Health insurance coverage often includes beneficiary contributions, which require an insured individual to pay some portion of medical expenses. The medical expenses charged to an individual—particularly for certain types of beneficiary contributions—can vary depending on the amount and type of services used. The two most common forms of beneficiary contribution requirements—health insurance premiums and cost sharing—differ in the method and frequency with which they are applied. Premiums are charged at regular intervals, such as monthly, and generally the same amount is charged each time. In contrast, cost sharing charges can vary depending on the amount and type of services used. There are three types of cost sharing arrangements: coinsurance, copayments, and deductibles (see table 1). Among low-income populations, approximately 40 percent of children and nondisabled adults had at least one nonpreventive physician visit during 2000. Among these individuals, children averaged close to three nonpreventive physician visits per year, while nondisabled adults averaged fewer than five visits per year. Similarly, for individuals who filled at least one prescription, the average number of filled prescriptions ranged from approximately 4 per year for children to over 32 per year for adults with disabilities. (See app. I for more information on beneficiary service utilization.) Medicaid and SCHIP generally limit the use of beneficiary contribution requirements. The following sections contain specific information about the programs and the federal laws pertaining to their use of beneficiary contributions. Established in 1965, Medicaid is a joint federal-state entitlement program that finances health care coverage for certain low-income families, children, pregnant women, and individuals who are aged or disabled. In fiscal year 2001, there were more than 46 million Medicaid enrollees, over half of whom were children, and federal and state expenditures totaled $228 billion. Medicaid eligibility is based in part on family income and assets; states set their eligibility criteria within broad federal guidelines. Eligibility criteria for each state’s Medicaid program are outlined in a CMS- approved state plan. Medicaid allows states to require certain beneficiaries to contribute to the cost of their coverage by charging premiums and requiring cost sharing. The populations that can be required to make beneficiary contributions under federal law differ depending on the type of beneficiary contribution—premiums or cost sharing—and the law places limits on the amounts of the contributions states can require. Federal law generally bars states from requiring beneficiary contributions of certain populations, but exceptions do exist. Additionally, states may seek federal approval to waive certain provisions regarding beneficiary contributions. States are prohibited from requiring premiums from certain low-income individuals within certain groups, including children, pregnant women, individuals in families with dependent children, individuals with disabilities, and elderly persons, but exceptions exist. Specifically, in Medicaid, the law allows states to require premiums from certain populations, such as certain working individuals with disabilities and families. (See table 2 for examples of these exceptions.) Additionally, states are allowed to charge premiums to medically needy individuals— generally, people who fall into one of the eligibility coverage groups indicated above, but who incur medical expenses such that their income, less these expenses, makes them eligible for Medicaid. If states require premiums for medically needy individuals, the regulations specify that the premiums be assessed on a sliding scale, from $1 to $19 per person per month, on the basis of their family’s total gross income. Federal law prohibits states from applying cost sharing requirements for certain individuals and certain services. Specifically, cost sharing may not be charged for categorically and medically needy children under 18 years of age, and pregnant women, for services related to the pregnancy or to conditions that could complicate the pregnancy. Additionally, cost sharing may not be charged for the categorically and medically needy for services furnished to individuals residing in a nursing home or other institution, who were required to spend most of their income for medical care; services furnished to individuals receiving hospice care; emergency services; and family planning services and supplies. States may require nominal copayments, coinsurance, or deductibles within federal limits from other beneficiaries or for other services (see table 3). Beneficiaries may be charged only one type of cost sharing per service. Providers may collect cost sharing amounts from beneficiaries and generally are not to be reimbursed by the state if they are unsuccessful in collecting cost sharing from beneficiaries. Providers generally may not deny services if beneficiaries are unable to pay cost sharing amounts. States must seek permission from the federal government to charge premiums or cost sharing beyond what is allowed under Medicaid. Under section 1115 of the Social Security Act, the Secretary of Health and Human Services has broad authority to approve demonstration projects that he determines are likely to promote Medicaid objectives. The Secretary may waive certain provisions of the statute if the Secretary finds it necessary for the performance of the experimental, pilot, or demonstration projects. Section 1115 waivers have been used to provide coverage to individuals not normally eligible for Medicaid—or to expand coverage to those who are eligible under Medicaid but are not included in the scope of the state’s plan. Beneficiary contribution requirements for