For over 35 years, Medicaid has operated as a joint federal-state entitlement program to finance health care coverage for certain categories of low-income individuals. Medicaid eligibility is based in part on a family’s income in relation to the federal poverty level. Federal law requires states to extend Medicaid eligibility to children aged 5 and under if their family income is at or below 133 percent of the federal poverty level and to children aged 6 to 16 in families with incomes at or below the federal poverty level. At their discretion, most states have set income eligibility thresholds that expand their Medicaid programs beyond the minimum federal statutory levels. For most populations, state Medicaid programs must offer certain benefits, such as physician services, inpatient and outpatient hospital services, and nursing facility and home health services. In addition to the benefits that are federally mandated, states may offer optional services, such as dental, physical and occupational therapy, prescription drugs, and case management services. For most children, states must provide Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services. These services are intended to provide comprehensive, periodic evaluations of health and developmental history, as well as vision, hearing, and dental screening services, to most Medicaid-eligible children. States are required to cover any service or item that is necessary to correct or ameliorate a condition detected through an EPSDT screening, regardless of whether the service is otherwise covered under a state’s Medicaid program. Across the nation, 48 states and the District of Columbia have Medicaid managed care programs, which require approval from CMS. These managed care programs can be targeted to specific geographic areas within a state or can be statewide. As of June 2000, 36 states and the District of Columbia had Medicaid mandatory managed care programs. In such programs, certain beneficiaries may choose between at least two capitated managed care plans, and states pay prospectively for each enrolled beneficiary on a PMPM basis. As a part of their managed care programs, states can provide beneficiaries a FFS based alternative, such as primary care case management (PCCM). Under PCCM, primary care providers are paid a nominal fee to manage the care of beneficiaries, and all services received are paid on a FFS basis. The remaining 12 states have managed care programs that are voluntary for beneficiaries, including a FFS-based alternative (such as PCCM), or both. The Congress created SCHIP in 1997 as a means of providing health benefits coverage to children living in families whose incomes exceed the eligibility limits for Medicaid. Although SCHIP is generally targeted to families with incomes at or below 200 percent of the federal poverty level, each state may set its own income eligibility limits, within certain guidelines. Using the flexibility built into the statute, states’ upper income eligibility for SCHIP ranged from 133 percent to 350 percent of the federal poverty level for separate SCHIP programs as of October 2000. States have three options in designing SCHIP: they may expand their Medicaid programs, develop a separate child health program that functions independently of the Medicaid program, or do a combination of both. Fifteen states and the District of Columbia have created Medicaid expansion programs, 16 states have separate child health programs, and 19 states have a combination Medicaid expansion and separate child health component. (See app. II for a summary of states’ SCHIP design choices and app. III for states’ income eligibility levels in SCHIP and Medicaid.) While Medicaid expansion programs under SCHIP must use Medicaid’s enrollment structures, benefit packages, and provider networks, SCHIP separate child health programs may depart from Medicaid requirements, particularly with regard to benefits and the plans, providers, and delivery systems available to enrollees. SCHIP separate child health programs generally cover basic benefits, such as physician services, inpatient and outpatient hospital services, and laboratory and radiological services, and may provide other benefits at the state’s discretion, such as prescription drugs and hearing, mental health, dental, and vision services. In contrast to Medicaid, SCHIP does not require that beneficiaries have freedom to choose among providers or plans, and permits states to implement mandatory managed care; thus, states may place SCHIP enrollees in a single managed care plan without an alternative. Medicaid and SCHIP separate child health programs may differ in other respects, particularly in terms of their application requirements, eligibility determination processes, cost-sharing requirements, and periods of eligibility. Some of these differences are based in federal statute, while others are the result of federal regulations. For example, federal law has been interpreted to require that public employees determine Medicaid eligibility, while SCHIP contains no such requirement; consequently, states are currently permitted to use private contractors to determine SCHIP eligibility. Also, while federal Medicaid regulations generally do not permit cost-sharing for children, the SCHIP statute allows states to require beneficiary cost-sharing, which some states have implemented as a way to mirror private insurance and encourage appropriate use of services. (See table 1.) Medicaid and SCHIP also differ in terms of the proportion of their program expenditures that come from federal funds and in whether eligible individuals are considered entitled to the program benefits