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 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). They are also less likely to get care for injuries, see a physician if chronically ill, or get dental care. 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. 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. Starting in July 1989, states had to cover 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. 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. 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. (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. 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. 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.) In 1994, Medicaid covered 22.9 percent of U.S. children—16.1 million children. 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.) 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. 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 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. 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). 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. 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 not understand that children in two-parent families could be eligible for Medicaid. 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. 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 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. 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 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. 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. 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. 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. 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 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. 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 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. 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 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. 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. Age under which children are eligible (continued) Age under which children are eligible (continued) 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). 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. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. 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Summary: Pursuant to a congressional request, GAO provided information on the number of uninsured Medicaid-eligible children in 1994. GAO found that: (1) the percentage of children without health insurance was 14.2 percent in 1994; (2) the percentage of children with private health insurance has steadily decreased since 1987; (3) while there has been a decline in coverage for poor children, coverage for nonpoor children has remained stable; (4) Medicaid coverage for children was lower in 1994 due to methodological changes in the Current Population Survey; (5) there were 2.9 million Medicaid-eligible children that were not enrolled in Medicaid in 1994; (6) these children represented 30 percent of all uninsured children from birth to 5 years old, and had family incomes that fell below the federal poverty level; (7) the number of children eligible for Medicaid will increase in the next 6 years to include poor teens aged 13 to 19 years old; and (8) Medicaid will cover even more uninsured children as soon as the families of eligible uninsured children learn that they qualify for Medicaid.