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

June 1996 HEALTH INSURANCE

FOR CHILDREN

Private Insurance

Coverage Continues to

Deteriorate

G O A

years

1921 - 1996

GAO/HEHS-96-129

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-271717 

June 17, 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:

As the U.S. health care marketplace changes, having health insurance

coverage has become increasingly important for children. The transition

into greater reliance on managed care has left hospitals and physicians

less willing to provide charity care for those who lack insurance. Children

are particularly vulnerable to the lack of health insurance. Although a

healthy group, they need preventive and acute care for their optimum

development. If they do not get care when they need it, their health can be

affected for the rest of their lives.

As we have reported earlier,1

 private health insurance coverage for

children decreased between 1987 and 1993. Expanding children’s coverage

through the publicly funded Medicaid program helped to cushion the

effect of this decrease. The Medicaid expansion increased health

insurance coverage for poor children.2

 However, it did not lead to an

overall increase in the percentage of children covered because children

above the poverty level lost private coverage but were less likely to be

eligible for Medicaid. Since our earlier report, the Congress has considered

restructuring the Medicaid program, including children’s eligibility for

coverage. It has also considered proposals that would change the private

insurance marketplace. In addition, the shift toward managed care in the

health care marketplace has continued, which reduces providers’

willingness to care for uninsured patients.

Concerned about these issues and their impact on children, you asked us

to provide you with updated information for 1994 on whether health

insurance coverage for children had increased and in particular how poor

children were affected. You also asked us

1

See Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb. 14, 1995), Health Insurance for

Children: Many Remain Uninsured Despite Medicaid Expansion (GAO/HEHS-95-175, July 19, 1995),

and Medicaid and Children’s Insurance (GAO/HEHS-96-50R, Oct. 20, 1995).

2

Poor children are children in families with income at or below the Federal Poverty Income

Guidelines. These guidelines set income levels by family size to determine poverty. In 1996, a family of

three with income at or below $12,980 is considered poor.

Page 1 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

• whether more children in working families were depending on Medicaid

than had previously been reported,

• how many uninsured children might be eligible for Medicaid but not

enrolled in 1994, and

• why families of uninsured but Medicaid-eligible children might not be

seeking Medicaid coverage for their children.

To answer these questions, we analyzed the Bureau of the Census’ March

1995 Current Population Survey (CPS), which can be used to estimate

health insurance coverage for children from birth through 17 years old in

1994. The methodology for the CPS questionnaire and data collection had

been improved for the March 1995 CPS. In addition, the sample frame or

sample selection process for families had been updated by using 1990

census information. While these changes provide better estimates of

insurance coverage for 1994, in our opinion and that of Census Bureau

officials, some estimates for 1994 are not comparable to prior years’

estimates of insurance coverage primarily because of these

methodological changes. In this report, we highlight comparisons of 1994

and earlier estimates that we think are most comparable. (See app. I.) Our

work was conducted between January and May 1996 in accordance with

generally accepted government auditing standards.

Results in Brief The number of children without health insurance coverage was greater in

1994 than at any time in the last 8 years. In 1994, the percentage of

children under 18 years old without any health insurance coverage

reached its highest level since 1987—14.2 percent or 10 million children

who were uninsured. (See fig. 1.) In addition, the percentage of children

with private coverage has decreased every year since 1987, and in 1994

reached its lowest level in the past 8 years—65.6 percent or 46.3 million

children. In comparison, the loss of health insurance coverage for adults

18 to 64 years old appears to have stabilized in the last 2 years. Between

1993 and 1994, the decline in health insurance coverage for children was

concentrated among children in poor families. Health insurance coverage

remained stable for nonpoor children.

Among children whose parents are working, Medicaid continued to be an

important source of insurance coverage. The Medicaid expansions in

eligibility for low-income children not on welfare allowed more children of

working parents to become insured through Medicaid—a trend that

continued in 1994. But Medicaid coverage for children as estimated

through the CPS was lower in 1994 than 1993—which may be due to

Page 2 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

methodological changes in the CPS. (See app. I for more detail on these CPS

changes and their effects.)

Despite greater reliance on Medicaid for covering children of the working

poor, many eligible uninsured children do not enroll in Medicaid. For 1994,

we estimate that 2.9 million uninsured children were eligible for Medicaid

by federal mandate but did not enroll.3

 These Medicaid-eligible uninsured

children represent 30 percent of all uninsured children. Unless the

Congress changes Medicaid eligibility law, the group of children eligible

for Medicaid will grow between now and 2002 because current federal law

is phasing in Medicaid eligibility for poor teens 13 to 19 years old. In 1994,

there were 4.1 million poor teens in this age group. This continuing

expansion could cover more of the uninsured, because 1.3 million poor

teens 13 to 19 years old were uninsured in 1994. However, Medicaid can

only increase coverage if families of eligible uninsured children are

informed that their children are eligible for Medicaid and enroll them.

