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



 
        COVERING UNINSURED KIDS: REVERSING PROGRESS ALREADY MADE

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


                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 2008

                               __________

                           Serial No. 110-91


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

                           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
    Vice Chairman                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              STEVE BUYER, Indiana
LOIS CAPPS, California               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. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     4
    Prepared statement...........................................     6
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................     9
    Prepared statement...........................................    10
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    11
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................    13
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................    14
Hon. Hilda L. Solis, a Representative in Congress from the State 
  of California, opening statement...............................    15
    Prepared statement...........................................    16
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    17
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, opening statement.................................    18
    Prepared statement...........................................    18
Hon. Darlene Hooley, a Representative in Congress from the State 
  of Oregon, opening statement...................................    19
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................    20
Hon. Edolphus Towns, a Representative in Congress from the State 
  of New York, prepared statement................................    73

                               Witnesses

Chris Gregoire, governor of Washington...........................    20
    Prepared statement...........................................    25
Haley Barbour, governor of Mississippi...........................    39
    Prepared statement...........................................    40
Deval L. Patrick, governor of Massachusetts......................    42
    Prepared statement...........................................    45
Sonny Perdue, governor of Georgia................................    47
    Prepared statement...........................................    50
Ted Strickland, governor of Ohio.................................    51
    Prepared statement...........................................    53

                           Submitted Material

Letter of September 17, 2007 from United States Governors to 
  Secretary Leavitt..............................................    74
.................................................................


        COVERING UNINSURED KIDS: REVERSING PROGRESS ALREADY MADE

                              ----------                              


                       TUESDAY, FEBRUARY 26, 2008

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:40 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Frank 
Pallone, Jr. (chairman of the subcommittee) presiding.
    Members present: Representatives Pallone, Waxman, Towns, 
Gordon, Eshoo, Green, DeGette, Capps, Schakowsky, Solis, 
Hooley, Matheson, Inslee, Markey, Dingell (ex officio), Deal, 
Wilson, Shadegg, Burgess, Blackburn and Barton (ex officio).
    Staff present: Bridgett Taylor, Chief Health Finance Policy 
Advisor; Amy Hall, Professional Staff Member; Yvette Fontenot, 
Professional Staff Member; Hasan Sarsour, Legislative Clerk; 
Jodi Seth, Communications Director; Brin Frazier, Deputy 
Communications Director; Lauren Bloomberg, Press Assistant; 
Megan Mann, Staff Assistant; Ryan Long, Minority Chief Counsel; 
Brandon Clark, Minority Professional Staff Member; and Chad 
Grant, Minority Legislative Clerk.

