Policy Question: What should be the FPL Limit on SCHIP?

The State Children’s Health Insurance Program (SCHIP) is the premier policy issue of the day and is getting a lot of attention both at the state and federal level. The central question under debate, once you strip away all the political rhetoric, is whether or not there should be a federal ceiling to the income limit for families seeking help under SCHIP and what that limit should be.

The State Children’s Health Insurance Program was designed to cover children whose families make too much to qualify for Medicaid yet cannot afford private insurance. Currently, families whose annual income is up to 200% of the Federal Poverty Level (FPL) — approximately $41,000 — may receive SCHIP funding. States that want to cover families whose income is more than 200% of the FPL cannot use federal funding unless they apply for a waiver from the federal government.

The SCHIP bill put forth by Congress (which was successfully vetoed by President Bush) would have raised the FPL limit from 200% to 300%. States wanting to cover children whose families have an annual income of up to 300% no longer would have to apply for a waiver from the federal government. For Democrats, the increase would provide affordable health coverage for millions of more children. For some conservative Republicans — including junior Senator John Cornyn — the increase was the first step towards socialized medicine. The increase in the FPL-based income limit is the fundamental policy conflict surrounding the SCHIP legislation.

I will examine this conflict, and some of the administrative rules surrounding it, by looking at the history of CHIP here in Texas.

President Bush’s History with the FPL Limit
SCHIP is administered by the states, and states have the power to restrict or expand the rules of the program as they choose.

When President Bush was Governor of Texas, he fought with the Texas Legislature on what the FPL limit should be for the state. At the negotiating table, then-Governor Bush argued for a 185% FPL limit. Democrats in the legislature — including my former boss, State Rep. Garnet F. Coleman — argued that 200% was necessary. After much debate, Bush called the Democrats and said, “You beat me.” Texas’ FPL limit was set at 200%.

But recently, now-President Bush found out how he could win: by pushing for stricter bureaucratic limits on the FPL limit. Specifically, last August the Bush administration pushed for new rules to make expanding SCHIP more difficult:

The administration’s new policy [says]…states that must demonstrate that they have “enrolled at least 95 percent of children in the state below 200 percent of the federal poverty level” who are eligible for either Medicaid or the child health program.

President Bush followed a page from the playbook of conservative policy-makers back in Texas: make it impossible to enroll or expand the program not by laws through Congress, but by using agencies and bureaucratic rules that went around elected officials.

Administrative Rules: The Real (Potential) Barrier to CHIP
The federal government could raise SCHIP’s FPL limit to 500% and provide $1 trillion to the program — it wouldn’t matter unless the administrative rules governing the administration of the program allowed states to enroll all the potentially eligible children. How is that possible? Allow me to explain.

We know that Texas state law sets a 200% FPL limit on income in order to enroll in CHIP. However, administrative rules crafted by the state agency that administers CHIP, the Health and Human Services Commission (HHSC), provide additional barriers to enrollment. What’s more, these administrative rules don't require any action by the Legislature to be instated — they may be created, changed, and eliminated at the whim of the agency directors in charge of CHIP. This distinction between what is mandated by state or federal law and what is directed by administrative rules is the key to the policy conflict concerning whether we should raise the FPL limit.

In 2003, the Republican-controlled Texas legislature passed House Bill 2292. Authored by Rep. Arlene Wohlgemeuth, the legislation didn’t fundamentally change state law itself; instead, it required HHSC to promulgate certain kinds of rules that made it more difficult to enroll in CHIP. These rules ultimately required over 100 pages of “red tape” and a 15-20 step paperwork process for families trying to officially enroll in CHIP. The question of eligibility — whether a family met the 200% FPL limit — wasn’t the reason children didn’t receive CHIP coverage; the administrative red tape was. If it is physically impossible for a state agency to process CHIP applications, then children can’t enroll in the program.

State Rep. Garnet Coleman, who I had the pleasure of working for in the 80th Regular Session, recognized these administrative barriers. He successfully passed an amendment onto the budget that eliminated much of the red tape created by administrative rules that sought to create barriers to enrollment in CHIP.

Tying the Administrative Rules to the FPL Limit
What do these barriers have to do with the policy debate on the FPL limit? Simple: they underscore how raising the FPL limit could never lead to socialized medicine.

SCHIP is a federal-state program. The FPL limit set by the federal government is used for one thing and one thing only: to determine how much money each state receives in the SCHIP formula. It is up to the states to reach out and inform families that they are eligible. It is up to states to administer the programs. And most importantly, it is up to the states to decide what kind of administrative rules they want governing CHIP.

If states believe that the 300% FPL limit is too high, all they have to do is put the necessary barriers in place that make it difficult to expand CHIP. The states are laboratories of democracy, and at the local level — in how they choose to elect their legislature — the people can decide whether expanding SCHIP is socialized medicine or not.

And that is the rub: the public will always want to expand CHIP, because the general public has this idea that giving health care to children is good. President Bush and Senator Cornyn know this, which is why they have stood as roadblocks to the legislation. But ultimately, the Democrats (and the general public) will prevail — if not now, then in November of 2008.