individuals who become eligible for Medicaid through an 1115 waiver may be approved at the Secretary’s discretion, subject to some limitations. CMS reviews states’ proposed beneficiary contribution requirements for 1115 waivers as part of the waiver approval process and specifies any terms and conditions that a state must adhere to as a condition of the waiver approval. According to CMS, because the provisions of Medicaid law related to limitations on beneficiary contributions are applicable only to persons eligible under the state plan, specific waivers of the beneficiary contribution provisions are not always necessary. Waivers are necessary when states want to charge premiums or cost sharing amounts that are generally prohibited under federal law for individuals who are already covered under the state’s plan. As of February 2004, two states—Arkansas and Vermont—have received approval to charge individuals premiums and one state—Arizona—has received approval to charge individuals both premiums and cost sharing. For other populations, specific waivers of requirements regarding beneficiary contributions are not necessary. In particular, states are permitted to charge beneficiary contributions in excess of what would otherwise be permitted for populations who, without a waiver, would not be eligible for coverage under the state’s Medicaid plan. For these populations, states are permitted to end coverage for beneficiaries who fail to pay premiums or deny services to those who fail to pay cost sharing. As of February 2004, of the 22 states with statewide 1115 waivers, 21 states covered populations in their Medicaid program for which the Medicaid statutory provisions regarding limits on beneficiary contributions are not applicable. In 1997, Congress established SCHIP, which provides health care coverage to low-income, uninsured children living in families whose incomes exceed the states’ eligibility limits for Medicaid. SCHIP covered over 5.8 million children during fiscal year 2003, and federal and state expenditures were approximately $6.1 billion. States have three options in designing SCHIP—expand their Medicaid program, develop a separate child health program that functions independently of Medicaid, or combine these two approaches. The approach that a state chooses affects its beneficiary contribution policies. A state that uses its SCHIP allocation to expand Medicaid must follow Medicaid rules—thus SCHIP beneficiaries are subject to the state’s Medicaid policies with regard to premiums and cost sharing. For a state with a separate SCHIP program, federal law limits the premium and cost sharing amounts it may charge. States with a separate SCHIP program are prohibited from requiring premium or cost sharing contributions together totaling more than 5 percent of family income. States with separate SCHIP programs are also prohibited from charging any cost sharing on preventive services. In addition, for children in families with income at or below 150 percent of the FPL, there are specific limits on the amounts of premiums and cost sharing that states may charge in a separate SCHIP program (see table 4). For these individuals, federal regulation also prohibits states from requiring more than one type of cost sharing charge on each service. Additionally, regardless of family income or a state’s SCHIP design, states are prohibited from charging premiums or cost sharing to American Indians or Alaska Natives. Similar to Medicaid, to require premiums or cost sharing in SCHIP beyond what is permissible under federal law, states must seek waivers from the Secretary of Health and Human Services. In establishing SCHIP, Congress extended the applicability of section 1115 of the Social Security Act to SCHIP “in the same manner” as it applies to states under Medicaid. According to CMS, six states with SCHIP programs that are Medicaid expansions have received section 1115 waivers to require beneficiary contributions that would be allowable in a separate SCHIP program. In some cases, 1115 waiver approvals have allowed states to increase cost sharing in their premium assistance programs—programs in which the state helps individuals gain access to available employer-based insurance by using SCHIP funds to pay for part of an individual’s share of the cost of coverage. Specifically, two states—Illinois and Oregon—have waivers to allow for increased cost sharing for children in such premium assistance programs. In response to our survey, states reported that children were more likely to be subject to premiums and cost sharing in SCHIP than in Medicaid. Overall, 26 states charged premiums for some portion of children— “some,” “most,” or “all” in SCHIP, and 9 states charged premiums, through the use of 1115 waivers, for some portion of children in Medicaid. Twenty- five states charged cost sharing for children in SCHIP compared to six states for Medicaid. Most states that reported charging cost sharing applied copayment requirements to the six services we reviewed. In addition, the amounts of beneficiary contributions required for children varied on the basis of factors such as family income. Twenty-six states reported charging premiums for some portion of children in SCHIP, compared to 9 states for Medicaid: 5 states charged premiums for some portion of children in both Medicaid and SCHIP, 21 states charged premiums for SCHIP children only, and 4 states charged premiums for Medicaid children only. (See table 5.) Although federal law generally prohibits states from charging premiums for children in Medicaid, some states reported having received waivers from the Secretary of Health and Human Services granting them authority to do so. Of the nine states charging premiums for children in Medicaid, six states required premiums for children included in their 1115 