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

    Mr. Pallone. The subcommittee is called to order.
    The subcommittee is meeting today to discuss the reversal 
of progress made on covering uninsured children in America, and 
I will yield to myself for an opening statement initially.
    First I want to welcome our illustrious panel here today. 
We have of course Governor Strickland, who was a member of this 
subcommittee and this Committee for many years. He used to sit 
with myself and Sherrod Brown, who is now our Senator from Ohio 
as well. So thank you in particular and thank all of you for 
being here today.
    Last year should have been a landmark year for children's 
health. Within our reach was the opportunity to build upon the 
success of the previous 10 years in which millions of low-
income children were provided access to healthcare coverage 
through the Children's Health Insurance Program, or CHIP. We 
sought to exceed that achievement by providing States with the 
resources they needed to maintain current enrollment as well as 
expand enrollment by 4 million additional children who are 
presently eligible but don't participate. In spite of our 
extensive efforts to develop bipartisan bicameral legislation, 
that opportunity was lost, in my opinion to petty politics and 
ideological warfare waged by a President who has continually 
ignored the needs of hardworking American families. Instead of 
working with Congress to develop a compromise that would build 
CHIP up for future generations, he set out to unilaterally tear 
it down.
    On August 17 of last year, the Administration issued a new 
directive to State CHIP officers that would seriously alter the 
way CHIP currently operates, essentially stripping States of 
the flexibility they have long enjoyed since the program's 
inception. Under the new directive, a State would have to prove 
that it has enrolled 95 percent of its CHIP and Medicaid-
eligible children in families with incomes below 200 percent of 
the federal poverty level before providing coverage above 250 
percent of the federal poverty level. By almost every account, 
there is no State that will be able to meet this requirement, 
and adding insult to injury, research suggests that CMS does 
not even have a methodology to measure State participation 
rates. There are equally egregious new policies imposed on the 
beneficiaries themselves such as a 12-month waiting period for 
a child who loses private coverage before he or she can enroll 
in CHIP, and I still have not found an answer for what that 
child is supposed to do for healthcare during those 12 months.
    There is no doubt that if enforced this new directive would 
seriously constrain States who are trying to provide coverage 
to more kids. We have already seen some of the effects. New 
York planned to expand coverage from 250 to 400 percent of the 
federal poverty line but had its plan denied by CMS. That means 
approximately 47,000 fewer children in New York will have 
access to health coverage as a result of that denial. And while 
the Administration claims it will not expect any effect on 
current enrollees, I believe the policies put forth within that 
August directive could imperil the coverage of thousands of 
children in those States that already cover children above 250 
percent of the federal poverty level.
    Now, in addition to this August 17th directive, this 
Administration has issued a slew of Medicaid regulations that 
seriously jeopardize the healthcare of millions of low-income 
and disabled Americans of all ages. You have already talked 
about that at your governors' conference. What is on the 
chopping block? Funding for rehab services for those with 
disabilities, outreach, enrollment assistance and coordination 
of healthcare services for children with disabilities in school 
settings as well as payments for graduate medical education, 
which is an important revenue source for teaching hospitals 
around the country including in my home State of New Jersey, 
which is in desperate need of these funds to avoid further 
hospital closings. We had a hospital closing announced in my 
district just last Thursday. And most recently, CMS has 
proposed two new rules that would allow States to enroll 
Medicaid beneficiaries into benefit packages that offer fewer 
benefits as well as charge them higher premiums. If allowed to 
go into effect, these regulations would slash billions of 
dollars from State Medicaid programs, shifting costs to States 
at a time when many are strapped for cash. I know this to be 
true in my home State of New Jersey. Our governor couldn't 
appear today because he is delivering his budget address that 
freezes State spending in order to close our budget shortfall. 
If New Jersey starts losing federal dollars for its Medicaid 
and CHIP programs, the State simply will not have enough money 
to make up the difference. Instead, it is more likely that 
enrollment will be curtailed and services will be cut.
    Now, it is clear that the Administration is on the wrong 
side of history here. Everyone but the President seems to be 
working to expand health coverage, especially to our most 
vulnerable citizens. Because of the President's intransigence, 
we were unable to pass a robust CHIP reauthorization last year 
that would have helped move us towards covering all uninsured 
kids. Now he is clearly trying to move backwards from 
longstanding federal commitments by cutting federal dollars 
from our Nation's safety net programs at a time when States are 
talking about using these very programs to build the basis for 
universal coverage. How is a State like California, New Jersey 
or New York supposed to provide universal coverage without the 
Federal Government doing its part to help or how is a State 
like Massachusetts supposed to continue its current endeavor if 
the Administration is going to pull the rug out from under 
them?
    As we see increasing signs that the U.S. economy is 
weakening and heading towards a recession, it is crucial now 
more than ever that we ensure that those hardworking American 
families who are negatively impacted by the economic downturn 
have a safety net to fall upon, and that is why myself, 
Chairman Dingell, Representatives Peter King and Tom Reynolds 
introduced H.R. 5268, legislation that would help protect 
access to health coverage through Medicaid during the economic 
downturn. It provides a temporary increase of the Federal 
Medical Assistance Percentage, or FMAP. During a time when the 
outlook for so many American families seems uncertain, we 
should be promoting policies with programs that provide States 
and beneficiaries with the relief they need. Temporarily 
increasing the federal matching payments in Medicaid is a 
proven strategy for stimulating the economy. Slashing billions 
of dollars from Medicaid through administrative fiat is not.
    Now, we are going to hear from all of you today. I want to 
thank you all for being here. We are anxious to hear your 
testimony. I mentioned Ted Strickland, and we realize that you 
are taking time beyond the Governors' conference to be here 
today and we certainly appreciate that.
    Mr. Pallone. I now recognize our ranking member, Mr. Deal, 
for an opening statement.

