[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
    COVERING UNINSURED KIDS: MISSED OPPORTUNITIES FOR MOVING FORWARD

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 29, 2008

                               __________

                           Serial No. 110-85


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


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                    COMMITTEE ON ENERGY AND COMMERCE

    JOHN D. DINGELL, Michigan,       JOE BARTON, Texas
             Chairman                    Ranking Member
HENRY A. WAXMAN, California          RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts      FRED UPTON, Michigan
RICK BOUCHER, Virginia               CLIFF STEARNS, Florida
EDOLPHUS TOWNS, New York             NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey       ED WHITFIELD, Kentucky
BART GORDON, Tennessee               BARBARA CUBIN, Wyoming
BOBBY L. RUSH, Illinois              JOHN SHIMKUS, Illinois
ANNA G. ESHOO, California            HEATHER WILSON, New Mexico
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             CHARLES W. ``CHIP'' PICKERING, 
ALBERT R. WYNN, Maryland                 Mississippi
GENE GREEN, Texas                    VITO FOSSELLA, New York
DIANA DeGETTE, Colorado              ROY BLUNT, Missouri
    Vice Chairman                    STEVE BUYER, Indiana
LOIS CAPPS, California               GEORGE RADANOVICH, California
MIKE DOYLE, Pennsylvania             JOSEPH R. PITTS, Pennsylvania
JANE HARMAN, California              MARY BONO, California
TOM ALLEN, Maine                     GREG WALDEN, Oregon
JAN SCHAKOWSKY, Illinois             LEE TERRY, Nebraska
HILDA L. SOLIS, California           MIKE FERGUSON, New Jersey
CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
JAY INSLEE, Washington               SUE WILKINS MYRICK, North Carolina
TAMMY BALDWIN, Wisconsin             JOHN SULLIVAN, Oklahoma
MIKE ROSS, Arkansas                  TIM MURPHY, Pennsylvania
DARLENE HOOLEY, Oregon               MICHAEL C. BURGESS, Texas
ANTHONY D. WEINER, New York          MARSHA BLACKBURN, Tennessee        
JIM MATHESON, Utah                   
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
                                     
_________________________________________________________________

                           Professional Staff

 Dennis B. Fitzgibbons, Chief of 
               Staff
Gregg A. Rothschild, Chief Counsel
   Sharon E. Davis, Chief Clerk
  David Cavicke, Minority Staff 
             Director

                                  (ii)
                         Subcommittee on Health

                FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California          NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York                 Ranking Member
BART GORDON, Tennessee               RALPH M. HALL, Texas
ANNA G. ESHOO, California            BARBARA CUBIN, Wyoming
GENE GREEN, Texas                    HEATHER WILSON, New Mexico
DIANA DeGETTE, Colorado              JOHN B. SHADEGG, Arizona
LOIS CAPPS, California               STEVE BUYER, Indiana
    Vice Chairman                    JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine                     MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
ELIOT L. ENGEL, New York             SUE WILKINS MYRICK, North Carolina
JAN SCHAKOWSKY, Illinois             JOHN SULLIVAN, Oklahoma
HILDA L. SOLIS, California           TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas                  MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon               MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          JOE BARTON, Texas (ex officio)
JIM MATHESON, Utah
JOHN D. DINGELL, Michigan (ex 
    officio)

  
                             C O N T E N T S

                              ----------                              
                                                                   Page
 Hon. Frank Pallone Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     1
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     3
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     4
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     5
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     6
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................     8
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     9
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    10
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    11
Hon. Darlene Hooley, a Representative in Congress from the State 
  of Oregon, opening statement...................................    12
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................   613
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    15
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................    16
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, prepared statement................................   126
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................   130

                               Witnesses

Cynthia Mann, Research Professor and Executive Director, Center 
  for Children and Families, Georgetown University Health Policy 
  Institute......................................................    18
    Prepared statement...........................................    20
Chris Peterson, Specialist in Health Care Financing, Domestic 
  Social Policy Division, Congressional Research Service.........    40
    Prepared statement...........................................    42
Carolyn Taylor Chester, Nursing Assistant, Service Employees 
  International Union............................................    62
    Prepared statement...........................................    63
Louis F. Rossiter, Research Professor and Director, Schroeder 
  Center for Health Care Policy, College of William and Mary.....    64
    Prepared statement...........................................    65
Bruce Lesley, President, First Focus, Alexandria, VA.............    66
    Prepared statement...........................................    69
    Answers to submitted questions...............................
Ann C. Kohler, Deputy Commissioner, New Jersey Department of 
  Human Services.................................................    98
    Prepared statement...........................................   100
Dennis G. Smith, Director, Center for Medicaid and State 
  Operations, Centers for Medicare and Medicaid Services.........   101
    Prepared statement...........................................   102
Tricia Brooks, President and CEO, New Hampshire Healthy Kids 
  Corporation....................................................   106
    Prepared statement...........................................   108

                           Submitted Material

Chart, Monthly Costs of Living...................................   128
Chart, ``Coverage of Recent SCHIP Enrollees During the Six Months 
  Before They Enrolled,'' submitted by Ms. DeGette...............   129
.................................................................


    COVERING UNINSURED KIDS: MISSED OPPORTUNITIES FOR MOVING FORWARD

                              ----------                              


                       TUESDAY, JANUARY 29, 2008

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:13 a.m., in 
room 2128, Rayburn House Office Building, Hon. Frank Pallone, 
Jr., [chairman of the subcommittee] presiding.
    Present: Representatives Pallone, Eshoo, Green, DeGette, 
Capps, Solis, Hooley, Deal, Cubin, Shadegg, Pitts, Murphy, 
Burgess, Blackburn, and Barton (Ex Officio).
    Staff Present: Purvee Kempf, Bridgett Taylor, Robert Clark, 
Amy Hall, Yvette Fontenot, Hasan Sarsour, Brin Frazier, Lauren 
Bloomberg, Brandon Clark, and Chad Grant.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. The hearing of the subcommittee is called to 
order. Today's hearing is entitled Covering Uninsured Kids, 
Missed Opportunities For Moving Forward. Last week the House 
tried for a second time to override the President's veto of 
bipartisan bicameral legislation that would have reauthorized 
the Children's Health Insurance Program and moved our Nation 
towards making sure no American child has to go without health 
insurance. To be honest, it is hard for me to understand the 
President's logic or the rationale of those within Congress who 
voted to uphold his veto. I think we all have forgotten or 
simply do not understand the challenges that American families 
face in securing affordable health coverage for their children.
    Perhaps today's hearing will remind us about the day-to-day 
struggle millions of American families face in order to afford 
the costs of health insurance. As health care costs continue to 
rise, employer-sponsored insurance is eroding. Employers are 
shifting more cost to workers or they are dropping coverage all 
together. For those who don't have employer insurance 
purchasing insurance health insurance in the individual market 
is not really a viable option. The result has been a steady 
increase in the number of uninsured Americans since 2001, 9 
million of which are children.
    Now as the economy continues to slump, things are only 
going to get worse for these families that have no health 
insurance. Unemployment rates are increasing, which means more 
and more Americans are going to lose the health coverage that 
was tied to their jobs, will have fewer dollars in their pocket 
to pay for private insurance.
    Soon enough, many of these families are going to come to 
rely on CHIP or Medicaid for their children's health coverage, 
and I think it is questionable whether or not the States will 
have the ability to respond to this increasing level of need. 
As we learned from last year's debate, States are already 
having great difficulty in meeting the needs of those presently 
enrolled, not to mention the millions of kids who are currently 
eligible but unenrolled. Every year, the number of States that 
experience a shortfall increases. I distinctly remember members 
of the Georgia legislature descending upon Washington last 
year, pleading with congressional leaders to provide them with 
additional funds in order to prevent an enrollment freeze. We 
answered their call and filled in their shortfall so no child 
on the program had to lose their health care. But we didn't 
stop there. We worked in a bipartisan fashion with our 
colleagues in the Senate to craft a bill that would strengthen 
CHIP so that there wouldn't be any more shortfalls. Our bill 
would have provided $35 billion over 5 years to the States to 
maintain and expand coverage to 10 million children.
    We provided the States with the tools and resources 
necessary to go out and sign up the lowest-income children 
first. We strengthened the benefits offered under CHIP 
including the mental and dental benefits. We took note of the 
administration's concerns and removed adults from the program 
faster than the President could by simply disapproving waiver 
renewals. And we also strengthened the program so only U.S. 
citizens could enroll in CHIP or Medicaid. But none of this 
seemed to satisfy the President. Instead of living up to the 
promise he made to enroll millions of poor children in CHIP 
during the 2004 presidential campaign, he issued veto after 
veto, and he didn't stop there.
    It was simply not enough to deny the States the resources 
they need to insure the children of their State. The Bush 
administration has also tried to tie their hands with a torrent 
of erroneous policies on CHIP and Medicaid. Today, this 
administration has issued seven regulations that would 
collectively gut the Medicaid program and roll back coverage 
for millions of Americans. Some of the most egregious 
regulations are targeted towards health care services for low 
income and disabled children. In addition to the Medicaid 
regulations, the administration's misguided CHIP directive 
contained in the August 17 letter to State Medicaid directors 
is truly atrocious.
    It would, amongst other things, force a child to go one 
full year without health insurance before they could enroll in 
CHIP. I guess a kid can just go to the emergency room for his 
or her health care like the President suggested. But I would 
like to see the President send one of his children to the 
emergency room instead of their family doctor. If it is good 
enough for hardworking families, it should certainly be good 
enough for his children as well.
    The bottom line is that instead of working with us to move 
our Nation forward and provide health care to kids, the 
President has chosen to wage an all-out attack on our Nation's 
safety net system and those who rely upon it. I am glad we have 
someone here from the administration today, Mr. Smith, who can 
try to justify these policies. But I also want to put Mr. Smith 
and the President on notice that I don't intend to sit idly by 
as more and more Americans lose their health coverage.
    We are determined to work together to strengthen CHIP and 
Medicaid so every American child can access the care that they 
need to grow up healthy. And while the President may not be in 
the habit of living up to his promises when it comes to 
children's health care, that is a promise from me to you that 
anyone can take to the bank. I would obviously like if over the 
next year we can come up and negotiate an expansion of SCHIP 
that provides additional coverage for children on a bipartisan 
basis. Nothing ever happens around here unless it is done in a 
bipartisan basis. But I also think it is important and today's 
hearing is part of that process, it is important to show that 
we can't just sit by. That we are going to continue to have 
kids that are uninsured and the numbers are going to increase 
and something has to be done. And that is the purpose of this 
hearing, to find out what actually is going on out there. And 
with that, I would yield to the gentleman from Georgia, Mr. 
Deal.

  OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Deal. Thank you, Mr. Chairman. You and I get along very 
well on a personal basis. I find it regrettable that your 
opening statement is so partisan, a continued effort to beat up 
on our President. We ought to be concerned about what we either 
do or don't do right here on our own Health Subcommittee. We 
ought to ask ourselves the very hard question, why was it in 
both iterations of the SCHIP bill that came before the House to 
vote on we never had a legislative hearing on either of those 
versions?
    This is what this committee is supposed to be about. We are 
supposed to have input. I heard your reference to you worked on 
a bipartisan basis with the Senate. Well, we are not the 
Senate. We are all elected to come here to this committee in 
this body and try to work together. And I pledge to you that we 
will do that if given the opportunity. But we agree on some 
things, we disagree on others. One of the things we agree on is 
that SCHIP ought to be reauthorized. It should have been 
reauthorized and we should have learned the lessons of the 
first 10 years of its existence.
    No piece of legislation is perfect, and over 10 years of 
being in existence we should have learned where the mistakes 
and the errors were. One of those mistakes was it should have 
been a children's insurance plan and yet we find that in the 
versions that we were asked to vote on, we offer a bill or a 
version to get adults out of the children's health program and 
that was rejected.
    Now GAO recently issued a report looking at those States 
that have covered adults in SCHIP and they conclude that 
overall adults account for 54 percent of the total SCHIP 
expenditures in those nine States. That is not a children's 
program. And it ought not to be working that way. The other 
thing we should have learned is, it was intended at the outset 
to focus on children that were above the Medicaid eligibility 
levels and at a 200 percent or below of the poverty levels.
    And yet we have found States that--my State, as you alluded 
to, Georgia, we went to 235 percent. I think yours went to 350 
percent. We had States that were using income disregards that 
could bring your earnings in a family of four far above the 
$42,400 for a family of four, which should have been the target 
area for those families and below. Now we offered a meaningful 
test that would have eliminated income disregards and that was 
rejected.
    Now, where are we and what can we do? First of all, I think 
we ought to acknowledge that the program has value and merit, 
and it should be reauthorized. But it should not be used as a 
spring board for a larger plan of universal government-run 
health care for everybody. And if we want to keep it in a 
bipartisan fashion, then let's focus on the things that we 
agree on and those are many. And I would hope that in today's 
hearing as we listen to witnesses, we can focus on those things 
that we can agree on and make the program work as it was 
originally intended, to help poor children first.
    And I personally think that any State that says that they 
are not willing to enroll 90 to 95 percent of their children 
that are poor children below 200 percent of poverty, but 
instead want to go up the economic scale to extend benefits to 
families with 70 and 80 and above earning income, I think that 
is wrong. It is a perversion of the intent of the program. And 
we ought to do something to stop it. I look forward--we have 
two good panels of witnesses and thank you for putting them 
here today. Thank you.
    Mr. Pallone. Thank you, Mr. Deal. The gentlewoman from 
California, Ms. Eshoo.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Mr. Chairman, thank you for holding this 
hearing. I can't help but think that this is really very sad 
that we are here to review the impacts of what is not being 
done. I get up every day and that is an act of optimism and I 
think the information that we will get will be important. I 
can't really figure out why those that are so into States 
rights, that when the States want to exercise something and 
come up with the dollars for it, that they be able to do so. I 
think my friends on the other side of the aisle are squarely 
against every American having health insurance. That is why 
this is so menacing to them. The best place we know to start is 
children. They are the cheapest to insure. We know how to do 
it. We have had success with the program. It is one of the best 
offerings that has been set up. And so today, we will learn 
more from the witnesses through their expertise about how this 
is going to affect children across the country. I think it is 
regrettable that we are where we are. But I look forward to a 
new day when not only when all children are insured but that 
their mothers and fathers, their families are as well. So thank 
you for having the hearing and I look forward to what the 
witness will instruct us.
    Mr. Pallone. Thank you. The gentleman from Pennsylvania, 
Mr. Pitts.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. Well, Mr. Chairman, I wasn't going to say 
anything, but since the dialog is so good. In SCHIP, we were 
talking about poor children without insurance, children, not 
adults, poor children, not children of middle income families. 
Children without any insurance, not bringing people off the 
private insurance markets for government-run health care. You 
know, the purpose of government is not to provide all the needs 
of people. The purpose of government is to provide atmosphere 
in which people can meet their own needs. We are for every 
American having health insurance, just not government-owned 
health insurance. Government may be organized in insurance, 
private insurance but not one-size-fits-all. I find it sad that 
we are deteriorating into this partisanship so soon. I would 
hope that we could be a little bit more bipartisan in looking 
at some of the solutions and I look forward to hearing the 
witnesses. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. The gentleman from Texas, our Vice 
Chair, Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. And I have to respond 
to some of the opposition. And for someone that has dealt with 
insurance both as a State legislator and now in Congress, 
health plans--it is interesting, last night we had the State of 
the Union and the President decided one of his proposals was to 
remove employer-based insurance tax deductions. And yet in our 
country after World War II, the countries that were coming out 
of World War II were receiving national health care, Japan, 
western Europe, our country, because of World War II stuck with 
employer-based insurance. And by and large, it was very good up 
until we found out that employers often didn't cover their 
employees for retirement so Medicare was created and Medicaid 
in 1965. And in 1997, we found out that children oftentimes, 
even though the employer maybe provided coverage for that 
employee, low-wage workers, they couldn't afford the dependent 
care.
    So the SCHIP program has created a partnership similar to 
Medicaid in many States to cover these low-income children. 
Those children may have access to employer-based insurance, but 
they can't afford it if you make $15 an hour and have two or 
three children.
    So that is why it has to be created. The private insurance 
market will work as long as they can make money. 20, 25, 30 
percent. But when the market doesn't work, we have to make sure 
we depopulate our emergency rooms in dealing with persons 65, 
with the poor and the elderly, and now, in 1997, the children. 
And so that is why I think it is interesting. I support the 
private insurance market, but there are a lot of areas that 
they don't want to cover folks and this is one of them. I think 
it is interesting, the CHIP program was created in 1997 for 
children. But because of various administrations, two 
administrations have given waivers to certain States to be able 
to cover adults.
    In the bill that the President vetoed allowed those adults 
who were on there for 1 year so they can find another coverage 
if they can. But that wasn't a congressional decision. That was 
an administrative decision. And to call for the removing of 
adults, the easiest way they could have done it is never allow 
them to begin with. And it wasn't a congressional decision to 
do that. My frustration in the 10 years since Congress created 
the SCHIP program is that I come from a State like Texas where 
nationwide, we still have 9.4 million children are uninsured.
    Unfortunately 100,000 of those children are in my home 
State of Texas. And I hope our witnesses today will help answer 
some of the questions. Our State, because of local controls, 
they erected significant barriers that make it difficult 
enrolling new children in SCHIP. And it will kick children off 
of CHIP in 2003, and it resulted in enrollment of about 500,000 
children in Texas in 2003 going down to 200,000, 350,000 in 
2007.
    And while these numbers were dropping, we still have the 
growth in children who qualify. U.S. citizens data puts the 
number of uninsured Texas children below 200 percent of Federal 
poverty at 1.5 million. Of these 1.5 million children, almost 
750,000 or 850,000 are eligible for Medicaid or SCHIP. 
Approximately 3/4 of those 750,000, 850,000, I am sure are 
eligible but not enrolled. The majority of these children would 
qualify for Medicaid and the remainder for SCHIP. Let me put it 
another way, Texas HHS estimates somewhere between 200,000, 
300,000 children are eligible for SCHIP but simply not enrolled 
in my home State.
    And Mr. Chairman, I know we have a limit on time and I have 
lots of information. But I think it is atrocious that the 
President vetoed the reauthorization of the SCHIP program. And 
I would hope that when we do reauthorize it, if not this year 
then next year, we will make sure that we make--that we cover 
as many children as possible and not allow States who pay less 
than in case of the third of the SCHIP to be able to send back 
money and have uninsured children in a State like I have in 
Texas. And I would like my home State to be placed into the 
record. And I yield back my time.
    Mr. Pallone. Thank you. The gentlewoman from--oh, Mr. 
Barton is here. I am sorry. Our ranking member of the full 
committee, Mr. Barton. I apologize that there is no time posted 
anywhere. I have a little clock on my left here. But there is 
nothing else for the rest of you to know what the time is 
unfortunately.
    Mr. Barton. That is what you get when you get outside our 
committee room, see.
    Mr. Green. Mr. Chairman, not to interrupt, but they take 
our jurisdiction and they don't even give us a clock.
    Mr. Pallone. Or another way of saying it, they don't even 
give us the time of day.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. But the blue color is soothing though. It is 
good to be here, to see Mr. Leach and some of the other former 
chairmen of this committee. Mr. Gonzalez, a fine Texan. Mr. 
Oxley. It is good to be here. Well, thank you, Mr. Chairman, 
for this hearing. I can go either way on that. I hope we are 
substantive today. It is obvious that there are lots of 
children in America that need help, their families need help to 
provide health insurance and health care for them. Their 
parents don't make the money or don't work in the situation 
where their companies provide health insurance. People on my 
side of the aisle have been asking for over a year to have a 
hearing that was focused just on SCHIP and just on the 
children. And today we have that opportunity. I hope it doesn't 
become political. But so far this year, or last year, almost 
everything that was involved with SCHIP was political, which is 
acceptable.
    It is understandable in an atmosphere where people get 
elected by parties and sometimes we have partisanship. Having 
said that, I know that you and my friends on the Democratic 
side are totally supportive of the Children's Health Insurance 
Program. And I can assure you that myself and people on the 
Republican side of the aisle are just as supportive. Our 
differences of opinion, when we really get down to the policy, 
are about which children should be covered. Those of us on the 
Republican side believe that the program, as it was initiated 
10 years ago or 11 years ago now, should be focused on the near 
low income, those children between 100 and 200 percent of 
parents whose parent or parent in some cases do not have health 
insurance in the workplace. There is still work to be done in 
that targeted area.
    Now we know that there are many children below 100 percent 
of poverty in America. Those children are covered by a program 
called Medicaid. We also know that there are many children 
above 200 percent of poverty or 250 percent of poverty whose 
family may or may not have health insurance. And those children 
also are deserving of help. But study after study has shown 
that in the initial original target group of 100 to 200 percent 
of poverty, there is still many children that could be covered 
that are not covered.
    And what we on the Republican side of the aisle, Mr. 
Chairman, are saying, let's do the very best job we can to 
cover those kids first. That is what the President was saying 
when he put out his proposal that we have to cover 95 percent 
of those children before you go above 200--I believe 250 
percent of poverty. And that is what Mr. Deal and I were saying 
when we put out our proposal, that again, allowed to go above 
the 200 percent level which you got and I believe we said 90 
percent.
    So I hope at some point in the hearing, Mr. Chairman, we 
focus on that. I also hope that we focus on ways to do better 
outreach. Mr. Pallone and myself have had off-the-record 
informal discussions, but I think the Republicans would be very 
willing to look at ways to encourage States to go out and again 
find innovative ways to get children enrolled that could be 
enrolled if their parents just knew how to enroll in the 
program. I think we could also look at the enrollment period. I 
know in my State of Texas until recently you had to re-enroll 
every 6 months. Well, that is silly.
    Surely there is a way to get a child enrolled and maintain 
that child's enrollment over a longer period of time than a 6-
month period. So Mr. Chairman, we are very excited that we are 
finally having a hearing just on SCHIP. I hope that it leads to 
another hearing and a legislative markup in a bipartisan 
drafting exercise. It is not impossible even in this political 
environment to permanently reauthorize or reauthorize for an 
extended period of time the SCHIP program. If it devolves into 
a partisan mud-slinging contest, obviously nothing is going to 
happen. But if we really work constructively together, I am 
very confident that this committee and the full committee could 
come up with a program that both sides of the aisle could 
support. With that, Mr. Chairman, I yield back.
    Mr. Pallone. Thank you. The gentlewoman from California, 
Mrs. Capps.

   OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Capps. Thank you, Chairman Pallone, for this hearing 
and the demonstration of your continued dedication to the 
hearing and health and well-being of children in this country. 
I might add yet another of several hearings on children's 
health and lack thereof. We have also, as I recall, had a very 
painful markup experience on the State Children's Health 
Insurance Program, which, of course, is administered through 
the various States through private vehicles.
    I am proud to serve on this subcommittee and to be part of 
the ongoing effort to ensure access to health care for every 
child in this country. I always welcome the chance to talk 
about it and listen to the expert witnesses talk about the 
importance of providing quality health care to children and 
families. It is unfortunate, however, I believe that we need to 
hold a hearing to discuss missed opportunities. Last week we 
had another chance to provide health insurance coverage for the 
most vulnerable members of society through the Children's 
Health Insurance Program. And once again, this opportunity was 
denied by this President and his allies in Congress.
    We worked long and hard to construct a package that would 
have protected not only 6.6 million children currently enrolled 
in SCHIP but 4 million additional children who are eligible, 
clearly eligible and have no access to care. I am extremely 
disappointed that the misguided opposition of the President and 
a few of our Republican colleagues derailed this important 
bipartisan effort despite the overwhelming support of the 
American people. As a result of this indefensible act of 
obstruction, millions of low-income children will continue to 
remain uninsured. You know, their lives don't stand still while 
we do this. And we can't afford to wait any longer.
    In the face of an economic downturn that continues to 
threaten important American families, we have failed to offer 
the comfort of knowing that their children's care or health 
care will be covered. How many more mothers are going to be 
forced to make this impossible decision between putting food on 
the table or taking her child to the doctor and paying cash?
    As a former school nurse, I have seen firsthand the 
consequences of that result from this kind of inaction, these 
kinds of painful choices. Millions of children are not 
receiving proper primary care or dental care, and they are 
suffering from preventable illnesses. They will be sent to 
school sick, interfering with their ability to learn. Our 
children count on us to protect them. They can't do it by 
themselves.
    So it is our responsibility to give voice to their needs 
when they can't advocate. It is imperative that we work 
together to overcome the roadblocks posed by those who do not 
value the health and safety of our children above all else. So 
I thank you, and I know that we can do better for our children 
and I know we are going to learn a great deal from our 
witnesses. And I thank you all for coming. I yield back.
    Mr. Pallone. Thank you. The gentlewoman from Tennessee, 
Mrs. Blackburn.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. And I thank you 
for the hearing. I want to welcome all of our witnesses. And I 
am one of those individuals that is a strong supporter of the 
SCHIP program as it was originally put in place. And we have 
heard about how successful this program is. That is because of 
the way that the structure was placed in order for it to be a 
block grant program, not an entitlement program. We have heard 
about the need for getting health care to poor children and yes 
indeed, the children of the working poor are to be the ones 
that realize the benefits of this program and previously they 
have.
    Now, I do have concerns that we have had a litany of missed 
opportunities in this committee due to a lack of regular order, 
if you will. This is only the second hearing that we have done 
on SCHIP. We never had a hearing on the legislation when it 
came to committee for unfinished markup. So those are 
regrettable because we have seen SCHIP on the floor 13 
different times, 13 different times on the floor of the House. 
So I find myself sitting here listening to the opening 
statements thinking, how many times is the House going to have 
to vote down the majority's attempts to socialize health care 
before they realize that working in a bipartisan manner with 
regular order is what is going to be necessary to produce 
better legislation that will deal with the original intent of 
SCHIP and will allow for its continued success? So I think that 
we have heard time and again, Mr. Chairman, people are not 
interested in seeing adults on SCHIP. They have concerns about 
that. There are concerns about loopholes that may have been in 
the legislation that was presented to us earlier this year that 
would allow illegal immigrants to access services. They are 
concerned about spending billions of dollars to substitute 
private health insurance coverage when, with a government-run 
health care coverage, they are concerned about focussing on 
enrolling higher-income kids instead of the low-income 
uninsured kids.
    They are concerned about a flawed tobacco tax scheme to the 
tune of $70 billion. I am pleased with the efforts that we have 
had to reject some of this. I do look forward to working with 
the committee, and working to achieve consensus on SCHIP 
legislation that will focus on securing health care for the 
under served children and children of the working poor. And I 
yield back.
    Mr. Pallone. Thank you. Ms. DeGette.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you, Mr. Chairman. Well, listening to 
the comments of my colleague who spoke last, I guess we could 
both--all of us keep beating a dead horse for this term of 
Congress and yet we would still have 12 million kids in this 
country who don't have health insurance. I don't think that is 
good for those kids and I don't think that is good for our 
country and I don't think anybody would. The topic of this 
hearing is Covering Uninsured Kids, Missed Opportunities For 
Moving Forward.
    I will talk about SCHIP in a minute more globally. But 
there is a couple of missed opportunities that no one has yet 
mentioned that I am looking forward to hearing our witnesses 
talk about. The first one is the CMS regulation recently 
promulgated that serves to limit States' flexibility and 
undermine our safety net. On August 17, CMS ordered a directive 
that hinders long-standing State flexibility surrounding SCHIP 
eligibility levels. Now, all of us agree SCHIP should be used 
for the children of the working poor, people whose parents 
can't afford health insurance. What this directive does, 
though, is it says that States cannot expand coverage levels 
above 250 percent of the Federal poverty level unless they meet 
a 90 percent participation rate for below 200 percent of the 
Federal poverty level. But CMS has not provided any guidance to 
the States as to how to meet those standards or even what data 
will be used to calculate a 95 percent compliance rate.
    So how can States be expected to meet minimum standards 
when CMS won't even tell States how the standards are 
calculated? Now to all of us, we all say well, we want to cover 
children of the working poor. But in fact, the reason we gave 
States flexibility in this State Children's Health Insurance 
Program is because income levels and ability to buy insurance 
vary widely from State to State.
    The most recent expansion of the number of uninsured 
children in this country is from families who make from 200 
percent to 400 percent of poverty. And the reason is because 
two things have happened: Number one, insurance premiums have 
skyrocketed; and number two, employers have been covering less 
and less of those premiums. And so since 2000 the average cost 
for a family of four for insurance around the country is almost 
$12,000, and in some parts of the country, like New York and 
New Jersey, it can be $20,000.
    So while it seems ridiculous to give SCHIP to a family 
making $53,000, if you have a family of four living in New 
York, making $53,000 and their insurance premium is $20,000, I 
am going to guarantee you, they are not going to insure their 
kids. And Mr. Chairman, members of this committee all have the 
Federal employees health insurance so we don't realize what a 
burden these bills are on American families.
    One last issue. There is another CMS regulation that went 
into effect this year which limits reimbursement for school-
based rehabilitation services and another one limits hospitals' 
ability to access the Medicaid dish funding by inappropriately 
changing the definition of public hospitals. In my State alone, 
Colorado, this is going to cost us $140 million. The impact of 
this would be devastating both to individuals and safety net 
providers. The rule is slated to go into effect the end of May. 
But if we don't fix it much in advance, Mr. Chairman, what will 
happen is the hospitals are going to simply start cutting their 
budgets now. I hope we can do something about this and all of 
these other problems. And I look forward to the rest of the 
hearing today.
    Mr. Pallone. Thank you. The gentleman from Pennsylvania, 
Mr. Murphy.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Thank you, Mr. Chairman, and thank you for 
continuing to work on issues for our children. Many times the 
discussion that takes place on Capitol Hill when it comes to 
issues dealing with health care are really discussions about 
health insurance. And regardless of what side of the aisle one 
is on, the discussions are often the same. For example, we talk 
about health care as being expensive and so we say let's have 
the Federal Government pay for it. We talk about health care as 
being expensive, so we say let's have the Federal Government 
manage it through such things as tax breaks for people to 
purchase it. We expand Medicare and Medicaid and SCHIP and see 
those price goes up to the point that 45 percent of our Federal 
mandatory spending is health care. And yet the expanses 
continue to rise. Now we understand for families, they need 
health insurance coverage at one time or another. But we also 
have to do it as a Congress.
    I still have hope that this session of Congress will do 
something about it, is deal with the spiraling cost of health 
care. Let me give you a couple of examples. When it comes to 
infection rates that are picked up at hospitals and clinics, 
the CDC tells us that there are about 2 million cases a year, 2 
million cases that cost $50 billion and 90,000 lives a year. 
Illnesses people pick up in hospitals when someone doesn't wash 
their hands or use sterile equipment or use antibiotics before 
or after surgery. There are tens of billions a year wasted when 
people have a chronic illness that is difficult to manage. And 
so amidst the multiple doctors' appointments and medications 
and treatments and therapies, it is inevitable that patients 
will feel overwhelmed by that and oftentimes not follow through 
correctly.
    Oddly enough, many times the Federal insurance programs 
that we have will not pay $5 for a nurse to call a patient and 
say what is your blood glucose level? Did you pick up your 
insulin? How is your diet? How is your weight? Won't pay $5 for 
a nurse to do that but will pay thousands of dollars to have a 
diabetic's foot amputated when they have complications. 
Something is wrong there. We also have a system where we 
realize that people who have chronic illness have a high 
incidence of depression, twice that of the general population, 
twice that. And yet if a person has untreated depression and 
chronic illness, their medical costs double while we struggle 
to getting a mental health parity bill done in this Congress.
    We have electronic medical records issues that we have 
tried to move forward. The RAND Corporation estimates $162 
billion a year savings would come if we are able to get 
electronic medical records use nationally and then save 
employers an additional $150 billion a year in other lost wages 
and lost work time. I still hold out hope that perhaps in this 
SCHIP bill or some other vehicle this committee can move 
through that we have both the passion and compassion to work to 
save lives and save money. We should be working hard on these 
issues to make sure that we incorporate all these things, ways 
of paying for all of these health care reforms and not just 
insurance.
    I am glad we are dealing with SCHIP. It is an important 
issue. But I still hope that this committee, this subcommittee 
will add to it or other bills issues that could really save 
money so we can expand health care to those who need it and not 
just continue to expand ways to pay for it. I yield back. Thank 
you, Mr. Chairman.
    Mr. Pallone. Thank you. I recognize the gentlewoman from 
Oregon, Ms. Hooley.

 OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Ms. Hooley. Thank you, Mr. Chair, for holding this hearing 
today on missed opportunities because of the President's veto 
of overwhelmingly bipartisan legislation to reauthorize the 
State Children's Health Insurance Program, SCHIP. It was over 
11 years ago when I first came to Congress that I was working 
with a group of women to provide health insurance for children. 
A year ago, when I first became a member of this Subcommittee 
on Health, I had hoped that we would be holding hearings this 
year, discussing the early successes of a bipartisan SCHIP 
reauthorization. Although Congress extended SCHIP 
reauthorization through March 2009, I thank you, Mr. Chair, for 
continuing to push this important issue to the front of our 
agenda.
    The debate about SCHIP has always been about priorities. I 
tell my constituents who implore me to continue fighting to 
expand children's health care that I will not stop working 
until we realize that goal. And every corner of my district, 
constituents tell me they do not understand why the President 
would oppose providing health care to more low-income children. 
More than 9 million American children, including nearly 116,000 
children in Oregon, are currently uninsured. That is simply not 
acceptable.
    Nearly 4 million more children, including over 36,000 
Oregon children, would have received health insurance under 
TERPA. As the economy softens, more parents are likely to lose 
their jobs and thus, their health insurance. Employers may also 
drop their coverage for employees as premium costs rise and 
profits fall. Since 2000, health insurance premiums have 
skyrocketed by 87 percent and that growth trend seems likely to 
continue. Family incomes have simply not kept pace with health 
care inflation.
    In these uncertain economic times, we must act for our 
children's sake now more than ever. Providing health insurance 
through SCHIP is the most cost effective way to provide health 
care to our Nation's children. We cannot afford not to act. The 
lack of access to adequate medical care creates a terrible 
burden for our children. Uninsurance leads to delayed diagnosis 
for treatable conditions that may become acute, chronic or life 
threatening.
    As a former schoolteacher, I can also say from experience 
that poor health leads to poor performance in schools. No 
society can expect to achieve and maintain its prosperity while 
compromising on the well-being of their children. I would also 
like to briefly mention my concern with some of the regulatory 
action taken last year by the administration. For example, the 
Centers for Medicare & Medicaid Services, CMS, August 17 
directive placing unreasonable restrictions on States in their 
efforts to expand coverage to more low-income children will 
likely force States to drop thousands of currently covered 
children. Regulations creating cost limits for public providers 
and reduction in payments for graduate medical education are 
two more of CMS regulations that will have a harmful effect on 
our children.
    The latter two regulations are particularly important for 
Oregon's Health and Science University, the location for much 
of the best pediatric care in Oregon. Legislation and 
regulatory roadblocks set up by this administration last year 
will make it more difficult for children to receive health 
care. I hope we can begin to overcome those hurdles this year 
and reach sensible compromises that meets our children's health 
care needs. Again, thank you, Mr. Chairman for holding this 
hearing.
    Mr. Pallone. Thank you. I will recognize the gentleman from 
Arizona, Mr. Shadegg.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Shadegg. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I think this is a critically important 
issue and I am glad we are discussing it. I want to make 
something very clear, I have introduced a refundable tax credit 
to provide cash to every single child that would be eligible 
for SCHIP funding every year since I have been here in 
Congress. I believe that it is a shame that there are so many 
children in America without insurance and I believe that it is 
a shame that there are so many Americans without insurance and 
without health care coverage. What I think this debate needs to 
be about, however, is how we go about achieving the end.
    I personally believe that America made the decision as a 
Nation a number of years ago that nobody should go without 
health care, not the least of us in our society should have to 
go without health care, and certainly our children shouldn't. 
But I think the fundamental question that we need to ask here 
is how do we go about improving health care? Let me ask you 
some questions. Are there problems with health care in America 
and with the access of children to health care in America 
because we as individuals have too much control over our health 
care and our health care decisions and who our doctor is? Or 
are there problems because we as individuals have too little 
control? Is it better off to have third parties, like our 
employers or our insurance company or the government making 
health care decisions for us? Or would we be better off if we 
made health care decisions? Let me ask kind of a fundamental 
question, would the cost of health care go down if we gave more 
control of health care and health care decisions to the 
government, to our employers, to our insurance companies? Or 
would the cost of health care go down if we had, as 
individuals, more control over our health care?
    Would, for example, the quality of health care in America 
go up if we gave more control to our employers or to our 
insurance companies or to the government? Or would, in fact, 
the quality of health care in America go up if we could hire 
and fire our insurance company, if we as individuals could hire 
and fire our health insurance plan, if we could hold our health 
insurance plan accountable by firing it when it did a lousy job 
rather than having to go and complain to our employer, I 
suggest we get both lower cost and higher quality. If in fact 
we could decide who we wanted to provide our insurance because 
the government helped us get money to go buy our own health 
plan and we can hold accountable, wouldn't that both drive down 
cost and up quality? And I would suggest it would.
    And that is why I believe what we need to be doing in this 
country to insure the children of America is to provide a 
refundable tax credit to every single family in America. If you 
don't make enough money to pay income taxes, we will give you 
cash, provided you go out and buy yourself a health insurance 
plan. It is your health insurance plan. You can pick the plan 
that has the doctors you want. If you don't like the plan, you 
can fire the plan. It is not your employer's health insurance 
plan. It is not the government's plan. And the reason that I 
don't favor SCHIP is because I think giving those basic health 
care decisions, who my health insurer is, whether it is 
responsive to me or not, which doctors it hires, giving those 
decisions away to the government, as SCHIP does, simply 
divorces the consumer of the good from the provider of the good 
and when you divorce the consumer of the good health care from 
the provider of the good, you get no accountability.
    So costs go up as they have in America when we have had 
more and more third-party pay, and quality goes down as we have 
had in America, as we have had more and more third-party 
control over our health decisions. So what is the answer? Why 
isn't the answer to say to every American, you get a tax 
credit. If you are too poor to pay income taxes, you get money 
from the government. If you are already paying income taxes, 
you reduce the amount you send to the government, and you go 
take that tax credit and you buy a health insurance plan. 
Whether you are poor or whether you are rich, it is your money. 
You get to hire the plan, not your employer. You get to fire 
the plan, not your employer. The government doesn't hire the 
plan. The government doesn't fire the plan. The government 
doesn't let the plan pick the doctors. You do. Wouldn't giving 
people control over their own health care improve quality and 
lower cost? And isn't that a much better system than expanding 
even further the third party control we already have in this 
country where we have divorced the consumer from the provider 
and therefore you can't fire your doctor, you can't fire your 
health care plan and you can't demand higher quality or lower 
cost? I thank the gentleman and yield back my time.
    Mr. Pallone. Thank you. The gentleman from Texas, Mr. 
Burgess.

 OPENING STATEMENT OF MICHAEL C. BURGESS, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman. I too am glad we are 
having this hearing today early in the year. Probably some of 
the most interesting time i have spent during my short tenure 
in congress was in the unintended SCHIP negotiations that 
worked their way through this Congress last fall and worked 
really on conference committee because we never appointed 
conferees from the House and the Senate. It was just people who 
showed up when we talked health care oftentimes well into the 
night. The consequence of that was the 18-month extension that 
we passed last December, and I am grateful that we were able to 
do that. No child in this country lost health insurance because 
Congress was not able to do its work in a timely fashion. Now 
we are tasked with getting this job done. We have given 
ourselves an extension. It is incumbent on us to utilize that 
time wisely. But a lot of the issues that have come up this 
morning, and we do need to talk about how we are going to 
maintain a network of providers, the workforce the doctors, the 
nurses, the nurse practitioners, the pediatric specialists to 
ensure that children who are covered whether it be by partial 
insurance or by SCHIP will have timely access to medical 
professionals.
    How do we keep from removing children from private 
insurance when parents have the means to pay for their 
children's coverage? And is that even important? Well I think 
that it is. Doing an informal survey back home in my district 
from pediatricians and talking to them about--even as bad as 
our insurance companies are, we all know they are terrible. But 
the average of the four largest third party payers in my 
district in north Texas, CPT code 99213, office visit low level 
of complexity, the four largest insurers compensate at an 
average price of $71 for that visit of 99213. Under the State 
Children's Health Insurance Program, State of Texas 99213 
reimburses at a rate of $37.64. So a little more than half of 
what the four largest insurers, as bad as they are, a little 
less than half of what the four largest insurers compensate. 
99214, office visit established medium complex. The bad 
insurance companies, as bad as they are, reimbursed at a rate 
of $109. 99214, the State Children's Health Insurance Program, 
State of Texas Dallas/Fort Worth area $52.86.
    Again, we are talking a little less than half. What is the 
effect of our pediatric workforce if we move children from 
commercial insurance, as bad as it is, and I am not going to 
argue that commercial insurance is good or companies behave 
properly. But as bad as it is, what is the effect if we remove 
children from commercial insurance? Now when we had multiple 
hearings during the negotiations, we had figures from the 
Congressional Budget Office, and the figure of 10 million 
children was always brought up. Well, 6 million children are 
already on SCHIP. There are 800,000 kids that could be on SCHIP 
today but they are hard to find. It is hard work. It is hard 
for the States to go find them.
    And guess what, if the States do the work and go find them, 
they pick up 1,200 children who could be on Medicaid. So there 
are children that could be covered under today's rules under 
today's expansion without any expansion of the program. And in 
fact, according to the CBO's own figures, to get that 10 
million figure, 2 million children will have to be pulled off 
of private health insurance. Is that a problem?
    Again, I submit the notations that I got from a survey of 
pediatricians back in my district back in north Texas. We are 
putting their reimbursement rates by about half by taking 
children from SCHIP, from commercial insurance and putting them 
on SCHIP. That may not be a problem if you are an academic 
pediatrician, it may not be a problem if you practice in a 
Federally qualified health center. But if you are out there in 
the neighborhood doing the work in my district, it will have an 
extremely deleterious effect on the pediatric workforce.
    Mr. Pallone. I would just want to notify the gentleman he 
is over a minute. If you could wrap it up.
    Mr. Burgess. Where is our clock, Mr. Chairman?
    Mr. Pallone. Unfortunately we don't have one and people 
have been going over.
    Mr. Burgess. Reserving the right to object, I think I have 
made my point. And I will yield back my time. But I thank you 
for holding the hearing. I think it is important and I look 
forward to the testimony of our witnesses. And I think it is 
incumbent on all of us to work hard. We have to put the 
partisanship aside and get the work done for the American 
people. And that is what I look forward to doing today. And I 
will yield back.
    Mr. Pallone. Thank you. I have one but no one else does. So 
we will try to bear with it.
    Let me ask unanimous consent that a statement of our full 
committee Chairman, Mr. Dingell, be entered into the record. 
Without objection, so ordered.
    [The prepared statement of Mr. Dingell follows:]