and services. State expenditures for Medicaid are matched by the federal government using a formula that results in federal shares ranging from 50 to 77 percent of expenditures, depending on a state’s per capita income in relationship to the national average. The national average federal share of Medicaid expenditures is about 57 percent. The SCHIP statute provides for an “enhanced” federal matching rate, with each states’ SCHIP rate exceeding its Medicaid rate. Federal shares of SCHIP expenditures range from 65 to 84 percent with the national average federal share equaling about 72 percent. In the Medicaid program, all eligible individuals are entitled to program benefits. No overall federal budget limit exists for the Medicaid program. In contrast, for SCHIP, federal matching for each state is limited. The Congress appropriated $40 billion over 10 years (from fiscal year 1998 to 2007), with a specified amount allocated annually to each of the 50 states, the District of Columbia, Puerto Rico, and the U.S. territories. States’ choices to operate a Medicaid expansion or separate child health program determine whether eligible individuals are entitled to receive the benefits and services offered. States opting for a Medicaid expansion under SCHIP must provide Medicaid benefits to all eligible children. The state must continue to serve those children even if its allocated federal funds are exhausted. In contrast, SCHIP separate child health programs are not entitlements to coverage or services; once federal funds are exhausted, states have the option to discontinue providing services or cover the services with other funds. Both statutory and regulatory requirements for coordination between Medicaid and SCHIP exist at the federal level. The SCHIP statute requires the program to coordinate with Medicaid, including first screening SCHIP applicants for Medicaid eligibility. On the basis of this initial screen, applications (which in most states are the joint Medicaid/SCHIP applications) are directed to either Medicaid or SCHIP, where each program is responsible for final eligibility determination and enrollment. (See fig. 1.) In addition, as of August 24, 2001, SCHIP regulations also require that state Medicaid agencies adopt a process that facilitates enrollment in a state child health program when a child is determined ineligible for Medicaid. In part because Medicaid and SCHIP eligibility represent a continuum of income levels, coordination between the programs is important. Several states have found that many families applying for SCHIP actually have incomes that qualify them for Medicaid. In addition, families may need to apply to both Medicaid and SCHIP to obtain health care coverage for all of their children because Medicaid eligibility standards can vary according to the age of the child. Table 2 illustrates for two states (Florida and Vermont), how income eligibility can—but does not always—vary by age. (App. III shows the eligibility standards for SCHIP and Medicaid in the 35 states with SCHIP separate child health programs.) Differences in Medicaid and SCHIP enrollment requirements—particularly application requirements and eligibility determination practices—can affect beneficiaries’ ability to obtain and keep coverage. To help simplify the process for applicants, 8 of the 10 states we reviewed used joint applications that had similar—but not always identical—requirements for Medicaid and SCHIP applicants. When application requirements differed, Medicaid applicants had to provide additional information or documentation. The extent and effectiveness of coordination between the programs affected applicants’ ability to obtain coverage because joint applications often were transferred between the Medicaid and SCHIP offices to ensure that applicants were enrolled in the appropriate program. Poor coordination meant that applications that were transferred or incomplete risked being delayed or denied. In two of the four states we reviewed, Medicaid applications generally took more time to process. However, different processing times could not be attributed solely to lack of coordination efforts because other factors may affect processing times as well. Once enrolled, Medicaid and SCHIP families faced different requirements for maintaining coverage, such as a more complex redetermination process for Medicaid, and premium and annual fee requirements in SCHIP. Joint Medicaid/SCHIP applications are used widely—31 of the 35 states with SCHIP separate child health programs (including 8 of the 10 states we reviewed) have them. In most states, joint applications are the primary method for applying for SCHIP; however, families applying for Medicaid and other public programs may be required to use a separate, different application form. Joint application forms have helped simplify application and eligibility determination for both programs. When an applicant is found ineligible for one program, the joint form can minimize or eliminate the follow-up needed to determine eligibility for the other program. While the 10 states we reviewed generally had similar information and documentation requirements for both programs, some differences remained with regard to income deductions, asset information, and interview requirements. With regard to income reporting, 9 of the 10 states we reviewed established identical requirements for both Medicaid and SCHIP. Some of the 10 states in our sample have taken other steps to make application requirements consistent between the programs. For example, most of the states we reviewed did not ask for information about assets or require the applicant to complete an interview.