3

For 1993, these were children from birth to 5 years old with family income at or below 133 percent of

the federal poverty level and poor children 6 to 10 years old. Because coverage is being phased in for

children born after Sept. 30, 1983, for 1994, we considered children as Medicaid-eligible according to

federal mandate if they were from birth to 5 years old with family income at or below 133 percent of

the federal poverty level or if they were poor children 6 to 11 years old.

Page 3 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

Figure 1: In 1994, 14.2 Percent of

Children Were Uninsured

Uninsured

14.2%

10M

Medicaid

18.4%

13M

Private/Medicaid

4.5%

3.2M

Private

61.2%

43.1M

CHAMPUS

1.7%

1.2M

Note: M=million. Uninsured children are children who were reported to have no insurance

coverage at all for the entire year. Children reported as having health insurance coverage may

have been uninsured for some part of the year. Children with more than one source of coverage

reported may have had duplicate coverage at the same time or may have had different types of

coverage at different times of the year. CHAMPUS is the Civilian Health and Medical Program of

the Uniformed Services. The Census Bureau includes other types of public coverage in the

CHAMPUS coverage category, such as health coverage through the Indian Health Service or

state-funded programs. For this figure, more than one source of coverage is shown only for

children who have both private insurance and Medicaid coverage. Children with Medicare are

included with the Medicaid group. Children with both private insurance and CHAMPUS coverage

will be shown in the group with private insurance coverage. Children with Medicaid (or Medicare)

and CHAMPUS insurance will be shown in the section for Medicaid.

Background Studies have shown that uninsured children are less likely than insured

children to get needed health and preventive care. The lack of such care

can adversely affect children’s health status throughout their lives.

Without health insurance, many families face difficulties getting preventive

and basic care for their children. Children without health insurance or

with gaps in coverage are less likely to have routine doctor visits or have a

Page 4 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

regular source of medical care. When they do seek care, they are more

likely to get it through a clinic rather than a private physician or health

maintenance organization (HMO).4

 They are also less likely to get care for

injuries,5

 see a physician if chronically ill, or get dental care.6 They are less

likely to be appropriately immunized to prevent childhood illness—which

is considered by health experts to be one of the most basic elements of

preventive care.7

The Medicaid program is the major public funding source for children’s

health insurance. It is a jointly funded federal-state entitlement program

that provides health coverage for both children and adults. It is

administered through 56 separate programs, including the 50 states, the

District of Columbia, Puerto Rico, and the U.S. territories. States are

required to cover some groups of children and adults and may extend

coverage to others. Children and their parents must be covered if they

receive benefits under the Aid to Families With Dependent Children (AFDC)

program. Children and adults may also be eligible for the program if they

are disabled and have low incomes or, at state discretion, if their medical

expenses are extremely high relative to family income.

Beginning in 1986, the Congress passed a series of laws that expanded

Medicaid eligibility for pregnant women on the basis of family income, and

for children on the basis of family income and age. Before these eligibility

expansions, most children received Medicaid because they were on AFDC.

Before 1989, coverage expansions were optional for states, although many

states had expanded coverage.8

 Starting in July 1989, states had to cover

4

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

States, 1988,” Advance Data From Vital and Health Statistics of the National Center for Health

Statistics, No. 188, U.S. Department of Health and Human Services, Public Health Service, Centers for

Disease Control, National Center for Health Statistics (Hyattsville, Md.: 1990), pp. 1-8; and Alexander

M. Kogan, and others, “The Effect of Gaps in Health Insurance on Continuity of a Regular Source of

Care Among Preschool-Aged Children in the United States,” Journal of the American Medical

Association, Vol. 274, No. 18 (1995), pp. 1429-35.

5

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. 402-04.

6

Alan C. Monheit, and Peter J. Cunningham, “Children Without Health Insurance,” The Future of

Children: U.S. Health Care for Children, Center for the Future of Children, The David and Lucile

Packard Foundation, Vol. 2, No. 2 (Los Angeles, 1992), pp. 154-70.

7

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

Pediatrics, Vol. 86, No. 5 (1990), pp. 666-73; Charles N. Oberg, “Medically Uninsured Children in the

United States: A Challenge to Public Policy,” Pediatrics, Vol. 85, No. 5 (1990), pp. 824-33; and 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. 341-44.

8

Thirty-two states and the District of Columbia had expanded coverage for pregnant women and

infants, and 26 states and the District of Columbia had expanded coverage for older children as of

December 1988.

Page 5 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

pregnant women and infants with family incomes at or below 75 percent

of the federal poverty level. Two subsequent federal laws further

expanded mandated eligibility for pregnant women and children. By

July 1991, states were required to cover (1) pregnant women, infants, and

children up to 6 years old with family income at or below 133 percent of

the federal poverty level and (2) children 6 years old and older born after

September 30, 1983, with family income at or below 100 percent of the

federal poverty level. Current law expands the group of poor children over

6 years old eligible for Medicaid year by year until all poor children up to

19 years old are eligible in the year 2002. In addition, states may expand

Medicaid eligibility for infants and children beyond these requirements by

either phasing in coverage of children up to 19 years old more quickly than

required, by increasing eligibility income levels, or both. (See table II.2 for

current eligibility levels in states.)

