to charge copayments for primary and preventive

services, except Alabama’s Caring Program for Children, which asked, but

could not require, physicians to waive the copayments they normally

charged Blue Cross/Blue Shield patients.

Managed Care Strategies

Becoming More Commonly

Used

Most of the state and privately funded programs we visited were

increasing their use of managed care, which is a strategy widely followed

by private companies to constrain health care costs.19 Many of the

19Whether managed care actually reduces payer cost is unclear. Managed care is a continuum of

different types of care arrangements, from least to most restrictive. HMOs, the most restrictive type of

care, seem to have the greatest potential to actually reduce costs, since they can reduce utilization of

expensive services. But whether HMOs reduce costs for those paying the premiums depends not only

on reducing use of expensive services but also on passing these savings on to payers. See Managed

Health Care: Effect on Employers’ Costs Difficult to Measure (GAO/HRD-94-3, Oct. 19, 1993).

Page 16 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

programs enrolled some of their children in HMOs, and most were trying to

increase their use of HMOs. In addition, three of the state-funded programs

paid insurers fixed, lump-sum payments to cover needed health services,

which placed risk with the insurer rather than the program. Of these three

state-funded programs, two used competitive bidding to choose their

insurers. (See fig. 4.)

Figure 4: Programs’ Use of Managed

Care Strategies

Alabama Caring Program

for Children

Florida Healthy Kids

Program

MinnesotaCare

New York’s Child Health

Plus Program

Pennsylvania’s Children’s

Health Insurance Program

Western Pennsylvania

Caring Program for Children

Program

Medicaid

Fee-forService

Providers

Private

Provider

Networks HMOs

Gatekeeper/

Case

Manager

Managed Care

Minnesota paid Medicaid-certified providers on a fee-for-service basis, but

the program plans to transition to managed care in 1996. The other

programs covered children using private provider networks,20 HMOs,

gatekeeper/case managers, or some combination of these. Alabama’s

Caring Program for Children was the only program using network

providers exclusively, and Florida’s program was the only one using HMOs

exclusively. Pennsylvania’s Children’s Health Insurance Program and the

Western Pennsylvania Caring Program for Children enrolled children in

HMOs whenever available. At least 80 percent of the enrollees in New

York’s Child Health Plus Program, Pennsylvania’s Children’s Health

20Families with children enrolled in provider networks are either prohibited from using nonnetwork

providers or required to pay more for care if they use them.

Page 17 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Insurance Program, and the Western Pennsylvania Caring Program for

Children were in HMOs. These three programs expect to increase their use

of HMOs for program children’s care.

All of the state programs except Minnesota paid insurers a fixed, per child,

per month payment, which shifted risk from the public payers to the

insurers. The insurers or managed care organizations were then

responsible for providing or contracting for all covered health services.

Florida and Pennsylvania used a competitive process to select insurers

and set rates; New York had a selection process that was not competitive.

In Florida, Healthy Kids contracted with one HMO organization selected

through competitive bidding for each county or group of counties. In

Pennsylvania’s Children’s Health Insurance Program, if more than one

insurer bid, the contract was awarded to the lowest qualified bidder, but

other qualified bidders could provide services in the same area at the

lowest bidder’s price. In New York, all insurers who met specified program

qualifications during the selection process were permitted to participate,

but the state had approval rights over the premiums they charged.

Programs Did Not Attract

High-Risk, High-Cost

Children

The insurers and developers of most of the programs we visited had

expected that children enrolling would be less healthy than children with

private insurance and would, therefore, use services more frequently. In

addition, since all the programs covered preexisting health conditions, the

programs were expected to attract families with ill children who could not

get other insurance coverage. Programs like Pennsylvania’s Children’s

Health Insurance Program and the Florida Healthy Kids Program

negotiated prices for their premiums assuming that the programs would

attract children who would be more costly to serve than privately insured

children. In addition, Alabama required families to enroll all of their

eligible children in its program, which kept families from enrolling only

sick children and assisted in health promotion.

However, according to managers from all the programs, the children

served were not significantly sicker and did not use services more than

privately insured children. New York’s Child Health Plus Program officials

found through a survey that most of the children enrolled in the program

did so after they lost private insurance coverage. Alabama and Florida

reported a slight increase in the use of services due to initial demand, but

that soon stabilized. The lower-than-anticipated use of services led to

cost-savings for Pennsylvania’s Children’s Health Insurance Program and

the Florida Healthy Kids Program: a rebate of $1.3 million for the

Page 18 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Pennsylvania program and a 21-percent decrease in premiums for Healthy

Kids in Volusia County.21

Program Designs

Simplified

Administration and

Facilitated

Participation of

Providers and

Patients

All the programs were designed to facilitate implementation and provider

and patient participation. Most state- and privately funded programs relied

on private insurers or nonprofits for many administrative functions and

used their physician networks. The programs used existing billing systems

and generally had reimbursement levels that approximated market

rates—factors that were attractive to providers. The programs guaranteed

access to a provider network, used simple enrollment procedures, and in

many ways appeared similar to private insurance, which helped the

programs avoid the stigma of welfare. Families surveyed by their programs

were satisfied with the programs and with the health care their children

received.

Programs Used Existing

Administrative Systems

To some degree, all the programs we visited used administrative systems

already in place when designing and implementing their programs. While

Minnesota employed state Medicaid structures for administrative

functions, the other programs employed nonprofit corporations or private

insurers to perform key administrative functions. (For more detail on

specific programs, see app. II.)

For example, in both the state-funded New York Child Health Plus and the

Pennsylvania Children’s Health Insurance programs, the state agencies

exercised general program oversight, but most administrative functions

were performed by private insurance plans under contract to the state. In

addition to assuming responsibility for paying providers (and assuming

risk for the costs involved), the insurers processed applications and

determined eligibility. Each enrollee signed up with one of the insurers,

which used its existing network of providers or HMOs to serve program

patients.

21Pennsylvania’s Children’s Health Insurance Program included a “rate margin” provision in some of its

insurers’ contracts to protect them if the program attracted too many sick children. It guaranteed the

insurers that if their actual costs exceeded the costs on which they based their premiums, the program

would make up the difference, up to a limit of 5 percent of the anticipated costs. But the rate margin

provision also guaranteed that if the insurers’ costs were below expectations, they would have to

return the excess (again, subject to the 5-percent limit). Since the insurers’ costs were below

expectations, the state became entitled to a $1.3-million rebate. In the second year, because the state

and insurers had information from the program’s first year to help price the premiums, the rate margin

provision was dropped. Similarly, the Florida Healthy Kids Program renegotiated premium rates with

the Volusia County HMO several times during the program’s first year because service utilization and

costs were lower than expected. Overall, the HMO cut the premium rate 21 percent—from $58.98 to

$46.50 per month.

Page 19 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

The nonprofit Florida Healthy Kids Corporation (FHKC) managed the

Healthy Kids program using schools, HMOs, and contractors to provide

some administrative services. It contracted with an HMO in each county to

provide program services to enrollees in that county and with other

entities to provide application processing, eligibility determination,

premium billing and collection, technical assistance, and program

evaluation. The schools also provided some administrative services, such

as distributing enrollment applications and forwarding computerized data

for eligibility determination.

In-Place Billing Systems

and Provider Networks

Encouraged Physician

Participation

All the programs we visited used existing billing systems and provider

networks, generally through private or nonprofit insurers. Contracting

with an existing network of providers facilitated program implementation,

since enrollees could be served as soon as a contract was signed. New

York’s Child Health Plus Program required contracted insurers to have an

existing network of providers in place to enable them to reach program

children in every part of the state. Program officials said that this

requirement made the program “just another line of business” for the

insurers.

In addition, physicians did not have to adapt to new, or to significantly

change existing, operating processes to serve program children, which

increased their willingness to participate in these programs. In Alabama,

for example, all Caring Program providers filed claims electronically

through Blue Cross/Blue Shield’s existing claims system. According to a

program official, most providers will accept lower payment rates and new

patients if their routine billing and payment processes are not disrupted.

One Alabama physician noted that quick reimbursement and lack of “red

tape” contributed to her willingness to serve program children. Similarly,

two providers cited use of Minnesota’s Medical Assistance program billing

structure as contributing to MinnesotaCare’s success, because the

physicians did not have to adjust to new operating procedures and

hospitals could more easily participate in the program.