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

    Mr. Deal. Thank you, Mr. Chairman. I thank you for holding 
this hearing on an important topic as we revisit the 
reauthorization of SCHIP and possible reforms to the program. 
We are indeed honored to have such a distinguished panel of 
witnesses, and I want to thank these governors for taking time 
out of their very busy schedules to be with us here today. 
States play a very integral part of making the SCHIP program 
work and your input is certainly appreciated.
    At this point I think we all know that SCHIP was created to 
allow the States to cover targeted low-income children with 
federal matching funds with a capped allotment. Moreover, SCHIP 
has been remarkably successful at achieving its goals. 
Unfortunately, like any new program, there have been some 
abuses. Some States have covered more adults than children. 
Others have focused on covering children who are up the income 
scale while leaving the truly needy children from low-income 
families behind. Still others have failed to discourage 
families from dropping their private health insurance and 
replacing it with a government program.
    It is these abuses which led to the August 17th guidance 
from CMS. I understand that many governors are concerned about 
the impact this guidance will have on their SCHIP programs and 
I am certainly willing to work with governors and my friends on 
the other side of the aisle to address this August 17th letter. 
But before we do so, we must ensure that the abuses within 
SCHIP are addressed so that poor children do come first. With 
reauthorization of SCHIP I believe we could craft a better 
solution than the August letter while addressing the other 
legitimate concerns about the current operation of the program.
    I also hope the governors will take some time to shed light 
on what I believe is a major contradiction we are hearing from 
some governors lately. Recently due to slower economic growth, 
I believe the National Governors Association requested an 
increase in federal matching rate for Medicaid to meet the 
demands Medicaid places on State budgets. In this context, it 
is hard for me to understand how in the case of SCHIP States 
act as if they have ample resources to expand that program. It 
would seem to me that if States cannot afford to meet their 
obligation in Medicaid to the Nation's neediest citizens, they 
would not be able to expand eligibility of SCHIP to higher 
incomes.
    Again, I want to thank each of you for taking time to be 
with us. We look forward to your testimony and welcome you to 
this hearing.
    I yield back.
    Mr. Pallone. Thank you, Mr. Deal.
    I recognize the chairman of the full Committee, Mr. 
Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Mr. Chairman, I thank you for your courtesy 
and I commend you for having this hearing. It will give us an 
opportunity to hear from a number of distinguished governors as 
to perspectives of themselves and their States with regard to 
current issues relating to children's health programs.
    We are delighted to have before us five outstanding 
governors representing different regions and differing 
political perspectives. I want to express my thanks to each of 
you ladies and gentlemen for your presence here and your 
assistance. We know how busy you are and I am grateful to you 
for your kindness in this matter.
    I am also pleased to welcome back a former member of this 
Committee, our good friend, Governor Strickland from Ohio. 
Welcome back. This is a room that you will remember from other 
good days when you served here with such distinction.
    The governors joining us today will provide enormously 
valuable insights into the importance of the State Children's 
Health Insurance Program and Medicaid and the efforts of 
several States to reduce the number of children who do not have 
health insurance. However, storm clouds threaten to undermine 
the progress the States have made in recent years. Over the 
past year, the Administration has taken a number of actions 
directly impeding State coverage efforts not only in SCHIP but 
also in Medicaid. The Administration's August 17th directive 
will affect at least 26 States by this summer, causing the 
States to roll back existing coverage and to stop planned 
expansions. While this directive is couched in rhetoric about 
helping the poorest first, the Administration's own actions 
make it clear that this is not the real intent. If this 
Administration were interested in helping those with the lowest 
incomes, the President would not have vetoed the bipartisan 
Children's Health Insurance Program Reauthorization Act that 
provided new incentives, new tools, bonus payments to make sure 
that the States had the funds to get the job done and the 
assistance of the Federal Government in doing so, and I will 
not mention the $35 million over the next 5 years that would 
have been made available to the States to make sure that they 
had sufficient funds to meet the growing need for SCHIP and for 
its beneficiaries. If the August 17th directive was not enough, 
the President's budget proposes to go one step further, 
stopping the States from covering children in families with 
annual incomes above $35,200.
    As the infomercial would say, wait, there is more. The six 
Medicaid regulations the Administration has issued in the past 
year would cut more than $13 billion from Medicaid. These cuts 
would come from critical services for people with disabilities 
such as rehabilitation and case management services as well as 
from public institutions that serve as a safety net for our 
most vulnerable of our society. In the face of these cuts, many 
States will choose to do the right thing and use State-only 
funding to protect coverage of those in need. But States cannot 
and should not bear this burden alone, and there are many that 
cannot carry the kind of load that the Administration expects 
them to do.
    When both Medicaid and SCHIP were created, the Federal 
Government was a full partner and it should remain so. 
Moreover, with the country facing an economic downturn, it is 
unclear how long States can sustain their commitment if the 
Administration continues to erode federal assistance to the 
States. This Congress will work to ensure and to restore the 
ability of the States to cover uninsured children in need. We 
will press forward with the good policies included in the SCHIP 
reauthorization vetoed by the President twice so that SCHIP is 
fully funded and the States have the resources to meet the 
growing need for coverage and we will work to stop this 
Administration's assault on healthcare coverage for children.
    I look forward to today's witnesses' testimony, and I want 
to thank the governors for their presence here and their 
assistance to us. I look forward to working with them to 
protect SCHIP and the Medicaid programs and to assist them in 
their difficult labors in this matter.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Dingell follows:]

                   Statement of Hon. John D. Dingell

    I thank Chairman Pallone for calling this hearing to 
provide the opportunity for the Committee to hear State 
perspectives on current issues relating to children's health 
programs.
    We are pleased to have before us today five Governors 
representing different regions and political perspectives. I am 
especially pleased to welcome back a former member of this 
committee, Governor Strickland from Ohio.
    The Governors joining us today will provide valuable 
insights into the importance of the State Children's Health 
Insurance Program (SCHIP) and Medicaid, and the efforts of 
their States to reduce the number of children who do not have 
health insurance.
    However, storm clouds threaten to undermine the progress 
that States have made in recent years. The Administration has 
taken a number of actions over the last year that directly 
impede State coverage efforts.
    The Administration's ``August 17th directive'' will affect 
at least 26 states by this summer, causing States to roll back 
existing coverage and stop planned expansions.
    While this directive is couched in rhetoric about helping 
the poorest first, the Administration's own actions make clear 
that is not its real intent. If this Administration were 
interested in helping those with the lowest income, the 
President would not have vetoed the bipartisan Children's 
Health Insurance Program Reauthorization Act (CHIPRA) that 
provided new incentives, tools, and bonus payments to make sure 
States got the job done--not to mention $35 billion over the 
next 5 years to make sure that States had sufficient funding to 
meet the growing need for SCHIP.
    And, if the August 17th directive wasn't enough, the 
President's budget proposes to go one step further, stopping 
States from covering children in families with annual incomes 
above $35,200.
    As the infomercial would say, wait: there's more. The six 
Medicaid regulations the Administration has issued in the past 
year would cut more than $13 billion from Medicaid. These cuts 
would come from critical services for people with disabilities, 
such as rehabilitation and case management services, as well as 
from public institutions that serve as the safety net for the 
most vulnerable of our society.
    In the face of these cuts, many States will choose to do 
the right thing, and use State-only funding to protect coverage 
for those in need. But, States cannot--and should not--bear 
this burden alone.
    When both Medicaid and SCHIP were created, the Federal 
Government was a full partner, and it should remain so.
    Moreover, with the country facing an economic downturn, it 
is unclear how long States can sustain their commitment if the 
Administration continues to erode Federal assistance to States.
    This Congress will work to restore the ability of States to 
cover uninsured children in need. We will press forward with 
the good policies included in the SCHIP reauthorization vetoed 
by the President twice so that SCHIP is fully funded and States 
have the resources to meet the growing need for coverage. And 
we will work to stop this Administration's assault on health 
coverage for children.
    I look forward to the testimony of today's witnesses and to 
working with the Governors to protect SCHIP and Medicaid 
programs.
                              ----------                              