These expansions partially fueled the increase in Medicaid costs in the

1990s, but children still represent less than one-fourth of Medicaid

expenditures. In 1994, nondisabled children represented a large

percentage of Medicaid recipients—49 percent—compared with the

percentage of Medicaid expenditures for medical care that they accounted

for—16 percent.9

 Nonetheless, Medicaid’s overall cost and the rate of cost

increases have raised concerns about the program’s impact on the federal

budget. Medicaid costs are projected to increase from about $156 billion in

1995 to $243 billion by the year 2000, according to the Congressional

Budget Office. The Congress has recently considered different options to

lower the cost of the program, including removing guaranteed eligibility

for some types of current recipients and giving capped funding to the

states as block grants.

Health Insurance

Coverage for Children

at Lowest Reported

Level Since 1987

In 1994, the percentage of children with private health insurance reached

the lowest level reported in the last 8 years—65.6 percent or 46.3 million

children.10 (See fig. 1 and table II.1.) Mirroring this trend, the percentage of

children who were uninsured rose to its highest reported level since

1987—14.2 percent or 10 million children. (See figs. 2 and 3 and table II.1.)

Compared with adults 18 to 64 years old, for whom private insurance

coverage has slightly increased in the last 2 years, coverage for children

appears to be decreasing.

9

This is for children under 21 years old and does not include disabled children. If disabled children

under 21 are included, all children on Medicaid under 21 represent 52 percent of recipients and 23

percent of medical expenditures. (HCFA only collects data on children under 21 years old.)

10These children might also have had other sources of coverage, such as Medicaid, in the same year.

Page 6 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

Figure 2: The Percentage of Children

and Adults With Private Insurance

Declined Since 1987

Percent

60

62

64

66

68

70

72

74

76

78

80

1987 1988 1989 1990 1991 1992 1993 1994

Year

Children Under 18 Years Old

Adults 18 to 64 Years Old

Source: The Bureau of the Census.

Page 7 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

Figure 3: The Percentage of Uninsured

Has Begun to Rise in the Last 2 Years

for Children but Not Adults

Percent

10

11

12

13

14

15

16

17

18

19

20

1987 1988 1989 1990 1991 1992 1993 1994

Year

Children Under 18 Years Old

Adults 18 to 64 Years Old

Source: The Bureau of the Census.

Decreased Coverage

Reported Despite Increase

in Parents Working

Full-Time

The estimated decrease in children’s coverage occurred although slightly

more children were reported to be in families with a parent who worked

full-time in 1994 than in 1993. Children of a parent who worked full-time

for the entire previous year are more likely to have private health

insurance than other children. However, in 1994, almost 25 percent of

children with a parent working full-time did not have privately funded

employment-based health insurance. Almost 12 percent of children with a

parent working full-time were uninsured.

Children whose parents worked at less than a full-time job for the entire

year were worse off for health insurance than children whose parents did

not work at all in 1994. Only 37 percent had employment-based insurance

(36.8 percent). More children of parents who worked less than full-time all

year were uninsured (21.7 percent) than were children of parents who did

not work at all in 1994 (14.6 percent). This is because children of parents

who are not working tend to be enrolled in Medicaid.

Page 8 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

More Poor Children

Estimated as Uninsured in

1994 Compared With 1993

A higher percentage of poor children were reported as uninsured in

1994—22.3 percent—than in 1993—20.1 percent. In contrast, reported

rates of being uninsured did not differ significantly between 1993 and 1994

for children above poverty. (See table 1.)

Table 1: Percent of Children Without

Health Insurance Coverage, by Poverty

Level

Figures are percents

1989 1993 1994

Percentage

point

difference

1993-94

Poora 25.0 20.1 22.3 2.2b

Near-poorc 26.5 24.5 24.9 0.4

Above near-poord 7.5 9.1 8.9 (0.2)

Note: Figures in each year are percentages of children who were uninsured for one entire year

within each income group. Only children who matched to a parent were included in this table.

aPoor families have incomes at or below 100 percent of the federal poverty level.

bStatistically significant at the 0.05 level.

cNear-poor families have incomes between 101-150 percent of the federal poverty level.

dAbove near-poor families have incomes above 150 percent of the federal poverty level.

Medicaid Continues to

Be a Significant

Source of Coverage

for Children, but

Many Eligible

Children Do Not

Enroll

In 1994, Medicaid covered 22.9 percent of U.S. children—16.1 million

children.11 This number was lower than the Bureau of the Census

estimated in 1993. The difference may be due partially to a reduction in the

number of children on AFDC (who are automatically eligible for Medicaid)

and partially to changes in CPS methodology that reduced the 1994

estimate, relative to the 1993 estimate. (See app. I.)

11These children are reported as having any Medicaid coverage, even if they also have

employment-based coverage. Of these children, 3.2 million had private coverage as well as Medicaid

coverage at some point in 1994. In our previous reports, children who had both Medicaid and

employment-based private coverage were counted as having employment-based coverage and not

counted as having Medicaid coverage.