                   Statement of Hon. John D. Dingell

    Thank you for holding this hearing. I am pleased that there 
are two distinguished panels of witnesses before us today to 
discuss missed opportunities for providing health care to 
America's children. Certainly the most obvious ones are the 
Administration's two vetoes of our efforts to reauthorize and 
expand the Children's Health Insurance Program.
    Not once, but twice this Administration rejected 
legislation that would reauthorize the Children's Health 
Insurance Program for the next five years and add sufficient 
funding to protect existing coverage and improve access for 
millions of additional low income children.
    There are many States without enough money to cover their 
children under the existing program. The bills passed by 
Congress would have averted these likely funding' shortfalls, 
expected to affect some 42 States by 2012.
    Last year's CHIP reauthorization also made great strides in 
the area of children's dental and mental health, as well as in 
quality measurement and improvement. With the President's veto 
we lost this as well.
    Most importantly, the bill went right to the heart of 
finding and enrolling uninsured but eligible children through 
financial incentives for States and new tools, such as express 
lane eligibility, to streamline enrollment paperwork.
    It is a sad legacy indeed that this Administration leaves 
behind on children's health.
    If preventing health coverage for 10 million additional 
children isn't bad enough, the Administration has proposed to 
cut more than $12 billion from the Medicaid program over the 
next 5 years.
    We can also thank the Bush Administration for the now-
infamous ``August 17 guidance,'' which is being used to derail 
State plans to cover uninsured children. With little regard for 
the well-being of poor children in America, the Administration 
would prohibit a child's enrollment in CHIP for a full year 
after the date the child's parent loses employer-sponsored 
coverage.
    That is a full year of immunizations, well-child visits, 
ear aches, strep throat, dental care, and other needs that will 
go untreated. This is simply bad and, frankly, mean-spirited 
public policy.
    Our Nation has record numbers of Americans who are 
uninsured and, in addition, millions more who are under-
insured. Nearly 1 in 4 families under the age of 65 will spend 
more than 10 percent of their pre-tax income on healthcare 
costs in 2008. With the pending recession, programs such as 
CHIP and Medicaid take on heightened importance. As we all 
know, health coverage is often an early casualty of a parent 
who is laid off, and children should not be the ones who suffer 
as a result.
    States need the ability to keep these vital programs 
strong--especially in times of economic downturn--and we should 
be seeking ways in addition to CHIP that provide State 
assistance in the form of increased Federal funding of 
Medicaid. States also need the ability to ramp up these 
programs to help those working Americans whose incomes are not 
keeping pace with health costs. We should not have any more 
missed opportunities for this country or its children.
    I thank today's witnesses for joining us, and in particular 
Ms. Taylor-Chester for sharing her very compelling story of her 
son's experience with CHIP.
                              ----------                              

    Mr. Pallone. And now that concludes our opening statements 
by the Members of Congress. I will now turn to our witnesses. 
If the members of the first panel could come up to the table 
there, I would appreciate it.
    I understand there are other Members on both sides that 
would like to submit opening statements for the record. So 
without objection, I will ask unanimous consent that those all 
be entered into the record. And let the record be open for 
those opening statements. Without objection, so ordered.
    First of all, welcome. Let me introduce the first panel and 
I will go from my left. We have Cynthia Mann, who is research 
professor and executive director at the Center For Children and 
Families at Georgetown University Health Policy Institute. And 
next to her is Mr. Chris Peterson who is a specialist in health 
care financing, domestic social policy division of the 
Congressional Research Service. And then next to him is Ms. 
Carolyn Chester who is a nursing assistant. And she is speaking 
on behalf of Service Employees International Union. And then we 
have Dr. Louis Rossiter who is a research professor and 
director of the Schroeder Center For Health Care Policy at the 
College of William and Mary. And then the last on my right is 
Mr. Bruce Lesley who is President of First Focus based here in 
Alexandria, Virginia.
    Mr. Pallone. We are going to have 5-minute opening 
statements from each of you. They will be made part of the 
record. And again, you don't have a clock. So I may just have 
to tell you when the 5 minutes are up. Each witness may, in the 
discretion of the committee, submit additional brief and 
pertinent statements for inclusion in the record. I am going to 
try to stick to the 5 minutes and give you some notice when the 
5 minutes is over. We will start with Ms. Mann. I recognize her 
at this point. Thank you for being here.

  STATEMENT OF CYNTHIA MANN, RESEARCH PROFESSOR AND EXECUTIVE 
    DIRECTOR, CENTER FOR CHILDREN AND FAMILIES, GEORGETOWN 
               UNIVERSITY HEALTH POLICY INSTITUTE

    Ms. Mann. Thank you. Good morning, Chairman Pallone, and 
Representatives Barton, Deal and other members of the 
subcommittee. I am Cindy Mann, research professor at Georgetown 
University and director of the Center For Children and 
Families. I am pleased to be with you today to talk about the 
topic of children's coverage and missed opportunities to move 
that coverage forward. During my remarks, I will refer to some 
of the figures that were included in my testimony beginning on 
page 16. When 2007 began, all signs were that CHIP 
reauthorization would go forward and that it would be 
accomplished in a manner that would actually legally strengthen 
children's coverage both in the CHIP program and in the 
Medicaid program. But instead, we had a year of missed 
opportunities in terms of children's coverage, and in fact, as 
a result of the directive issued by the Centers for Medicare & 
Medicaid service, the August 17 directive that some of you have 
referenced.
    Federal policy governing children's coverage has actually 
moved backward over this past year. It is particularly 
troubling that this has happened because despite a decade of 
progress in terms of lowering the rate of uninsured children. 
We have begun to see that number rise in the last 2 years under 
census data. And it is growing again at a rate of about 2,000 
children a day. The weakening economy will inevitably push 
these numbers upward unless further action is taken by Congress 
to put the Nation back on the right track.
    There were many hopeful signs as we began the year 2007. 
The first we had a program with a 10-year track record. It was 
a much studied program. And we know from the studies from the 
State experiences that it worked. In fact, it exceeded 
expectations. It was regarded widely as resoundingly 
successful. 6.7 million children were enrolled in CHIP as we 
began the year. And millions more had been brought in the 
Medicaid program because of the focus on covering children had 
prompted States around the country to ease up their Medicaid 
enrollment processes and make it easier for families with 
eligible children to enroll their children into coverage. Not 
only were children gaining coverage, but the studies also 
showed that the children with coverage had greater access to 
care, access that was comparable to counterparts with private 
coverage.
    As a result of CHIP and Medicaid over these last 10 years, 
the uninsured rate among low-income children, children below 
200 percent of the poverty line dropped by a third. That is an 
astounding development, particularly when you think about that 
during this period of time we had rising health care costs, 
declining employer-based coverage for both children and adults, 
and the number of adults without insurance rising sharply.
    So as the debate over CHIP began, we had a program with a 
proven track record and where the results had actually exceeded 
expectations. We also had very willing partners at the State 
level. You know, we will hear from two of them today, two CHIP 
directors. During the years 2006 and 2007, we began to see a 
resurgent, a new wave of activity going on around the country 
as States began to reinvest their energies, reinvest their 
resources into coverage for children. So whatever changes 
Congress was about to make in 2007 through CHIP 
reauthorization, you had a ready and willing audience at the 
State level. States were eager to move coverage forward and you 
will see in my testimony the States that did so were quite 
diverse. They were Oklahoma they were Indiana they were 
Washington, Texas, Alaska, Pennsylvania, States in all regions 
of the country and with leadership on both sides of the 
political aisle, moved coverage forward.
    In this environment, Congress also moved forward. You 
passed a very strong bill now known as CHIPRA, the Children's 
Health Insurance Program Reauthorization Act of 2007. It didn't 
have all of the provisions that was in the House 
reauthorization, the CHAMP bill that would have moved coverage 
forward for children. But it was a very strong bill. And 
according to the Congressional Budget Office, it would have 
brought coverage to an additional 4 million children who 
otherwise didn't have access to affordable health insurance 
coverage.
    It is important when you think about the missed 
opportunities and where we are today to think about what CHIPRA 
would have done. It would have strengthened coverage in three 
ways. Put CHIP on secure financial footing over the next period 
of time, give States new resources, new tools, new options to 
make sure that the lowest-income children were covered, and it 
also would have strengthened the benefit package and adopt new 
quality initiatives for children. CHIP would gain the support 
of the large majorities of the members of Congress, but of 
course not enough to override the veto. And as a result, the 
opportunities presented by that legislation were lost.
    Let me now focus on two of the consequences of those missed 
opportunities. One is the weakening economy. As I mentioned 
before, we began to see the uninsured rate among children pick 
up.
    Mr. Pallone. Ms. Mann, you are over 5 minutes. So if you 
could try to wrap it up. I apologize because I know there is no 
clock there.
    Ms. Mann. That is fine. I will try to be very brief. The 
lack of CHIP moving forward is obviously more of a problem now 
because of the weakening economy where we will see more 
children be uninsured. Let me just finally touch on the August 
17 directive which remains in place. I think there is a sense 
that by extending CHIP through the March 2009, you left the 
status quo in place, but in fact, we have a new policy that has 
actually thwarted States' efforts to move forward. We have 
already had six States affected. We will have 23 States 
affected by August 2008. They are stopped from making the 
decisions that they have decided were best for the children in 
their State which is to cover children with no affordable 
health care options. Thank you, Mr. Chairman.
    [The prepared statement of Ms. Mann follows:]

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    Mr. Pallone. Thank you. Mr. Peterson.


    STATEMENT OF CHRIS PETERSON, SPECIALIST IN HEALTH CARE 
   FINANCING, DOMESTIC SOCIAL POLICY DIVISION, CONGRESSIONAL 
                        RESEARCH SERVICE

    Mr. Peterson. Thank you, Chairman Pallone, Mr. Deal and 
members of the subcommittee. I am going to pose four questions 
to frame health insurance issues generally in SCHIP 
reauthorization specifically and then I will discuss how those 
questions were addressed in the three House passed 
reauthorization bills: CHAMP, which the Senate did not take up, 
and the two CHIPRA bills vetoed by the President. Obviously, my 
role is not to assess whether any particular approach was 
right, but rather to instill the complex issues into a 
framework of describing bills that I hope is useful. Much 
greater detail is in my written testimony. The first question 
is, if you build it, will they come? In 2006, 9 million 
children were uninsured, nearly two-thirds of them eligible for 
Medicaid or SCHIP. The Federal Government and States built it. 
But 6 million uninsured eligible kids haven't come.
    To address this, the House-passed bills would have provided 
bonus payments to States that increased child enrollment by 
certain amounts and that outperform certain activities. CBO 
estimated CHAMP would increase Medicaid and CHIP enrollment by 
2012 by 7.5 million. The two vetoed CHIPRA bills would have 
increased enrollment by 5.8 million. In all three the increase 
was mostly about current eligibility groups, which leads to the 
second question, if you build it, how many nontargeted 
individuals will come? And how many is acceptable? Note the 
question is not whether nontargeted individuals will come but 
how many. Children not targeted by SCHIP include those already 
enrolled in job-based coverage. According to CBO the House-
passed reauthorization bills had crowd-out rates of a third. 
This means that for every three people enrolled in Medicaid or 
SCHIP because of the legislation, two would have been uninsured 
and one would have had other coverage in its absence.
    However, CBO's director said quote, we don't see very many 
other policy options that would reduce the number of uninsured 
children by the same amount without creating more crowding. As 
one economist put it, it is like fishing for tuna, when you let 
down the tuna nets, you catch some dolphins too. Again, the 
policy question is, how much is acceptable? The third question 
is, if you build it, who should design it? And with how much 
flexibility? For example, the tension between State flexibility 
and federal specificity is illustrated by recent debates over 
how high up the income scale SCHIP eligibility should go and 
whether adults should be eligible.
    This is also discussed in greater detail in my written 
statement. The fourth and final question is, if you build it, 
what should the structure be? Nearly 100 years ago Americans 
debated whether coverage proposals linked too heavily toward 
government involvement versus the free market concerns also 
raised regarding SCHIP. But discussions about what health 
insurance structure we should have are impeded by challenges to 
defining what structure we currently are. Private insurance is 
projected to generate public tax expenditures of $130 billion 
this year. On the flip side, public insurance, like Medicaid 
and SCHIP, provides much of its coverage through private 
insurers. Thus, health policy options are rarely binary choices 
between something wholly private or public but tend to be 
gradations of one over the other in the hopes the trade-offs 
are beneficial.
    If one's goal for SCHIP is to lean more toward private 
coverage, one option is premium assistance where SCHIP pays a 
portion of job-based premiums. Of course when considering a 
different structure like this, it raises the first three 
questions again. If you build it, will they come? How many 
nontargeted individuals will come? And who does the designing? 
With how much flexibility? Because current restrictions on 
SCHIP premiums make it so difficult, most States with these 
programs use waivers to give them more flexibility. CHAMP had 
no premium assistance provisions, but CHIPRA would have made 
SCHIP premium assistance easier to implement without waivers.
    In conclusion, getting health insurance to children in any 
population is not rocket science. It is harder. In rocket 
science, you have constants. You know what speed is necessary 
to escape the earth's atmosphere and how often do you hear 
debates about the measure of gravity's pull or whether a 
certain orbit is too high or too low or what the best path is 
to get there? When it comes to health insurance, however, there 
are important fundamental questions about what the goals are 
and how best to accomplish them. I hope my testimony has helped 
frame these questions in a useful way. Thank you.
    [The prepared statement of Mr. Peterson follows:]

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    Mr. Pallone. Thank you. Ms. Chester.

STATEMENT OF CAROLYN TAYLOR CHESTER, NURSING ASSISTANT, SERVICE 
                 EMPLOYEES INTERNATIONAL UNION

    Ms. Chester. Good morning, my name is Caroline Taylor 
Chester and I live in Baltimore with my husband Jerry and son, 
Keith. He is 11 years old. I work at Wesley Assisted Living in 
Baltimore, which just changed from a nursing home to assisted 
living. I have worked there for almost 8 years, and I do it 
because I like helping elderly and taking care of patients. The 
work is hard and it does not pay much, but I get to meet 
special people and their families. I like making their days a 
little better.
    Last year my family earned about $20,000. Wesley offers 
health insurance, but it is very, very expensive to cover my 
family. There is no way in the world I would be able to afford 
it. It would cost over $298 per pay period for my check to 
cover my husband and Keith. That would eat up almost 30 percent 
of my family's income just for health insurance. On top of 
that, there are still deductible and a $30 co-pay for a primary 
care physician, $40 co-pay for visits to the specialist. This 
does not even cover dental insurance either, that is more.
    Every year the cost of family coverage just keeps going up 
and up. God knows I appreciate SCHIP. We pray on my husband 
staying healthy without insurance, but at least our son is 
covered. Keith has been helped by the Maryland CHIP program all 
his life. With the Maryland CHIP program, Keith sees a 
pediatrician on a regular basis, gets tested early for 
allergies and asthma and sees an allergist when needed.
    My son had a lot of ailments when he was younger. He has 
had asthma pretty bad. With MCHIP we are able to treat Keith's 
breathing problem early and we do not use the hospital 
emergency room, which is sometimes the only option for families 
like mine.
    The relationship you have with your doctor is one that 
needs to be built on trust and understanding. Not only has 
Keith been able to see the same pediatrician his entire life, 
he is the same pediatrician I went to when I was a child. He 
denies it to the end, he says he was not the one, but he did 
treat me.
    Keith also gets a regular dental checkup with the MCHIP 
program. Since we were first enrolled with CHIP in the program 
for about 12 years Maryland has made it easier for a family 
like ours to renew our coverage from the mail. We have moved a 
lot so we can live in better places. It is not easy for us to 
make sure that Keith stays insured under MCHIP.
    I brought a picture of Keith with me today because I am 
very proud of him. He is a healthy, strong sixth grader who 
doesn't have to miss school all the time because he is sick. He 
can focus on his schoolwork and just being a kid. This is my 
family's story. I wanted you to hear because it is not just 
about Keith, it is about people like my coworker Antoinette 
whose daughter lost her health insurance when the SCHIP 
expansion funding was cut. There are millions of people like us 
whose families and health depend on the program.
    I used to work on the health suite at Baltimore City Public 
Schools when I was employed by the schools and I knew the 
challenge of just finding parents just to remember to renew 
your insurance every year. It was hard and we had to look for 
parents. Teachers would send children to the health suite, they 
were sick, and it was like we do not have any insurance. 
Children are in need of insurance, families are in need of help 
because we cannot afford to have the health insurance that is 
needed for the parents that need to have health insurance. They 
quit their jobs or do whatever they need to do to be able to 
provide insurance for their children. It is not fair that I 
should choose whether to work or whether my child should have 
health insurance. We live in the richest country in the United 
States, and it is a shame for anyone to say we can't afford 
health insurance for each and everyone that lives in the United 
States.
    Thank you for your time.
    [The prepared statement of Ms. Chester follows:]

                  Statement of Carolyn Taylor Chester

    My name is Carolyn Taylor Chester and I live in Baltimore, 
MD, with my husband Jerry and son Keith. He is 11 years old.
    I work at Wesley Assisted Living Center in Baltimore, which 
just changed from a nursing home to an assisted living center. 
I have worked there for almost 8 years, and I do it because I 
like helping the elderly and taking care of my patients. The 
work is hard, and it doesn't pay much, but I get to meet 
special people and their families and I like making their days 
a little bit better.
    Last year my family earned about $20,000. Wesley offers 
health insurance, but it is very, very expensive to cover my 
family. There's no way in the world I'd be able to afford it. 
It would cost over $260 per pay period from my check to cover 
my husband and Keith. That would eat up about 30% of my 
family's income just for health care. On top of that, there are 
still deductibles and a $30 copay for each primary care visit--
and $40 copays for each visit to a specialist. This does not 
even cover dental insurance either--that's more. Every year, 
the cost of family coverage just keeps going up and up.
    God knows I appreciate SCHIP. We pray on my husband staying 
healthy without insurance but at least our son is covered. 
Keith has been helped by the Maryland CHIP program all his 
life. With the Maryland CHIP program, Keith sees a pediatrician 
on a regular basis, gets tested early for allergies and asthma, 
and sees an allergist when he needs to. My son had a lot of 
ailments and allergies when he was younger. He had asthma 
pretty bad. With MCHIP, we were able to treat Keith's breathing 
problems early, and we don't use the hospital emergency room--
which is sometimes the only option for families like mine.
    The relationship you have with your doctor is one that 
needs to be built on trust and understanding. Not only has 
Keith been able to see the same pediatrician his entire life, 
he's the same pediatrician I went to when I was a child! Keith 
also gets regular dental check-ups with the MCHIP program.
    Since we first enrolled Keith in the CHIP program 12 years 
ago, Maryland has made it easier for families like ours to 
renew our coverage through the mail. We've moved a lot so we 
can live in better places. It's now easier for us to make sure 
that Keith stays insured under MCHIP.
    I brought a picture of Keith with me today, because I am 
very proud of him. He is a healthy and strong 6th grader who 
doesn't have to miss school all the time because he's sick. He 
can focus on his schoolwork and just being a kid.
    This is my family's story. I wanted you to hear it because 
it's not just about Keith. It's about people like my coworker 
Antoinette whose daughter lost her insurance when the SCHIP 
expansion funding was cut. There are millions more like us 
whose children's lives and health depend on this program.
    Thank you for your time.
                              ----------                              

    Mr. Pallone. Thank you, Ms. Chester; appreciate it.
    Dr. Rossiter.

    STATEMENT OF LOUIS F. ROSSITER, RESEARCH PROFESSOR AND 
 DIRECTOR, SCHROEDER CENTER FOR HEALTH CARE POLICY, COLLEGE OF 
                        WILLIAM AND MARY

    Mr. Rossiter. Good morning, Chairman Pallone, Ranking 
Member Deal and distinguished members of the committee and 
subcommittee. I am pleased to be here to discuss missed 
opportunities in covering uninsured families.
    I think the number one missed opportunity, in my opinion, 
is not doing enough to incorporate the principles of welfare 
reform in SCHIP. President Clinton outlined these in 1995. He 
said, ``Number 1, focus on work.'' Number 2, ``Have real work 
requirements.'' He said with regard to--with welfare, with 
money now spent on welfare and food stamps to subsidize private 
sector jobs the SCHIP case would be to subsidize private sector 
jobs with health insurance. The number 3 quote he said, have 
real incentives to reward States who put people to work. I 
would add in our case here today to put people to work with 
jobs with health insurance.
    Because we don't focus on work in the SCHIP program we are 
not maximizing group health coverage. Our experience with SCHIP 
fosters all or nothing welfare-like coverage and it encourages 
uninsurance because some children have their coverage switched 
and there are the required periods of no insurance. It also 
fragments coverage for families and it lures parents to drop 
their own group coverage. It also encourages small employers 
with low income workers to abandon coverage.
    We know we are trading off 2 for 1. Adding 2 uninsured 
children to the SCHIP rolls means 1 child who loses existing 
coverage. The tradeoff rises to 1 to 1 at the higher income 
levels.
    That brings me to the number 2 missed opportunity with this 
bill that we are talking about, which is understanding health 
insurance trends. Since enactment of SCHIP the rate of 
employer-sponsored insurance has declined and the uninsurance 
rate increased. No one really understands why. While we might 
say these trends would have been worse without SCHIP, with 
millions of children covered by SCHIP, neither can we rule out 
an SCHIP effect on all these families. SCHIP is obviously 
helping some children, but it could also be harming the U.S. 
economy and the health insurance system and their ability to 
cover even more children.
    The number 3 missed opportunity is the opportunity to grow 
group health insurance for small firms with low wage workers.
    I have three recommendations for your consideration as we 
look at this bill. Number 1, focus on work with health 
insurance. I would recommend gradually eliminating the Medicaid 
expansion option the States have under SCHIP. Medicaid 
expansion programs let the States really cop out of the hard 
work involved with organizing and subsidizing group health 
insurance. SCHIP should be separate from Medicaid, focused on 
helping parents at work by subsidizing private sector jobs with 
insurance.
    The second recommendation is to have real work requirements 
on SCHIP participation and cover families, not just children. A 
welfare recipient must work for benefits, the parents of an 
SCHIP recipient do not. Whenever possible to strengthen the 
link to group coverage, the State should have sensible work 
requirement at jobs with insurance.
    The third recommendation is to have real incentives for 
States who can place people into publicly organized and 
subsidized group insurance. Don't merely establish a task force 
for nationwide education outreach for small business. Low 
income parents should face stiff provisions to enroll their 
children and use the benefits appropriately.
    The government requires all sorts of things for parents, 
including sending kids to school, immunizations, the paying of 
taxes and the provision of child support. The States should 
have similar provisions with regard to subsidized health 
insurance for them and their children.
    Mr. Chairman, it is sad when a child goes on Medicaid. The 
goal should be reducing, not increasing the number of children 
on Medicaid. Bringing SCHIP into alignment with the original 
principles of welfare reform is an opportunity we do not want 
to miss, especially for the children.
    Thank you.
    [The prepared statement of Dr. Rossiter follows:]

                 Testimony of Louis F. Rossiter, Ph.D.