    Mr. Pallone. Thank you, Chairman Dingell.
    I recognize the gentlewoman from Tennessee, Ms. Blackburn.

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

    Ms. Blackburn. Thank you, Mr. Chairman, and I want to 
welcome all of our governors who are here to talk with us about 
this. I appreciate that you would take the time away from your 
duties to be here and talk with us about SCHIP. It is an 
important program to us and I certainly support SCHIP as it was 
originally created and support the goals of that program. 
Indeed, they are good goals. It is a worthy program and it 
fills such a need in our country.
    This hearing and what we are going to talk about today is 
responsible guidance from CMS requiring States to ensure that 
SCHIP funds are targeted toward the low-income children before 
States spend money to expand coverage to wealthier populations 
and I appreciate the good government effort put forth by CMS to 
ensure that States cover 95 percent of their eligible low-
income children first and reach those children first. In 
addition, we will also talk about procedures to address crowd-
out.
    Now, I come from Tennessee and we know a lot about crowd-
out in Tennessee and we have a lot of experience in government 
taking over a majority of the healthcare market. We have seen 
it in our State with the TennCare program. I am certain some of 
you are aware of this and are aware of the TennCare program 
that we have had. So we know what happens when government 
overextends itself and when promises are made that cannot be 
kept or that are very difficult to be kept and the burden that 
this places on our citizens, so we are interested to hear what 
you have to say. We are interested in hearing how we address 
these issues, how we meet the needs of this population before 
we take any other steps, and we are looking forward to all the 
information that you will bring forward to us as we address the 
issues that we have with funding and with the budget and with 
other proposals that will come before us as we proceed through 
the years.
    So welcome. We appreciate your taking the time to be with 
us, and Mr. Chairman, I yield back the balance of my time.
    Mr. Pallone. Thank you.
    I now recognize the gentleman from California, Mr. Waxman.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. I want to 
welcome the Governors here as well. I want to thank my 
colleagues for allowing me to give an opening statement early 
because I have to run to chair my own hearing, so I won't be 
here to hear all of your testimony. But I think it is important 
we hold this hearing and I thank Chairman Pallone for convening 
us.
    We need to look at a number of Medicaid issues. I know that 
a lot of the discussion this morning will be on the August 17th 
CMS letter, which as a practical matter eliminates State 
flexibility to extend SCHIP coverage to children in families 
with income above 250 percent of the federal poverty level. In 
my view, this policy doesn't make any sense. It doesn't have 
any basis in statute. This is clearly the province of the 
Congress, not the Executive Branch, and I will continue to work 
with my colleagues on both sides of the aisle to bar CMS from 
implementing this misguided and mean-spirited directive.
    But I hope that in addition to the August 17th letter, we 
will also hear from the Governors about the State-specific 
impact on the Medicaid regulations CMS issued last year 
affecting payments to government providers, payments for 
graduate medical education, provider taxes and coverage for 
outpatient hospital services, rehabilitative services, case 
management services and school administrative and 
transportation costs. The Federal Government is issuing 
regulations saying we know how better to handle all those 
things, we are not going to let the States decide these 
matters, we are going to tell you what to do.
    Last November the Oversight Committee asked Mr. Smith, the 
principal author of these regulations, for a State-by-State 
analysis of their impact. Well, as the governors well 
understand, there are very great differences between States and 
the impact would differ from State to State. We asked for the 
impact, and last Friday we finally got a response from Mr. 
Smith.
    Here is what he wrote: ``With respect to your second 
request concerning State-specific impact analysis, I regret 
that we are unable to develop and report this information. 
While we share your interest in having State-specific impacts, 
it is not possible at this time to generate accurate 
assessments due to a variety of deficiencies in data collection 
including variation in State reporting, changes in State 
funding practices, current available data sources, information 
systems and resource levels.''
    Well, this is a pretty breathtaking response. The federal 
official in charge of Medicaid who has issued seven regulations 
that will reduce federal payments to the States by at least $15 
billion over the next 5 years cannot tell us how any of these 
new policies will affect individual States.
    Fortunately, we have the five of you here today to help us 
understand better what the effect of these regulations will be 
on coverage of low-income children. Will the regulations 
denying Medicaid payments to schools for outreach and 
enrollment activities result in a decline in Medicaid and SCHIP 
enrollment? Will the regulation narrowing Medicaid coverage for 
rehabilitative services result in the defunding of early 
childhood development programs for children from birth to 3? 
Will the cumulative loss of federal matching funds from all 
these regulations in a time of an economic downturn undercut 
the ability of States to finance their share of health coverage 
for children under Medicaid and SCHIP?
    I hope the hearing can shed some State-specific light on 
these issues. This is a federal-State cooperative program and 
your federal partner is telling you we don't know what the 
impact will be on you. Maybe you can tell us what the impact 
will be before we allow these regulations to take effect.
    Thank you. I yield back the balance of my time.
    Mr. Pallone. Thank you, Mr. Waxman.
    Mr. Burgess of Texas.
    Mr. Burgess. Thank you, Mr. Chairman. It is an important 
hearing. In the interests of time, I am going to submit my 
opening statement for the record.
    I just want to thank all of our witnesses for being here 
today. I do feel obligated to let you know there is a competing 
subcommittee hearing on food safety, and with all the attention 
that has been on food safety recently, it is not for lack of 
attention or for lack of desire that I have to divide my time 
between two subcommittees. I wish the subcommittees would work 
together in a better fashion so that we didn't have these 
problems occur but such is life on this side of the dais.
    Mr. Chairman, I would say this is an extremely important 
hearing and we are going to get some great information today. I 
am so pleased as we go through the process this year. I wish we 
have seen so this type of effort and attention last year when 
it was incumbent upon us to do the work of reauthorization of 
the State Children's Health Insurance Program. I hope that as 
we go forward, the importance of this subcommittee will be 
recognized. I realize process arguments aren't the kinds of 
things of which headlines are made and I am not supposed to 
talk about process, but in this subcommittee, process is 
important. I said it before and I will say it again: Some of 
the best legislative and scientific minds in the United States 
Congress, in the United States House of Representatives today 
are on this Committee, and Mr. Strickland, they were last year 
as well, but it is imperative that this committee weigh in on 
this important subject and we don't need a bill cut from whole 
cloth from the Speaker's office, air dropped into the full 
committee in the middle of the night. That is not the way to do 
it.
    Mr. Chairman, I hope you will take your leadership and make 
certain that this subcommittee is able to do its work through 
the legislative hearings and the legislative markup that this 
subcommittee is supposed to conduct to get this vital 
legislation passed for the American people, and I will yield 
back.
    Mr. Pallone. Thank you.
    I now recognize the gentlewoman from California, Ms. Eshoo.

