Most U.S. families access the health care system through health insurance coverage. Without health insurance, many families face difficulties getting preventive and basic care for their children. Uninsured women, for example, are less likely to get early and adequate prenatal care. Late and inadequate prenatal care is associated with higher rates of low birth weight and prematurity, serious illness, and handicap for children.Children without health insurance are less likely to have routine doctor visits, get care for injuries, 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).Uninsured children are also less likely to be appropriately immunized—important in preventing childhood illness. Insured children in the United States either have privately or publicly funded health insurance. In 1993, 89 percent of children with private insurance got coverage through their parents’ employment. A small percentage of children have private, individually purchased policies. An even smaller percentage are children of military personnel who get publicly funded insurance through their parents’ employment. Most children with publicly funded insurance get coverage through Medicaid. The Medicaid program is a jointly funded federal-state entitlement program that provides health insurance for both children and adults. It is implemented 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 AFDC program. In the past, most children received Medicaid because they were on AFDC. Children and adults may also be eligible for the program if they are disabled and have low incomes or 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, infants, and children. (See table I.1 in app. I.) Before 1989, coverage expansions were optional, although many states had expanded coverage. Starting in July 1989, states had to begin covering pregnant women and infants with family incomes at or below 75 percent of the federal poverty level. The Omnibus Budget Reconciliation Acts of 1989 and 1990 added additional requirements that states had to implement in 1990 and 1991. By 1993, states were required to cover (1) pregnant women, infants, and children up to age 6 with family income at or below 133 percent of the federal poverty level and (2) children aged 6 to 10 (born after September 30, 1983) with family income at or below 100 percent of the federal poverty level. Current law also requires that the group of poor children over age 6 eligible for Medicaid continue to expand year by year until all poor children up to age 19 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 age 19 more quickly than required or by increasing eligibility income levels or both. As of April 1995, 37 states and the District of Columbia had expanded coverage for children beyond federal requirements. (See app. I.) Children represent a large proportion of Medicaid recipients but a small proportion of Medicaid expenditures. In 1993, 49 percent of Medicaid recipients were children under age 21, but only 16 percent of Medicaid medical vendor payments were for their care. 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 $131 billion to $260 billion by the year 2000, according to the Congressional Budget Office. The Congress is currently considering different options to lower the cost of the program, including removing guaranteed eligibility and giving capped funding to the states as block grants. Medicaid has become an increasingly important source of health insurance for low-income children as employment-based insurance has declined for both children and adults. Between 1989 and 1993, the number of children covered by Medicaid increased 54 percent—from 13.6 percent of U.S. children in 1989 (8.9 million children) to 19.9 percent in 1993 (13.7 million children). This could have led to a major decrease in the percentage of children uninsured. It did not, however, because the decrease in children covered by employment-based insurance offset the increase in U.S. children insured through Medicaid. (See fig. 1.) Comparing trends between children and adults clarifies Medicaid’s role. Between 1989 and 1993, the percentage of children with employment-based health insurance decreased 9 percent. During the same period, the percentage of adults aged 18 to 64 with such insurance decreased 7 percent. Both children and adults lost employment-based coverage. Because of the Medicaid expansion, however, the decline in employment-based insurance for children did not lead to an increase in the proportion of uninsured children. Adults had a different experience. (See fig. 2.) Between 1989 to 1993, the proportion of adults who were uninsured rose 16 percent. In contrast, the proportion of children who were uninsured was similar in 1989—13.3 percent—and 1993—13.5 percent. Comparing the experience of adults and children suggests that expanding Medicaid for children did not displace privately purchased individual insurance. The proportions of children and adults with privately purchased insurance were similar in 1989 and changed little in 1993. An increased proportion of adults did not purchase individual policies as more adults became uninsured. If Medicaid had displaced privately purchased insurance for children, the proportion of children with privately purchased insurance would have decreased, but it did not. The question of whether parents who could have employment-based insurance for their families chose to drop or refuse coverage to get Medicaid coverage for their children is more complicated. The longitudinal data that would be needed to directly answer this question are not available. Two researchers attempted to overcome this limitation by developing an economic model using CPS data from 1987 through 1992. They estimated that expanding Medicaid coverage for pregnant women and children did partially displace employment-based coverage, being responsible for about 17 percent of the decline in private insurance coverage between 1987 and 1992. The rest of the decline in coverage was due to macroeconomic factors, changes in the demographic mix of population, or changes in employers’ offering or generosity in covering health insurance for workers and their families. For children, their analysis leads to an estimate that 37 to 47 percent of children’s increase in Medicaid coverage was linked to a reduction in employment-based insurance coverage. Although the Medicaid expansion offset the decrease in employment-based insurance, an increasing number of children either have no health insurance or depend on publicly funded health insurance. In 1993, 9.3 million children were uninsured, and 13.7 million were on Medicaid. These totals represent over one-third of U.S. children. The effect of the Medicaid expansion is clear when considering how poor children, near-poor children, and higher income children fared in the health insurance marketplace between 1989 and 1993. During this period, the percentage of children of all income levels with employment-based insurance declined, and Medicaid coverage for all income levels expanded but to different degrees. Employment-based insurance declined most for near-poor children. (See table 1.) Meanwhile, an additional 11 percent of these children obtained coverage under Medicaid. The proportion of near-poor children who were uninsured did not change significantly. These children were still most likely to be uninsured in 1993 and most likely to be on Medicaid. Poor children had a smaller decline in employment-based insurance than near-poor children and a large increase in Medicaid coverage. As a result, the percentage of poor children who were uninsured actually declined from 25 percent in 1989 to 20 percent in 1993. Unlike poor and near-poor children, children with family incomes above 150 percent of the federal poverty level were more likely to be uninsured in 1993 than 1989. This group of children had the highest rates of employment-based coverage in 1989 (80.2 percent) and the smallest decrease in such coverage. The Medicaid expansion cushioned this group less since few of these children depend on Medicaid for their coverage. However, the percentage of these children covered by Medicaid had a small and statistically significant increase—from 7.5 percent to 9.1 percent. Because of policy changes to expand children’s eligibility, Medicaid has become a more important source of insurance for children who were less likely to get Medicaid in the past, such as children in working families. The proportion of Medicaid children who had a working parent increased between 1989 and 1993. By 1993, more than half the children on Medicaid had a working parent, and almost half did not depend on AFDC. Medicaid coverage also increased more during this period among other children less likely to receive Medicaid in the past—children in two-parent families, children of more educated parents, white non-Hispanic and Hispanic children, and children living in the South. Changing Medicaid eligibility policies so that children are eligible on the basis of income and age, even if they are not on AFDC, allowed uninsured children of low-income working families to get health insurance through Medicaid. A significant increase in the number of children with a working parent on Medicaid has resulted. Over half of Medicaid children had a working parent in 1993. (See fig. 3.) The proportion of children in working families on Medicaid grew, and the number of Medicaid children with a working parent increased from 4 million in 1989 to 7.3 million in 1993—an 83 percent increase. Most working parents with children on Medicaid worked less than full time for the entire previous year. However, the percentage of Medicaid families with a full-time worker increased. By 1993, 1 child in 5 on Medicaid had a parent who worked full time all year. Expanding Medicaid eligibility on the basis of income and age was a major reason for the increase in Medicaid enrollment, but not the only reason. AFDC enrollment also increased between 1989 and 1993. The number of children in Medicaid on AFDC or AFDC combined with other assistance increased by 1.3 million children—a 25 percent increase.