    Good morning Chairman Pallone, Representative Barton, 
Representative Nathan, and distinguished members of the 
Subcommittee. I am pleased to be here today to discuss missed 
opportunities in covering uninsured families. I am a health 
economist with Medicaid experience at The Centers for Medicare 
& Medicaid Services (CMS) (1990-1992), and responsibility to 
the Governor of Virginia on the implementation and operation of 
our State Children's Health Insurance Program (SCHIP or FAMIS 
in Virginia) (2000-2002). More recently, I co-authored the 
Medicaid chapter in a recent Brookings Institution Press book 
(edited by Alice Rivlin of the Brookings Institution and Joe 
Antos of the American Enterprise Institute) entitled Restoring 
Fiscal Sanity 2007: The Health Care Spending Challenge. Based 
upon this and other research I want to share three missed 
opportunities represented by H.R. 3963 and why significant 
improvements can be made.

     Number One Missed Opportunity: Align SCHIP With Welfare Reform

    No one wants uninsured children. Yet, SCHIP should not be 
renewed without alignment with Welfare Reform\1\: There are 
three principles that the current SCHIP violates:
    1.``focus on work''
    2.``have real work requirements'' with ``money now spent on 
welfare and food stamps [redirected] to subsidize private 
sector jobs''
    3.``have real incentives to reward states who put people to 
work''.
    The provisions of the SCHIP (1997) program are a step 
backward from the Welfare Reform (1996), passed just one year 
prior. The capped-grant feature of SCHIP is an improvement over 
the perverse incentives of Medicaid (Weil and Rossiter 2007). 
But rather than maximizing group health coverage, our 
experience with SCHIP fosters all-or-nothing welfare-like 
coverage and:
    1.Encourages uninsurance due to switched coverage for 
children who may already have access to group coverage and a 
lag in the period of coverage
    2.Fragments coverage for families and lures parents to drop 
their own group coverage
    3. Encourages small employers with low-income workers to 
abandon coverage
    We know we are trading off ``two for one''--we buy two 
uninsured children SCHIP coverage at the cost of existing 
coverage for one child. The trade off rises to ``one to one'' 
at the higher income levels. One reason is that SCHIP does not 
focus on work.

  Number Two Missed Opportunity: Understanding Health Insurance Trends

    What is wrong with having more children covered by P-SCHIP 
even though it means crowding out private coverage? Since 
enactment of SCHIP, the rate of employer-sponsored insurance 
has declined and the uninsurance rate increased. No one really 
understands why. While we might say these trends would have 
been worse without SCHIP, with millions of children covered by 
SCHIP, neither can we rule out an SCHIP effect on all of these 
families. SCHIP is obviously helping some children but could be 
harming the U.S. health insurance system and our ability to 
cover even more children.

Number Three Missed Opportunity: Group Health Insurance for Small Firms 
                         With Low-Wage Workers

    To bring SCHIP into alignment with Welfare Reform and 
ensure that the unintended consequences of SCHIP are minimized, 
the authorizing legislation needs to be rewritten this Spring 
to accomplish the following:
    A.``Focus on work'' and gradually eliminate the Medicaid-
expansion option the states have under SCHIP. Medicaid 
expansion programs let the states cop-out of the hard work 
involved with organizing and subsidizing group health 
insurance. SCHIP should be separate from Medicaid, focused on 
work for the parents and used to subsidize private-sector jobs.
    B.``Have real work requirements'' on SCHIP participation 
and cover families, not just children. A welfare recipient must 
work for benefits. The parents of an SCHIP recipient do not. 
Whenever possible, to strengthen the link to group coverage, 
the states should have a sensible work requirement.
    C.``Have real incentives for states who can place people'' 
into publicly organized and subsidized group health insurance . 
Do not merely establish a task force for nationwide education 
and outreach for small business (H.R. 3963). Revise all of the 
provisions in HR 3963 to demand that the states aggressively 
establish programs separately from Medicaid--as 18 states have 
done--and rapidly grow the separate programs we already have. 
Low income parents should face stiff provisions to enroll their 
children and use the benefits appropriately. Ten years of 
voluntary SCHIP outreach programs is not cost-effective use of 
public funds. Government requires all sorts of things from 
parents including immunizations, the paying of taxes and the 
provision of child support. We should have similar provisions 
for subsidized health insurance for them and their children.
    It is sad when a child goes on Medicaid. We should set the 
goal of reducing, not increasing, the number of children on 
Medicaid. Bringing SCHIP into alignment with the original 
principles of Welfare Reform is an opportunity we do not want 
to miss.

    \1\ President Clinton on Welfare Reform, National 
Governors' Association Summit on Small Children, June 6, 1995. 
http://www.libertynet.org/edcivic/welfclin.html accessed 
January 26, 2008.
    \2\ Rosenbaum, Sara, Borzi, Phyllis C., Smith, Vernon. 
2001: Allowing Small Businesses and the Self-Employed to Buy 
Health Care Coverage through Public Programs. Inquiry: Vol. 38, 
No. 2, pp. 193-201.
                              ----------                              

    Mr. Pallone. Mr. Lesley.

STATEMENT OF BRUCE LESLEY, PRESIDENT, FIRST FOCUS, ALEXANDRIA, 
                               VA

    Mr. Lesley. Thank you, Mr. Chairman. My name is Bruce 
Lesley. I am the President of First Focus, a bipartisan 
children's advocacy organization dedicated to making children 
and families a priority in Federal policy and budget decisions.
    I spent some time working on this committee for 
Congresswoman Diana DeGette and it was a wonderful experience, 
worked on many children's health issues as that is a priority 
of hers, worked on some SCHIP provisions related to covering 
pregnant women, presumptive eligibility, but also she 
championed a pediatric organ transplant bill that passed the 
House I think by 400-something to 3. So I have spent some time 
working on this committee working on children's health issues.
    There is a perception in this town that children fare 
better than the reality when it comes to Federal legislation. 
It is epitomized by Dana Milbank's column in the Washington 
Post during the middle of the SCHIP debate, where he wrote, 
lawmakers on both sides of the aisle know that a piece of 
legislation stands a much better chance of passage if it is 
about children. He went on to cite eight pieces of legislation 
as examples. However, he didn't take the next step which was 
then to look to see how they are faring, and none of them have 
passed the Congress. It is a disturbing trend that First Focus 
has increasingly found.
    According to an Urban Institute report that First Focus 
commissioned this past year, entitled Kids Share 2007, the 
share of Federal domestic spending on children has actually 
declined by an astonishing 23 percent since 1960. And based on 
projections from the Congressional Budget Office, that downward 
trend will drop further over the next decade unless Congress 
takes specific actions to reverse that trend.
    I say that because this I think epitomizes the SCHIP 
debate. Years ago I worked for Senator Jeff Bingaman on the 
Senate Finance Committee, and we were faced with the task of 
what are we going to do about Medicare prescription drug 
coverage for senior citizens. Congress passed a $400 billion 
bill very much supported by the President of the United States.
    Last year when we were working on SCHIP we had a bill that 
would have provided $35 billion, far less than the $400 billion 
provided for senior citizens, and yet we couldn't get it 
through the administration, who vetoed it twice. I will note 
that what finally did pass was an $800 million extension. So if 
you compare 400 billion to 800 million, that is a 500:1 ratio 
when we dealt with how we dealt with senior citizens and how we 
dealt with children, but it is not because of the lack of broad 
public support from the public.
    We commissioned a poll by Republican Frank Luntz that 
showed that 83 percent of Americans supported renewing SCHIP 
programing, including a 2:1 margin of support from Republican 
voters.
    I think that some of the issues that people outlined today 
were good ones about how we should move forward. I think that 
we should all keep in mind is three goals. One is that there 
are 9 million children in this country who are uninsured and we 
should keep that as the first and foremost goal. We should also 
make, and I agree with some of the members who talked about 
this, the lowest income children the top priority. And last, 
failing meeting those goals, we should always make sure not to 
backtrack on coverage, we should definitely do no harm.
    I used to play basketball in high school and we used to go 
out and do training with the track team, and I always was most 
amazed by the people who did the high hurdles because I tried 
and failed. But the analogy is that in Medicare we saw an end 
goal of we needed to provide prescription drug coverage to 43 
million Americans, there were hurdles. One thing is that 71 
percent of senior citizens had former drug coverage, 
prescription drug coverage already. What Congress didn't do is 
say, oh, we can't jump that hurdle, Congress figured out ways 
around that problem and in the end got to the goal of providing 
drug coverage for senior citizens.
    What I see, I was reading the testimony from CMS, and what 
instead has happened with the administration this year was that 
first whole hurdle of cut, crowd-out, which was far lower for 
SCHIP if you think the crowd-out rate is 34 percent as opposed 
to 71 percent potentially for Medicare. What we did was stopped 
and started looking at that, and that became the goal, and it 
is that issue rather than getting to the end game of getting 
low income children covered.
    Also the problem is that wasn't the only issue we were 
hearing. We also heard it was kind of the moving goal. We 
also--when talking to the White House it was it is not that we 
have a problem with SCHIP, it is that we want to get our tax 
credits passed. In talking with OMB, it was an issue of well it 
is not that we have any problems with any of the legislation, 
it is the 35 billion is our problem. We put in our budget for 5 
billion, which we all know would have actually meant a million 
children would have lost health insurance.
    So what I appreciated Congressman Deal and Congressman 
Barton talking about is how can we move forward. And one of the 
ways I think the administration repeated this more than 50 
times during the SCHIP debate, and it is let's look at the 
poorest kids first. I would note that as Cindy Mann testified, 
the CHIPRA bill, actually the newly covered children, the 3.9 
million children who would have been covered, 87 percent of 
those kids would have been children below 200 percent of 
poverty. So it took very strong steps toward achieving that 
goal.
    As we move forward though, what we could do is at least 
take those provisions from that legislation and start there. 
And some of the things that were in that legislation were the 
outreach enrollment provision, the express lane eligibility 
provisions. We have done a great deal in the Medicare side of 
using health information technology and those kinds of things, 
and we could do a better job on the SCHIP side on that as well. 
We could also move forward on quality provisions. We have 
passed numerous pieces of legislation and CMS has been moving 
forward on quality for senior citizens. We could do the same 
and take the provisions out of the CHIPRA bill on quality and 
move forward.
    Just a few words about express lane enrollment. When a 
child is eligible for--I know I am running out of time, so I 
will hurry.
    Mr. Pallone. You are about a minute over.
    Mr. Lesley. Over, okay. I will just finish up then. On 
express lane enrollment, the issue is that if a child is 
enrolled in food stamps or school lunch or those other kind of 
programs, States have in their systems that data, the 
eligibility data, that shows that these kids are--you know for 
a fact are eligible for Medicaid or SCHIP. So one of the things 
that was really great about the CHIPRA bill is that it had 
language that allowed that data to be used for eligibility 
determination for the SCHIP and Medicaid programs. It is in 
that vein that I think we can move forward. That is something 
that I did not hear any opposition for, and I hope we will 
start from there and move forward.
    Thank you very much.
    [The prepared statement of Mr. Lesley follows:]