Page 9 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

Figure 4: Estimated Medicaid

Enrollment for Children Expanded

Between 1989 and 1993, but Was

Lower in 1994

Percent

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

1987 1988 1989 1990 1991 1992 1993 1994

Year

Source: The Bureau of the Census.

Nevertheless, Medicaid’s role as an insurer for children in working families

not depending on welfare has grown. In 1994, 62 percent of children on

Medicaid had a working parent. Thirty percent of children on Medicaid

had a parent who worked full-time for the entire previous year and

another 18.8 percent had a parent who worked full-time but for less than

the entire year. Another 13 percent had a parent who worked part-time.

Only 38 percent had no working parent. In 1994, more than 50 percent of

the children on Medicaid did not receive AFDC or other public assistance.

Page 10 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

Figure 5: More Than 60 Percent of

Medicaid Children Had a Working

Parent and More Than 50 Percent Did

Not Receive AFDC in 1994

Working Full-Time All Year

30.3%

Working Less Than FullTime All Year

31.7%

Not Working

38.0%

With AFDC

Without AFDC

53.8%

46.2%

At Least 30 Percent of

Uninsured Children

Eligible for Medicaid by

Federal Mandate

Many uninsured children who are eligible for Medicaid do not enroll.

Present law mandates eligibility for children from birth to 5 years old with

income at or below 133 percent of the federal poverty level and for poor

children born after September 30, 1983. This means that poor children

Page 11 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

under 13 years old are now eligible and, year by year, more poor children

will become eligible until all poor children under 19 years old will be

eligible in 2002. States have the option to expand age and income eligibility

beyond this mandate for pregnant women, infants, or children, and 40

states have done so. (See table II.2 for states that have expanded eligibility

beyond federal requirements.)

We estimate that 14.3 million children in 1994 were eligible for Medicaid

by federal mandate because of their age and family income.12 Of those

children, 11.4 million had private or public insurance coverage and

2.9 million were uninsured (20.3 percent). The 2.9 million uninsured,

Medicaid-eligible children accounted for 30 percent of all uninsured

children.

Compared with children on Medicaid, higher percentages of uninsured,

Medicaid-eligible children had a working parent in 1994 (80.4 percent).

Almost three-fourths of these uninsured, Medicaid-eligible children lived in

the South (41 percent) or the West (30.4 percent). Over one-half were

African-American (21.7 percent) or Hispanic (34.7 percent).

More Uninsured Teens Will

Become Eligible for

Medicaid Coverage in the

Next 6 Years

Poor teens under 19 years old will be phased into Medicaid eligibility in

the next 6 years if current federal Medicaid eligibility mandates for

children are maintained. In 1994, an estimated 4.1 million children 13 to 18

years old were poor. In 1994, 32 percent of poor teens 13 to 18 years

old—1.3 million teens—were uninsured.

Parents May Not Enroll

Eligible Uninsured

Children in Medicaid for

Various Reasons

As we have previously reported, there are several possible reasons why

families may not enroll their children in Medicaid. First, low-income

families may not know that their children could be eligible for Medicaid

even if a parent works full-time or if the family has two parents. A study

that interviewed current AFDC recipients and former recipients who had

begun working found that 41 percent of AFDC recipients and 23 percent of

former recipients did not understand that a parent could work full-time

and receive AFDC for his or her children and an even larger percentage did

12For 1994 these were children from birth to 5 years old with family income at or below 133 percent of

the federal poverty level and poor children 6 to 11 years old—federal law mandates coverage for

children from birth to 5 years old, and for poor children older than 5 and born after September 30,

1983. For 1993, we counted children as eligible if they were up to 5 years old with family income at or

below 133 percent of the federal poverty level or were poor children 6 to 10 years old.

Page 12 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

not understand that children in two-parent families could be eligible for

Medicaid.13

Families participating in other programs for low-income persons also have

low rates of Medicaid enrollment. In 1992, only 48 percent of the women,

infants, and children enrolled in the Special Supplemental Program for

Women, Infants, and Children (WIC) were enrolled in Medicaid, even

though over 72 percent were in families with incomes below 130 percent

of the federal poverty level. In 1993, only 68 percent of children in Head

Start, an early childhood education program for low-income children, were

enrolled in Medicaid.

Second, getting enrolled in Medicaid is difficult for low-income families. In

a previous report, we found that many Medicaid applicants never complete

the eligibility determination process and about one-half are denied for

procedural reasons; that is, applicants did not or could not provide the

basic documentation needed to verify their eligibility or did not appear for

eligibility interviews.14 Finally, some families may not seek Medicaid until

they face a medical crisis or may not want to enroll in Medicaid because

they consider it a welfare program and therefore stigmatizing.