State and Private Programs

Generally Set Acceptable

Rates and Used Other

Means to Ensure Provider

Coverage

State and private programs have developed various methods for ensuring

provider and insurer participation. Most of the programs chose to

reimburse providers at close to market rates to ensure provider

participation. In addition, some of the programs required physicians to

accept the set rates as a condition of caring for other, more lucrative

patients.

Page 20 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

The state and private programs we visited, with the exception of

MinnesotaCare, chose a strategy other than Medicaid for paying providers’

rates. Because many state Medicaid programs have paid below market

rates for services, these programs have had difficulty maintaining an

adequate provider network. Some studies have indicated that Medicaid

patients have more difficulty accessing health care than non-Medicaid

patients. MinnesotaCare paid Medicaid rates, and some providers

complained that MinnesotaCare’s reimbursement was about 50 to

60 percent of their normal billing rates.

The other programs paid premiums intended to approximate market rates.

The Alabama and Western Pennsylvania Caring Programs reimbursed

physicians according to the rate schedules used by their respective Blue

Cross/Blue Shield organizations, although for Alabama the rates paid for

treating program participants were some of Blue Cross/Blue Shield’s

lowest.

As an additional incentive, physicians in several programs were required

to treat program patients if they wished to treat other, sometimes more

lucrative patients. For example, physicians participating in the Blue

Cross/Blue Shield provider networks of Alabama and Western

Pennsylvania could not refuse to serve Caring Program patients unless

they withdrew from the Blue Cross/Blue Shield provider network entirely.

Similarly, insurers in New York’s Child Health Plus Program required their

participating physicians to treat program patients as a condition of treating

the insurers’ private patients. And in Minnesota, physicians could not

participate in the more lucrative state and local government employee

health benefit program unless they also participated in the state’s health

assistance programs, which included MinnesotaCare.

Using Existing Provider

Networks Gave Program

Patients Guaranteed

Access to Care

All six programs gave children access to a network of providers. In two

programs, more than one insurer covered some parts of the state, so

families had a choice of networks. Patients in Minnesota’s program had

access to providers that participated in Medicaid. Through state mandate,

MinnesotaCare is ensured a large network; in 1995, the program had

24,000 primary care providers for 48,000 enrolled children.

Patients enrolled in all the programs except Minnesota’s had guaranteed

access to at least one and sometimes two established provider networks

or HMOs through private insurers. New York’s Child Health Plus Program

had 15 insurers that together covered the entire state. A few areas in the

Page 21 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

state were covered by more than one insurer, and patients were allowed to

select between insurers. Three of the four regions covered by

Pennsylvania’s Children’s Health Insurance Program were served by at

least two insurers, which increased families’ choices. The Alabama Caring

Program for Children used the existing Blue Cross/Blue Shield network,

which covered most physicians in the state. The Western Pennsylvania

Caring Program for Children used either the Blue Cross/Blue Shield HMO or

the Blue Cross/Blue Shield network, which included more than 12,000

physicians. Florida’s Healthy Kids Program enrollees were limited to

providers in a single HMO per county, but the program required that

children be no more than a 20-minute car ride from a provider, except in

the most rural areas.

Simple Enrollment

Procedures Facilitated

Access to Programs

The enrollment procedures for the state- and privately funded programs

were relatively simple. Some programs were flexible about documenting

information for eligibility and proceeding on the basis of trust. Simplified

enrollment procedures and flexible eligibility documentation requirements

minimized enrollment barriers and thus encouraged program

participation.

All the state and private programs used a simple mail-in enrollment form

(often one page long) and did not require face-to-face interviews. In

addition, New York’s Child Health Plus Program directed applicants to

program insurers who provided telephone assistance in completing the

forms. MinnesotaCare, which also used a mail-in application, asked

follow-up questions by phone. Florida’s Healthy Kids Program allowed

parents to obtain and submit one-page applications through the schools.

Some programs were more flexible than others about documenting

enrollment information, such as income. For example, the Alabama Caring

Program for Children allowed an “honor system,” on the theory that

applicants were truthful about their incomes, and New York’s Child Health

Plus Program allowed a self-declaration of income if applicants were

unable to produce any other verification. Pennsylvania’s two programs

required applicants to verify income, and the Florida Healthy Kids

Program relied on the National School Lunch Program to verify applicants’

income. Most of the programs did not apply resource tests, which also

simplified eligibility determination. Minnesota and Alabama staff reported

finding that families generally reported information honestly and

accurately when applying for their programs.

Page 22 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Programs Offered an

Identity Separate From

Medicaid to Avoid Welfare

Stigma

Program officials generally agreed that for families to use the program,

they must not feel stigmatized, a problem that often exists with welfare

recipients. Program staff stressed that it was important to preserve the

families’ dignity at all times.

To avoid the stigma of welfare, the state and private programs tried to

resemble private insurance as much as possible. In addition to generally

using private insurers’ networks and simplified administrative processes

that did not require face-to-face interviews at welfare offices for eligibility

determinations, the programs used other strategies to preserve families’

dignity. Some of these were modest. For example, all programs using

private insurers issued enrollees insurance membership cards that were

similar to cards issued for the insurers’ commercial programs.

Families Satisfied With

Care

Families generally reported being very satisfied in the five programs that

assessed patient satisfaction.22 For example, 97 percent of respondents in

a 1993-94 survey of Florida’s Healthy Kids families were either “very

satisfied” or “satisfied” with the care provided for their children. More

families with children in the Healthy Kids Program were satisfied with

their care than families of children in any of the four comparison

groups—Medicaid, private insurance, other insurance, or uninsured. A

separate study of Healthy Kids families found that higher percentages of

program families than of nonprogram families were “very satisfied” with

the benefits available to their children, their doctor’s availability, waiting

times in the doctor’s office, and the amount they had to pay at the time of

an office visit. As another example, a 1989 survey of participants in

Minnesota’s Children’s Health Plan, predecessor to MinnesotaCare, found

that over 80 percent rated the program either a 9 or a 10 on a scale of 1 to

10, with 10 being excellent.

Programs Improved

Children’s Use of Health

Care Services

All the programs we visited sought to reduce unmet medical needs and to

encourage the appropriate use of primary and preventive care services.

Several of the programs have begun to evaluate whether their programs

are achieving these goals. Although some programs are finding that access

and appropriate use of medical services have increased, several have

found that use of preventive services is still below desired levels. Program

staff have increased their efforts to educate parents about the importance

of preventive care for children. (See app. III.)

22Pennsylvania’s Children’s Health Insurance Program was the only program that had not assessed

patient satisfaction. The Western Pennsylvania Caring Program for Children included its Children’s

Health Insurance Program families in its satisfaction survey.

Page 23 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

Conclusions If enacted, legislation to change the Medicaid program to a block grant

would give states greater flexibility to redesign their Medicaid programs,

but it would also limit federal funding. To accommodate these changes,

states would need to make difficult choices when structuring their

Medicaid programs. While the programs we visited differed from Medicaid,

they exemplified the choices states and private-sector organizations have

made when using their own resources to provide health coverage to

uninsured children.

Most notably, the state- and privately funded programs we visited

• covered some children who would not otherwise have been covered;

• complemented existing Medicaid coverage;

• kept per child costs to a minimum;

• provided preventive and primary care services—the services children are

most likely to need;

• offered a wide network of providers;

• required families to share part of the cost;

• used HMOs frequently to manage children’s health care; and

• used existing administrative systems of state, nonprofit, and private

organizations.

Despite these state and private efforts, many children remained uninsured.

In addition, eligible children sometimes had to wait to enroll. Further,

programs did not always cover services routinely available to children

insured through private insurance or Medicaid.

In the future, the responsibility for ensuring health care coverage for

children may fall more directly on the states; their local communities,

including private-sector providers and nonprofit organizations; and

children’s families. The programs we visited appear to have succeeded in

bringing together these groups and individuals to expand children’s access

to health care. Their program experience could prove instructive for other

states and the Congress.

Although this report does not focus on agency activities, we discussed its

contents with responsible officials at HCFA, who had no comments. We also

discussed its contents with officials in the programs we visited. Program

officials’ comments were generally limited to specific technical

corrections, which we incorporated in this report.