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    Mr. Pallone. Thank you, and I thank all of the panel for 
your opening statements. Now we will go to questions and I will 
recognize myself initially for 5 minutes. I wanted to start 
with Ms. Mann.
    Just so you understand my perspective, I remember a year 
ago when the State delegations were coming here and saying, you 
know, we are running out of money, we are going to have to take 
kids off SCHIP. So we passed a temporary measure then. I think 
it was part of the supplemental to carry them. But the main 
goal was to have the much larger program to cover up to 10 
million kids, which was the CHAMP bill, which unfortunately was 
vetoed twice by the President.
    We then, as you know, passed as part of the omnibus, I 
guess, to continue SCHIP and theoretically at least hold 
harmless and make sure there was enough money for the next 
year. My concern obviously is that there won't be and with the 
economic slump we will start to see more and more people that 
need SCHIP as well as Medicaid. But even beyond that, the 
August 17th directive, instead of allowing us to expand the 
kids, puts such a crimp on it that States are going to now 
actually have to not be able to enroll kids who are currently 
enrolled. So my fear is that we just can't wait around here 
until 2009 or the next President or whatever, that we are going 
to face an increasing crisis.
    So I wanted to ask you, Ms. Mann, you have spent a lot of 
time studying this August 17th directive, and CMS says it was a 
way to improve coverage for low income children. Do you believe 
that that will be the result or is this directive going to have 
the opposite impact? And if you don't agree with the 
administration that this is actually going to improve coverage, 
what do you think is going to happen? How will kids be 
affected? How many States, or kids are going to be negatively 
impacted? We're just trying to get a handle on it.
    Ms. Mann. Well, thank you for the question, Chairman 
Pallone. There is not even a theoretical answer anymore, there 
is an actual answer. We have had activity taking place since 
the directive was issued between CMS and with States and no 
State has gotten an approval of their coverage plan to go 
forward to cover kids over 250 percent over the poverty line 
since the directive. We have had two States that have had 
denials and we have had other States that have cut back their 
planned expansions, expansions that their State legislatures 
had determined were needed in their States because of the 
directive. As a result, we have already seen just in the short 
time since the directive has been in place tens of thousands of 
children who otherwise would have had coverage not get the 
coverage that their State has already determined that they 
needed.
    When we come around to August '08, even more States will be 
under the requirements of the directive that CMS gave the 
States that had already been covering children above 250 
percent of poverty, States like your State of New Jersey, until 
August '08 to come into compliance. CMS has said that the 
children in those States who are already enrolled do not have 
to come off the program, but the State will not be able to 
enroll any new children, including the children who might have 
income fluctuating and go off and on again.
    So it will have a decimating effect, and it is very 
important to think about it in light of the worsening, 
weakening economy.
    We are going to be seeing more children become uninsured, 
children who are eligible for Medicaid, children eligible for 
CHIP and children in that in between area who simply don't have 
an opportunity to buy affordable health insurance coverage. 
That really was CHIP's original intent. There was a lot of 
discussion about did CHIP go beyond its original intent. Its 
intent was to bridge that affordability gap between Medicaid 
and private health insurance coverage. That gap has been 
growing, and we need to take into account that that gap has 
been growing.
    Mr. Pallone. So there is no doubt on your part that over 
the next year because of the economy, because of this 
directive, we are just going to have a lot more kids that are 
not going to be covered.
    Ms. Mann. We will go backward over this year, absolutely. 
CHIPRA would have helped the States move forward by giving 
stable and predictable funding, by helping with the performance 
based payments for Medicaid as States enrolled children. The 
Medicaid eligible children have a lower Federal match rate so 
States, particularly when they are in a weakened economic 
circumstance, are reluctant to enroll those Medicaid eligible 
children, they bring less Federal dollars. CHIPRA would have 
addressed that. CHIPRA would have given States new tools like 
express lane to encourage the enrollment of eligible children, 
focusing the resources on the lowest income children. All of 
those opportunities are not now on the table as well as the 
August 17th directive that stops States in their tracks from 
moving forward for families who have a growing affordability 
problem purchasing health insurance.
    Mr. Pallone. Mr. Lesley, you wanted to talk about the 
missed opportunities in terms of outreach and all that. Just 
briefly because my time is pretty much over.
    Mr. Lesley. Sure. Just to build on that. As Ms. Mann 
pointed out and your question is that if the third principle of 
what Congress did last year in passing the extension was really 
affirming that no, that we should at least maintain the status 
quo and we should not go backtrack. The problem with the 
regulations is that that is exactly what we are doing, and we 
will see increased numbers of uninsured children.
    On outreach and enrollment, I do believe that we do have an 
opportunity. The President when he was running for reelection 
stood on the platform at the Republican National Convention and 
declared he would do everything in his second term to address 
this issue of eligible but unenrolled children. He put in the 
budget a few years ago a billion dollars for outreach and 
enrollment. Somehow that has disappeared. And what we would 
like to do is to take up that promise, and I think that that is 
something we could do now and really take some of the aspects 
of CHIPRA, and they were not controversial, and move forward in 
terms of trying to get express lane enrollment and outreach 
enrollment. A part of that is dealing with the regulations 
because they do cause a backward momentum for kids.
    Thank you.
    Mr. Deal.
    Mr. Deal. I would observe at the beginning that my 
understanding is that CBO has said that there would be a 3.3 
percent annual rate of growth in the SCHIP program under the 
extension that we have already passed, so I think that is a 
question of whether there is a regression or a continued state 
of growth.
    Dr. Rossiter, you are an economist and many people here on 
the Hill as we talk about a stimulus package today in all of 
our States are concerned about the economy. Let me ask you a 
question as to whether you think the CHIPRA bill would have a 
positive or a negative effect on the American economy?
    Mr. Rossiter. I guess I have a different view than has been 
expressed regarding the impact of these expansions, because my 
concern is that we have not ruled out the possibility that 
SCHIP and especially in its form of Medicaid expansions is 
really doing more harm to our health insurance system and 
employers, especially to small employers than if the States 
worked really hard, as some States are doing. Some States have 
separate programs and seem very happy with them and are working 
real hard. And by the way, they happen to be States that are 
also working on general health insurance reform.
    The missed opportunities that we have allowed SCHIP to 
morph into in many parts of a Medicaid only program and 
forgotten the welfare principals. And because of that it is 
having a negative impact on small employers who will probably 
be the first to be hard hit by a recession if that is what we 
are in.
    Mr. Deal. Would you expand upon the implications if a State 
were to eliminate the Medicaid expansion options to a State? 
What effect would that have for the SCHIP program?
    Mr. Rossiter. Well, there are only nine States that are 
Medicaid only, and then there is a mixture. There are other 
States like Virginia who are a mixture, so they could reduce 
their Medicaid only portion. But there are other States that 
are separate programs entirely, and those include Georgia, 
Pennsylvania, New York and Texas.
    One thing I could see is that in a revised bill that you 
bring the match level in line for those who are in SCHIP who 
are Medicaid only, make it the same match rate as Medicaid. Why 
should the match rate be higher than for a higher income child 
and lower income? Why should there be no work requirements or 
any other requirements, including asset tests, and yet the 
Federal Government is paying a higher rate? It would save money 
and you would be able to expand and encourage States to put in 
place separate programs that would better blend and merge and 
support the private health insurance industry.
    Mr. Deal. Thank you.
    Mr. Peterson, I have just a very brief question. Looking at 
the CBO scoring of the CHIPRA bill, it appears to me that they 
are projecting that only 800,000 individuals who are currently 
enrolled for SCHIP would be enrolled in the expansion; is that 
the way that you read that?
    Mr. Peterson. Say that again, please?
    Mr. Deal. That in terms of expanding coverage for currently 
eligible SCHIP children that there would only be 800,000 that 
would fit that category.
    Mr. Peterson. I would have to look up the CBO.
    Mr. Deal. Well, that would be those who are eligible, but 
unenrolled. I will share the chart with you.
    Mr. Peterson. Yeah. I will follow up with you.
    Mr. Deal. All right.
    One of the things that I think concerns all of us is that 
we have different numbers that people are throwing around here. 
In looking at that CBO score it appears to me that if you look 
at the bottom line they say that under the bill that was 
proposed there would be 7.4 million enrollees in SCHIP and yet 
we hear the figure of 10 million children thrown around. And 
yet even in the 7.4 there is a significant crowd-out of 
children who currently have private insurance that would be 
included in that number.
    Dr. Rossiter, can you give us some insight as to why the 
numbers don't seem to add up?
    Mr. Rossiter. The numbers don't add up probably because 
that crowd-out figure, it could be underestimated and I think 
also it tends to be a question of tactics rather than strategy 
that gets applied when we use these numbers. By that I mean we 
talk about the children. Of course no one wants uninsured 
children, but what kind of system are we building if we 
continue to use Federal funds to match the State funds that 
possibly could be harming private health insurance industry? 
And after all, where do we want it to go in the long run? So I 
think the figures are important, but they come into question 
because we haven't agreed upon what kind of health care system 
we would like for our children in the future.
    Mr. Deal. Thank you, Mr. Chair.
    Mr. Pallone. Thank you, Mr. Deal. The gentlewoman from 
California, Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to all of 
the witnesses. I think you did an excellent job. I just want to 
make a couple of comments about some of the things that were 
said and then quickly go to my questions.
    Mr. Lesley, thank you for everything that you said and your 
good work, and I was very pleased that in your testimony that 
you mentioned the benefits of Health Information Technology, 
HIT. It is an area that the Congress I believe needs to 
address. I think it is a nonpartisan issue. I think that 
billions of dollars potentially could be saved. We put into 
place an effective system and I am proud to have introduced 
bipartisan legislation on it and look forward to the committee 
taking that up.
    To Dr. Rossiter, I am a bit puzzled about some of your 
testimony. The whole issue of tying children's health insurance 
to people that work. I don't think that is the basis by which 
we solely establish health care coverage for children. Children 
don't work and their parents, many parents, have a huge problem 
getting coverage. And so the incentive was to offer this so the 
children are insured. So I am kind of puzzled by that nexus 
that you established in your testimony.
    But let me get to my questions. To Ms. Mann, thank you for 
the work that you do at the Center for Children and Families at 
Georgetown. Much has been made about the phenomenon called 
crowd-out. You know what crowd-out is, we know what it is. For 
the record, they are workers who may be able to get private 
insurance for their families at work and they instead opt out 
for coverage under SCHIP.
    To what degree does crowd-out exist? Can you give us some 
information about that and what factors lead to it? If you can 
set that down for the record, I think it would be helpful to 
us.
    Again, if you could briefly restate for us, you began to 
touch on this, but your time ran out in your testimony about 
States that wanted to expand their health insurance for 
children and the directive that has come from the Federal 
Government which I think myself is absolutely punitive. I mean 
it is like we are going to show you you are not going to be 
able to do this.
    So if you could address those two things. Again, Mr. 
Chairman, thank you for having the hearing.
    Ms. Mann. Thank you. First, let me address crowd-out. It is 
unfortunately not as simple a topic on--different measures of 
crowd-out look at different things. The CBO analysis is a very 
broad conception looking more at the population as a whole, 
looking at the economy. What might have happened in terms of 
public or private coverage or uninsured rates had CHIP not been 
in place or had the Congress not passed the CHIPRA law.
    States often look at the issue of crowd-out to examine what 
coverage did families have before they went into CHIP, and did 
they drop private coverage, and if they dropped private 
coverage for what reasons. When States have examined that 
question, and the congressionally mandated evaluation of CHIP 
also looked at that question, they have found a very small 
portion of crowd-out, very small, around 7 percent of families 
that had private coverage drop them. A lot of families that 
might have had private coverage in the income range of the CHIP 
program had it at a very high cost. They were paying very high 
premiums. The average family premium last year, according to 
the Kaiser study, is about $12,000 per year without an employer 
contribution. So if your employer doesn't contribute towards 
family coverage, it is very difficult to afford.
    Ms. Eshoo. If I might jump in, that is an extraordinary 
number, and it goes to the heart of this debate about both the 
directive and how it presses down, depresses the whole 
situation, but the huge criticism that my colleagues on the 
other side of the aisle have leveled about the costs and what 
families would be eligible for this. I mean, one child, $12,000 
a year?
    Ms. Mann. For family coverage.
    Ms. Eshoo. You know, we make some $160,000 a year. What 
about each one of us, with the number of children that we have, 
paying $12,000 a year for a policy?
    Ms. DeGette. And will the gentlelady yield? In some States, 
like New York and New Jersey, for a family of four that is an 
average, $12,000 is an average in some of those States, like 
Mr. Pallone's State insurance premiums for that same family can 
be $20,000.
    Ms. Eshoo. Thank you.
    Ms. Mann. And I think that is Ms. Chester's point as well, 
is that she had an offer of health insurance from her job but 
it was simply unaffordable, and that is increasingly the case.
    The other point to remember, as CHIP States go up the 
income ladder a bit and address the affordability problem, they 
are not providing free coverage for families. Families pay 
premiums in the CHIP program, so CHIP does not give out free 
coverage. It provides affordable coverage, which is of course 
exactly the goal.
    Ms. Eshoo. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Ranking Member, Mr. Barton.
    Mr. Barton. Thank you, Mr. Chairman, and I thank the 
witnesses. I want to talk a little bit about adults in SCHIP. I 
know the focus is children in SCHIP, as it should be. I am told 
that if we didn't cover adults we would have a lot more money 
for children, which we all support. So I want to ask Mr. 
Peterson, do you have any information about what it costs to 
cover an adult under SCHIP and how much money would be freed up 
if we didn't cover adults under SCHIP?
    Mr. Peterson. Well, we had done an analysis that adults' 
cost on average doubles what children cost. Adult coverage, 
however, when it was first offered through waivers, it was 
specified under the Clinton administration that if the 
administration was going to approve that, that the State would 
have to ensure that they were doing a good job of covering 
those targeted low income children. But on the per capita cost 
in particular, yes, it is true that adults are approximately 
double.
    Mr. Barton. Okay. Dr. Mann, do you up support phasing 
adults out of SCHIP so we have more money for children?
    Ms. Mann. The action taken by the Congress in CHIPRA shows 
that there is support for coverage generally and that the 
tradeoff is between a child at $42,000 versus a child at 
$18,000.
    Mr. Barton. I am asking do you support adults being covered 
under SCHIP?
    Ms. Mann. I support the opportunity for States to cover 
adults when they are also able to cover children.
    Mr. Barton. So you think it is okay for us all to be under 
SCHIP?
    Ms. Mann. The earlier waivers that Mr. Peterson talked 
about, I was actually at the Health Care Financing 
Administration when those were issued. We issued that policy 
and it said explicitly to States that were looking to cover 
adults, to cover parents. We didn't allow States to cover 
childless adults through that waiver policy, that you had to be 
doing a good job covering children.
    States have found when they covered their parents they have 
increased enrollment of children. I think our experiences in 
New Jersey that will testify in the next panel substantiates 
that. It has not been a trade off in terms of covering parents 
versus children.
    Mr. Barton. So you dispute what Mr. Peterson says, that it 
will cost twice as much to cover an adult?
    Ms. Mann. My understanding is that it is about 1.6 
difference.
    Mr. Peterson. Yeah, that was our original analysis. There 
has been new data.
    Ms. Mann. And there are also adults that are covered in 
CHIP that are pregnant women, and they are far more expensive 
than the parents who are covered. So it varies.
    If I might point out, one of the reasons why a few States, 
and there is really only at this point 11 States with parent 
waivers, 10 States that are operating them still, some of the 
reasons why States used waivers is that they were not able to 
use their CHIP dollars to cover children. They had already 
expanded coverage for children----
    Mr. Barton. They had 100 percent coverage in the eligible 
population. That is not true.
    Ms. Mann. No, what I am saying is they weren't allowed by 
the provisions of CHIP law to use any of their CHIP dollars to 
cover children. They didn't have 100 percent participation 
rate, but they were blocked from using CHIP dollars because the 
State that had already expanded Medicaid before CHIP was 
enacted were foreclosed from using CHIP dollars for children. 
And so some of those States were then given the opportunity to 
use some of their CHIP dollars.
    Mr. Barton. Dr. Rossiter, what is your position on adults 
in SCHIP?
    Mr. Rossiter. I think the childless adults don't make sense 
to me in SCHIP, but----
    Mr. Pallone. I don't think his mike is on.
    Mr. Rossiter. Childless adults should not be covered under 
SCHIP. They do cost more, we can cover more children, but 
family coverage does make some sense to me, especially when you 
have a separate program that is not Medicaid and you can use 
those funds to subsidize private based insurance. Just as an 
example, Maryland is a Medicaid only State, and she commented 
that her husband is without insurance. If Maryland had set up a 
separate program and used the funds, perhaps they could have 
bought coverage for the entire family.
    Mr. Barton. Mr. Lesley?
    Mr. Lesley. On this issue I agree with Mr. Rossiter, in 
that when this issue came before Congress we did a study and 
asked Sarah Rosenbaum of George Washington University to look 
at this issue. So we agree that childless adults make no sense 
in the SCHIP program, but do see some value in instances of 
having family coverage. For example, in the premium support 
provisions that people support you are basically doing premium 
support for family coverage. So there are instances where it 
does make sense for us to allow, but childless adults we agree 
should not be covered by SCHIP.
    Mr. Barton. Mrs. Chester, do you have a position?
    Ms. Chester. My position is that each family is different.
    Mr. Pallone. Is your mike on?
    Ms. Chester. I pushed it.
    Mr. Barton. She is just very polite, Mr. Chairman.
    Ms. Chester. Thank you. My position is that each family is 
different and they need to investigate instead of cutting and 
taking. You need to check and see what is going on. Things 
change and different things happen. So that is why people don't 
have insurance.
    Mr. Barton. Thank you. Final question----
    Mr. Pallone. You are----
    Mr. Barton. Am I out of time?
    Mr. Pallone. Yes, you are a minute over.
    Mr. Barton. I am sorry.
    Mr. Pallone. That is all right.
    Ms. DeGette. Just to follow up on Mr. Barton's question, 
putting the childless adults aside, which I think a lot of us 
agreed, if you could rewrite SCHIP the right way then States 
would be able to use their funds to really target the children 
and they wouldn't have extra money so that they would be 
covering extra people like childless adults. But one of the 
rationales that some States had in covering parents, covering 
adults with children in outreach and enrollment, it helped get 
the kids in when they could put the whole family in; is that 
correct?
    Ms. Mann. That is correct. And if I can just review a bit. 
The legislation does not allow States to cover parents with--
the 1997 legislation does not allow States to cover any adults 
with CHIP dollars except in a very narrow instance of premium--
--
    Ms. DeGette. But what I am saying is there is some public 
policy reason to allows States the option when they have met 
other requirements to do outreach to parents who don't have 
health insurance who meet the income eligibility requirements 
in order to get the kids in, right?
    Ms. Mann. Absolutely, and there has been solid experience 
that that has worked in many States.
    Ms. DeGette. And so that helps get more kids enrolled?
    Ms. Mann. That is correct.
    Ms. DeGette. I want to follow up on the questions Ms. Eshoo 
was asking about crowd-out. I think there is a miscommunication 
or misunderstanding about crowd-out. Some people say we 
shouldn't invest in Medicaid and SCHIP because of crowd-out, 
because families will drop their employer coverage in order to 
cover children under SCHIP. How much evidence is there that 
this is really a problem?
    Ms. Mann. There is very little evidence that we have had 
families actually dropping coverage. And to the extent that 
families have dropped coverage, the coverage that they had 
often had been unaffordable. They have been--it is sustaining 
it because they have had no other way to do it.
    Ms. DeGette. I have a chart and I have staff making copies 
of this chart. It was a congressionally mandated evaluation of 
SCHIP that showed that coverage of recent SCHIP enrollees 
during the 6 months before they enrolled, and it shows that 
there was in fact 28 percent of those people--43 percent were 
uninsured, 29 percent had been on Medicaid. So I guess they got 
a job and that bumped them up to SCHIP, but then 28 percent had 
been in private insurance, which might seem like a big number, 
except for when you look at that 28 percent, a lot of those 
people didn't just move over from private insurance. It is as 
you are saying, they had private insurance but they lost their 
job or their family structure changed, someone was divorced or 
whatever. They couldn't afford their premiums. Only 2 percent 
shifted because they preferred SCHIP to their insurance.
    So really it really seems to me if you get below the 
surface of the 28 percent it is actually not a huge number that 
are leaving private insurance for the SCHIP program; would that 
be correct?
    Ms. Mann. That's right. Small numbers have private 
insurance and most of those families lost their private 
insurance because of a job change, or because the parent died, 
or because the employer himself or herself dropped insurance 
and the insurance was no longer available. So that you have 
really about 7 percent who have dropped coverage for other, 
what are considered to be more voluntary reasons. And some of 
those voluntary reasons also relate to the issues of 
affordability.
    If we can go back to the August 17th directive, we talked 
about it would require participation rates. It would require if 
a State met those participation rates, every child they covered 
would have to have a 12-month waiting period regardless of any 
of these factors, including if the employer had dropped the 
coverage, including if the parents had gotten divorced, and so 
it would force uninsurance on children regardless of the 
reasons for why they no longer have private health insurance.
    Ms. DeGette. Ms. Chester, when I heard you talk about your 
son, I am just so grateful he's been able to have that 
insurance. Can you imagine if somebody said to you, you know, 
your status has changed so your son can't now have insurance 
for 12 months until we are sure he is eligible. I don't think 
that would be a very satisfactory result for kids, do you?
    Ms. Chester. I do not think that would be a very good 
result because then we would have to use the emergency room. I 
cannot treat my child and say you are sick and it is okay. It 
is not right.
    Ms. DeGette. Right, I agree. Thank you very much. I yield 
back.
    Mr. Pallone. The gentleman from Pennsylvania, Mr. Pitts.
    Mr. Pitts. Thank you, Mr. Chairman. Mr. Peterson, just one 
clarification on what Mr. Deal had asked about on the CBO score 
on H.R. 3963. I understand that CBO projects that only 800,000 
currently SCHIP eligible but unenrolled people would be added 
to SCHIP by fiscal year 2012, is that true?
    Mr. Peterson. Yes, that is true. I was able to turn to the 
chart, and that is indeed what it says.
    Mr. Pitts. In talking about the cost of covering an adult, 
I think you said it would be about twice as much as it costs to 
cover a child on SCHIP. Assuming this is true and a State has 
100,000 adults in their SCHIP program, is it accurate to say 
that it is possible for that State to enroll over 200,000 
additional kids in their SCHIP program without increasing their 
SCHIP spending if they would simply transition their adults out 
of their SCHIP program?
    Mr. Peterson. I suppose on average that is the case, but it 
is still true that there is remarkable variance across States 
in terms of what adults cost, because some States only cover 
pregnant women. So you can imagine that their costs are even 
higher on a per capita basis. So there are tradeoffs in terms 
of again who these non-targeted people are. If they are 
pregnant women, maybe the calculation is a little different.
    And then to an earlier point as well, the structure 
matters. So if one wants premium assistance, then the best way 
to do that, one might argue, is to try to get the whole family 
enrolled. So in that case you do get parents enrolled and it 
may not be as expensive. So there are those tradeoffs.
    Mr. Pitts. Dr. Rossiter, if you think adults should not be 
covered in SCHIP, what would be a reasonable transition period 
to take the adults off of SCHIP?
    Mr. Rossiter. I think about 2 years would be a reasonable 
transition time. Also, it seems to me it is a reasonable 
compromise to cover families--families are important, families 
are important to providing health care. Probably most of us in 
this room with private insurance have family coverage. It is a 
staple of health insurance, and so a good compromise would be 
to cover those parents of SCHIP eligible children and gradually 
reduce the childless adults on the SCHIP program.
    Mr. Pitts. Now is it true that H.R. 3963 will increase 
taxes on smokers by over $71 billion over the next 10 years in 
order to pay for only 5 years of SCHIP? Can you explain why 
that is fiscally responsible?
    Mr. Rossiter. Well, it probably isn't fiscally responsible, 
but we are in Washington and it is a way to get us going in the 
first 5 years, but it leaves a big cliff at the end. By the 
way, that will hit at about the same time the boomers are 
hitting the Medicaid program. It is a problem that is discussed 
in a new book that I hope everyone will get, Restoring Fiscal 
Sanity: The 2007 Health Care Spending Challenge, and I and Alan 
Weil wrote the Medicaid chapter in that book from Brookings 
Institution, and it covers it clearly and shows that this kind 
of financing, it doesn't make a whole lot of sense given what 
we are facing in the future in health care spending.
    Mr. Pitts. And what you are referring to as the cliff, 
fiscal year 2013 to -17, no funding for SCHIP but the increased 
tax on smokers would be kept in place?
    Mr. Rossiter. And it would probably have to increase 
further to keep pace with rising SCHIP costs. And also for the 
record, taxes on tobacco are very regressive and hit the lowest 
income people the most.
    Mr. Pitts. Mr. Peterson, could you explain how income 
disregards work; for instance, how the State of New Jersey is 
able to cover populations at greater incomes, far greater than 
what appears to be the statutory limit?
    Mr. Peterson. Well, this gets back to the point I had made 
earlier in terms of the tension between State flexibility and 
Federal control. The SCHIP statute states very clearly that 
eligibility is for children up to 200 percent of poverty, plus 
50 percentage points above those pre-CHIP Medicaid levels.
    On the other hand, the statute says that income is defined 
by the State and the same is true for Medicaid as well. So in 
New Jersey what they did is they disregarded all income between 
200 percent of poverty and 350 percent of poverty and they used 
that flexibility. So really what we are talking about is that 
tension between the State flexibility versus the Federal 
control and then who those non-targeted individuals are.
    Mr. Pitts. Finally, Dr. Rossiter, we were talking about 
crowding out. What impact would crowding out over 2 million 
people from their private health insurance coverage and placing 
them in a government run, taxpayer financed program have on our 
economy?
    Mr. Rossiter. As I said, it hits the small businesses the 
most. And as I said in my testimony, it just gives me great 
concern that in the 10 years of SCHIP that it doesn't make 
sense to me that we are covering more children and some more 
adults and yet we still see the uninsurance rates go up and we 
still see the most troubling figure is the percent covered by 
employment-based health insurance. And I just ask the question 
is SCHIP contributing to this, does it have anything to do with 
it or nothing at all? We want children covered, but are we 
having ill effects and unintended effects on our private health 
insurance market. It seems like it should be fairly easy in 
this bill, it is a missed opportunity that we haven't done it 
yet, to do some things that will help support private health 
insurance, not harm it.
    Mr. Pitts. I yield back.
    Mr. Pallone. Thank you. Ms. Solis.
    Ms. Solis. Thank you, Mr. Chairman. I apologize for coming 
in late. I was at another event talking about expanding 
services to HIV/AIDS population in low income communities, but 
this is a very important issue and I want to thank the chairman 
for having a very good panel and the discussion that is taking 
place.
    I have a lot of concerns and questions. Obviously I 
represent a very large State, and a disproportionate number of 
low income and minorities are affected by the lack of health 
care insurance. And we know in California that there is a large 
number of continued uninsured Latino families and African 
American families.
    I just want to know from Ms. Mann and also from Mr. Lesley, 
why is it important that we continue to look at trying to 
expand access and different outreach efforts, and what kinds 
of--maybe you can give me an idea which programs did work or do 
work. We know now we are coming back and we are regressing, we 
are actually going in the opposite direction, and our 
population continues to grow. We continue to see the recession 
really having a devastating effect in cities that I represent 
where unemployment is over 7 percent and no one really talks 
about what is going to happen to these families. They are 
working families, but they are working poor. So if you could 
shed a light on that, and I would start with you, Ms. Mann.
    Ms. Mann. Thank you. Well, a large problem in terms of the 
uninsured rate among children, which has been actually dropping 
significantly over the last decade, is with respect, however, 
to the remaining children who are uninsured, and many of them 
are uninsured for reasons of language access. Many of them are 
uninsured because their parents may be working two or three 
jobs. It is difficult to learn about the programs, it is 
difficult to get to apply for the programs. States have made 
progress over the last 10 years, some more than others, in 
terms of easing their application system. California started 
with a 28-page application, you had to have an in-person 
interview at the county welfare offices to get children health 
care coverage in California. That is no longer the case.
    So there are important steps going forward. However, we had 
a change also in the Deficit Reduction Act of 2005 which 
required States to ask for more paperwork on citizen children, 
and that has led to an extensive backward movement, a loss of 
coverage for children, the poorest children who are in the 
Medicaid program.
    Ms. Solis. Would you on that point--I often look at reports 
that state that in fact because of the Deficit Reduction Act 
and the fact that you have to provide more documentation that 
we are actually hurting more citizen children. Can you 
elaborate on that?
    Ms. Mann. It is a provision that explicitly goes to the 
citizen children. The Deficit Reduction Act did not change the 
rules for documenting for eligibility for immigrant kids. They 
had to provide documentation of immigration status. It changed 
the rules for citizen children and required a lot more 
paperwork both for citizenship and the issue of identity. And 
there are documents that I would have trouble finding for my 
children and that in fact many families have had trouble 
finding.
    Ms. Solis. Give me an example of what that means though 
just quickly.
    Ms. Mann. It means you have to provide an original birth 
certificate, for example.
    Ms. Solis. If you were born in your home you might not have 
that birth certificate. If you were born in Louisiana and 
Hurricane Katrina wiped away your documents, if you were born 
in Nebraska but now you are applying in California and don't 
have your original birth certificate, it would at least take 
time and money to be able to get that original birth 
certificate. You also need different identity documents in 
order to now show citizen children--show that they are 
eligible.
    Ms. Solis. Has there been any evidence to show that more 
actual citizen children have been excluded because of this 
maybe? Mr. Lesley, you are nodding your head there.
    Mr. Lesley. Yes, absolutely, there has been several studies 
that show that hundreds of thousands of kids have been--in 
various States have lost coverage due to these barriers and 
very little evidence that it has actually excluded immigrant 
children. And so citizenship documentation is one problem, and 
back to your original question, if you look at the eligible but 
unenrolled children, I grew up in El Paso, Texas and worked at 
the public hospital there, and we would go around on the 
pediatric ward, and you could see all the kids because they 
were uninsured, there are preventable diseases that were lost 
opportunities for these kids, that if they had had insurance--
and if you look at the eligible but unenrolled they are 
disproportionately Hispanic. And so providing health insurance 
to those children you reduce health disparities, and so getting 
kids enrolled in things that work are one of your bills, the 
Community Health Workers bill.
    Ms. Solis. Can you talk about that?
    Mr. Lesley. Yeah, absolutely. The Community Health Workers 
bill that you have introduced, one of the things we did was one 
of those dreaded earmarks, but there was an earmark that 
Senator Bingaman put in a few years ago to test this program 
and to see. And we provided an earmark of funding for community 
health workers in some community health centers in New Mexico. 
For example, the earmark that went for Dona Ana County, which 
is in Los Cruces, New Mexico, right on the border, it was so 
effective, it was so effective that they actually enrolled more 
children than they thought were eligible because the two women 
who got the grant would go around, they were like block mothers 
and they would go to the fair and they would go to the schools 
and they would enroll these children, and it was wildly 
successful.
    And also the other thing about getting coverage is it does 
reduce health disparities, and an express lane would also--
which was in the CHIPRA bill, would also be very beneficial to 
the Hispanic community.
    Mr. Pallone. We are a minute over.
    Ms. Solis. Thank you.
    Mr. Pallone. Thank you.
    The gentlewoman from Wyoming.
    Mrs. Cubin. Thank you, Mr. Chairman. This is better anyway 
because I am sitting up higher, I feel like I can see all of 
you. I usually carry a box with me I am so short.
    I just have a couple questions, and I would like to start 
with Mr. Peterson. Can you confirm that H.R. 3963, the second 
CHIPRA which was vetoed by President Bush, scheduled a 
precipitous drop in funding in the fifth year of the program? 
In fact, it is so precipitous that the funding went to zero in 
2013?
    Mr. Peterson. Well, the bill was meant to provide SCHIP 
funding through 2012.
    So just as the original CHIP bill provided funding for 
2007, necessitating taking action. CHIPRA was structured the 
same similarly, except it was a 4- or 5-year period. But CBO, 
however, is required to--notwithstanding the fact it was on a 
5-year bill essentially to do 10-year cost estimates. So that 
is why you see that.
    Mrs. Cubin. And that is because that is the only way--for 5 
years is the only way that it would meet the PAYGO rules, isn't 
that right?
    Mr. Peterson. Well, they structured the bill to meet the 
PAYGO rules using what spending and the Federal revenue offsets 
that were raised. So yes.
    Mrs. Cubin. Okay. Well, is the tobacco tax that is being 
used to pay for the program counted--taken up 10 years of the 
tobacco tax?
    Mr. Peterson. Yes.
    Mrs. Cubin. And paying for only 5 years of the program; is 
that correct?
    Mr. Peterson. In terms of what the program was intended to 
provide in this bill, yes.
    Mrs. Cubin. And Dr. Rossiter, I understand that you are a 
father. And I was just curious, would you rather have your 
children on State Medicare or would you rather have them on a 
quality private policy like Blue Cross/Blue Shield offers for 
example?
    Mr. Rossiter. Well, yes. I would prefer a private policy. I 
didn't know we could bring pictures of children today. I would 
have liked to bring my daughter's picture, although Ms. 
Chester's son looks like a wonderful young man.
    Mrs. Cubin. We can always bring pictures of babies.
    Mr. Rossiter. The big concern for me is, we recently did a 
study at the Center For Health Care Policy, and we were trying 
to figure out access to physician care. And guess what, it was 
very interesting because the fee-for-service Medicaid 
recipients who were in the survey had very similar access to 
care as those uninsured. Part of the reason is that not that 
many doctors accept Medicaid. We are pretty well off in 
Virginia. But there are some States, I understand, like 
Michigan who are having terrible problems with physician 
participation in Medicaid and partly--and because of the fees, 
but also because we heard billing problems.
    So access to care was actually not unlike being uninsured. 
I think that is because some of the uninsured are wealthy 
enough to pay the doctor bills when they come in the door and 
the doctors know that and they accept that. So you know it is a 
problem. And I often--I used to be responsible for the Medicaid 
program in Virginia when I was Secretary of Health and Human 
Resources and often thought in the spirit of Virginia that 
those who run Medicaid programs and those who are responsible 
for them should also have the option to enroll in the Medicaid 
program just to keep--to keep--to help them understand what 
kind of program they are running, and to take ownership of that 
program and that notion would extend to the Congress as well.
    Mrs. Cubin. Not a bad idea. I think I didn't make my point 
very well about the funding for the program. I do understand 
your point, Mr. Peterson, that you know most of the things that 
we fund are for a certain period and then you know it drops 
off. But actually, I think it is just more slight of hand to 
pass an expensive program that we can't afford because we are 
just pushing that responsibility off for 5 years to the people 
that are going to be here in 5 years.
    And they are either going to have to raise taxes or cut 
drastically someplace else to make up for that money that isn't 
coming in for the program. Could you respond to that?
    Mr. Peterson. Probably that the argument could have been 
the same 10 years ago, that if this is not done beyond 10 years 
in the money provided up front, then that is pushing it off on 
a future Congress. And to some extent there is truth to that. 
So once the program's funding is over with and the new Congress 
has to revisit that, and that is put into effect, both in 1997 
and CHIP reauthorization, then that is a concern one could 
raise.
    Mrs. Cubin. But my point is that the bill actually does 
break the PAYGO rules because it goes, you know, 10 years 
forward on the tobacco tax and only 5 years forward on the 
program. Is my time up?
    Mr. Pallone. Yeah. You are over a minute.
    Mrs. Cubin. Sorry.
    Mr. Pallone. That is all right.
    Mrs. Cubin. Thank you, Mr. Chairman.
    Mr. Pallone. It is almost 2:00 so I have to move on. Mr. 
Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman. I apologize I had to 
leave, but I am glad to be back. Ms. Mann, I would like to ask 
you this question now, and I would like to ask a couple other 
witnesses the same question. Do you think that a tax policy 
that says, employers get a deduction for providing health care 
to employees and the value of that health care is not income to 
an employee, but which tax policy goes on and says that if you 
don't get health insurance from your employer, you have to buy 
it with after-tax dollars, meaning it costs 25 to 30 to 33 
percent or more for the individual that does not get it from 
their employer, do you think that tax policy is rational or 
fair or defensible?
    Ms. Mann. I am sorry. Is that question directed to me?
    Mr. Shadegg. Yeah. Basically should we say, should we be 
saying to everyone in America, it doesn't matter if you get 
your health insurance from your employer or you go out and get 
it yourself, the Tax Code will treat you the same and it is not 
going to punish people who have to go out and buy it on their 
own?
    Ms. Mann. I suppose I would maybe be the last person, but I 
will be the first person to say that I think there is nothing 
personally rational about our entire health care system and how 
we finance it, and that would include our tax code.
    Mr. Shadegg. So I will take that as a yes on that point?
    Ms. Mann. I will take it as a yes on that but I think there 
are debates about what the right solution is.
    Mr. Shadegg. Fair enough. I just wanted to get to whether 
or not this policy is rational. Mr. Rossiter, do you think that 
a policy that says if you get your health insurance from your 
employer, it is tax free but if you buy it on your own, you 
have to pay for it after tax dollars, do you think that is 
rational or fair?
    Mr. Rossiter. No, I don't, and I think it is actually one 
of the biggest things that we could change in the health care 
system to make it more rational and to provide the right 
incentives to encourage private insurance with employers. And, 
for example, I grew up in a restaurant family. The waitresses 
in that restaurant, they had to pay, of course, their wage 
taxes, they had to pay their income taxes, but they didn't have 
health insurance. So it doesn't make sense for them to have to 
subsidize coverage for everyone else. And then seeing that 
those funds go, actually as in the case of SCHIP is what I have 
been talking about, having them go toward subsidizing coverage 
for someone else's children.
    Mr. Shadegg. Mr. Lesley, I see you raising your hand. Do 
you think that is rational or fair?
    Mr. Lesley. I worked for Senator Bingaman and we worked on 
legislation to do exactly what you are talking about, which is 
to address that unfairness. And one of the things that as a 
children's organization that we are concerned about too in the 
Tax Code is that when, for example, in some of the proposals 
that people had for tax credits, you have got to make sure that 
you address the fact that family policies cost almost three 
times that of an individual.
    And some of the tax proposals put forth, for example, the 
administration's proposal is a 2-to-1 ratio. The effect of that 
you are adding the spouse but you are leaving the kids 
completely out. So one of the things we are really encouraging 
people who are looking at the Tax Code is to really address the 
fact that family policies cost almost three times that of an 
individual.
    Mr. Shadegg. I ask the question because it drives me insane 
that by and large, people who don't get their health insurance 
from their employer are the least among us, at least there are 
some people who are self-employed and do well and don't get 
health insurance from their employer. But there are many people 
who don't get health insurance from their employer who are on 
the bottom rung of our society. We say to them that it is 
responsible and it is an appropriate thing for you to go out 
and get health insurance. But then we give them the back of our 
hand and say, oh, by the way if you do, you have to do it with 
after tax dollars, which I just think is unfair, outrageous and 
indiscriminatory.
    Mr. Rossiter. It is a missed opportunity that this bill 
doesn't address that.
    Mr. Shadegg. I agree with you completely.
    Ms. Mann. It is also a question of what is the most 
efficient way to provide that health insurance coverage.
    Mr. Shadegg. I completely agree. I think the efficient way 
to provide it and the way that I believe will both bring down 
cost and increase quality is to put more people in charge. But 
the debate goes beyond our discussion today.
    Mr. Peterson, you talked about crowd-out. And you analyzed 
crowd-out. Crowd-out--maybe you can briefly explain the effect 
of crowd-out by when we expand SCHIP, what does crowd-out do?
    Mr. Peterson. Well, you know there are many choices in 
terms of what is the impact of people going to private 
coverage? And you know people often raise the issues of, well, 
does CHIP cost more or less than private coverage?
    Mr. Shadegg. Was it true that under this bill at certain 
levels, the crowd-out effect would have been up to 50 percent? 
Isn't that what----
    Mr. Peterson. CBO found that at the higher income levels 
that was true.
    Mr. Shadegg. If alternatively--because I am running out of 
time--we said, look you have a choice, you can stay on the 
SCHIP program or we will give you cash, a premium support to 
stay in your employer's plan, assuming you are already in your 
employer's plan or to stay in a plan you purchased yourself, 
then the issue of crowd-out would go away, wouldn't it?
    Mr. Pallone. This has got to be the last question because 
it is a minute over again.
    Mr. Peterson. That depends on how it is structured again 
because you can think of individuals who are currently in 
employer-sponsored coverage who are paying out of pocket for 
the entire thing. And then suddenly this--you can provide 
public dollars. So in that sense, there may be crowd-out in the 
sense of what was formerly being paid by individuals entirely 
for the coverage, now the public sector is kicking in for that.
    Mr. Shadegg. The crowd-out, if you give them cash to buy 
that same insurance whether it is a part of the premium or all 
of the premium, that enables them to choose to either stay in 
that private insurance or go into SCHIP, right?
    Mr. Pallone. We have to move on, yes.
    Mr. Peterson. Depending on the structure.
    Mr. Shadegg. Thank you.
    Mr. Pallone. I want to thank this panel. Thank you very 
much. This has been very helpful. And as I expressed before, 
the concern is what is going to happen over the next year? So 
you are certainly helping us in that regard as we move forward 
on trying to deal with SCHIP and look at an expansion. So thank 
you again. You wanted to----
    Mr. Lesley. Yeah, Mr. Chairman. Can I provide----
    Mr. Pallone. Very briefly please.
    Mr. Lesley. I will say one thing for the record. We did an 
analysis of at 250 percent of poverty for each of the 
congressional districts representing. For example, your 
congressional district, if you look at what that income level 
provides you, and you deduct housing costs, food costs, child 
care costs, transportation, taxes and then add private health 
insurance, it leaves a family in New Jersey with negative 
$1,723 a month. So that is one of the issues that there is a 
disparity in terms of what 50 percent of poverty means in New 
Jersey as opposed to in Tulsa, Oklahoma. And I would like to 
provide this to you.
    Mr. Pallone. You make a very good point. And if you would 
like to submit that for the record, I would ask unanimous 
consent that you submit that and get back to us.
    Mr. Lesley. Thank you.
    Mr. Pallone. So ordered. Thank you again. I am just moving 
on because we have another panel. But I appreciate everything 
that you said to us this morning. Thank you. And I will ask the 
second panel to come forward please.
    Okay. Thank you. Welcome again. Let me introduce each of 
the members of the second panel. They are representing 
different states. First, from my home State of New Jersey, Ms. 
Ann Kohler, who is deputy commissioner of the New Jersey 
Department of Human Services. Welcome; Mr. Dennis Smith, who is 
director of the Center for Medicaid and State Operations at the 
Centers for Medicare & Medicaid Services here in D.C. 
obviously. And last is Tricia Brooks, who is President and CEO 
of the New Hampshire Healthy Kids Corporation from Concord.
    Mr. Pallone. I had the opportunity to spend a little time 
in Concord during the primary. We get to go to New Hampshire 
every 4 years. Okay. I will say you know 5-minute opening 
statements again. They will be part of the record. We may 
submit additional questions to you later that you would respond 
to. But let's start today with Ms. Kohler. Thank you for being 
here. You see how New Jersey is often the focus of attention 
when we come to SCHIP.