waiver populations only. For example, Rhode Island charged premiums only for children with incomes between 150 and 250 percent of the FPL, all of whom became Medicaid eligible through its 1115 waiver. The remaining three states—Arizona, Arkansas, and Vermont—also had 1115 waivers but had received approval to waive provisions related to premium requirements. Thus, they were allowed to charge premiums for children. States generally are not allowed to charge premiums for children in their SCHIP Medicaid expansion programs, as these programs follow the law governing the Medicaid program. According to CMS, six states have received SCHIP 1115 waivers to require beneficiary contributions for children in their SCHIP Medicaid expansion programs. Three of those states—Missouri, Rhode Island and Wisconsin—used their 1115 waiver to implement premiums for some portion of their SCHIP beneficiaries. The remaining three states—Arkansas, New Mexico and Ohio—did not charge premiums for children in their SCHIP program. Among states with premium requirements for children, SCHIP programs often reported charging premiums for a larger proportion of their children than did Medicaid programs (see app. II). Ten of the 26 states charging premiums for children in SCHIP required them for all or most of their SCHIP children. In contrast, all nine of the states with premiums for children in Medicaid required them for only some of the population. The amount of premiums required for Medicaid and SCHIP children varied across and within states. (See app. III for the range in premiums for all states.) Some states reported varying premium amounts on the basis of beneficiaries’ family income, and some states reported capping the amount of premiums a beneficiary could be subject to in a given year. (See table 6.) The following are examples of the variation in states’ premium requirements. In Vermont, Medicaid premiums were assessed for eligible children in families with incomes above 185 percent of the FPL, and amounts varied from $25 to $35 a month depending on the family income. Medicaid programs in Rhode Island and Minnesota limited total yearly premium amounts to 4 percent and 7.5 percent of annual family income, respectively. In SCHIP, monthly premiums in Washington were $10 per child, with a cap of $360 per family per year. In New York, monthly premiums for families with incomes between 133 and 185 percent of the FPL were $9 per eligible child with a cap of $27 per family per month; families with incomes above 185 were charged $15 per eligible child with a cap of $45 per family per month. In requiring cost sharing amounts, states reported relying on copayments and generally did not report using the other two main types of cost sharing requirements—coinsurance and deductibles. Twenty-five states charged copayments for some portion of children in SCHIP, while six states charged copayments for some portion of children in Medicaid. (See table 7.) With regard to coinsurance, three states charged coinsurance in Medicaid; Alaska and Missouri charged only children aged 18 or over, and Arkansas charged only children in its 1115 waiver program. Additionally, four states charged coinsurance in SCHIP (Alaska, Arkansas, Colorado, and Utah). None of the states reported using deductibles as a form of cost sharing for children. While federal law prohibits states from charging cost sharing for children in Medicaid under age 18, some states require cost sharing to the extent it is permissible under Medicaid provisions or through an 1115 waiver. For the six states that charged copayments for some portion of Medicaid children, Alaska’s, Missouri’s, and Wisconsin’s copayment requirements applied to children age 18 or over, and Delaware reported charging copayments for nonemergency transportation, requirements that are permissible under federal law. Arkansas charged copayments only to children in its state’s 1115 waiver population. Tennessee, whose entire Medicaid program operates under an 1115 waiver, charged copayments to children at or above the FPL. With regard to cost sharing in SCHIP, six states obtained section 1115 waivers that allowed them to require beneficiary contributions from children in their SCHIP Medicaid expansion programs. Four of the states—Arkansas, Missouri, New Mexico and Wisconsin—used their 1115 waiver to implement copayments for some portion of their SCHIP beneficiaries. The remaining two states—Ohio and Rhode Island—did not charge copayments for children in their SCHIP programs. Among states with copayment requirements for children, SCHIP programs were more likely to charge a larger proportion of their population compared to Medicaid (see app. IV). Most states that reported charging cost sharing applied copayment requirements to the six health care services that we considered. (See table 8.) In addition, the amount of cost sharing that states charged for the six selected services varied by service and state. For example, in the Texas SCHIP program, copayments varied on the basis of family income, ranging from $2 to $10 per physician visit, and from $25 to $100 per inpatient hospitalization. Across states with copayments for physician services, copayment amounts ranged from $1 per visit in Missouri’s Medicaid program and Wisconsin’s Medicaid and SCHIP programs to as high as $25 per visit in Tennessee’s Medicaid program. (See app. V.) Some states varied cost sharing amounts for children on the basis of family income. For example, in Virginia, SCHIP copayments for children in families with income from 133 percent to below 150 percent of the FPL were $2 per physician visit or per prescription and $5 for these services for children in families with higher incomes. Of the six states that charged cost sharing for children in Medicaid, only Tennessee capped cost