Page 24 GAO/HEHS-96-35 New Strategies to Insure Children
B-259618 

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from the

date of this letter. At that time, we will send copies to interested parties

and make copies available to others on request.

Please contact me at (202) 512-6806 if you or your staff have any questions.

This report was prepared under the direction of Sally Jaggar, Mark Nadel,

and Rose Marie Martinez by Sheila Avruch and others. Other staff who

contributed to this report are named in appendix IV.

Sincerely yours,

Janet L. Shikles

Assistant Comptroller General

Health, Education, and

 Human Services Division

Page 25 GAO/HEHS-96-35 New Strategies to Insure Children
Contents

Letter 1

Appendix I 

Most States Have

Expanded Medicaid

or Developed Other

Health Insurance

Programs for Children

28

Appendix II 

Descriptions of the

Six State- and

Privately Funded

Programs

32

The Alabama Caring Program for Children 32

Florida Healthy Kids Program 34

Minnesota’s MinnesotaCare Program 38

New York’s Child Health Plus Program 41

Pennsylvania’s Children’s Health Insurance Program 44

Western Pennsylvania Caring Program for Children 46

Appendix III 

Limited Evaluations

Show Programs

Improved Children’s

Use of Health Care

Services

50

Appendix IV 

GAO Contacts and

Staff

Acknowledgments

53

Related GAO Products 56

Tables Table 1: Characteristics of the Six Programs 6

Table 2: Comparison of Family Cost-Sharing Provisions 15

Page 26 GAO/HEHS-96-35 New Strategies to Insure Children
Contents

Table I.1: 1994 Enrollments and Budgets of State- and Privately

Funded Programs to Insure Children

30

Figures Figure 1: Program Eligibility Requirements 8

Figure 2: Health Insurance Eligibility for Children in Western

Pennsylvania

10

Figure 3: Average Cost Per Child Per Month for Services Covered

by Programs

13

Figure 4: Programs’ Use of Managed Care Strategies 17

Figure I.1: States’ Health Insurance Programs for Children 29

Abbreviations

AFDC Aid to Families With Dependent Children

ER emergency room

FPL federal poverty level

FHKC Florida Healthy Kids Corporation

HCFA Health Care Financing Administration

HMO health maintenance organization

Page 27 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix I 

Most States Have Expanded Medicaid or

Developed Other Health Insurance

Programs for Children

Forty-five states and the District of Columbia have expanded Medicaid

beyond federal requirements to cover infants or children, have

implemented a Medicaid waiver, or have developed privately funded or

state programs to insure children. Some states have more than one type of

program to add coverage for children. (See fig. I.1.)

Page 28 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix I 

Most States Have Expanded Medicaid or

Developed Other Health Insurance

Programs for Children

Figure I.1: States’ Health Insurance Programs for Children

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

Total

Infants

(Birth to 1)

Children (1-18;

Range Varies

by Program)

Implemented

Medicaid

1115 Waiver

Privately

Funded Progam

State-Funded

Programb

Requirementsa

Beyond Federal

Medicaid Expansion

Infants

(Birth to 1)

Children (1-18;

Range Varies

by Program)

Implemented

Medicaid

1115 Waiver

Privately

Funded Progam

State-Funded

Programb

Requirementsa

Beyond Federal

Medicaid Expansion

State State

34 21 5 22

d

c

14

(Figure notes on next page)

Page 29 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix I 

Most States Have Expanded Medicaid or

Developed Other Health Insurance

Programs for Children

Note: Some of these programs insure adults and children.

aState Medicaid expansions as of April 1995.

bState funded programs include those classified by the National Governors’ Association as both

public and public/private, except Rhode Island and Tennessee, which have Medicaid 1115

waivers. The primary source of funding for most of these programs was state financing.

cThe 1115 Medicaid waiver transferred children up to age 21 and pregnant women from

MinnesotaCare to Medicaid. The other adult MinnesotaCare participants remained in the

state-funded MinnesotaCare program.

dMedicaid funds the children’s services for Washington’s Basic Health Plan.

Sources: “Innovative State Health Initiatives for Children,” Stateline, July 21, 1995, National

Governors’ Association, Washington, D.C., Center on Budget and Policy Priorities; Health Insurance

for Children: Many Remain Uninsured Despite Medicaid Expansion (GAO/HEHS-95-175, July 19,

1995); Western Pennsylvania Caring Program for Children, personal communication with executive

director; MinnesotaCare Program, personal communication with director; and Washington Basic

Health Plan Plus, personal communication with program manager.

State- and privately funded programs vary in size: some cover fewer than

100 children, and others cover up to 99,000. (See table I.1.)

Table I.1: 1994 Enrollments and

Budgets of State- and Privately

Funded Programs to Insure Children

State Enrollment Budget (in millions)

State-fundeda

Arizona 2,300 $7.3

California 13,784 71.5

Colorado 1,712 .7

Delaware 8,473 NAb

Florida 15,500 8.8

Maryland 3,500 .9

Massachusetts 22,021 12.0

Michigan 3,105 1.4

Minnesota 42,891 36.6

Nebraska 245 5.0

New Hampshire 39 .2

New York 98,538 55.0

Pennsylvania 28,923 21.0

Utah 99 2.0

Washington 16,944 20.0

Privately funded

Alabama 5,400 1.3

California 5,000 1.2

(continued)

Page 30 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix I 

Most States Have Expanded Medicaid or

Developed Other Health Insurance

Programs for Children

State Enrollment Budget (in millions)

Georgia 409 NAb

Idaho 400 NAb

Iowa 2,117 .4

Kansas 3,474 .7

Louisiana 412 .1

Mississippi 1,027 .2

Missouri (2 programs) 2,275 .9

North Carolina 3,498 1.4

Ohio 5,717 1.6

Pennsylvania (western) 5,877 4.3

Pennsylvania (southeastern) 3,434 2.2

South Dakota 385 .2

Utah 1,615 .6

Wisconsin 800 NAb

Note: Budget and enrollment data were not identified for Caring Programs in Maryland,

Massachusetts, Montana, North Dakota, Oklahoma, Texas, and Wyoming.

aState-funded programs include programs classified by the National Governors’ Association as

both public and public/private, except for Rhode Island and Tennessee, which have Medicaid

1115 waivers.

bDid not provide budget information.

Sources: “Innovative State Health Initiatives for Children,” Stateline, July 21, 1995, National

Governors’ Association, Washington, D.C., and Western and Southeastern Pennsylvania Caring

Programs for Children, personal communication with executive directors.

Page 31 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix II 

Descriptions of the Six State- and Privately

Funded Programs

This appendix provides programmatic and administrative details about the

six programs we visited, presented alphabetically by state. Each

description includes

• a background section, which highlights the history of the program and its

goals, and

• a section on program structure and operations, which includes

information on administration; funding; eligibility; enrollment; covered

services and costs; insurer payment and provider networks used; and

publicity, outreach, and marketing.

The Alabama Caring

Program for Children

Background The Alabama Caring Program for Children is a statewide, privately funded

program that was created in 1988 by Blue Cross/Blue Shield of Alabama. It

provides primary care services to enrolled children using Blue Cross/Blue

Shield providers. Enrollees are children from low-income, working

families who do not have insurance through an employer, yet whose

income is not low enough to qualify them for Medicaid.

Program Structure and

Operations

The nonprofit Alabama Child Caring Foundation administers the program,

including determining eligibility, enrolling children, publicizing the

program, collecting donations, and fundraising. Blue Cross/Blue Shield

staff process claims and pay providers. All administrative services,

including Foundation staff salaries, are donated by Blue Cross/Blue Shield.

The program does not underwrite insurance—instead it contracts with

Blue Cross/Blue Shield for claims and payment services. The program also

uses Blue Cross/Blue Shield’s provider network to deliver health care

services.

Funding The Caring Program is funded entirely through the philanthropic

donations of businesses, churches, foundations, civic/service

organizations, and individuals. Blue Cross/Blue Shield matches all

contributions dollar for dollar. The program’s budget for 1994 was

approximately $1.7 million, and the estimated budget for 1995 is

approximately $2 million.