States can obtain federal matching funds to conduct outreach programs

about the Medicaid program. States determine their own outreach

programs—both the amount and the focus. According to one Health Care

Financing Administration (HCFA) official, Medicaid outreach to children’s

families has focused more on encouraging the use of preventive care by

enrolled children than on informing nonenrolled families that their

children might be eligible. Some states do try to inform low-income

families that they can get health insurance for their children through

Medicaid—either by using informational billboards, 800 telephone referral

numbers, or other means. In addition, HCFA and the Agency for Children

and Families have developed a cooperative agreement to work together

and with states and localities to improve outreach to families of potentially

eligible low-income children, particularly those enrolled in federally

funded child care and Head Start programs.

Fiscal pressures may have made some states less interested in expanding

the number of children receiving Medicaid than they were several years

13Sarah C. Shuptrine, Vicki C. Grant, and Genny G. McKenzie, A Study of the Relationship of Health

Insurance Coverage to Welfare Dependency (Columbia, S.C.: Southern Institute on Children and

Families, 1994), pp. 21-25.

14Health Care Reform: Potential Difficulties in Determining Eligibility for Low-Income People

(GAO/HEHS-94-176, July 11, 1994).

Page 13 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

ago. Even though children represent a relatively small percentage of

Medicaid expenditures (about 16 percent of expenditures are for

nondisabled children under 21 years old), growth in the number of

children on Medicaid has contributed to program expenditure increases.

Medicaid spending increases have become one of the largest budget

problems for states—representing 19.4 percent of state expenditures in

1994.

Conclusions Private health insurance is overwhelmingly employment-based in the

United States, but many children do not get this benefit even if their

parents work. Health insurance is less likely to be offered in the firms that

employ low-income workers. If health insurance is available through work

but is costly for workers, it is less likely to be affordable for low-income

workers.

Part of the reason that families with children may have difficulty affording

health insurance is that many children live in low-income families.

Twenty-four percent of children lived in poor families in 1994, and another

21 percent lived in families with income between 101 and 200 percent of

the federal poverty level. Moreover, families with employer-sponsored

health insurance have faced sharply rising costs over the last decade to

purchase family coverage through their employer. These rising costs may

prove to be much more of a burden for lower-income families.

Private health insurance coverage has continued to decrease for children.

As private coverage has decreased, Medicaid has become a more

important source of health insurance coverage, especially for children in

working families. Nevertheless, despite the expansion in public insurance

funding, 10 million children were uninsured in the United States in 1994.

Even more notable, the largest percentage of uninsured children were in

families with a working parent or parents. In addition, at least 30 percent

of uninsured children were eligible for Medicaid, which means that many

uninsured children are not getting the advantage of publicly funded

insurance.

As long as private coverage continues to decrease for children, the number

of children uninsured or on Medicaid will continue to grow. This strains

public resources—either to pay for Medicaid coverage or to provide direct

care or subsidies to hospitals to care for the uninsured. In the past,

providers have had various sources of funds to recoup some of the cost of

caring for the uninsured patient. In the era of managed care and

Page 14 GAO/HEHS-96-129 Children’s Health Insurance in 1994
B-271717 

cost-cutting, it is becoming more difficult for hospitals and physicians to

care for patients without insurance. As these trends continue, it will likely

become even more difficult to get care without insurance.

Medicaid cost increases are pressuring states and the federal government

toward different types of program changes. Changes to the Medicaid

program that remove guaranteed eligibility or alter the financing and

responsibilities of the federal and state governments may strongly affect

health insurance coverage for children in the future. Other types of

changes that strengthen the private insurance market may also have

significant effects on children’s coverage in the future.

Agency Comments We did not seek agency comments because this report does not focus on

agency activities. We did, however, discuss relevant sections of this report

with responsible officials in the Department of Health and Human

Services, HCFA, and the Department of Commerce, Bureau of the Census.

They offered technical suggestions that we included where appropriate in

the report.

As agreed with your office, we plan no further distribution of this report

for 30 days. At that time, we will make copies available on request. Please

contact me at (202) 512-7114 or Michael Gutowski at (202) 512-7128 if you

or your staff have any further questions. This report was prepared by

Michael Gutowski, Sheila Avruch, and Paula Bonin.