sharing amounts for children. In SCHIP, seven states set specific caps for cost sharing amounts for a child in a given year. (See table 9.) For example, SCHIP cost sharing was capped at $650 a year in Connecticut and $750 a year in West Virginia. Nearly half the states (25) reported assessing premiums for some adults enrolled in Medicaid, and a majority of the states (43) reported requiring cost sharing for some portion of adults, primarily in the form of copayments. Overall, 45 states required some portion of adults to share in the cost of their care by charging premiums, cost sharing, or both. (See fig. 1.) The states that required premiums generally did so on a limited basis, targeting portions of particular population groups, such as certain adults with disabilities. In contrast, the states with cost sharing requirements for adults in Medicaid charged several population groups and a larger portion of each group. Twenty-five states reported assessing premiums for some portion of their adult Medicaid populations. States mainly charged premiums to adults with disabilities (23 states) and parents (9 states), but a few states charged premiums to other adults, such as pregnant women (4 states) and noninstitutionalized elderly individuals (2 states). (See table 10.) (App. VI contains details on the portion of the populations charged premiums in each state.) Generally, states are not permitted to require certain individuals to pay premiums, including elderly persons, individuals with disabilities, and pregnant women. However, certain exceptions exist, for example: Four states (Hawaii, Minnesota, Rhode Island, and Vermont) reported charging premiums to pregnant women through their states’ 1115 waiver programs. Vermont had a waiver of the specific Medicaid provision regarding premium requirements, while the other three states charged pregnant women in their 1115 waiver programs. Hawaii, Rhode Island, and Vermont charged premiums only to pregnant women with incomes exceeding 185 percent of the FPL. In the fourth state, Minnesota, pregnant women with incomes at or below 275 percent of the FPL could choose whether to enroll in the state’s regular Medicaid program or the state’s 1115 waiver program. Only those enrolled in the 1115 waiver program were charged premiums, and failure to pay the required premiums did not result in the women’s disenrollment from the program. As allowed under federal law, states may charge premiums in Medicaid to certain individuals with disabilities, primarily those who are employed. For example, Connecticut reported charging premiums to working individuals with disabilities with incomes above 200 percent of the FPL. These individuals were required to pay a monthly premium equivalent to 10 percent of their income that exceeded 200 percent of the FPL, minus the amount the individuals or their spouses paid for any other health insurance. Premium amounts and requirements varied significantly across the 25 states. For example, in Massachusetts, monthly premiums ranged from $15 for families with incomes at the poverty level to over $928 for families with incomes over 1,000 percent of the FPL. Maine charged premiums equal to 3 percent of families’ net incomes for eligible parents with incomes above 150 percent of the FPL. (See app. VII for the income thresholds and ranges in amounts for premiums charged to adults in each state.) Twelve states capped the amount of premiums that beneficiaries could be subject to in a given year. For example, premiums for working individuals with disabilities in Mississippi were capped at 5 percent of annual income, and in Maine, premiums for some adults were capped at 3 percent of annual income. (See table 11.) Forty-three states reported requiring adult populations to share in the cost of their care by charging copayments, coinsurance, or deductibles. (See fig. 2.) All 43 states charged copayments for selected services to some portion of adults. Nine of these states also charged coinsurance to some portion of adults. Two of the 43 states—South Carolina and Wisconsin— required a deductible for elderly individuals who received pharmacy—but no other—benefits from the states’ Medicaid program. For example, all participants in South Carolina’s Medicaid pharmacy program were required to pay a $500 deductible for prescription drugs. Copayments were the predominate form of cost sharing for adults, with states most frequently reporting copayments for adults with disabilities, noninstitutionalized elderly persons, and parents. (See table 12 and app. VIII.) Three states required copayments for pregnant women (Delaware, Virginia, and Wisconsin) for services unrelated to the pregnancy. While states generally are prohibited from charging cost sharing, including copayments, for medical services for individuals residing in institutions, Delaware considers nonemergency transportation to be an administrative cost and thus was allowed to charge a $1 copayment. The services for which states most frequently reported charging copayments were physician services and prescription drugs. (See table 13.) Copayment amounts varied depending on the service and the state. Across states, copayments ranged from $.50 to $25 for physician services and prescription drugs. Across the services, most states that required copayments for inpatient hospital services charged higher copayment amounts for this service compared to the other five services. For example, Montana’s copayment requirement for inpatient hospital services was $100 per stay, whereas its copayment requirements for the five remaining services we reviewed were $1 to $5. (See app. IX for details on the cost sharing amounts, including copayments, for adults, by state.) In five states, the amount of cost sharing charged varied by income for some portion of adults. For