Page 32 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix II 

Descriptions of the Six State- and Privately

Funded Programs

Eligibility Children may enroll if they (1) are under age 19, unmarried, and have an

annual family income under $9,500; (2) are full-time students (unless they

are under school age or have completed grade 12); (3) are Alabama

residents, and (4) are ineligible for Medicaid or other insurance.

Additionally, families must enroll all of their eligible children in the

program. Foundation staff refer children potentially eligible for Medicaid

to the Medicaid bureau before they can enroll in the Caring Program.

Enrollment As of July 31, 1995, 5,922 children were enrolled in the program. Since the

available funding was not sufficient to provide coverage for all eligible

applicants, 1,766 eligible children were on a waiting list. The Foundation

generally responds to an application within one day of receipt, but the

average waiting time for enrollment is 18 to 24 months, because the

program does not have the funding to enroll children as soon as they are

determined eligible. While the program is statewide, donors can designate

their funding for particular counties, so children in some counties spend

less time waiting to enroll.

The Alabama Child Caring Foundation determines eligibility and enrolls

children using a simple, one-page, 12-question form that can be mailed to

the Foundation. There are no income verification requirements. Once a

child is admitted, the Foundation staff send the child a benefits handbook,

a Blue Cross/Blue Shield identification card, and a list of participating

providers.

Covered Services, Costs, and

Cost-Sharing

The program covers primary and preventive outpatient services (well-child

visits, immunizations, outpatient physician services, outpatient surgery,

and diagnostic tests). It also covers emergency and accident care. It does

not cover prescription drugs or inpatient, vision, hearing, or dental care

(except in one county, which has a specially funded pilot program for

dental care). Program officials told us that benefits have not been

expanded further because funding is limited and many children are

currently waiting to join the program. The program does not have any

pre-existing condition exclusions.

The average monthly cost per child is $20, which does not include any

administrative expenses. Program participants pay no premiums or

deductibles. They may be required to pay a $5 copayment for some

outpatient services. However, program and Blue Cross/Blue Shield

officials have asked providers to waive the copayment in order not to

discourage program participants from obtaining care, and most providers

have complied.

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Insurer Payment and Provider

Networks

The Foundation pays for covered services provided by physicians in the

Blue Cross/Blue Shield of Alabama provider network, to which most

physicians in the state belong, according to the program’s executive

director. Physicians cannot refuse to treat Alabama Caring Program

patients without dropping out of the network. Providers are reimbursed

based on the existing Blue Cross/Blue Shield fee-for-service rate schedule,

and claims are processed through the Blue Cross/Blue Shield billing

system. Claims are paid within 5 days.

Publicity, Outreach, and

Marketing

Program officials use a variety of methods for publicizing the program,

including public service announcements on TV and radio, free advertising

in newspapers, distribution of brochures and flyers, and contacts with

providers, advocacy organizations, churches, schools, and corporate

donors. Blue Cross/Blue Shield developed radio and TV public service

announcements using some of Alabama’s college football coaches. These

announcements have been very successful at publicizing the program.

Since the program is currently wait-listing applicants because it lacks the

resources to enroll them, it has focused the past year’s efforts principally

on fund-raising rather than on outreach.

Florida Healthy Kids

Program

Background The Florida Healthy Kids Program is a school enrollment-based program

created through the July 1990 Healthy Kids Corporation Act. Its goal is to

provide every child access to quality health care by uniting children with

accessible, local, comprehensive health care providers. The program was

initially funded in Volusia County as a HCFA demonstration project that

also received state, county, and private funds. It is currently available in

seven Florida counties, with 13 other counties waiting to join. Uninsured

children of any income level attending school in a participating county can

join, but only children with family income at or below 185 percent of FPL

will have their premiums partially subsidized.

Program Structure and

Operations

The nonprofit Florida Healthy Kids Corporation (FHKC) has overall

administrative responsibility for the program. FHKC contracts with others

for processing applications, determining eligibility, billing and collecting

premiums, providing technical assistance, and evaluating the program.

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County schools and their boards help inform parents about the program,

disseminate enrollment applications, and provide monthly computerized

data, which are used for eligibility redeterminations. In addition to the

board that oversees FHKC, each county has its own board to direct Healthy

Kids activities.

Funding The program was initially funded by federal and state funding, including a

HCFA demonstration grant, which ended in February 1995, and family

premium payments. The program is currently funded by state general

revenue funds, a county ad valorem tax for children’s services, other

county funds, health district tax funds, county school board funds, and

premium payments by parents. The program’s total funding for 1994 was

approximately $8.8 million, and the amount budgeted for 1995 was

$13.1 million.

Eligibility A child may enroll in Healthy Kids if he or she is (1) 5 through 19 years of

age or a 3- to 4-year-old sibling of an enrollee, (2) actively attending

school, (3) uninsured, and (4) not enrolled in the Medicaid program. In

some counties, children must prove they are not eligible for Medicaid

before being enrolled in Healthy Kids; in others, not being enrolled in

Medicaid is enough. Children must participate in the National School

Lunch Program to get their premiums subsidized, since income eligibility

for subsidized premiums is determined through the School Lunch Program

eligibility process. FHKC redetermines eligibility monthly by having a

contractor compare computerized records for the Healthy Kids, School

Lunch, and Medicaid programs.

Enrollment The Healthy Kids Program provides school enrollment-based health

insurance. The children obtain health coverage in the form of group

insurance policies provided through the school districts, rather than

through employers. By using school districts, the program can tap into

existing communication systems with parents to market the program and

enroll children. School officials distribute and collect applications during

the open enrollment period at the beginning of the school year. Additional

enrollment periods are available to children who transfer to other schools.

An FHKC contractor determines eligibility and then FHKC sends a list of

eligible children to the responsible HMO. The HMO sends the family new

member information and a membership card and requests that the family

select a primary care provider. If the family does not respond within 90

days, the HMO will send a follow-up letter and call the family to encourage

them to use well-child services.

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As of July 1, 1995, 6,602 children were enrolled in Volusia County, and

15,254 children were enrolled in the Healthy Kids Program statewide.

Statewide, 87 percent of enrolled children had family income at or below

185 percent FPL and thus had their premiums partially or fully subsidized;

in Volusia County, 93 percent were in that category.

Covered Services, Costs, and

Cost-Sharing

The Volusia County program offers a wide range of services including

primary and preventive outpatient services (well-child visits,

immunizations, outpatient physician services, outpatient surgery, and

diagnostic tests), emergency and accident care, hospitalization, and

related inpatient physician services. It also includes physical, speech, and

occupational therapy (limited to 15 inpatient days per contract year and 24

outpatient treatment sessions within a 60-day period per episode of illness

or injury). In addition, it covers prescription drugs, vision care (corrective

lenses limited to one pair every 2 years unless prescription or head size

changes), hearing care, home health care, ambulance services, durable

medical equipment and prosthetic devices, family planning, chiropractic

care (limited to six visits in 6 months), and podiatric care (limited to 2

visits per month). Mental health services are included, but limited to 15

inpatient days per contract year and 20 outpatient visits per contract year,

with a lifetime maximum expenditure of $20,000. Substance abuse services

are provided for pregnant teens only. Healthy Kids covers newborn care,

skilled nursing facility services limited to 100 days per contract year, and

transplant services. Covered services and limitations may vary by county.

For example, dental care is available in some counties. There are no

preexisting condition exclusions.

The average cost per month to provide health services to children in

Volusia County was $46.50, which reflects the total premium payment to

the HMO. Program officials estimated that, in addition, the program

averages administrative costs of about $1.50 per month per child.

The amount that parents pay toward premiums differs by county and

income category. Since September 1, 1995, all counties have required

parents to pay some share of their children’s premium. Before that time,

Volusia County did not require poor parents to pay any share of their

children’s premiums, while other counties required parents to pay $5 per

month for children in the lowest income group (at or below 130 percent of

FPL.) Starting in September 1995 in Volusia County, families with income at

or below 100 percent of FPL paid $15 per child per month; those with

income between 101 and 130 percent of FPL paid $20; those with income

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between 131 and 185 percent of FPL paid $27; and those with income above

185 percent of FPL paid $48. Families pay no deductibles.

Some services require a small copayment. Prescription drugs and

optometrist refractions both have $3 copayments, mental health outpatient

visits have a $5 copayment, and prescription eyeglass lenses and

nonauthorized ER visits have $10 copayments.