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

    Ms. Eshoo. Thank you, Mr. Chairman, for holding today's 
hearing about healthcare for uninsured children in our country. 
Welcome to the governors and certainly to our colleague and our 
friend, always will be. You are an honorary member of this 
Committee, the full Committee and the House, Governor 
Strickland.
    In the last several weeks the subcommittee has had much 
testimony from State Medicaid officials, from parents, from 
academics, from policy experts who testified about how we are 
losing ground in covering uninsured children in our country, so 
your presence here today is very important to 45 other States 
whose governors can't be here today. This is, I think, one of 
the better partnerships that the State and the Federal 
Government have for the children of our country, so your 
testimony is going to be really important to us.
    With the economy on the verge of recession, many States 
including my home State of California are facing deep budget 
shortfalls. I think I am probably preaching to the choir when I 
say that to you, but it is a tough time, and families obviously 
are very concerned about their jobs and their healthcare 
coverage. Rather than providing security to these families the 
Administration diminished its commitment to low-income children 
by vetoing the expansion of SCHIP which would have covered an 
additional 4 million uninsured kids in our country. We thought 
that that was making progress, which I think is synonymous with 
being an American, that that really signified real progress.
    Now this is on the ropes but what has been added to the 
ropes is what the Administration came out with in their August 
17th memo. Now, there are 43 governors of both parties that 
endorsed the legislation, so it was neither a partisan bill nor 
a bill that didn't enjoy important support from governors 
across the country. Among other things, the Administration's 
August 17th directive for SCHIP enrollment set nearly 
impossible goals for States to achieve before they can expand 
their program to cover uninsured kids and families earning up 
to $43,000 a year. Thousands of uninsured kids in States that 
plan to expand their programs have already seen this avenue to 
healthcare coverage closed as a result of the directive. Other 
States which already expanded have to come into compliance by 
this summer in order to maintain their plans, otherwise they 
are going to be forced to scale back the programs. Obviously as 
a result, it is more likely that we are going to see more 
children without healthcare and I think that is why several 
States, including Washington State, are suing over the 
directive. That is a major step for a State to take, to sue 
over this. Further undermining the program, the 
Administration's 2009 budget failed to propose funding 
sufficient to cover existing enrollment, so it is adding insult 
to injury.
    In a letter to Oversight and Government Reform Committee 
Chairman Waxman, the Chief Deputy Director for the Health 
Programs for California wrote, ``The reductions in federal 
funding as a result of regulatory proposals are likely to lead 
to destabilization of an already fragile healthcare safety net 
system in California which bears a heavy burden in rendering 
needed healthcare services to Medicaid beneficiaries and the 
uninsured.'' I think if we had children here testifying in the 
next panel, that a child might say what did I do to you, what 
did I do to you that you are doing this to us. In one of the 
issues relative to the guidance that was put out, it bars 
children from enrolling in the program until they have been 
without insurance for a full year, and as one of my colleagues 
said, and much sicker.
    So Mr. Chairman, thank for you having the series of 
hearings. Thank you to the governors that are here today. You 
have tough jobs in tough atmospheres today, and we want to work 
with you to see that your hand can guide what your State 
chooses to do and that the Federal Government will be a fair 
and full partner in that. Thank you.
    [The prepared statement of Ms. Eshoo follows:]