example, copayment amounts for physician services in Utah varied from $3 or $5 per visit depending on income. Six states reported placing a cap on the amount of cost sharing an individual could be subject to in a given year. For example, in Pennsylvania cost sharing expenses were capped at $90 per beneficiary every 6 months, and in New Mexico cost sharing amounts for working individuals with disabilities were capped at 3 to 5 percent a year depending on income. From the beginning of their 2001 state fiscal years through August 1, 2003, 34 states reported increasing and 10 states reported decreasing the amount of beneficiary contributions they required in Medicaid, SCHIP, or both. We considered states to have increased beneficiary contribution requirements if they either raised the amount of existing contributions or instituted new contribution requirements for certain populations or services. For children, 18 states increased the amount of beneficiary contributions required in Medicaid, SCHIP, or both. For adults in Medicaid, 30 states increased the amount of beneficiary contributions. For the states that provided us information on the amount of beneficiary contribution increases, premium increases to existing requirements ranged from $2 a month to $39 a month. Other states added new premium requirements, some of which were as much as several hundred dollars a month. In contrast, states primarily increased copayment requirements by $5 or less. For a small number of states, however, copayment increases were more significant. New Hampshire SCHIP, for example, increased copayments for ER visits from $25 to $50 per visit. While no states reported decreasing their beneficiary contribution requirements for children in Medicaid, five states decreased these requirements (premiums, cost sharing, or both) for some portion of children in SCHIP, and five other states decreased cost sharing requirements for some portion of adults in Medicaid. From the beginning of their 2001 state fiscal years through August 1, 2003, 18 states reported increasing the amount of beneficiary contributions required for children in Medicaid, SCHIP, or both. Beneficiary contribution requirements were increased solely in Medicaid by 3 states, solely in SCHIP by 12 states, and in both Medicaid and SCHIP by 3 states. During the same period, 5 states decreased the amount of beneficiary contributions required for children, with all decreases occurring in states’ SCHIP programs. Of the 9 states charging premiums for children in Medicaid, 5 reported increases in premiums. Eleven of the 26 states charging premiums for children in SCHIP also reported increased premium amounts. (See table 14.) Some states increased existing premiums, while other states added new premiums, as shown in the following examples. Vermont increased its existing Medicaid monthly premiums by $5 or $9 per household depending on income; it increased its SCHIP monthly premiums by $20 per household. Premiums for newly covered populations of children were added in Arizona’s Medicaid program and Maryland’s SCHIP program. While no states decreased their premiums for children in Medicaid, two states—Kansas and Utah—decreased SCHIP premium amounts. For example, in February 2003, Kansas increased its monthly premium amounts by $20 or $30, depending on family income, and then decreased them by $10 or $15 dollars a few months later. Delaware was the only state of the 6 states charging copayments for children in Medicaid that reported increasing copayment amounts, compared to 6 of the 25 states charging copayments for children in SCHIP that reported increasing copayment amounts. (See table 15.) Delaware added a copayment in Medicaid for nonemergency transportation services in 2002. As described in the following, of the six states that reported increasing SCHIP copayment requirements, two increased existing copayments, and four both increased existing copayments and added new copayment requirements. Missouri and New Hampshire increased existing copayments. For example, New Hampshire increased copayments for nonemergency use of the ER from $25 per visit to $50 per visit and increased copayments for physician visits from $5 to $10. Kentucky, Texas, Utah, and West Virginia made multiple changes to their copayment requirements. For example, Utah added a copayment for dental services for children in families with incomes at or below 150 percent of the FPL and increased copayment amounts for children in families with incomes above 150 percent of the FPL. While no states reported decreasing copayment amounts for children in Medicaid, four states did so for SCHIP. Colorado decreased the SCHIP copayment for nonemergency use of the ER from $5 to $3, and Virginia decreased copayments for vision exams from $25 to either $2 or $5, depending on family income. In addition to decreasing copayment amounts, the remaining two states, Texas and Utah, also increased copayments during the same period. Texas’ changes to copayments varied by service and family income. For example, the state decreased the copayment for generic prescription drugs by $1 or $2 for certain SCHIP beneficiaries, while increasing the copayment for brand name prescription drugs by between $3 and $10 for these and other beneficiaries. Copayment increases for other services in Texas ranged from $3 to $50. Utah decreased SCHIP copayment amounts for children in families with incomes at or below 150 percent of the FPL by $2 for physician services, inpatient and outpatient hospital services, and ER services. The state also increased copayments by $5 for physician and ER services, and $1 for certain prescription drugs for children in families with incomes above 150 percent of the FPL. While none of the states changed coinsurance requirements for children in Medicaid, one