  STATEMENT OF ANN C. KOHLER, DEPUTY COMMISSIONER, NEW JERSEY 
                  DEPARTMENT OF HUMAN SERVICES

    Ms. Kohler. Well, good morning, Mr. Chair. And thank you 
very much for having me here. My name is Ann Kohler, as you 
know, and I am over both the Medicaid and the SCHIP committee 
programs in New Jersey. I very much appreciate the opportunity 
to be here today to talk to you about the importance of both 
Medicaid and SCHIP across the Nation, and especially in New 
Jersey. Providing affordable health care coverage has become 
increasingly important given the state of our current economy 
and the difficulties faced by many of our vulnerable citizens. 
Medicaid and SCHIP has significantly reduced the number of 
uninsured children in New Jersey. We currently provide health 
care coverage to over 1 million individuals, that is one out of 
every eight people in the State are covered. We cover 430,000 
adults and 570,000 children between Medicaid and SCHIP. Since 
Governor Corzine has taken office, we have had enrolled over 
180,000 new children into our programs. As you know, New Jersey 
has made a very strong commitment to both Medicaid and SCHIP 
and any proposals to limit our ability to cover these children 
are a serious concern to us. While New Jersey uses a higher 
percentage of the Federal poverty level for eligibility for 
SCHIP, we also have one of the highest median family incomes in 
the Nation.
    The median family income for a family of four in New Jersey 
is $90,261. However, in our 10 largest cities, the median 
income is only $30,000, slightly over $30,000. And over 30 
percent of that income goes to cover the families' housing 
cost. Over 34 percent of all the children in our major cities 
live in poverty. And in Camden, our poorest city over 58 
percent of the children live in poverty. Currently over 80 
percent of the children we have in our Medicaid--in our SCHIP 
program have families below 133 percent of the Federal poverty 
level, which is just over $27,000 for a family of four. And the 
very small number of children, 1.7 percent of our population, 
with incomes above 250 percent of the Federal poverty level, 
pay $125 each month for their coverage under SCHIP. We are 
concerned that recent Federal proposals to change SCHIP may 
prevent our ability to continue to provide this critical health 
care coverage to the working poor.
    As the economy worsens, these families must rely on the 
safety net provided by Medicaid and SCHIP to provide health 
insurance for their children. The proposed regulation regarding 
crowd-out in SCHIP would require children to remain uninsured 
for a full year before they can become eligible. This cannot 
happen. New Jersey's own experience with the crowd-out 
provisions has shown that reducing--that increasing coverage 
and reducing the period that the child remains uninsured has 
not significantly resulted in an increase in people dropping 
their private insurance. We believe that the CMS requirement 
that children remain uninsured for a year would cause havoc 
with our program and jeopardize coverage of needy children. I 
know there has been a great deal of discussion over what is 
being called the private insurance decline. The August 2007 CMS 
letter prohibits States from covering children above 250 
percent of the Federal poverty level if employer based coverage 
of children among the targeted population has declined in their 
State by more than a certain percentage.
    In New Jersey, we do require that our families enroll in 
private insurance if it is offered through their employers. 
However, fewer employer plans provide fewer benefits and 
include high copays and deductibles, and therefore, become 
unaffordable to the families. In addition, many of the part-
time employees are not covered by their employer plans and 
often work rules are designed to make sure they never obtain 
coverage.
    As our country enters a recession, cutting health benefits 
flies in the face of many efforts needed to stimulate our 
economy and provide the needed services to our working poor. 
Providing health care benefits improves health outcomes in 
school attendance for our children, reducing caretaker 
absenteeism from work, keeping people at work and earning a 
paycheck. It also creates job opportunities for allied health 
care professionals in the health care arena. There is a 
multitude of reasons to expand our coverage of children, not 
decrease it. I believe that we all agree that providing health 
care insurance for our children is vital to the Nation.
    Healthier children create healthier families. And I believe 
it is in our collective best interest to urge the 
administration to take a more reasoned approach towards our 
Nation's children, one of our most important national assets. 
Thank you again for the opportunity to be here and speak to you 
this morning. And I am happy to answer any questions that you 
may have.
    Mr. Pallone. Thank you very much.
    [The prepared statement of Ms. Kohler follows:]

                    Statement of Ann Clemency Kohler

    Good morning, I am Ann Clemency Kohler, Deputy 
Commissioner with the New Jersey Department of Human Services. 
As Deputy Commissioner, I oversee both the SCHIP and Medicaid 
programs in New Jersey.
    I very much appreciate the opportunity to be here today to 
talk to you about the importance of the Medicaid and SCHIP 
programs across the nation and in New Jersey. Providing 
affordable health care coverage has become increasingly 
important given the state of our current economy and the 
difficulties faced by many of the most vulnerable in our 
society.
    Medicaid and SCHIP have significantly reduced the number 
of children without access to quality medical care.
    In New Jersey, we provide health care coverage to well 
over one million individuals. We cover over 430,000 adults and 
570,000 children through our SCHIP program and Medicaid 
programs.
    Since Governor Corzine took office, New Jersey has 
enrolled just under 180,000 new children.
    New Jersey has made a strong commitment to the Medicaid 
and SCHIP programs.
    Any proposals to limiting our Medicaid and SCHIP programs 
are of serious concern to us.
    While New Jersey uses a higher percentage of the federal 
poverty level for eligibility for its SCHIP program than all 
other states, we also have one of the highest median family 
income levels in the nation.
    The median family income for a family of four in New 
Jersey is $90,261. However, in our 10 largest cities, the 
median income is only $30,110 and over 30% of that income goes 
to cover the families housing costs. Over 34% of all children 
living in these cities live in poverty. In Camden, our poorest 
city, over 58% of all children live in poverty.
    Currently, almost 80% of the children covered under 
Medicaid and SCHIP live in families with incomes below 133% of 
the federal poverty level--which is just over $27,000 for a 
family of four.
    Both Medicaid and SCHIP are essential programs to these 
families. By keeping the children healthy they allow the 
parents to go to work.
    However, recent federal proposals to change SCHIP may 
prevent our ability to continue to provide this critical health 
care coverage to the working poor.
     As the economy worsens, these families must rely on the 
safety net provided by Medicaid and SCHIP to provide health 
insurance for their children.
    The proposed regulation regarding crowd out in SCHIP would 
require children to remain uninsured for a full year before 
they can receive SCHIP coverage. This cannot happen.
    New Jersey's own experience with the crowd out provision 
has shown that reducing crowd out does not have a significant 
impact on enrollment.
    We believe that the CMS requirement of one year will cause 
havoc with our program and could jeopardize coverage for 
thousands of children.
    I know there has also been much discussion over what is 
being called ``the private insurance decline standard.'' The 
August 2007 CMS directive prohibits states from covering 
children above 250 percent of the FPL through SCHIP if employer 
based coverage of children among the target population has 
declined in their state by more than a certain percentage.
    In New Jersey, we do require that clients enroll into 
private insurance plans through our premium support program. 
However, because private employer plans provide fewer benefits 
and include copay and deductibles, these plans fail to meet the 
``cost effectiveness'' test to qualify for premium support.
    In addition, part time employees are not covered by 
employer plans and often work rules are designed so that a 
large percentage of employees are part time.
    As our country enters a recession, cutting health benefits 
flies in the face of any efforts to stimulate the economy and 
provide much needed services to the poor.
    Providing health care benefits improves health outcomes 
and school attendance thus reducing caretaker absenteeism from 
work, keeping people at work and earning a paycheck. It also 
creates job opportunities for health care and allied 
professional workers in the health care arena. There are a 
multitude of reasons to expand our efforts to provide health 
care to our children.
    I believe that we can all agree that providing health 
insurance for children is vital to the health of this nation. 
Healthier children create healthier families
    And so I believe it is in our collective best interest to 
urge the administration to take a more reasoned approach 
towards our nation's children and one of our most important 
national assets--their health.
    Thank you again for the opportunity to speak here this 
morning and I would be happy to answer any questions you may 
have.
                              ----------                              

    Mr. Pallone. Mr. Smith.