Insurer Payment and Provider

Networks

The program pays a capitated monthly fee to HMOs to cover enrolled

children’s health care services. To choose HMOs, FHKC sends out requests

for proposals and then contracts with one HMO per county. The HMOs are

required to provide hospitalization and specialist services as needed and

ensure that children live no more than 20 minutes by car from a provider

except in the most rural areas. To meet these requirements, the HMO in

Volusia County contracted with some private doctors in the western, more

rural, part of the county. The HMO contracts with FHKC allow FHKC to pay for

services that patients need and then bill the HMO for the services if the HMO

is not providing adequate service. FHKC monitors waiting time and patient

complaints to measure access.

Publicity, Outreach, and

Marketing

The Florida Healthy Kids Program uses numerous methods to reach its

target audience, including paid and public service radio and television ads,

brochures and flyers, a video, and presentations by FHKC and HMO staff. In

1994, FHKC spent less than $5,000 on advertising. However, most

advertising is donated by HMOs, school districts, county boards, and others.

For example, in Volusia County, one large fast-food restaurant used tray

liners publicizing the program. According to program officials, the school

district and the county board have been creative and effective at

developing advertising strategies tailored to their community.

The program has specifically targeted teens, and African-American and

migrant children, who were not joining the program at expected rates. The

program used high school coaches and shop teachers to speak for the

program and school dial-up message systems and direct mail to reach

teens’ parents. The program has also worked through churches to reach

African Americans and through migrant crew chiefs to reach migrant

families.

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Minnesota’s

MinnesotaCare

Program

Background MinnesotaCare was established by the state legislature in 1992 to both

expand and replace Minnesota’s Children’s Health Plan. The Children’s

Health Plan, the first statewide, state-funded program providing health

insurance coverage for uninsured children of low-income families, began

in July 1988. When MinnesotaCare was implemented in October 1992, it

broadened the Children’s Health Plan’s eligibility criteria by allowing

parents and siblings living in the same households as qualifying children to

enroll, and it subsequently expanded to include adults without children. In

April 1995, Minnesota received HCFA approval of a Section 1115 Medicaid

waiver that integrated a segment of the MinnesotaCare

population—children and pregnant women—into the state’s Medicaid

program effective July 1, 1995. The waiver allows the state to receive

federal Medicaid funding for children and pregnant women in

MinnesotaCare, but leaves children and pregnant women subject to

MinnesotaCare rules regarding eligibility, enrollment, and cost-sharing.

The state hopes to develop uniform eligibility, enrollment, and other

criteria for MinnesotaCare, Medicaid, and the state’s General Assistance

Medical Care program.

Program Structure and

Operations

The program is administered by the state’s Department of Human

Services, the same agency that administers the state’s Medicaid program.

However, MinnesotaCare has a separate office within that agency, as well

as its own director and 89 dedicated staff. Other Department of Human

Services staff perform some duties related to the program as well.

Funding The portion of MinnesotaCare that covers children and pregnant women is

financed by a combination of federal Medicaid funding, state funds, and

enrollee premium contributions. The remainder of MinnesotaCare is

financed entirely by state funds and enrollee premiums, which is how the

whole program was financed before the waiver. The state finances its

share of the program through a 2-percent provider tax. Previous state

funding sources have included the state’s general funds and a 1-percent

cigarette tax. Program costs (including administrative costs and program

expenditures) were $36.6 million in fiscal year 1994, and are budgeted at

$93.9 million for fiscal year 1995.

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Eligibility Children under age 21, as well as their parents and dependent siblings if

they reside in the same household, may enroll in MinnesotaCare if (1) their

family income does not exceed 275 percent of the FPL, (2) they are

permanent Minnesota residents, (3) they have had no other health

insurance for the preceding 4 months, and (4) they could not get

employer-subsidized insurance for the preceding 18 months. (The last two

requirements do not apply to children in families with incomes that do not

exceed 150 percent of FPL.) Single adults and families without children

may enroll if their household incomes do not exceed 125 percent of FPL

and they satisfy the other requirements. If funding is available, the state

may increase the upper income limit for single adults and families without

children to 135 percent of FPL in October 1995 and to 150 percent of FPL in

October 1996.

The current eligibility criteria for MinnesotaCare are much broader than

the criteria used when the program that preceded it, the Children’s Health

Program, was first implemented in 1988. At that time, the only eligible

group was children aged 1 through 8 with family incomes up to

185 percent of FPL.

Enrollment As of July 1995, MinnesotaCare had 88,123 enrollees. Of this total,

50.7 percent were children, 43.2 percent were adults in households with

children, and 6.1 percent were adults in households without children.

MinnesotaCare has a mail-in enrollment and recertification process. A staff

of 44 eligibility representatives reviews the applications and follows up

with applicants by telephone or mail on an as-needed basis to verify

residency status, income, and availability of other health insurance. Since

May 1994, enrollees have received a generic identification card that the

state uses for all its state-supported health care programs.23

Covered Services, Costs, and

Cost-Sharing

MinnesotaCare provides children with a comprehensive benefit package

that includes primary and preventive outpatient care (including well-child

visits, immunizations, diagnostic testing, outpatient physician services,

and outpatient surgery); emergency and accident care; physical,

occupational, and speech therapy; prescription drugs; inpatient hospital

and psychiatric care; mental health and chemical dependency services;

vision, hearing, and dental care; home health care; durable medical

equipment and prosthetic devices; podiatry; chiropractic services; family

planning; case management; Christian Science sanitoriums;

daycare/school examinations; day treatment; hospice care; intermediate

23Previously, MinnesotaCare participants received an identification card that specifically indicated that

they were MinnesotaCare enrollees.

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care facilities for the mentally retarded; nurse anesthetists, private duty

nursing, nursing facility services, and in-home nursing services;

orthodontia; personal care; public health clinic visits; speech, hearing, and

language disorders treatment; and medical transportation. Adults receive a

similar benefit package, but a few services (such as nonpreventive dental

care) are not covered, and some others are subject to service limitations

or copayments. The benefit package has expanded considerably since the

inception of the Children’s Health Program in 1988, when only children’s

outpatient services were covered.

The average monthly cost per child for MinnesotaCare is $53, excluding

administrative costs. Enrollees pay a monthly premium that is determined

using a sliding scale linked to income level and household size and that

ranges from 1.5 to 8.8 percent of gross family income. However, a reduced

premium of $48 per year is payable for children in families with incomes

that do not exceed 150 percent of FPL. According to state officials, about

two-thirds of all children in the program fall into this category. The

program has no deductibles or copayments for children’s services, but

adults are required to contribute copayments for certain services.

Provider Network and

Reimbursement

MinnesotaCare gives enrollees access to the same providers who

participate in the state’s Medicaid program. It pays providers on a

fee-for-service basis using the Medicaid fee structure. Minnesota requires

providers to either take part in the state’s health assistance programs or

forgo participating in the more lucrative state and local government

employee health benefit programs.

Under the terms of the Medicaid waiver, most of the children in Medicaid,

including those transferred into Medicaid from MinnesotaCare, will

eventually be enrolled in HMOs. Program participants who live in areas

where there is a scarcity of HMOs will continue to be served by

fee-for-service providers. The state plans to award the first HMO contracts

in 1996.

Publicity, Outreach, and

Marketing

Program officials use a variety of methods to publicize the program,

including paid radio advertisements, radio and television public service

announcements, listings in community-based service agency publications,

and brochures and flyers. Officials also rely on contacts with hospitals,

doctors’ offices, advocacy organizations, public clinics, and schools,

among others.

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New York’s Child

Health Plus Program

Background Child Health Plus is a statewide, state-funded program created by the New

York State legislature in 1990 to insure children. The program’s goals are

to provide low-income children with comprehensive outpatient health care

services, increase children’s access to primary and preventive health care,

and improve participating children’s health status. The program is open to

children at all income levels, but only children in families with gross

income below 222 percent of FPL receive a subsidy.

Program Structure and

Operations

The New York State Department of Health has overall responsibility for

administering the program, while the State Insurance Department

approves participating insurance companies’ premiums and reviews

subscriber contracts. The State Insurance Department works with the

Department of Health to define “equivalent health insurance” to determine

which children can join the program. The program uses private insurers to

perform many administrative functions, including processing applications,

determining eligibility, collecting premiums, paying providers, engaging in

marketing and outreach, and monitoring quality assurance. The program

also contracts out marketing and outreach activities to two nonprofit

organizations.