of the four states (Alaska, Arkansas, Colorado, and Utah) that charged coinsurance in SCHIP (Colorado) increased its coinsurance requirements. Thirty states reported increasing the amount of beneficiary contributions charged to some portion of adults in Medicaid. Most of these states (24) increased copayment amounts; fewer states increased premiums (12) and coinsurance amounts (2). Five states decreased beneficiary contribution requirements, specifically with respect to cost sharing. From the beginning of their 2001 state fiscal years through August 1, 2003, 12 states reported increasing premiums for some portion of adults in Medicaid. Half of these states increased the amount of existing premium requirements. For example, Rhode Island increased monthly premiums from approximately 3 percent of a family’s income to approximately 4 percent, and Vermont increased premiums for certain working individuals with disabilities by $25 to $36 a month, depending on the individual’s income and whether he or she had other insurance. The other half of these states added new premium requirements. For example, in January 2003, Arizona began covering working individuals with disabilities, requiring the new beneficiaries to pay monthly premiums of $15 or $25, depending on their income. In 2002, Washington added a premium for certain families covered under transitional Medicaid assistance. While a few states increased premiums for pregnant women, adults with disabilities, and parents, no states increased premiums for noninstitutionalized elderly beneficiaries. (See table 16.) No states decreased premium amounts for adults during this period. With regard to cost sharing, 25 states reported increasing requirements for some portion of Medicaid adults. Twenty-two of these states increased only copayment requirements, one state increased only coinsurance requirements, and two states increased a combination of cost sharing requirements. States’ cost sharing increases were generally targeted to noninstitutionalized elderly persons, adults with disabilities, parents and medically needy individuals. (See table 17.) Some states increased the amount of existing cost sharing requirements, while other states added cost sharing requirements for new services, as shown in the following examples: Both Nebraska and South Carolina increased prescription drug copayments by $1, and Utah increased copayments for drugs by $2. In North Dakota, copayments for inpatient hospitalization increased from $50 to $75 per stay, and copayments for nonemergency visits to the ER increased from $3 to $6 per visit. Washington implemented a $3 copayment for nonemergency visits to the ER in July 2002, while Oklahoma added $1 to $3 copayments for certain services, such as outpatient hospital services. During this same time period, five states reported decreasing copayment or coinsurance requirements for portions of their adult population. Specifically, Illinois, Indiana, Maryland, and Montana decreased copayment amounts for some portion of adults. For example, both Illinois and Maryland eliminated their $1 copayments for generic prescription drugs. Only Arkansas decreased coinsurance requirements for adults. In November 2001, the state decreased the coinsurance amount for inpatient hospitalization for most adults by 12 percent, from 22 percent of the cost of the first day of hospitalization to 10 percent. We asked CMS officials to verify the technical accuracy of the statutory and regulatory information on Medicaid and SCHIP beneficiary contributions presented in the background section of this report. These officials provided technical comments, which we have incorporated as appropriate. Because we did not evaluate CMS’s management of the Medicaid and SCHIP programs, we did not ask CMS to comment on other sections of this report. As agreed with your offices, we plan no further distribution of this report until 30 days from its date of issue, unless you publicly announce its contents. At that time, we will send copies of this report to the Administrator of the Centers for Medicare & Medicaid Services. We will also make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. Please call me on (202) 512-7118 or Carolyn Yocom on (202) 512-4931 if you have questions about this report. Major contributors to this report are listed in appendix X. The medical expenses charged to an individual—particularly for cost sharing provisions—can vary depending on the amount and type of services used. The Medical Expenditure Panel Survey (MEPS) provides data on individuals’ annual utilization of medical services. MEPS, conducted by the Agency for Healthcare Research and Quality (AHRQ), consists of four surveys, including the Household Component, which provides nationally representative data and expenditures for the U.S. civilian noninstitutionalized population. The MEPS Household Component is a survey of individuals regarding their demographic characteristics, health insurance coverage, and health care use. At the time of our analysis, the 2000 version of the MEPS household component was the most recent version with all of the necessary data available. To determine service utilization for low-income populations, we included individuals with incomes below 200 percent of the FPL. For this cohort, we analyzed data for the following five population groups: (1) children (defined as individuals under age 18), (2) pregnant women aged 18 and over, (3) elderly persons—individuals aged 65 and over, (4) adults aged 18 to 64 with disabilities, and (5) nondisabled adults aged 18 to 64. For each of these population groups, we calculated the proportion of the population that used the following five services—(1) inpatient hospital, (2) outpatient hospital, (3) physician, (4) prescription drug, and (5) dental—at least once