STATEMENT OF DENNIS G. SMITH, DIRECTOR, CENTER FOR MEDICAID AND 
  STATE OPERATIONS, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Mr. Smith. Thank you, Mr. Chairman. It is a pleasure to be 
with you. I have a statement for the record. And I think, given 
the time, perhaps it would be most helpful to the subcommittee 
if I sort of address some of the things that came up in the 
previous panel that would be helpful as we do look forward to 
the full reauthorization of SCHIP. I first want to hasten to 
emphatically say, the administration strongly supports the 
SCHIP program and its reauthorization. The funding has been 
provided for the program to assure stability through March 
2009. I think--as we take this time to work with all Members 
during this period to achieve the goal of reauthorization 
through 2013.
    Last night, the President said in his State of the Union 
remarks, we share a common goal, making health care more 
affordable and accessible for all Americans. So we do believe 
that there is a vision to look at the entire system and how we 
provide health insurance coverage and access to affordable 
health insurance coverage. A couple of things--and obviously 
the August 17 guidelines have been the topic of some discussion 
and questions. And I would say we have three lawsuits that we 
are looking at from various States and beneficiary groups 
regarding the S&D letter.
    So it has gained a great deal of attention. But I want to 
emphasize the purpose of the S&D letter. A to say, find your 
poorer children first. They must come first. I think that in 
that respect, we have been far more successful. States have 
been far more successful in achieving that 95 percent goal than 
many people here in Washington have given them credit for.
    So we do believe the number of States will be able to 
achieve the 95 percent threshold and we move on from there. In 
our discussions with States, we have reached out to the States 
affected by the policy to engage them in a discussion and go 
through data and their policies over the next few weeks to work 
on implementing the August 17 goals. We are also saying that it 
should be--States do have an obligation under the SCHIP 
statute. We have talked a lot about crowd-out. There is 
different ways to measure it. There is different ways to view 
it. But I think the SCHIP original statute is clear.
    States do have an obligation to try to prevent it. And when 
we have seen States that come in with very high income levels 
with no cost sharing or very little cost sharing, no waiting 
period or very little waiting period, then we do question 
whether or not that they are meeting their obligation to 
prevent the substitution of private insurance for the public. 
Substituting insurance does not insure more kids. It is only 
shifting the cost. A couple of things in the previous panel, I 
think, that are helpful to talk about. The income disregards--
and again I think there is a lot of misinformation and a lot of 
misunderstanding in the previous SCHIP.
    What was the Secretary's authority? There are supporters of 
the SCHIP--supporters of the legislation that said the 
Secretary had full authority to deny State planning amendments 
that went to higher income levels. Income disregards. Is there 
a really a cap on income or not? And we have talked about the 
State flexibility to define what income is. And yet that 
flexibility was given in context of capped allotments. So there 
was--obviously 10 years ago there was an understanding that 
there would be competing pressures and competing interest and 
States would work accordingly. But now it is virtually, fund 
any decisions that the States make at any income level and 
regardless of what their strategies to prevent crowd-out is. 
Then we are simply paying the States to make any decision. That 
is not the way the original statute worked.
    On employer-sponsored health insurance, I think it is 
important--Ms. Mann from the previous panel. We are talking 
about in different States the cost of health insurance. 
Employer-sponsored health insurance U.S. total in 2005, the 
coverage was $728. Roughly a third of that the employee is 
paying directly. So yes, that insurance has increased over 
time. But the vast majority of cases, the employer is also 
contributing and contributing at least much of the cost. So I 
don't want Members to think $12,000 is the rule and families 
are paying the full freight. But I think it is also important 
to then------
    Mr. Pallone. You are almost at a minute. So if you could 
wrap it up.
    Mr. Smith. Yes, sir. And also in the context of the cost of 
that. When we look at, for example, comparing the cost to the 
SCHIP of what family coverage would cost in New York, there is 
an example using 2005, the employee contribution for the family 
premium was $217 on average. The PMPM that New York Medicaid--
New York SCHIP pays is $154 PMPM. So if you have two children 
in New York, you have--for the price of what you pay for those 
two children----
    Mr. Pallone. I am sorry, Mr. Smith. It is like a minute and 
a half over.
    Mr. Smith. Thank you, Mr. Chairman. I look forward to your 
questions.
    Mr. Pallone. Sure.
    [The prepared statement of Mr. Smith follows:]

                      Statement of Dennis G. Smith

    Chairman Pallone, Congressman Deal, thank you for inviting 
me to testify on today's topic as you renew the important work 
of reauthorizing the State Children's Health Insurance Program 
(SCHIP). The Administration strongly supports this important 
program and its full reauthorization. Last year, additional 
funding for the program was provided to ensure stability in the 
program through March 2009. We look forward to working with all 
members during this time to achieve the goal of reauthorization 
through 2013.
    The full picture of our commitment to insuring low-income 
children includes Medicaid as well as SCHIP. Medicaid is 
approximately four times larger than SCHIP in terms of 
enrollment of children and just over six times larger in terms 
of expenditures for children. Total Federal and State Medicaid 
spending on children will exceed $400 billion over the next 
five years and $1 trillion over the next ten years. There are 
important budgetary and programmatic interactions between SCHIP 
and Medicaid that are appropriate to consider in the context of 
reauthorization.

                               Background

    When Congress was considering the legislation that became 
Title XXI more than ten years ago, there was a widely held view 
that 10 million children in the United States lacked health 
insurance. It was recognized that many of these children were 
already eligible for Medicaid but were not enrolled, and that 
many of these children were uninsured but lived in families 
with sufficient income to be able to afford coverage. Congress 
ultimately adopted an approach that was targeted to children 
with family incomes above existing Medicaid levels who lived in 
families for which the cost of insurance was beyond their 
reach. It set a general upper limit of income eligibility at 
the higher of 200 percent of the federal poverty level (FPL) or 
50 percentage points above a state's Medicaid level. Under the 
FPL guidelines released last week for 2008, 200 percent of FPL 
is $42,400 for a family of four and 250 percent of FPL is 
$53,000 for a family of four. Just by way of comparison: the 
median income in the United States for a family of four is 
approximately $59,000.
    SCHIP is a unique compound of incentives and checks and 
balances. Congress rejected the idea of simply re-creating 
Medicaid and its complexities. States with an approved SCHIP 
plan are eligible for Federal matching payments drawn from a 
state-specific capped allotment. While the program provides 
states with a great deal of program flexibility, including 
using Medicaid as their vehicle for administering Title XXI, it 
also creates the expectation that states will adopt policies to 
stay within their capped allotments. Capped appropriations and 
capped allotments were critical features of that bipartisan 
compromise. The legislation appropriated $40 billion over ten 
years, an amount that would support the number of children 
thought to be in the target population group. That level of 
funding clearly was not designed or intended to serve children 
at all income levels, nor was it intended to create a new 
entitlement for coverage.
    Congress also realized that millions of children were 
eligible for Medicaid but were not enrolled. To ensure the 
success of SCHIP and avoid the possibility of creating a new 
program that would not be taken up by the states, the idea of 
an enhanced match rate was ultimately adopted as the means of 
providing states with sufficient incentive to aggressively find 
and enroll uninsured low-income children. Thus, SCHIP provides 
a 70 percent federal match rate on an average national basis 
compared to the 57 percent average match rate for Medicaid. But 
central to the bipartisan discussion at that time was the 
question, ``for whom is the enhanced match intended?'' That 
question remains central to reauthorization today.

                    Enrollment Exceeds Expectations

    If the goal ten years ago was to enroll 10 million 
children, then expectations have been exceeded. In 1998, the 
number of children ``ever-enrolled'' in Medicaid (enrolled at 
least for some period of time) was 19.6 million. States 
enrolled approximately 670,000 children in SCHIP in that first 
year for a combined total of more than 20 million children. 
Since then, combined Medicaid and SCHIP enrollment has 
increased every year. In FY 2006, more than 36 million children 
were enrolled (at least for some period of time) in Medicaid 
and SCHIP combined, an increase of 16 million children above 
the 1998 Medicaid level.
    Since 1998, enrollment of children in SCHIP and Medicaid 
has increased nearly 80 percent, while growth in the total 
number of children in the U.S. population as well as the number 
of children in families below 200 percent FPL over the same 
period has been nominal. Enrollment in Medicaid and SCHIP now 
exceeds the number of children below 200 percent FPL. 
Therefore, it is clear that Medicaid and SCHIP are covering 
children in higher-income families.

                     ``95 Percent Enrollment Goal''

    It is because of this tremendous growth in Medicaid and 
SCHIP enrollment relative to the overall population and to the 
low-income population specifically that we believe our adopted 
goal of 95 percent enrollment of low-income children before 
expanding eligibility to higher income populations is both 
reasonable, in light of the statutory purpose of SCHIP to serve 
low-income children, and is achievable.
    We anticipate working with states to determine their 
specific rates of coverage. It is unfortunate that some groups 
have prejudged compliance as they have relied on flawed 
national data to make comparisons regarding state performance. 
For example, it is widely recognized that the Current 
Population Survey (CPS) undercounts Medicaid participation. In 
the most recent CPS data released last year, the Census Bureau 
reported 20.7 million children ever enrolled in FY 2006, when 
enrollment reported by states for Medicaid and SCHIP combined 
in that same period was over 36 million.
    We believe the 95 percent goal is further supported by last 
year's work conducted by the Urban Institute which shows much 
lower uninsurance rates among Medicaid and SCHIP eligible 
children than expected.\1\ This study was not unanimously 
received as good news at the time, but we believe it 
demonstrates that states are far more successful than given 
credit. Therefore the 95 percent goal is not only achievable, 
but should be expected and demanded. Indeed, our view is that a 
number of states are already meeting the 95 percent goal.
    We strongly believe, as the future of SCHIP as a program is 
considered, that states be required to put poor children first 
before they expand to higher income levels. The federal 
government has tied financial incentives to performance 
standards in other public benefits programs with good results.
    I want to reaffirm our previously stated position that 
children currently enrolled in SCHIP should not be affected as 
we work with states to implement the August 17, 2007 State 
Health Official (SHO) letter. The guidance sets out procedures 
and assurances that should be in place when states enroll new 
applicants with family incomes in excess of 250 percent of the 
federal poverty level (FPL)--that is, in excess of the median 
family income in the United States. But the guidance is not 
intended to affect enrollment, procedures, or other terms for 
such individuals currently enrolled in State programs.

                             ``Crowd-Out''

    The goal of SCHIP is to increase the rate of insurance 
among our nation's children in low-income families. ``Crowd-
out'' or the substitution of existing coverage does not 
increase insurance rates, it merely shifts the source of 
funding. It is a public policy concern because it increases 
public expenditures without necessarily improving access to 
care or health status. It is also a concern because, as healthy 
lives are shifted out of the private sector insurance pools, 
there is a detrimental impact on those who remain. Insurance 
fundamentally means the sharing of risk. When the private pool 
of healthy insured lives shrinks and the risk cannot be spread 
as widely as before, the cost will rise for those who remain, 
triggering another cost increase which is likely to displace 
yet another group of people, whether employers or employees or 
both.
    Crowd-out is not a new topic. There were numerous papers 
written on Medicaid and crowd-out prior to the enactment of 
SCHIP and it remains a popular subject today. The pre-SCHIP 
papers on crowd-out dealt primarily with populations below 200 
percent of FPL, many of whom were assumed to not have access to 
employer-sponsored health insurance or the means to contribute 
the employee share of costs. There are a variety of opinions on 
how to define crowd-out, how to measure it, and how to prevent 
it. In its paper on SCHIP last May, the Congressional Budget 
Office (CBO) neatly summarized the research on this topic and 
concluded that, ``. in general, expanding the program to 
children in higher-income families is likely to generate more 
of an offsetting reduction in private coverage (and therefore 
less of a net reduction in uninsurance) than expanding the 
program to more children in low-income families.'' The CBO 
estimates on the SCHIP legislation that the President vetoed 
reinforce the findings of its May study.
    As early as February 1998, the federal government released 
instructions to the states on how it would review strategies to 
protect against substitution of private coverage. In a February 
13, 1998 State Health Official letter, co-signed by the 
Director of the Center for Medicaid and State Operations at the 
Health Care Financing Administration and the Acting 
Administrator of the Health Resources and Services 
Administration, the federal government provided that, ``States 
that provide insurance coverage through a children's only and/
or a State plan (as opposed to subsidizing employer-sponsored 
coverage) or expand through Medicaid will be required to 
describe procedures in their State CHIP plans that reduce the 
potential for substitution. . After a reasonable period of 
time, the Department will review States' procedures to limit 
substitution. If this review shows they have not adequately 
addressed substitution, the Department may require States to 
alter their plans.''
    Another federal agency within the Department of Health and 
Human Services, the Agency for Healthcare Research and Quality, 
listed several strategies to prevent crowd-out at that time 
which included:\2\
    Institute waiting periods (3, 6, or 12 months)
    Limit eligibility to uninsured or under-insured
    Subsidize employer-based coverage
    Impose premium contributions for families above 150 
percent of the Federal poverty level
    Set premiums and coverage and levels comparable to 
employer-sponsored coverage
    Monitor crowd-out and implement prevention strategies if 
crowd-out becomes a problem
    States faced competing pressures as they designed their 
SCHIP programs. Effective crowd-out strategies were measured 
against pressures to quickly build enrollment. Decision makers 
at the state level faced strong public criticism for ``turning 
back'' federal funds that would go to other states or be 
returned to the Federal Treasury.
    As the 16 million children were being added to Medicaid and 
SCHIP, the percent of children between 100 and 200 percent of 
poverty with private insurance declined. In 1997 according to 
data from the 2006 National Health Interview Survey, 55 percent 
of children in families with income at this level had private 
insurance. But by 2006, the percentage had declined to 36 
percent.\3\

                         Eligibility Expansions

    Currently there are 20 jurisdictions (19 states and the 
District of Columbia) that cover children in families with 
income greater than 200 percent of FPL, of which 17 
jurisdictions cover children in families with income equal to 
or greater than 250 percent FPL. In addition, there are three 
states that cover children in families with income thresholds 
above 200 percent of FPL that apply income disregards in an 
amount we believe is likely to exceed the 250 percent FPL 
threshold. Expansions of SCHIP to higher income levels occurred 
early in the program or just in the past two years. Of the 19 
states and the District of Columbia that provide coverage above 
200 percent of the poverty level, 13 of them received approval 
to cover those higher incomes by July 2001 or earlier. Of those 
13 states, eight were ``qualifying states,'' that had increased 
Medicaid eligibility prior to the creation of SCHIP.
    The other seven states that have expanded eligibility above 
200 percent FPL occurred in January 2006 or later. With the 
exception of Hawaii, the eligibility limits were approved as 
state plan amendments, not as waivers as has been widely 
reported. After a five-year period in which no state raised 
their eligibility level, there clearly are growing interests or 
pressures among additional states to expand eligibility beyond 
the statutory definition. It is important to understand those 
interests or pressures in order to design an appropriate 
response.
    Federal responses may be different than the choices made 
ten years ago and should include approaches outside of SCHIP as 
well as within the program. One area that seems particularly 
ripe for a new approach within SCHIP is premium assistance. 
Perhaps some of the crowd-out effect could have been prevented 
if SCHIP were used to a greater extent to support private 
coverage rather than replace it.

                               Conclusion

    SCHIP has been highly successful in the mission it was 
given to increase coverage among uninsured low-income children. 
But that success does not mean SCHIP can or will be as 
successful when populations at higher incomes are involved.
    We hope that the lessons of the past will guide how we use 
the fresh opportunity before us and the Administration looks 
forward to working with all members to forge reauthorization in 
the same bipartisan spirit in which SCHIP was created.

    \1\ ``Eligible But Not Enrolled: How SCHIP Reauthorization 
Can Help,'' September 24, 2007 [available at http://
www.urban.org/publications/411549.html].
    \2\ See http://www.ahrq.gov/chip/Content/crowd--out/crowd--
out--topics.htm.
    \3\ See http://www.cdc.gov/nchs/data/nhis/earlyrelease/
insur200712.pdf. The data are derived from the Family Core 
component of the 1997-2007 NHIS, which collects information on 
all family members in each household. Data analyses for the 
January-June 2007 NHIS were based on 41,823 persons in the 
Family Core.
                              ----------                              

    Mr. Pallone. Ms. Brooks.

 STATEMENT OF TRICIA BROOKS, PRESIDENT AND CEO, NEW HAMPSHIRE 
                    HEALTHY KIDS CORPORATION

    Ms. Brooks. Thank you, Mr. Chairman. Thank you for your 
patience, and I welcome the opportunity to share New 
Hampshire's story with you. For the record, my name is Tricia 
Brooks. I run a legislatively-created nonprofit by statute 
administers our SCHIP program. We also take the lead in 
coordinating outreach application assistance for both Medicaid 
and SCHIP. New Hampshire is fiscally conservative State, but we 
have made children's health insurance coverage our top 
priority. Our SCHIP program was specifically designed to be 
responsive to the needs of working families and self-employed 
who want to insure their children but cannot afford to do so in 
the private market.
    We also recognize the need to provide transitional coverage 
to families who encounter disruptions in employment and income. 
To do so, it was imperative in New Hampshire that we address 
the high cost of living and high cost of insurance by setting 
eligibility at three times the poverty level. This level was 
approved by CMS in our very original plan and it has been in 
place for the past decade.
    Much of the debate around SCHIP has been around whether the 
lowest income children are getting served first. In New 
Hampshire, the numbers speak for themselves. For every one 
child that is enrolled in SCHIP by our mail-in unit, six 
children and one pregnant woman is enrolled in Medicaid. Of the 
71,000 children covered by Medicaid and SCHIP, 91 percent have 
incomes below two times the poverty level. After celebrating 
Congress's success in passing the bipartisan CHIPRA bill last 
year, I am really discouraged that progress has been thwarted 
by the subsequent presidential vetoes.
    States need the predictability of the SCHIP reauthorization 
and the many positive provisions of CHIPRA to move forward in 
covering kids. I am not going to go into some of those positive 
items. They have been covered by other speakers. But on another 
front, I do want to talk about the fact that the CHIPRA bill 
would have eased the administrative barriers and unintended 
consequences of new requirements for verifying citizenship and 
identity. When the so-called CIT-DOC rules went into effect, 
New Hampshire already had in place a system for verifying 
citizenship of our applicants. This system has been disrupted 
by additional unnecessary requirements that have left eligible 
children uninsured.
    Although Congress extended the current SCHIP program with 
sufficient funding to offset expected shortfalls in States, 
States are still being stopped from taking full advantage of 
the flexibility allowed under current SCHIP rules by the so-
called CMS 8/17 directive. Furthermore, a number of States, 
including New Hampshire, face the untenable task of cutting 
back their programs unless Congress intervenes. This directive 
is the single biggest threat to the gains we have made in 
covering kids in New Hampshire over the past decade. This 
directive was issued arbitrarily without any public notice or 
any public process or advanced notice. It establishes 
preconditions to cover kids above 250 percent based on 
unreasonable and unattainable benchmarks for which no reliable 
data sources exists. It imposes new eligibility criteria.
    For example, a waiting period of a year does not allow a 
child access if their parent has lost a job or worse, if the 
child has lost a parent. Cost sharing comparable to the private 
market means eligible children and their families will not be 
able to afford to participate. This directive is even broader 
because it eliminates the use of deductions from income such as 
child care expenses that have long been a standard in Medicaid. 
In New Hampshire, we understand the importance of ensuring 
public coverage does not substitute for private coverages.
    Our outreach efforts and eligibility requirements strictly 
target uninsured children, but we also recognize that certain 
circumstances are beyond the control of families and warrant 
exceptions. Our policies have been effective in that employer-
sponsored insurance of children has remained steady while 
enrollment in Medicaid and SCHIP have grown. Assertions that 
currently enrolled children are not affected by this directive 
puts forth false expectations about its true impact. SCHIP 
provides transitional coverage.
    In New Hampshire, 75 percent of children enrolled above 2-
1/2 times the poverty level were on the program for 12 months 
or less. While currently enrolled children will stay on, the 
children who lose coverage will not be able to come in and fill 
their places. And they will be uninsured and they will not have 
continuity of care. Like many States, New Hampshire's State 
budget is in trouble. I know $50 million sounds like a rounding 
era down here. But it is a lot of money in our State budget and 
there are no surplus State funds that can be used as a stop gap 
to fill the void if this directive is allowed to stand. So in 
closing, let me reiterate.
    The predictability of a full SCHIP reauthorization is 
essential to States to move forward in covering kids. But more 
urgently, time is running out for States that must come into 
compliance with the 8/17 directive. Unless Congress places a 
moratorium on the directive, New Hampshire and other States 
will be force to the move backward, not forward in covering 
kids. Thank you.
    [The prepared statement of Tricia Brooks appears at the 
conclusion of the hearing:]