Sincerely yours,

William J. Scanlon

Director, Health Systems Issues

Page 15 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Contents

Letter 1

Appendix I 

Changes in the CPS

and Their Effect on

Estimated Insurance

Coverage and Other

Methodological

Considerations

18

CPS Improved, but Estimates Before 1994 May Not Be

Comparable

18

Private Insurance Comparable, but Type of Private Insurance

May Not Be

18

Medicaid Estimates for Children May Be Affected by Decreases

in AFDC Enrollment Rates and Change in Sampling Frame

19

Effect on Comparing 1994 With Our Previous Estimates 20

Methodology for Matching Children and Determining Parental

Work Status

21

Appendix II 

Insurance Status of

Children, 1987-94, and

Medicaid Eligibility,

by State, 1996

22

Related GAO Products 28

Tables Table 1: Percent of Children Without Health Insurance Coverage,

by Poverty Level

9

Table II.1: Health Insurance Status of Children Under 18 Years

Old

22

Table II.2: Medicaid Eligibility Levels for Pregnant Women and

Children, as of February 1996

22

Figures Figure 1: In 1994, 14.2 Percent of Children Were Uninsured 4

Figure 2: The Percentage of Children and Adults With Private

Insurance Declined Since 1987

7

Figure 3: The Percentage of Uninsured Has Begun to Rise in the

Last 2 Years for Children But Not Adults

8

Figure 4: Estimated Medicaid Enrollment for Children Expanded

Between 1989 and 1993, but Was Lower in 1994

10

Figure 5: More Than 60 Percent of Medicaid Children Had a

Working Parent and More Than 50 Percent Did Not Receive

AFDC in 1994

11

Page 16 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Contents

Abbreviations

AFDC Aid to Families With Dependent Children program

CHAMPUS Civilian Health and Medical Program of the Uniformed

Services

CPS Current Population Survey

HCFA Health Care Financing Administration

HMO health maintenance organization

WIC Special Supplemental Food Program for Women, Infants,

and Children

Page 17 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix I 

Changes in the CPS and Their Effect on

Estimated Insurance Coverage and Other

Methodological Considerations

The Bureau of the Census has made recent efforts to improve the accuracy

and ease of administering the CPS. These changes should improve

estimates of coverage, particularly for children. However, these changes

can affect the estimates reported. As a result, estimates for 1994 and

subsequent years may not be entirely equivalent to those for previous

years. Several changes completely or partially implemented this year

appear to have affected specific estimates of health insurance coverage.

CPS Improved, but

Estimates Before 1994

May Not Be

Comparable

Census reworded and reordered existing questions about health insurance

and added new ones for the March 1995 CPS, which reports 1994 data. This

was done as part of changing to a computer-assisted telephone

interviewing methodology. Census also changed the sample frame—or

types of families sampled to get a statistically representative

estimate—from one based on the 1980 census to one based on the 1990

census. These changes appear to have affected the 1994 estimates of the

percentage of people (particularly children) whose private insurance

coverage is employer-based versus privately purchased and the percentage

of children on Medicaid compared with previous years’ estimates.

Most people in the United States who have private insurance get their

insurance through their employer or union. The previous CPS questionnaire

asked first whether a person had any private insurance, then if that person

was the policyholder. Only after that did the questionnaire ask whether the

insurance was obtained through an employer or union. The new

questionnaire first asks directly whether a person has private insurance

through an employer or union. The questionnaire then asks about private,

individually purchased coverage.

Private Insurance

Comparable, but Type

of Private Insurance

May Not Be

Officials at Census believe that the 1994 estimate of overall private

insurance agrees well with previous years’ estimates, and the estimates for

individually purchased insurance and employment-based insurance are

superior to previous years’ estimates. However, the number of people who

report that their private insurance came from an employer or union has

increased, while the number who report that their private insurance was

individually purchased has decreased. Therefore, because these apparent

differences may be due to the questionnaire change rather than actual

changes in the composition of private insurance coverage, comparisons of

employment-based or private individual coverage in 1994 to previous years

may not be appropriate to understand trends in coverage. This is why we

Page 18 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix I 

Changes in the CPS and Their Effect on

Estimated Insurance Coverage and Other

Methodological Considerations

compared private coverage rather than employment-based coverage of

children over time in this report.

In addition, we are using a different definition of children on Medicaid for

this report than our previous report and correspondences. For this report,

our group of children on Medicaid are children with any Medicaid

coverage, even if they also have employment-based coverage. Previously,

we had excluded children with Medicaid coverage who also had

employment-based insurance in the same year from the Medicaid group.

We considered employment-based insurance their primary source of

coverage and included them in that group. But defining insurance

coverage this way led to a lower overall number and percentage of

children with Medicaid coverage. Therefore, for this report, we are

including children with both private and Medicaid coverage reported in

both categories. Figure 1 shows the overlap.15

Medicaid Estimates

for Children May Be

Affected by Decreases

in AFDC Enrollment

Rates and Change in

Sampling Frame

In the past, researchers have been concerned that the CPS underreports

Medicaid coverage, because CPS estimates of Medicaid enrollment have

historically been lower than HCFA numbers on Medicaid program

enrollment. Even if the CPS underreported Medicaid enrollment, consistent

estimates can be useful to follow overall insurance trends over time.

However, the calendar year 1994 CPS estimates of Medicaid coverage for

children are lower than the calendar year 1993 estimates. This is puzzling

to some researchers who have used the CPS in the past because HCFA data

on Medicaid program enrollment showed an increase in coverage between

fiscal year 1993 and fiscal year 1994. The apparent drop may be partially

due to a reported drop in the number of children enrolled in AFDC and it

may also be due to the change in the CPS sampling frame.

Between 1993 and 1994 the percentage of children who were reported to

be receiving AFDC or other assistance dropped from 10.6 percent to

9.6 percent—about 600,000 fewer children. Because children on AFDC are

entitled to Medicaid coverage, Census assigns Medicaid coverage to AFDC

children even if their parents do not report them as receiving Medicaid.