during the year (see table 18). For example, approximately 38 percent of children had a nonpreventive physician visit during the year, and almost 79 percent of adults with disabilities visited the physician for nonpreventive care. For the individuals in each population group who used a service, we calculated their average utilization rates for each of the selected services. The utilization rates for each service, displayed in table 19, represent the average use among individuals who used that particular service at least once during the year. Additionally, since federal law generally does not allow states to charge Medicaid cost sharing for emergency services, we calculated the utilization rates for nonemergency physician and dental visits by excluding visits classified in MEPS as emergencies. Similarly, since SCHIP generally does not allow states with separate SCHIP programs to require cost sharing for preventive medical or dental visits, we excluded certain types of visits we considered as preventive, such as well-child exams and dental visits for teeth cleaning. Appendix II: Premium Requirements for Children in Medicaid and SCHIP, by State, as of August 1, 2003 State only charged premiums to some portion of children with special needs. State did not charge premiums, but had an enrollment fee. Tennessee, which operates its entire Medicaid program under an 1115 waiver, charged premiums for some children in families with incomes at or above the FPL. Tennessee did not have a SCHIP program. Texas also had an enrollment fee. Lowest percentage of the FPL at which state $16.50 to $110 $9 or $15 per individual; $27 or $45 per family $61 to $92 $15 to $18 $13 to $25 per quarter $10 per individual with $30 family maximum $30 to $360 In Minnesota, families could choose to enroll their children in either the state’s regular Medicaid program or its 1115 waiver program – both of which covered children from families with incomes up to 275 percent of the FPL. Children in families that chose to enroll in the 1115 waiver program were charged premiums regardless of their family income. Thus, families with incomes less than 1 percent of the FPL could choose to pay premiums. Appendix IV: Copayment Requirements for Children in Medicaid and SCHIP, by State, as of August 1, 2003 Arkansas charged copayments to all children in its 1115 waiver program, but did not charge copayments to other children. Delaware’s only copayment, which the state charged to all populations in its Medicaid program, was for nonemergency transportation services. Although Delaware did not charge copayments to children in SCHIP, the state did charge a fee for inappropriate use of the emergency room. Maryland’s SCHIP program did not charge copayments, but SCHIP beneficiaries receiving coverage through Maryland’s employer-sponsored insurance program may be charged copayments by their health plan. Tennessee, which operates its entire Medicaid program under an 1115 waiver, charged copayments for some children in families with incomes at or above the FPL. Tennessee did not have a SCHIP program. NA = Not applicable. The state did not charge cost sharing for this service. Delaware charged a $1 copayment for nonemergency transportation. Missouri did not have a copayment for prescription drugs in Medicaid, but some children were charged a dispensing fee for prescriptions. Appendix VI: Premiums for Adult Populations in Medicaid, by State, as of August 1, 2003 The following states did not charge premiums to any adults in Medicaid: Alabama, Arkansas, Colorado, Delaware, District of Columbia, Florida, Georgia, Idaho, Kentucky, Louisiana, Maryland, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Virginia, and West Virginia. This population includes working adults with disabilities. States may require premiums from certain working adults with disabilities who received Medicaid coverage under the Balanced Budget Act of 1997 or the Ticket to Work and Work Incentives Improvement Act of 1999. Population not covered in the state’s Medicaid program. State charged premiums to all working individuals with disabilities, but did not charge premiums to other adults with disabilities. State charged premiums to some portion of childless adults. Maine charged premiums to individuals in the state’s HIV/AIDS waiver program. Tennessee, which operates its entire Medicaid program under an 1115 waiver, charged premiums to some adults enrolled in the state’s 1115 waiver program who had incomes at or above the poverty level. Not applicable: Tennessee did not report information based on these population groups. Utah charged an enrollment fee to all adults enrolled in the state’s primary care waiver program. Vermont charged premiums to some adults enrolled in the state’s 1115 waiver program. Individual, couple, or household $80 to $220 Individual $6 to $20 Individual 5% of income Individual $61 to $92 Family $20 to $550 for an individual; $40 to $1,375 for a family 15% of income Individual $10 semi-annually to $75 per month Individual or household Formula based on income Individual or household $25 to $1000; $30 to $300 Formula based on income Individual This appendix reflects the range in premiums states charged across their entire adult population. The lowest income level at which an adult could be charged premiums in this state’s Medicaid program equated to less than one percent of the FPL. However, for certain populations, there were higher income thresholds at which the state began charging premiums. Pennsylvania charged premiums only for working individuals with disabilities whose incomes were below 250 percent of the FPL. Appendix VIII: Copayment Requirements for Adults in Medicaid, by State, as of August 1, 2003 The following states did not charge copayments to any adults in Medicaid: Hawaii, Idaho, Michigan, Nevada, New