                    Statement of Hon. Anna G. Eshoo

    Thank you, Mr. Chairman, for holding today's hearing about 
health care for uninsured children in our country.
    In the last several weeks, the Subcommittee has heard 
testimony from state Medicaid officials, academics, policy 
experts and parents who have testified about how we're losing 
ground in covering uninsured kids. I'm pleased that we'll be 
hearing the perspective of five of our nation's governors 
today, including our former colleague, Ted Strickland.
    With the economy on the verge of recession, many states, 
including my home state of California, are facing steep budget 
shortfalls. Families are concerned about their jobs and their 
healthcare coverage. Rather than providing security to these 
families, the Administration diminished its commitment to low-
income children by vetoing the expansion of the SCHIP which 
would have covered an additional 4 million uninsured kids. This 
was not a partisan or unreasonable bill: 43 of our nation's 
governors from both parties, including Governor Schwarzenegger, 
supported this legislation.
    More than rejecting this opportunity to broaden coverage, 
the Administration has pushed forward a series of new rules and 
policy directives that are already reducing children's access 
to health care.
    Among other things, the Administration's August 17, 2007, 
directive for SCHIP enrollment set nearly impossible goals for 
states to achieve before they can expand their programs to 
cover uninsured kids in families earning up to $43,000 a year. 
Thousands of uninsured kids in states that planned to expand 
their programs have already seen this avenue to health care 
coverage closed as a result of this directive. Other states 
which already expanded their programs, must come into 
compliance by this summer in order to maintain their programs, 
otherwise, they may be forced to scale back their programs. As 
a result, we're likely to see more children without healthcare. 
That's why several states including Washington State are suing 
over the directive.
    Further undermining SCHIP, the Administration in its Fiscal 
Year 2009 budget failed to propose funding sufficient to cover 
existing enrollment.
    The Administration has advanced six regulations that scale 
back Medicaid funding by $13 billion. Although many of these 
cuts have been temporarily set-aside by congressional 
moratoria, the moratoria will be expiring over the next few 
months. The implementation comes at worst time for states as 
they struggle to balance budgets in the face of cumulative 
budget deficits of more than $34 billion this year.
    In a letter to Oversight and Government Reform Committee 
Chairman Waxman, the Chief Deputy Director for the Health 
Programs for the State of California wrote, ``The reductions in 
federal funding [as a result of CMS's regulatory proposals] are 
likely to lead to destabilization of an already fragile health 
care safety-net system in California, which bears a heavy 
burden in rendering needed health care services to Medicaid 
beneficiaries and the uninsured.''
    I don't envy our governors for the position they are being 
put in. Most of all, the children of our country deserve so 
much better.
                              ----------                              

    Mr. Pallone. Thank you.
    I recognize the ranking member of the full committee, Mr. 
Barton.