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    Mr. Pallone. Thank you. And I thank all of the panel. Let's 
go now to questions. And I will recognize myself for 5 minutes.
    I guess I am going to ask of this of Ms. Kohler because I 
think that Ms. Brooks sort of answered it for New Hampshire, 
although I may get back to you. Again, going back to my opening 
statement, I was very happy at the beginning of 2007 because 
obviously in New Jersey, as you said, the Governor was going 
out of his way to try to enroll new kids. You mentioned 180,000 
new kids were enrolled. And part of what we were trying to do 
with the CHAMP bill was to essentially put the vices in place 
so you could capture more kids and go out and do outreach and 
all that.
    So I kind of wanted to ask, you know, what you did to get 
to that 180,000 new kids, you know, what the CHAMP bill allows 
you to do even better you know in terms of some of the 
initiatives that were in there? But at the same time going back 
to this directive, what is going to be the practical effect of 
that? You know, what is that going to mean if you are not 
successful in barring the August 17 directive from taking 
place, what kind of changes would you have to make to the CHIP 
programs in terms of eligibility and all that? So I will ask 
you first, and then if Ms. Brooks has anything to add.
    Ms. Kohler. Okay. We have implemented a number of things in 
New Jersey to help us identify enrolled children. We have an 
entire cabinet to help us in this effort. So, for example, the 
Department of Education when they collect information on No 
Child Left Behind, they put in their database whether the child 
has insurance and sends out outreach material. Similarly, our 
division of taxation, if it appears the child may be eligible, 
the family may be eligible for our program, they will also mail 
them information to help enroll them. We have liked a lot of 
provisions in the express lane enrollment that were in the 
bill, in the champs bill that would allow us to just use other 
Federal programs, such as food stamps to automatically enroll 
people into our SCHIP and our Medicaid program. We think all of 
those things are very helpful and they have helped us enroll so 
many new children. Unfortunately on the downside, some of the 
new provisions coming out--for example, the citizenship 
provision----
    Mr. Pallone. You are talking about the August 17 directive?
    Ms. Kohler. I am sorry. The August 17 directive will slow 
down our ability because it will require children to remain 
uninsured for up to a year before we can enroll them. The other 
provision that I think was mentioned in the last panel is the 
new requirement on citizenship verification that was part of 
the Deficit Reduction Act. At any one time, we have over 7,000 
children in the process of us trying to verify their 
citizenship because we had to take down our existing program. 
And we do try and do as much electronically as we can. We match 
all of our statistic records in-house. But we still have a 
large number of children whose enrollment is delayed.
    Mr. Pallone. What is going to be the practical effect of 
this August 17 directive if you are not able to, you know, to 
bar it from taking effect?
    Ms. Kohler. Well, we are concerned that children will lose 
eligibility. Some of our children do go on and off as their 
family income changes. And of course, if they lose 
eligibility--well, CMS has indicated possibly the current 
enrollment, enrolled children can remain. And a new child could 
not come on. Similarly, we enroll children if they lose their 
employer-sponsored insurance through no fault of their own. If 
their parent dies, we allow them to enroll in our program. 
Under the August 17 program, they would have to stay uninsured 
for a full year before we could enroll them, and we do not 
think that is fair to children.
    Mr. Pallone. Did you want to add anything in this regard, 
Ms. Brooks, in terms of your State?
    Ms. Brooks. Yes. We believe ultimately half of our SCHIP 
children will be affected between either their more rigid 
eligibility, the loss of deductions as well as just the 
straight income tiers. And we know that this group has been a 
steady group of about 3,500 kids. The numbers are small. But if 
they are not allowed an option to come onto SCHIP as a 
transition between bridging between their public program or 
their private program coverage periods, then it will increase 
the number of uninsured children by as much as 20 percent 
within 2 years in our State.
    Mr. Pallone. And Ms. Kohler, earlier Dr. Rossiter spoke 
about eliminating the Medicaid option for States to operate 
their CHIP program and reducing the CHIP match to the level of 
the Medicaid match. What would the impact of that be on New 
Jersey?
    Ms. Kohler. What that would do is reduce the amount of 
Federal funding that we have say over 15 percent. That would be 
a significant loss of Federal funding in New Jersey. We also 
are facing a significant budget deficit. Ours is $2.5 billion. 
And there is no way the State could make up those additional 
Federal dollars. New Jersey has a mixed program. A portion of 
our program is a Medicaid localized to the lowest-income 
children. And the bulk of our program is free standing. So any 
loss in Federal funding would be disastrous for us.
    Mr. Pallone. I just wanted to mention, Mr. Smith--and I am 
just going to end with this. For the record, you mention on 
page 2 of your written testimony, you state that the median 
income for a family of four in the U.S. is approximately 
$59,000. But actually, the median income is $73,415. The median 
income for all families in the U.S. is the $58,407 figure. And 
then on page 3, you state enrollment in Medicaid and SCHIP 
exceeds the number of children below 200 percent of the Federal 
poverty level. But according to the current population survey, 
there are 30.2 million children in families with incomes below 
200 percent of the Federal poverty level. And there are 20.75 
million children in families at or below that income level 
enrolled in Medicaid and SCHIP. Mr. Deal?
    Mr. Smith. Did you want me to respond?
    Mr. Pallone. I am just saying the facts of what I have.
    Mr. Deal. You know, one of the things that I have been 
concerned about in the reauthorization of SCHIP is the creation 
of great inequities between rich States and poor States. Richer 
States, which I presume from standards of my State of Georgia, 
New Jersey and New Hampshire qualify as those richer States, 
although when I hear you talking about budget deficits there, 
and my State doesn't have a deficit, and my State is being able 
to cover children, for example, it makes me wonder.
    Ms. Kohler, the last time we had a hearing, which was 
roughly a year ago on this issue, we had a panel of people from 
all over the spectrum. And one of the questions that I asked 
was whether or not--what percentage should we insist on of 
covering children that are eligible for Medicare and Medicaid? 
What is an achievable percentage? And as I recall, the panel 
unanimously all agreed 90 percent was a realistic and 
achievable goal.
    Now, that same hearing or one shortly thereafter, the 
statistic was presented that New Jersey at that time had some 
23 percent of its eligible children, that is those who are 
eligible for SCHIP and Medicaid and/or Medicaid, that were 
still enrolled in neither. Now I have been told that now the 
Census Bureau says that you dropped to 22 percent of those 
eligible children that are still unenrolled. It would seem to 
me that if there was any one thing we all ought to agree on, 
and that is that the program was designed to fill the gap for 
the near poor and that they ought to have a priority, and yet 
we continue to hear witnesses railing against the letter, the 
August letter that had some of those criteria in it. Now I am 
short on time, so I will try to move as quickly as possible.
    One thing I would like to ask Mr. Smith is this, a recent 
GAO report that I alluded to earlier said that in the nine 
States that had high percentages of adults enrolled in their 
program that they cost about 54 percent of the total of the 
SCHIP programs in those States. I would like to know, when a 
State is spending over 50 percent of its funding on adults, I 
think it clearly is not having the goal of SCHIP in mind.
    Could you please tell us what the administration is doing 
to help ensure that needy children who are the top priority for 
this SCHIP program are actually going to be reached and 
covered? That is a broad question, but it needs an answer.
    Mr. Smith. Thank you, Mr. Deal. And obviously our coverage 
of adults has been controversial in SCHIP. And to sort of help 
put things into perspective, in those original waivers in which 
States agreed to terms and conditions under that waiver, there 
were specific provisions on what the State would do if, in 
fact, they ran out of their allotment. So the States from the 
very beginning agreed that they were running out of their 
allotment. To some States, most States were then to go to 
transition those adults into Medicaid, come back with a 
Medicaid waiver. And I believe one respect, the State agreed to 
fund those adults with State-only money entirely.
    So from the very beginning we always had an agreement with 
States, what would happen if they exceeded their allotments. So 
we believed we were always preserving SCHIP for children to 
assure that no children would be denied coverage in those 
States by virtue of covering adults. To sort of bring you up to 
date in the adult coverage, last year in 2007, three States 
that had had waivers to cover adults, Illinois, Oregon and 
Wisconsin, those States have agreed to move those adults out of 
SCHIP into Medicaid. And again, we aren't talking about them 
losing coverage. What we are talking about is the difference 
between Medicaid match and SCHIP match. In 2008, Rhode Island 
will also be in that category, they come up for renewal, and as 
we have previously said we would not be renewing. In 2009, then 
five States, including New Jersey and Michigan, come up for 
renewal in January of 2009.
    All these--Nevada we have already entered into discussions. 
They are out to 2011. But they have had so few uptake on the 
administrative side, they are already saying we are going to 
end this now. So we think it is appropriate just to--again, 
transition all of the adults to Medicaid. In many respects, 
take the argument off the table now by getting all of those 
adults into Medicaid by the end of this year.
    Mr. Deal. Thank you. My time is up. I appreciate the 
answers. Thank you, Mr. Chairman.
    Mr. Pallone. Dr. Burgess.
    Mr. Burgess. Again there is no clock. So watch me like a 
hawk. Mr. Smith, you started to talk about the per member, per 
month allocation when you were finishing your testimony and you 
ran out of time. Would you mind just finishing your thought for 
us?
    Mr. Smith. Yes, Dr. Burgess. And again, what I was trying 
to convey is in the respect of States going up to higher income 
levels, what families are paying for their share of family 
coverage, to insure the entire family, usually which means the 
addition of a spouse and however many children are in the 
family----
    Mr. Burgess. Those figures were not exclusively for adding 
a child to the coverage.
    Mr. Smith. That is correct. But I could break down what the 
employee's shares and the rest of the family coverage. But what 
we were trying to convey is, when you get--for family coverage, 
then you are covering all of the family, whether it is one 
child or two children or three children. In the case of myself, 
four children. It is all the same price because you have 
purchased that. In Medicaid and SCHIP, if they are in a managed 
care plan, what you are typically doing is paying a per member, 
per month amount. So what I was trying to relate was, for the 
price of two children that we are paying now a managed care 
plan, for that same price you can cover the entire family was 
the point that I was trying to make.
    Mr. Burgess. Now, would the administration be okay--because 
presumably a spouse could be covered under that, that is an 
adult that could be covered under SCHIP, would that be okay?
    Mr. Smith. Well, again, in family coverage and employer 
sponsored, I think we have set that premium assistance, the way 
to build on that, again, then you are not replacing private 
coverage. You are building on that private coverage for less 
cost than what you are paying now if you are paying for at 
least two children.
    Mr. Burgess. Now in the bill that was up when we were 
reauthorizing the SCHIP, the bill that came up in September and 
October, I think on the second generation of that, I spoke on--
or engaged with our Chairman of the full committee, Chairman 
Dingell, in colloquy on the House floor, trying to ascertain 
what the upper limit of income was that would be eligible for 
coverage under SCHIP.
    The stated amount on the bill or the amount that was 
referred to in the debates that morning was a figure somewhat 
over $60,000 a year that was in the bill. But there was also a 
possibility for income set-asides. And I think we have heard 
one of them alluded to this morning because of the child care 
exclusion, and the Chairman agreed with the fact that a $500 a 
year for a family's income could be excluded for child care 
expense. Do you agree with the Chairman? It was probably not an 
unreasonable position. But was the Chairman accurate on that?
    Mr. Smith. I think that it was accurate. And I listened to 
the debate and I read the statements afterwards. And again, I 
think it goes back to the question, for whom is the enhanced 
match really intended to be? And to some extent, is there 
really an upper limit to get around those rules?
    Mr. Burgess. And that was the furtherance of that colloquy. 
Because then we talked about a $20,000 exclusion for living 
expenses, $10,000 for transportation expenditures, and $10,000 
for clothing allowance. And it seemed to me just doing simple 
math that I am capable of doing that we were already somewhat 
north of $100,000 for a family of four. Was that accurate that 
what the Chairman related?
    Mr. Smith. I think the Chairman did speak accurately. Part 
of this is all a bit ironic. In terms of the very history and 
the purpose of what income disregards in public benefit 
programs were for in the first place, which was to help 
families who were on welfare. That is where they were starting. 
They were on welfare. And it was meant as a work incentive to 
help those families return to work so they weren't penalized by 
losing their health insurance.
    So income disregards were where you are starting at a 
higher income level but subtracting earned income, for example, 
the old $90 in the old AFDC rules, or a 30-1/3 or work-related 
expenses such as child care. Those were all intended for people 
leaving welfare.
    Now we have sort of turned it upside down and said, now we 
are going to use income disregards to people who are well above 
poverty levels, or even near poverty levels in order to start 
subtracting out their income in order to qualify them for these 
programs. It is almost the absolute reverse of what income 
disregards were historically used for.
    Mr. Burgess. Okay. I appreciate the clarification. Ms. 
Kohler, in the little bit of time I have left, if we could get 
some clarification on the citizenship verification issue that 
you alluded to.
    Under the existing law that expired September 30, what were 
the citizenship verification requirements under the existing 
law?
    Mr. Pallone. This is going to be the last one because he is 
over his time limit.
    Ms. Kohler. Okay.
    Mr. Burgess. See, I don't know that. So it is okay. I can't 
possibly----
    Mr. Pallone. You have to take my word for it.
    Ms. Kohler. Under the existing law, you have to prove both 
your citizenship plus your identification. So I think, as Cindy 
Mann explained, you need to come in with an original birth 
certificate.
    Mr. Burgess. And briefly under the new bill, the CHIPRA 
bill that was vetoed and sustained, what was the citizenship 
verification under that law?
    Ms. Kohler. There could be some attestations available to 
the families. But you didn't have to come in with your original 
document.
    Mr. Burgess. Attestation meaning you say that this is, in 
fact, correct. But was there at any point of documentation 
requirement or was it just simply the attestation?
    Mr. Pallone. Okay. That is the last one.
    Ms. Kohler. Okay. It was a combination. We had attestations 
plus we did require some verification.
    Mr. Burgess. Well, Mr. Chairman, this is an important point 
because we heard over and over again from your side when the 
second bill came up that there would be no relaxation of the 
citizenship verification. My side, in fact, was criticized when 
we brought up the fact that there might be a relaxation for 
citizenship verification. And while it may not be an issue in 
New Jersey or New Hampshire, I promise you, in the State of 
Texas, we have a lot of people in our State without the benefit 
of an accurate Social Security number. And not casting any 
other aspersions on why they don't have a Social Security 
number, it is a huge problem. And if we provide that type of 
relaxation of the citizenship requirement we are going to 
suddenly shift the burden significantly to border States like 
Texas. And I just think it is an important----
    Mr. Pallone. I understand your concern.
    Ms. Kohler. If I could just say, we actually did a study 
prior to the new requirements, and we found that we did not 
have any significant number of people on the program who were 
not citizens.
    Mr. Burgess. And I don't doubt that in New Jersey. I 
suspect in Texas it is different.
    Mr. Pallone. Let's move on. Mr. Green.
    Mr. Green. Mr. Chairman, I have some other questions. I 
want to follow up with my colleague from Texas, because I think 
obviously we have some difference of opinion on it. The 
citizenship requirements may have been relaxed, but I can tell 
you there are examples in Texas, particularly south Texas or 
even in an urban area like I have, that it is much more 
difficult to get that certified copy of a birth certificate, 
particularly when we have children born at home, even in urban 
areas with midwives.
    And again there is a cultural issue here. But wasn't the 
bill--and CMS can join in on this. I think the bill that we 
passed, that was vetoed, if someone who is not a citizen--and 
CMS did an audit, the State paid for that child because it was 
the State's decision, State-run program with Federal money. But 
wasn't that correct that if there was an audit by CMS, whether 
it be Medicaid or the CHIP program, that if you found out 
someone didn't have proper documentation, it was the State 
sticking it, not the Federal taxpayer?
    Mr. Smith. Actually, Mr. Green the penalty would have been 
only for the individual and could not be extrapolated to the 
rest of the population. So literally the----
    Mr. Green. Oh, I know it would be the individual. But if 
you did an audit of the State of Texas and found you know, we 
have 10,000 of these children--you didn't have the 
verification, you think questionable, the State taxpayer picked 
that up, that individual that they found.
    Mr. Smith. Actually, Mr. Green, no. Because you would have 
done it on a sample and you would have found 20. Usually in 
audits, you extrapolate to the rest of the population. But the 
way it was drafted, it literally was only the 20.
    Mr. Green. But if you showed 20, then depending on what 
your universe would be, 20 out of, you know, 10,000 may be much 
smaller. But it would show you evidence that maybe you need 
to----
    Didn't CMS have the ability to require the State to also do 
other verifications other than maybe weighing too much on 
attestations, and if you found a high significance of children 
who were undocumented on there?
    Mr. Smith. Well, again, what the bill provided for itself, 
a State might be very well willing to take the risk because the 
penalty was so small. There are other provisions in the bill on 
the express lane, for example, that we believed were loopholes 
in the eligibility. For example, at the school, you might not 
be asking about the insurance status. So where in SCHIP 
specifically you have to be uninsured, but if you weren't 
asking all the right questions, then the potential was you 
would be letting people who were not eligible for the program.
    Mr. Green. It sounds like CMS, if we want to run a Federal 
program we can. And frankly, I consider the percentages--for 
example, State of Texas receives from SCHIP is higher than the 
percentages we receive for Medicaid. You know, if we want to do 
that, then why would we want to trust the States to do it? 
Maybe it goes to the original concept of the SCHIP. I don't 
mind putting whatever requirements. But sometimes I see--
particularly this CMS with the new regulations--and I have a 
question on that.
    Mr. Chairman, I know I am running out of time. But you 
know, if you want to put all these barriers in place, then the 
program will not get to those folks, and particularly in a 
poorer population. My children, I have no trouble with getting 
them their certified copies of their birth certificates, or 
even our grandchildren. But if my children were born with a 
midwife in south Texas, then it is much more difficult. So that 
is why I think States who know that history and who use it for 
other verification, we use it for other verification, for 
example, in Harris County, our main issue in Harris County is 
that you need to first be a resident of the county because our 
public health system serves the Harris County residents.
    I guess that is the frustration that we had the differences 
in the CHIP bill. And of course, I come from a different part 
of the State than my colleague, in a different district. I also 
know that if I am going to err, I would rather err on the side 
of getting that child health care. And that is what I think 
ought to be the concern of the Federal Government. And 
hopefully some day, even State government.
    Let me get back to my questions, Mr. Chairman. This is a 
question for both Ms. Brooks and Ms. Kohler. With the recession 
we are talking about, and we are getting ready to vote on the 
stimulus that puts money back into the economy. In previous 
times with economic stimulus, the last time Congress passed a 
stimulus bill, it included $20 billion, for example, for State 
fiscal relief, $10 billion increased medicaid funding and $10 
billion for State grants.
    My concern is that, what we are doing today may be hardly 
even putting on our finger in the dike in what we are doing. 
And considering recent Congress commission on Medicaid and 
uninsured report that States Medicaid directors note that many 
States are now facing economic situations. It will either level 
off in the last of 2007 due to troubles in the housing market, 
targeted across-the-board Medicaid cuts before the end of the 
calendar year 2008, the coming possibility. Would you agree 
that the assessment with the economic downturn affects the 
state's ability to fund Medicaid and CHIP, Ms. Kohler?
    Ms. Kohler. Yes. It is a significant issue. As I said, in 
New Jersey we are basically in $2.5 billion deficit that we are 
trying to find ways to reduce our spending to live within our 
means. If I could say the last time Congress passed an economic 
stimulus package, it did include money for both Medicaid as 
well as block grants to the States. And that was a very, very 
effective way of getting the money very quickly out there in 
the economy. And it really did help prevent the recession.
    Mr. Pallone. I am going to let whoever wants to answer this 
and that is--because his time is over too. Go ahead.
    Ms. Brook. Just very briefly. 43 percent of the deficit in 
New Hampshire is going to have to be made up by the Department 
of Health and Human Services. Certainly an enhanced F map in 
New Hampshire would help us go a long way to help us bridge 
that. But also we know there is going to be increased demand if 
there continues to be an downturn in the economy, people are 
going to lose jobs and they are going to need health coverage.
    Mr. Green. Mr. Chairman, my concern about it, if we don't 
assist the States and if you are in some States, the States 
will have trouble coming up with the money, we will just see 
our uninsured population go up even more, particularly with the 
Medicaid population. So thank you, Mr. Chairman, for your 
patience.
    Mr. Pallone. Thank you. And thank you to all of you. I will 
end with this and say that you know we are going to have more 
discussion of this. We have Mr. Leavitt coming in to talk, I 
guess, during the budget review. In February, we are going to 
have another panel like this. There is the concern that as we 
move on, as the economic slump becomes worse, you know, what 
the impact is going to be. So this is a very important part of 
what we are looking at as a subcommittee in terms of where we 
go with not only SCHIP, but Medicaid and the need, as you said, 
to do something in terms of the match. So I appreciate it.
    I know we are ending on this note. But I think it is sort 
of a beginning of what we will have to look at in the 
subcommittee over the next few months.
    Thank you all very much. Let me mention that Members may 
submit additional questions for the record to be answered by 
you. They should be submitted to the committee clerk within the 
next 10 days, and then you would be notified. So we may get 
some additional questions in writing for you to answer. But 
thank you again. And without objection, this meeting of the 
subcommittee is adjourned.
    [Whereupon, at 1:19 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                    Statement of Hon. Jan Schakowsky

    Thank you, Mr. Chairman. You have been a real leader on the 
issue of covering more children, and I know this Committee 
appreciates your leadership and persistence.
    Over the next 2 years, 27 million American children will be 
uninsured for some period of time. They will go without 
preventive care. They won't be able to see a doctor or a 
dentist, and some will grow up with life-long health care 
problems that could have been prevented with early care.
    When a bill to cover 10 million children--which is 
supported by the House and the Senate, Governors in both 
parties, consumers, people of faith, medical associations, 
hospitals, pharmacies and insurers--is held back by the very 
few--truly this was a missed opportunity.
    The House SCHIP reauthorization legislation would have 
brought health coverage to approximately ten million children 
in need--preserving coverage for all 6.6 million children 
currently covered by SCHIP, and extending coverage to 3.8 
million children who are currently uninsured. In my home state 
of Illinois, this would have meant covering a total of 300,000 
Illinois children--constituting an expansion to over 150,000 
eligible, but not yet enrolled Illinois children.
    How can anyone justify leaving millions of our own children 
so vulnerable? It is a black mark on our country. It is a moral 
issue as well as a health issue. People in every other 
industrialized nation must shake their head in disbelief. We 
are a powerful and wealthy nation--the wealthiest in fact--and 
we know that we can do better. I am grateful to be having this 
hearing today because, though we extended SCHIP through to 
March 2009, and will continue to work at expanding and 
improving children's health insurance in the meantime, the 
Administration seems set on a course to fight us every step of 
the way.
    By issuing regulations that chip away at critical services, 
CMS is acting in direct opposition to numerous states--
including my own--that are working hard to expand on the 
coverage they currently provide through SCHIP, Medicaid, or a 
combination of both. By tying the hands of states who want to 
help children get access to essential services through its 
draconian regulations, the Bush Administration is preventing 
assistance from reaching families who are truly hurting.
    Given the worsening economic conditions and slow job 
growth, states that are already cash-strapped will soon face 
between 700,000 and 1.1 million additional applicants for their 
SCHIP and or Medicaid programs. This is no time to cut back on 
working families.
    I am glad to be starting the year off with such an 
important and timely hearing. I'd like to thank our witnesses 
for being here and with that, I yield back. Thank you, Mr. 
Chairman.

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