This partially explains why Medicaid coverage may have appeared to

15In our previous report and correspondences, we assigned a single source of coverage to children if

they had multiple insurance sources reported for a single year. We based the assignment for insured

children on a hierarchy—if they had any employment-based insurance, they were assigned to that

category; if they had no employment-based insurance, but had Medicaid or Medicare, they were

assigned to the Medicaid category; if they had neither employment-based insurance, Medicaid or

Medicare, but had CHAMPUS, they were assigned to CHAMPUS; if they had private, individually

purchased insurance, but none of the above categories, they were assigned to the individual privately

purchased coverage category.

Page 19 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix I 

Changes in the CPS and Their Effect on

Estimated Insurance Coverage and Other

Methodological Considerations

decrease. Department of Health and Human Services’ data also show a

small drop in the average monthly enrollment of children in AFDC between

calendar years 1993 and 1994, although because of the differences

between months included in calendar years and fiscal years, the drop does

not show up in fiscal year data until fiscal year 1995. In fiscal year 1995,

average monthly enrollment of children continued to drop.

Medicaid coverage also may have appeared to decrease because Census

changed the sample frame—or types of families that Census

interviews—from one based on the 1980 census to one based on the 1990

census. Because the March 1995 CPS was a transitional one for the sample

frame, half the families were chosen based on the 1980 frame and half

were chosen based on the 1990 frame. The percentage of children on

Medicaid was lower in the half chosen from the 1990 frame (22.3 percent)

than the half chosen from the 1980 frame (23.4 percent). While the sample

chosen from the 1990 frame should be a more accurate report of Medicaid

coverage, the differences between the two parts of the sample indicate

that reported differences between 1993 and 1994 Medicaid coverage levels

may be due in part to sampling frame changes rather than actual changes

in coverage.

Other types of health insurance coverage did not appear to be affected

much by sampling frame differences. Health insurance coverage estimates

for workers with private insurance or with CHAMPUS were almost the same

in the two halves of the sample frame.

Another issue with the 1993 estimate of children with Medicaid

coverage—which Census informed us has been resolved—concerns

miscoding. Last year, Census officials discovered some children appeared

to be miscoded as receiving Medicaid. Census officials attempted to fix

this through editing the CPS data tape, but the edited 1993 data tape may

still contain inadvertently included data that show some children in the

group with Medicaid who should not be in that group. According to

Census, the coding issue was resolved for the 1994 estimates.

Effect on Comparing

1994 With Our

Previous Estimates

These changes in reported coverage make some comparisons with our

previous reports and others’ reports based on the CPS problematic. While

the estimate of the uninsured should not be affected to any great extent by

changes in the questionnaire, estimates of employment-based insurance

and private, individually purchased insurance are not comparable from

1994 to previous years. However, estimates of private insurance (the

Page 20 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix I 

Changes in the CPS and Their Effect on

Estimated Insurance Coverage and Other

Methodological Considerations

combination of both) appear more comparable. Therefore, for this letter

we are reporting on comparisons of private coverage. Similarly, whether

private coverage came from employment or individual purchase can affect

other estimates when using a hierarchy to assign one source of coverage.

In addition, we are reporting children on Medicaid if they had any

Medicaid coverage (including those who also had employment-based

coverage) because this definition of Medicaid coverage should not be as

affected by the questionnaire change and is more comparable to previous

years’ data and better captures the full extent of U.S. children enrolled in

Medicaid.

Methodology for

Matching Children

and Determining

Parental Work Status

To determine characteristics of children’s parents, we followed a

methodology discussed in our previous report (see app. II of Health

Insurance for Children: Many Remain Uninsured Despite Medicaid

Expansion (GAO/HEHS-95-175)). We matched children to a parent (18 to 64

years old) in their household (or a related adult who served as a parent,

such as a grandparent or sister) and then linked that parent to a spouse, if

any. We matched about 98 percent of children, but fewer Medicaid and

uninsured children matched (about 96 percent) than did children with

employment-based insurance. We determined parental work status by

searching for a parent with the highest work status—full-time all year, less

than full-time all year, or not working. Figures 1 through 4 and table II.1

are based on the total number of children—that is, unmatched children.

Any discussions of employment status of parents are based on matched

children, as are figure 5 and table 1.

Page 21 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Table II.1: Health Insurance Status of

Children Under 18 Years Old

(1987-94—All Sources of Insurance

Reported)

Year

Private

insurance Medicaid Uninsured

1994a 65.6 22.9 14.2

1993b 67.4 23.9 13.7

1992c 68.7 22.0 12.7

1992 69.3 21.6 12.4

1991 69.7 20.4 12.7

1990 71.1 18.5 13.0

1989 73.6 15.7 13.3

1988 73.5 15.6 13.1

1987 73.6 15.2 12.9

Source: The Bureau of the Census.