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

    Mr. Barton. Thank you, Mr. Chairman.
    I want to welcome our governors, especially Governor 
Strickland. It is unusual to see you sitting down there. I am 
used to having you up here. Of course, I kind of liked it when 
you called me Mr. Chairman. It is obvious that you are doing a 
great job for the great State of Ohio, and of course, our good 
friend Haley Barbour, who is no stranger to this committee, and 
the other governors also. We are very delighted that you are 
here.
    I do want to thank Chairman Pallone for holding the 
hearing. I know that the focus theoretically on the hearing is 
on CMS's August 17th guidance letter, and I think that it is 
fair to have an open and vigorous debate about that, but I hope 
we can also get into some of the broader issues that deal with 
SCHIP and Medicaid, the component program with SCHIP. Several 
years ago we had in budget reconciliation a major review of 
Medicaid. We worked with the National Governors Association on 
a bipartisan basis. The two governors that led the taskforce 
were Governor Warner, a Democrat of Virginia, and believe it or 
not, Governor Huckabee, a Republican from Arkansas. They 
testified before this Committee several times, and Governor 
Warner on the record, and I quote, talked about Medicaid 
``being on the road to meltdown.'' I couldn't agree more with 
that statement that Governor Warner made several years ago.
    According to our latest CBO estimates, in the next 10 years 
Medicaid is going to spend $5.4 trillion--that is about a half 
a trillion dollars per year--and of that, the States are 
responsible for over $2 trillion, and I am sure that each of 
you governors is very well aware of that. It is an open 
question how we can afford on this one program, a State-federal 
program of Medicaid, to spend that much money and have all the 
other programs that each of you so well know your States work 
with the Federal Government to provide services and help to our 
less wealthy individuals at the State level.
    Last year the former chairman of the subcommittee Deal and 
I put forward an SCHIP proposal that would have required that 
before States could go above 200 percent of poverty, they had 
to show 90 percent enrollment of their children between 100 and 
200 percent of poverty. That is a little bit different than the 
guidance letter of 95 percent but it is close to it. It seems 
to me only fair before we go above the original intent of SCHIP 
in terms of enrollment of children at higher income levels, we 
really, really ought to try to get as many of our moderate low-
income children in the program as is possible. It just doesn't 
seem fair that proposal that the Majority put on the Floor back 
in August would have let States go up to 400 percent of 
poverty, which would be over $80,000 per family and also cover 
adults. I just think that we should cover children first and of 
those we should cover the low-income children between 100 and 
200 percent of poverty.
    I know I am going to be stunned if each of you don't talk 
about State flexibility. I didn't reach your statements but I 
chaired enough of these things and I know enough about a 
governor, or governors, generically, that you all want State 
flexibility. That is why people like me support block grant 
programs so that we give you the flexibility to manage the 
programs at the State level that you think is best for your 
State. So I don't have a problem with requiring flexibility for 
SCHIP, but again, I think the basic guidepost should be, let us 
cover our moderately low-income children first.
    I do appreciate you all being here, and I appreciate Mr. 
Pallone and Mr. Dingell for holding the hearing. I was one of 
the most vociferous objectors last year that we were 
legislating on the Floor without having hearings in committee, 
and I know there is a political element to this and there will 
be great gnashing of teeth and beating of breast and things 
like that as we go through today, but I do hope that we do 
focus on the policy underlying SCHIP, which is a State-federal 
partnership and it is designed to cover children between 100 
and 200 percent of poverty.
    I thank each of you governors for being here. I have 
another hearing going on in the Oversight Subcommittee so I am 
going to be shuttling back and forth, but I will try to listen 
to as much of your testimony as possible.
    Thank you, Mr. Pallone.
    Mr. Pallone. Thank you, Mr. Barton.
    The gentlewoman from California, Ms. Capps.