Funding The program is funded by enrollee premiums and New York’s Bad Debt

and Charity Care pool, which is raised by an assessment on hospitals. The

amount appropriated to Child Health Plus limits the number of children

who may be enrolled. Child Health Plus received $55 million from the Bad

Debt and Charity Care pool during 1994 and has been budgeted

$76.5 million for 1995.

Eligibility Children may enroll in Child Health Plus if they (1) are under age 15 and

born on or after June 1, 1980; (2) do not have “equivalent insurance”;24

(3) are New York State residents (even if they are not legally in the United

States); and (4) are not enrolled in Medicaid. The maximum eligible age

has been increased since the start of the program from under 13 to under

15.

24The “equivalent insurance” provision is intended to exclude children with insurance coverage

“consistent with the Child Health Plus benefit package” and whose copayments and/or deductibles are

consistent with insurance industry standards.

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Enrollment Child Health Plus is targeted primarily at low-income children. According

to a survey of program applicants completed in 1993, most children joined

after losing private insurance coverage or Medicaid. Their average family

income was $16,000. As of July 1995, the program had 104,248 enrollees, of

whom 99.6 percent were subsidized (under 222 percent of FPL).

Insurers process enrollment using a simple one-page application, which

can be submitted by mail, without a face-to-face interview. The program is

flexible about the documents needed to prove eligibility. For example,

income can be proved by means of employer attestations or, as a last

resort, a self-declaration form. Under the “presumptive eligibility”

procedure, families lacking needed documentation but whose children

appear eligible can have their children covered for up to 60 days while

they complete the application process. Unlike Medicaid, which counts net

income and also uses a resource test, the Child Health Plus Program

counts gross income and omits a resource test, which expedites eligibility

determination.

Covered Services, Costs, and

Cost-Sharing

The program covers primary and preventive care (including well-child

care, in accordance with American Academy of Pediatrics guidelines,

immunizations, outpatient treatment of illness and injury, diagnostic tests,

and outpatient surgery); emergency care; prescription drugs; outpatient

treatment for alcoholism and substance abuse; short-term physical and

occupational therapy; radiation therapy; chemotherapy; and dialysis. It

does not cover inpatient care, including inpatient mental health care;

dental care (except when necessary to treat a medical condition); or

speech therapy.

In 1994, the average monthly per patient cost was $54.71. The monthly per

child premiums paid to insurers ranged from $36 to $66.50, reflecting

geographical and other differences among the insurers. In addition, the

Department of Health incurred $0.80 per patient per month in

administrative costs.

Most children’s families pay little for coverage and services. Families with

gross incomes below 160 percent of FPL pay no premium (almost

87 percent of enrolled children). Families with incomes between 160 and

222 percent of FPL pay $25 per child per year up to a maximum of $100 for

the entire family (13 percent of enrolled children) toward the premium

cost. Families with incomes above 222 percent of FPL pay the entire

premium (0.4 percent of enrolled children). Families pay no deductibles.

Families may have copayments of $35 for inappropriate ER use (or may

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Descriptions of the Six State- and Privately

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have these claims denied) and may have copayments of up to $3 for each

pharmacy prescription, depending on the insurer.

Insurer Payment and Provider

Networks

The program pays a capitated monthly fee per child to insurers to cover

enrolled children’s health care services. The participating 15 nonprofit

insurers joined by submitting bids in response to a 1990 request for

proposal. To join the program, insurers had to have an existing network of

providers in place, with a sufficient number of board-certified physicians.

Child Health Plus Program enrollees are given access to the same

physicians as plan members with private insurance.

The 15 insurers together cover the entire state. Children must enroll with

an insurer responsible for the area in which they live. Certain areas fall

within more than one insurer’s service area, so enrollees residing in those

areas have a choice of insurer. Of the 15 insurers, 12 are managed care

plans and 3 are indemnity plans. As of December 1993, 80 percent of the

enrollees were enrolled in managed care plans.

Publicity, Outreach, and

Marketing

The state contracted with two nonprofit organizations to provide

marketing and outreach services to the program; insurers also provide

such services.25 Both the contractors and insurers work through

community-based organizations that serve low-income populations, such

as churches, clinics, and schools. Both make presentations and distribute

brochures and posters. One of the contractors also arranges “enrollment

events” and operates a hotline for New York City. The other contractor

operates a statewide hotline for the program. In addition, the Department

of Health supports outreach. For example, the staff worked with the State

Education Department to send an informational letter about the Child

Health Plus Program to every school district superintendent. The

Department of Health also provides a toll-free referral hotline that is used

to publicize the program and refer callers to participating insurers.

25The state’s total estimated expenditures to the two contractors from the program’s inception through

the end of 1995 are approximately $1,602,000, including $815,420 for January 1, 1994, through

December 31, 1995. The amount paid to the insurers for marketing and outreach is included in their

premiums.

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Pennsylvania’s

Children’s Health

Insurance Program

Background Pennsylvania’s Children’s Health Insurance Program is a statewide,

state-funded program established by the Children’s Health Care Act of

1992 to provide free or subsidized health care coverage to uninsured,

nonMedicaid-eligible children. It is modeled on Western Pennsylvania’s

Caring Program for Children.

Program Structure and

Operations

The Children’s Health Insurance Management Team26 has overall

responsibility for the program. They prepare budgets, execute contracts

with insurers, approve rates, and coordinate enrollment outreach

activities. They contract with insurers or their designates to handle many

other administrative functions, including processing applications,

determining eligibility, collecting premiums, paying providers, and

engaging in outreach.

Funding The state funds the Children’s Health Insurance Program through a 2-cent

per pack cigarette tax, and through parental premium contributions. Some

insurers pay the parents’ portion of the premium. The state expended

approximately $9.4 million on the program during the fiscal year July 1993

through June 1994, and approximately $28 million is budgeted for fiscal

year 1995.

Eligibility Children may enroll in the Children’s Health Insurance Program if they are

(1) under age 6 with family income at or below 235 percent of FPL, or age 6

through 15 with family income at or below 185 percent of FPL;

(2) Pennsylvania residents for at least 30 days (except for newborns); and

(3) not eligible for Medicaid or other insurance. Children who might be

eligible for Medicaid must apply to Medicaid before they can be enrolled in

the Children’s Health Insurance Program. Children’s Health Insurance

Program participants are annually reassessed for eligibility. If during

annual eligibility reassessment an enrolled child appears Medicaid-eligible,

the Children’s Health Insurance Program will continue to cover the child

for up to 60 days while the Medicaid bureau determines the child’s

eligibility.

26The team consists of Pennsylvania’s Secretary of the Budget, Secretary of Health, and Insurance

Commissioner.

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Enrollment As of July 1, 1995, 49,634 children were enrolled in the Children’s Health

Insurance Program. Ninety-seven percent of these children have income at

or below 185 percent of FPL and have their premium fully subsidized. In

May 1995, approximately 1,504 children were on waiting lists across the

state. Children on the waiting lists may participate in the program by

paying an at-cost premium.

Insurers determine eligibility and process enrollment, which can be

completed entirely by mail. Enrollment procedures vary somewhat among

insurers. Families who pay part of the premium must remit the first

payment before enrollment.

Covered Services, Costs, and

Cost-Sharing

The Children’s Health Insurance Program covers primary and preventive

health care (including well-child visits, immunizations, diagnostic testing,

outpatient physician services, and outpatient surgery); emergency and

accident care; physical, speech, and occupational therapy; vision care

(limited to one pair of corrective lenses every 6 months and one pair of

frames every 12 months); and hearing, dental, home health,and

prescription drug services. An enrolled child who cannot qualify for

benefits under the Medical Assistance spenddown provisions is eligible for

a maximum of 90 days of inpatient services for each calendar year, which

includes inpatient mental health services. Also covered are transplant

services, ultrasound and nuclear medicine, and allergy testing.

The original benefit package was established legislatively, but some

benefits have been added, such as inpatient and outpatient mental health

services in 1994. The program does not exclude coverage for any

preexisting condition.