Note: Rows may add to more than 100 percent because children with both private insurance and

Medicaid will be counted in both categories. In any year, under 5 percent of children have other

coverage, such as CHAMPUS. Children with coverage other than private insurance or Medicaid

and who are not uninsured are not counted in this table.

aData collection method changed to entirely computer-assisted telephone interviewing and

sample frame partially changed.

bData collection method partially changed to computer-assisted telephone interviewing.

cImplementation of 1990 census population weights, which affected the estimates—see other

estimate for 1992.

Table II.2: Medicaid Eligibility Levels

for Pregnant Women and Children, as

of February 1996

Percent of federal poverty levela

State

Pregnant

women

and

infantsb

Children

under 6

years old

Children 6

years old

and older

Age under

which

children

are eligible

Alabama 133 133 133 13c

Alaska 133 133 100 13c

Arizona 140 133 100 14

Arkansas 133 133 100 13c

California 200 133 100 19

Colorado 133 133 100 13c

Connecticut 185 185 185 13c

Delaware 185 133 100 19

Florida 185 133 100 20

Georgia 185 133 100 13c

Hawaii 300 300 300 19

Idaho 133 133 100 13c

(continued)

Page 22 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Percent of federal poverty levela

State

Pregnant

women

and

infantsb

Children

under 6

years old

Children 6

years old

and older

Age under

which

children

are eligible

Illinois 133 133 100 13c

Indiana 150 133 100 13c

Iowa 185 133 100 13a

Kansas 150 133 100 16

Kentucky 185 133 100 19

Louisiana 133 133 100 13c

Maine 185 133 125 19

Maryland 185 185 185 13c

Massachusetts 185 133 100 13c

Michigan 185 150 150 15d

Minnesota 275e 133 100 13c

Mississippi 185 133 100 13c

Missouri 85 133 100 19

Montana 133 133 100 13c

Nebraska 150 133 100 13c

Nevada 133 133 100 13c

New Hampshire 185 185 185 19

New Jersey 185 133 100 13c

New Mexico 185 185 185 19

New York 185 133 100 13c

North Carolina 185 133 100 13c

North Dakota 133 133 100 18

Ohio 133 133 100 13c

Oklahoma 150 133 100 13c

Oregon 133 133 100 19

Pennsylvania 185 133 100 13c

Rhode Island 250 250 100 13c

South Carolina 185 133 100 13c

South Dakota 133 133 100 19

Tennessee 185 133 100 13c

Texas 185 133 100 13c

Utah 133 133 100 18

Vermont 225 225 225 18

Virginia 133 133 100 19

Washington 200f 200 200 19

(continued)

Page 23 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Percent of federal poverty levela

State

Pregnant

women

and

infantsb

Children

under 6

years old

Children 6

years old

and older

Age under

which

children

are eligible

West Virginia 150 133 100 19

Wisconsin 185 185 100 13c

Wyoming 133 133 100 13c

Source: National Governors’ Association, State Medicaid Coverage of Pregnant Women and

Children: Winter 1996, MCH Update (Washington, D.C.: National Governors’ Association, 1996.)

Note: Percentages and ages in bold type show expansions beyond federal minimum

requirements, either for age, family income, or both.

aThe federal poverty level is the income level below which a family is poor, according to the

federal poverty income guidelines published every year by the Department of Health and Human

Services. The guidelines are for income by family size. For 1996, a family of three was poor if its

family income was below $12,980.

bInfants are children less than 1 year old.

cBorn after September 30, 1983.

dBorn after June 30, 1979.

eMinnesota defines infants as up to 2 years old.

f

Pregnant women are eligible if they have family income at or below 185 percent of the federal

poverty level. Infants receive automatic coverage if their mother was on Medicaid when the child

was born. In addition, infants are eligible if they are living in families with income up to

200 percent of the federal poverty level.

Page 24 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Page 25 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Page 26 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Appendix II 

Insurance Status of Children, 1987-94, and

Medicaid Eligibility, by State, 1996

Page 27 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Related GAO Products

Medicaid: Spending Pressures Spur States Toward Program Restructuring

(Testimony, GAO/T-HEHS-96-75, Jan. 18, 1996).

Health Insurance for Children: State and Private Programs Create New

Strategies to Insure Children (GAO/HEHS-96-35, Jan. 18, 1996).

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

Access Care (GAO/HEHS-95-115, Mar. 23, 1995).

Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb. 14, 1995).

Block Grants: Characteristics, Experience, and Lessons Learned

(GAO/HEHS-95-74, Feb. 9, 1995.)

Health Care Reform: Potential Difficulties in Determining Eligibility for

Low-Income People (GAO/HEHS-94-176, July 11, 1994).

Medicaid Prenatal Care: States Improve Access and Enhance Services, but

Face New Challenges (GAO/HEHS-94-152BR, May 10, 1994).

Employer-Based Health Insurance: High Costs, Wide Variation Threaten

System (GAO/HRD-92-125, Sept. 22, 1992).

Access to Health Insurance: State Efforts to Assist Small Businesses

(GAO/HRD-92-90, May 14, 1992).

(101395) Page 28 GAO/HEHS-96-129 Children’s Health Insurance in 1994
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100