Jersey, Ohio, Rhode Island, and Texas. Population not covered in the state’s Medicaid program. Alaska also charged copayments to all individuals qualifying for transitional Medicaid assistance. Delaware’s only copayment, which the state charged to all populations in its Medicaid program, was for nonemergency transportation services. Maine also charged copayments to all individuals enrolled in its HIV/AIDs waiver program and all individuals in its comprehensive 1115 waiver program. In addition, individuals participating in the Missouri’s 1115 waiver program, which extends 12 months of additional coverage to working parents or caretakers, were also charged copayments. As of January 2004, this program had approximately 2,400 beneficiaries. Nebraska also charged copayments to most individuals in its refugee resettlement program. Oregon also charged copayments to most childless adults. Pennsylvania also charged copayments to most adults in its general assistance program. State also charged copayments to all individuals in its state’s Medicaid pharmacy program. Tennessee, which operates its entire Medicaid program under an 1115 waiver, charged copayments to some adults enrolled in the state’s 1115 waiver program who had incomes at or above the poverty level. Not applicable: Tennessee did not report information based on these population groups. Utah also charged copayments to all individuals enrolled in its primary care waiver program. Vermont also charged copayments to all individuals enrolled in its 1115 waiver program. Nonemergency use of the emergency $0.50 or $1 $0.50 or $2 $1 or $3 $1 or $2 $3 (brand name only) NA 5% of payment; maximum of 5% of payment; $5 to $25 $5 or $10 $25 or $50 $15 or $25 $2 or $3 $3 or $5 $2 to $5 or 25% $6 or $30 10% of allowable Medicaid payment $3 or $25 per $1 to $10 or 50% $0.50 to $3 $1 to $3 $.50 to $15$.50 to $3 $2 to $25 NA = Not applicable. The state did not charge cost sharing for this service. This appendix reflects cost sharing amounts charged by states for the services and portions of the Medicaid adult populations subject to cost sharing charges. The amount of cost sharing and the services subject to cost sharing may vary within a state by population. See Appendix VIII for details on the adult populations subject to copayment requirements in Medicaid. Delaware’s only cost sharing was a $1 copayment for nonemergency transportation. llinois did not require cost sharing for all procedures within this service. Major contributors included Catina Bradley, Janice Raynor, Michelle Rosenberg, Kevin Milne, and Elizabeth T. Morrison.

Summary: Over 50 million low-income adults and children receive health insurance coverage through Medicaid and the State Children's Health Insurance Program (SCHIP). Federal law allows states to require beneficiary contributions, such as premiums and cost sharing (coinsurance, copayments, and deductibles), for at least some Medicaid and SCHIP beneficiaries. GAO was asked to (1) identify and compare states' Medicaid and SCHIP beneficiary contribution requirements for children, (2) identify states' Medicaid beneficiary contribution requirements for adults, and (3) determine the extent to which states' Medicaid and SCHIP beneficiary contribution requirements have changed since 2001. GAO surveyed Medicaid and SCHIP program offices in the 50 states and the District of Columbia about their beneficiary contribution requirements as of August 2003, including their requirements for specific population groups and for six selected services, such as inpatient hospital, physician services, and prescription drugs. For each population group covered, states were asked to indicate the portion of the group charged beneficiary contributions by selecting "all," "most," "some," or "none." GAO also interviewed officials of the Centers for Medicare & Medicaid Services (CMS) regarding the Medicaid and SCHIP statutory requirements for beneficiary contributions. GAO's survey found that children were more likely to be subject to beneficiary contributions, specifically premiums and cost sharing, in SCHIP than in Medicaid. Overall, 26 states reported charging premiums for a portion of children--"some," "most," or "all"--in SCHIP, compared to 9 states in Medicaid. Twenty-five states charged cost sharing for some portion of children in SCHIP, compared to 6 states for Medicaid. States used copayments as the primary form of cost sharing for children. Most states that reported charging cost sharing applied copayment requirements to the six health care services. Most states reported requiring beneficiary contributions from adults enrolled in Medicaid. Twenty-five states charged premiums, generally charging portions of certain populations, such as adults with disabilities. Over 40 states charged cost sharing to most, if not all, adults, including those with disabilities, noninstitutionalized elderly persons, and parents. Copayments were the predominate form of cost sharing. States most frequently reported copayments for prescription drugs and physician services. From the beginning of their 2001 state fiscal years through August 1, 2003, 34 states reported increasing and 10 states reported decreasing the amount of beneficiary contributions required in Medicaid, SCHIP, or both. For the 33 states that provided information on the amount of increases, premium increases to existing requirements ranged from $2 a month to $39 a month. Other states added new premium requirements, some of which were as much as several hundred dollars a month. In most instances, reported copayment increases were generally limited to $5 or less. GAO asked CMS officials to provide technical comments on the statutory and regulatory information on Medicaid and SCHIP beneficiary contributions, which were incorporated as appropriate.