The average monthly cost per child is approximately $63, which includes

both premiums and some administrative costs. The program limits

insurers’ administrative cost reimbursement to no more than 7.5 percent

of submitted invoices. Premium rates vary by insurer and region—from

$57.77 to $64.25 per child per month for fully subsidized children, and from

$67.30 to $83.52 per child per month for partially subsidized children.

Most children’s families pay nothing for coverage, and the remainder are

partially subsidized. Families with income at or below 185 percent of FPL

(97 percent of enrolled children in July 1995) do not pay any share of their

children’s premiums. The state pays half the premium for children with

family income between 185 percent and 235 percent of FPL. Some insurers

subsidize the remaining half; otherwise parents must pay that share of the

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premium. The program requires no deductibles, and the only copayment

($5) is for prescription drugs.

Insurer Payment and Provider

Network

The Children’s Health Insurance Program pays a capitated monthly fee per

child to insurers to cover enrolled children’s health care services. Insurers

were selected through a competitive bid process, but the nonprofit

insurers were legislatively required to bid. Insurers who did not have the

lowest winning bid for a premium rate could participate if they were

willing to match that rate. Currently, four nonprofit insurers and one

for-profit insurer give families a choice of insurers in three of the four

regions.

About 80 percent of program children are enrolled in HMOs, and the rest

are in preferred provider networks.27 Children are automatically enrolled

in HMOs, where available. If a county changes to HMO service, children may

remain in the preferred provider network plan until their recertification,

but then they are automatically transferred to the HMO.

Publicity, Outreach, and

Marketing

Each of the insurers is responsible for program publicity and outreach.

The insurers use a variety of publicity and outreach approaches, including

paid radio, TV, and newspaper ads; distribution of brochures and flyers;

and contacts with hospitals, doctors, advocacy organizations, churches,

and schools. Insurers must develop an outreach plan and are required to

contribute at least 2.5 percent of the total amount they bill the program as

an in-kind outreach contribution. The Department of Health and the

Insurance Department also conduct some outreach.

Western Pennsylvania

Caring Program for

Children

Background The Western Pennsylvania Caring Program for Children was the nation’s

first private-sector initiative to provide primary care health coverage to

27We have previously described preferred provider networks as arrangements that retain many

elements of indemnity plans but provide enrollees a financial incentive to receive care from providers

selected by the insurer (Managed Health Care: Effect on Employers’ Costs Difficult to Measure,

GAO/HRD-94-3, Oct. 19, 1993, pp.7-8). Although Children’s Health Insurance Program officials did not

characterize its non-HMO plans as preferred provider networks, we believe they are, because children

in those plans who visit providers who are outside the insurer’s provider network may be required to

pay the difference between what the insurer pays its network providers and what the nonnetwork

providers charge.

Page 46 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix II 

Descriptions of the Six State- and Privately

Funded Programs

uninsured, low-income children who could not qualify for Medicaid. In

1984, a group of Presbyterian ministers from a local Pittsburgh church

became concerned that many children were losing employment-based

health care coverage as the local steel mills closed. The group approached

Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield, which

agreed to help provide health coverage for the children. Together they

developed the Caring Program, which enrolled its first child in June 1985.

The Caring Program has changed its eligibility standards and its benefits

since then to complement changes in Medicaid eligibility and the

introduction of the Pennsylvania Children’s Health Insurance Program, a

state-financed children’s health insurance program that was partially

modeled on the Caring Program and introduced in 1993.

Program Structure and

Operations

The Western Pennsylvania Caring Foundation, Inc., a nonprofit

organization set up by Blue Cross/Blue Shield, administers the Caring

Program. The Foundation conducts enrollment and eligibility

determination, care coordination for children with special health care

needs, and outreach. Blue Cross/Blue Shield provides claims processing,

retrieval, and legal services to the program.

Funding The Caring Program is financed by tax-deductible donations made by local

foundations, religious organizations, civic groups, labor unions,

corporations, schools, and individuals. Community contributions provide

significant financial support for the program—for example, for fiscal year

1994, Pittsburgh area communities donated $870,000. However, the Caring

Program’s major donor is Blue Cross/Blue Shield, which donates $2 for

every $1 contributed by other donors as well as all administrative costs,

including Foundation staffs’ salaries. In fiscal year 1994, Blue Cross/Blue

Shield contributed about $4 million.

Eligibility When the program began, it enrolled uninsured children not eligible for

Medicaid from birth to 19 years of age with total family income no greater

than 100 percent of FPL. But as more public coverage options became

available for some of the younger children through Medicaid and the

Children’s Health Insurance Program, the Caring Program changed its

eligibility rules to provide services to older children and to complement

rather than compete with the Children’s Health Insurance Program and

Medicaid coverage.

Children may enroll in the Caring Program if they (1) are age 16 to 19 with

total family income no greater than 185 percent of FPL, (2) are attending

Page 47 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix II 

Descriptions of the Six State- and Privately

Funded Programs

school, (3) have resided in Pennsylvania for the past 30 days, and (4) are

uninsured and ineligible for Medicaid. Applicants who appear eligible for

but are not receiving Medicaid must apply for Medicaid and be denied

before being enrolled in the Caring Program. On average, the Caring

Foundation refers about 300 to 400 applicants each month to Medicaid.

The Foundation recertifies eligibility annually on the family’s enrollment

date. At that time, if a child appears to have become Medicaid-eligible, the

Caring Program provides temporary coverage while the child’s Medicaid

eligibility is determined.

Enrollment As of July 1, 1995, 5,532 children were enrolled in the program. To enroll,

families fill out a simple, one-page application, which is processed by the

Foundation. If approved, the family is mailed an acceptance letter and a

provider directory. Children covered by a fee-for-service system get active

coverage as of the beginning of the month, but those covered by an HMO

must choose a provider to activate their coverage. All participants receive

an enrollment card that is practically identical to that used by any other

Blue Cross/Blue Shield plan member. Enrollees must enroll in HMOs if Blue

Cross/Blue Shield is operating an HMO in their county.

Covered Services, Costs, and

Cost-Sharing

The Caring Program’s initial benefit package was very limited, including

only doctor office visits, immunizations, diagnostic testing, emergency

care, and outpatient surgery. The program developers would have

preferred to provide a more comprehensive package at that time, but since

the program’s funding depended entirely on charitable donations, limiting

benefits allowed the program to serve more children.

When the Children’s Health Insurance Program began, the Caring Program

wanted to provide the same set of covered services. In 1993 and again in

1994, the Caring Program expanded its services, adding dental, hearing,

and vision care; prescription drugs; limited hospitalization; and mental

health services. As under the Children’s Health Insurance Program,

families of children who are hospitalized must apply for Medicaid

coverage after 3 days. For families who do not qualify for Medicaid, the

Caring Program will pay for up to 90 days per year.

Currently, the program covers primary and preventive health care

(including well-child visits, immunizations, diagnostic testing, outpatient

physician services, and outpatient surgery); emergency and accident care;

physical, speech, and occupational therapy; vision care (limited to one pair

of corrective lenses every 6 months and one pair of frames every 12

months); hearing, dental, and home health care; and prescription drug

Page 48 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix II 

Descriptions of the Six State- and Privately

Funded Programs

services. An enrolled child who cannot qualify for benefits under the

Medical Assistance spenddown provisions is eligible for a maximum of 90

days of inpatient services for each calendar year, which includes inpatient

mental health services. Also covered are transplant services, ultrasound

and nuclear medicine, and allergy testing. The program does not exclude

coverage for any preexisting medical conditions.

The average cost for services is now $70.60 per child per month. This does

not include any administrative expenses, which are donated by Blue

Cross/Blue Shield. In 1985, the more limited benefit package cost about

$13 per child. The program requires little cost-sharing from families:

Families do not have to pay any share of their children’s premiums. The

program requires no deductibles, but does have a $5 copayment for

prescription drugs.

Insurer Payment and Provider

Networks

The Foundation pays providers through Blue Cross/Blue Shield. Children

are enrolled in HMOs in 16 counties and in indemnity plans in 13 counties.

HMOs are paid on a capitated basis, while network and other physicians are

paid on a fee-for-service basis. Children may go to doctors outside the

Blue Cross/Blue Shield network, but if they do the families are responsible

for any charges beyond the rate Blue Cross/Blue Shield would normally

pay for services. Few children use doctors who are not Blue Cross/Blue

Shield providers.

Publicity, Outreach, and

Marketing

The Caring Program publicizes itself in various ways, from Mister Rogers

television spots to bus billboards to grassroots efforts in every county. In

addition, its fundraising efforts help make it known to churches and other

community groups who can help outreach to families. Three outreach

specialists work in 29 counties to locate sponsors for the children, make

presentations, distribute applications, and help families enroll. In 1993,

more than 100 schools and several major corporations helped the program

raise funds and publicize its services. Currently, several chain stores have

distributed flyers and hung posters to inform shoppers about the Caring

Program. In addition, members of the Pittsburgh Steelers football team

have made speeches to community groups, donated prizes to fundraisers,

and hosted kick-off luncheons and victory parties as incentives for schools

raising funds for the program. The Western Pennsylvania Caring

Foundation spent about $370,000 in fiscal year 1994 for outreach and

publicity for both the Caring Program and the Children’s Health Insurance

Program.

Page 49 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix III 

Limited Evaluations Show Programs

Improved Children’s Use of Health Care

Services

Limited available evaluations show that the six programs we visited have

improved children’s access to and use of health care. The programs

increased the likelihood that children would get the care that they needed,

reduced inappropriate ER use in some cases, and increased children’s use

of preventive services. Some evaluations suggest children enrolled in the

programs may still not be getting as many preventive services as

recommended by health authorities.

Incidence of Unmet

Medical Needs Has Been

Reduced

Three programs’ evaluations have found evidence that they have reduced

their enrollees’ level of unmet need for medical treatment. A 1991 survey

of participants in the Western Pennsylvania Caring Program for Children

found that, before enrolling their children in the program, 33 percent of

parents postponed taking them to a physician when they thought it was

necessary, but after enrollment only 2 percent did so. HCFA’s evaluation of

the Florida Healthy Kids Program found that more enrolled children had

their medical needs met than did uninsured children in those states. A

separate study of the Florida program found that only 1 percent of Healthy

Kids respondents, compared with 17 percent of non-Healthy Kids

respondents, failed to seek medical care for their children because the

cost of a doctor’s visit deterred them.

Inappropriate Use of

Emergency Room Was

Reduced in Certain

Programs

Low-income families sometimes use hospital ERs when treatment by a

primary care provider would be more appropriate and less costly. The

programs’ effect on ER use was mixed: ER use by program children

declined in one program, but not in two others. In fact, the two programs

that used copayments to discourage inappropriate ER use had different

results.

Evaluation of the Healthy Kids Program found that participating children

were significantly less likely to use the ER than a comparison group of

nonparticipants. In addition, a hospital used by program children in

Volusia County studied its ER usage and found that uninsured pediatric ER

visits declined by about 15 percent during the 2-year period after the

program began, without an increase in ER visits by children enrolled in the

HMO used by the program. Florida uses a copayment to discourage

inappropriate ER use.

However, ER use by program families in the Western Pennsylvania Caring

Program and New York’s Child Health Plus Program did not decrease.

According to a 1991 University of Pittsburgh survey, participants in the

Page 50 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix III 

Limited Evaluations Show Programs

Improved Children’s Use of Health Care

Services

Western Pennsylvania Caring Program used the ER slightly more often

following enrollment in the program. Preliminary results of the University

of Rochester’s survey of participants in a limited geographic area in New

York’s Child Health Plus Program showed no significant changes in ER use

following enrollment in the program, even though Child Health Plus

authorizes a copayment for inappropriate ER use. Statewide data are not

yet available to fully evaluate the program’s impact on ER use.

Preventive Services Used

but Perhaps Not Enough

A number of programs have been successful at encouraging use of primary

and preventive care services. However, evidence from three programs

suggests that preventive services may still be underused by program

participants.

Four programs found that enrolled children were more likely than

uninsured children to get preventive and primary care. For example, a

1991 survey of participants in the Western Pennsylvania Caring Program

found that the likelihood of a child’s having had at least one well-child visit

during the year and being up-to-date with immunizations increased after

the child enrolled in the program. Evaluations of the Florida program

found that enrolled children were more likely to have had a doctor’s visit

or a preventive checkup in the previous 3 months than a comparison

group of uninsured children. An Alabama Caring Program evaluation

found that 81 percent of the enrolled children had developed an ongoing

relationship with a pediatrician or family doctor, whereas before enrolling

in the program only 17 percent of these children had ever visited a private

doctor.

Despite these increases in children’s use of primary and preventive care,

some children may still not be using preventive services at recommended

levels. Several programs evaluated their enrolled children’s care use and

found that many children were not using their insurance to get an initial

checkup or to get immunized. For example, the Institute for Child Health

Policy in Florida analyzed Healthy Kids children’s use of health care

services. They found that 32 percent of program children studied had

never had a doctor’s examination, and that the poorest enrolled children

and African-American and Hispanic enrollees were more likely to have

never used program services—results similar to those found from

evaluating another health program serving a similar population. The

Institute for Child Health Policy concluded that various sociopolitical and

cultural factors may discourage African-American and Hispanic families

from getting preventive services for their children.

Page 51 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix III 

Limited Evaluations Show Programs

Improved Children’s Use of Health Care

Services

New York and Minnesota also found that children were not using

preventive services sufficiently. An early quality assurance study of New

York’s Child Health Plus Program found that enrolled children averaged

2.5 immunizations by their first birthday, even though American Academy

of Pediatrics guidelines call for a minimum of 8 immunizations. The

University of Minnesota found in a study of Minnesota’s Children’s Health

Program (the precursor to MinnesotaCare) that more than 30 percent of

enrolled children did not receive well-child care in 1990. According to

several program officials or analysts, many families thought they were

supposed to use their children’s coverage only when their children were

sick. Program officials or insurers in Florida, Minnesota, and New York

attempted to increase the use of preventive care through sending

newsletters and other written materials to families.

Page 52 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix IV 

GAO Contacts and Staff Acknowledgments

GAO Contacts Sally Jaggar, Director, (202) 512-7119

Sheila Avruch, Project Manager, (202) 512-7277

Staff

Acknowledgments

In addition to those named above, the following individuals made

important contributions to this report: Cassandra Gudaitis and Marie

Cushing led the team in Los Angeles and, with Jay Goldberg, drafted major

sections of this report and helped conduct case studies in Alabama,

Florida, Maine, New York, and Pennsylvania; Tim Fairbanks, Shawnalynn

Smith, and Howard Cott helped conduct case studies in Minnesota and

Maine; Richard Jensen and Michael Gutowski advised the team, with

assistance from Deborah Perry of the National Governors’ Association;

Karen Sloan helped write and revise the draft report; Susan Lawes assisted

in developing the case study design and protocols; and Paula Bonin

analyzed the March 1994 Current Population Survey for information on

uninsured children in states.

Page 53 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix IV 

GAO Contacts and Staff Acknowledgments

Page 54 GAO/HEHS-96-35 New Strategies to Insure Children
Appendix IV 

GAO Contacts and Staff Acknowledgments

Page 55 GAO/HEHS-96-35 New Strategies to Insure Children
Related GAO Products

Medicaid and Children’s Insurance (GAO/HEHS-96-50R, Oct. 20, 1995).

Health Insurance for Children: Many Remain Uninsured Despite Medicaid

Expansion (GAO/HEHS-95-175, July 19, 1995.)

Medicaid: Spending Pressures Drive States Toward Program Reinvention

(GAO/HEHS-95-122, Apr. 4, 1995).

Medicaid: Restructuring Approaches Leave Many Questions

(GAO/HEHS-95-103, Apr. 4, 1995).

Medicaid: Experience With State Waivers to Promote Cost Control and

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Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb. 14, 1995).

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Health Care Reform: Potential Difficulties in Determining Eligibility for

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Employer-Based Health Insurance: High Costs, Wide Variation Threaten

System (GAO/HRD-92-125, Sept. 22, 1992).

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(GAO/HRD-92-90, May 14, 1992).

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Health Insurance Coverage: A Profile of the Uninsured in Selected States

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Health Insurance: An Overview of the Working Uninsured (GAO/HRD-89-45,

Feb. 24, 1989).

(108220) Page 56 GAO/HEHS-96-35 New Strategies to Insure Children
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