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

    Ms. Capps. Thank you, Chairman Pallone.
    I am very much looking forward to hearing the particular 
perspectives of our esteemed witnesses today. Of course, I am 
going to add my congratulations and welcome back to our former 
colleague, Governor Strickland from Ohio, and really commend 
the five of you for taking the time from your very busy 
schedules to give us the perspective from the ground troops in 
your States, from the people who really see the issues we are 
discussing today face to face and know the families and know 
the people we are talking about. You are the ones struggling to 
cope with some very traumatic setbacks that the Bush 
Administration has proposed for SCHIP and Medicaid. I commend 
the National Governors Association for rightly standing up 
against these misguided rules and I am pleased to see attention 
drawn to your concerns on the front page of this past Sunday's 
New York Times. I think it is interesting to note that many of 
the prominent Republican governors are the loudest objectors.
    Governor Perdue, we shook hands a few minutes ago and I 
want to put a quote into my statement from your commissioner of 
the Georgia Department of Community Health, Dr. Meadows. She 
said this: ``These rules taken together would have a tremendous 
adverse impact. They would undermine the healthcare safety net 
for the entire State of Georgia.'' But Georgia is not the only 
one. Our own governor, those of us from California, Arnold 
Schwarzenegger, has estimated $12 billion in losses to 
California alone.
    When we talk about these numbers, however, I think we lose 
sight of what these numbers really mean. The money isn't being 
taken away from Governor Schwarzenegger, his pockets or mine or 
yours. These are billions of dollars which represent lost 
services to our Nation's neediest families, to the children who 
will live lives compromised because of this lack of service. 
How insulting at the very time that we are experiencing an 
economic downturn when basically what the Bush Administration 
now has said through the SCHIP and Medicaid proposed rules is 
this: sorry, States, but we are reneging on the commitment we 
have made to work as partners in order to serve the needy 
families. What is also disturbing to me is the effect that this 
will have on public hospitals which are the backbone and the 
safety net in your communities, when they are being asked, when 
we rely on them. As President Bush has said, well, you can 
always go to the emergency room. They are going to be strapped 
for funds if we follow through with these rules and the 
hospitals they operate, we are going to see a domino effect as 
you know from where they will have to cut services in these 
very emergency rooms, in the trauma units and all of the 
services that your public demands and needs.
    So I look forward to hearing from you today, and I look 
forward to a thoughtful discussion that we can have on how 
important it is we prevent these harmful rules from going into 
effect.
    I yield back.
    Mr. Pallone. Thank you.
    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 I thank you for 
holding this hearing. It is extremely important that we examine 
this issue.
    I would like everybody to take one step back from the 
discussion of the SCHIP program and look at the broader issue 
of healthcare for Americans. I want to thank our witnesses. I 
think they are important players in this discussion and what we 
do. I would like to put my written statement into the record.
    But in asking you to step back, I would like to ask you to 
not think about what role in this debate you play, whether you 
are a governor who would control some of those funds and run a 
program or whether you are a Congressman and would enact what 
we pass into law, but rather think about it from the standpoint 
of the patient. In this case, think about it in the standpoint 
of the child and of the child's parents. I would suggest we are 
at a watershed in healthcare in America. I would suggest that 
anyone who examines healthcare in America today will find very 
rapidly that one of the biggest problems we face is that the 
consumer of the healthcare product, the individual who is 
treated, is not put into a position to make decisions. If you 
examine healthcare in America today, too many decisions are 
made by third parties. They are made by your employer, they are 
made by the plan that your employer hired and they are made by 
the doctor that the plan hired by your employer. And so you 
don't get to make those decisions because your healthcare plan 
was picked by your employer, or in the case of government 
healthcare programs, you don't get to make the decisions 
because some bureaucrat made those decisions. I would argue 
that we have a crisis in the delivery of healthcare in America 
today because we are not putting the people who know the most, 
the consumer of the goods, in a position to make a decision.
    I have introduced a bill every single year that I have been 
in this Congress since 1995 which would change that, which 
would say let us let individuals choose, let us say to an 
employer, you can buy a plan for your employees but you should 
also tell some of those employees that they have the right to 
go pick their own plan. I would suggest to you that with SCHIP, 
we can offer to the parents of the kids who need help a 
refundable tax credit, a block of money, and say to them, take 
this money and go buy health insurance coverage that meets your 
needs, a healthcare plan that you choose for your children, a 
healthcare plan that you pick with the doctors you like, and if 
you do not like how it performs, you can fire that plan. If you 
are not pleased with the way the doctors or the nurses or the 
labs or the hospitals treat you, you can get rid of that plan 
and do something else. We can do that. The bill I have proposed 
every year says we are going to give you a refundable tax 
credit to every single American. It would cover every single 
child in America and every single child in SCHIP and we can 
afford it because we are already spending that money in 
emergency rooms and in other clinics but the issue for America 
is, are we going to move toward more third-party control by 
employers or plans or the government or are we going to move 
toward patient-driven care?
    I would suggest that this is the discussion we should be 
having, and I personally believe that if you put patients in 
charge of their own healthcare, then not only will costs come 
down because consumers buy the most efficient care they can 
afford but quality will go up, because if patients can fire a 
doctor that isn't doing a good job for them or a plan that 
isn't doing a good job for them or a lab that didn't get the 
answer back quick enough, if patients can hold the deliverer of 
that service to them accountable, then you will get better 
quality as well as lower prices, and I think that is what we 
ought to be talking about. That is the healthcare plan that as 
a Republican I favor and it ought to be funded by the 
government for everybody who can't get that care. I pushed it 
every year since I got here. It has largely been adopted by 
John McCain in his proposal, and I think we need to start 
looking at something broader than one more little program for 
one more little niche group that needs help, and we can help 
all Americans and certainly we can help all American children.
    I thank the gentleman, and I yield back.
    Mr. Pallone. Thank you.
    I recognize the gentlewoman from California, Ms. Solis.

 OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Solis. Good morning, Mr. Chairman and to our witnesses, 
a very prestigious panel.
    I happen to have a different take on what is occurring and 
what is being presented to us. I don't believe that the 
President is being very--how can I say--satisfactory, in my 
opinion, in his treatment of children. In fact, I think that 
his proposals that he is presenting are misguided. In my State 
of California, we are seeing that 6.7 million individuals who 
are currently on Medicaid may be affected by these proposals 
that he plans to implement. And in a district like mine in East 
Los Angeles and the San Gabriel Valley where 70 percent of the 
population are minorities, we have a very vast number of young 
children under the age of 6 that are currently not even 
enrolled in any form of healthcare coverage.
    So I ask who is to care for our children? Who is to speak 
up for them? And last year, yes, we did discuss and debate a 
proposal that I was very much in favor of, the CHAMP Act, which 
I believe would have helped extend care to these vulnerable 
children in my district. Currently right now in my district, 
the SCHIP program serves 19,000 children. But 18,000 children 
in my district are still left without any form of healthcare. 
Look at those numbers. Those are things that I think the 
American public really wants to see us discuss. I believe that 
we should respect States' rights in the administration of these 
programs because there has to be flexibility provided for each 
States' goals and objectives. The goals of California may be 
very different from the goals of Washington State and Ohio. 
California certainly has its challenges, and I think that CMS' 
proposals are very cruel. I don't think that it is fair to 
punish children or individuals who are disabled. I don't think 
it is fair to punish children who are just starting out in 
their lives. We are trying to couple education with health. I 
would hope that the expansion of the SCHIP program and Medicare 
programs will continue to grow. In a district like mine that is 
part of the L.A. Unified School District, which is the second 
largest school district in the country, we face many 
challenges. It is disheartening for many of us to have to go 
home and say that while we continue to try to speak up on 
behalf of our constituents, that somehow the President and his 
Administration don't think that it is appropriate to provide 
coverage for these vulnerable populations.
    And in California, I would like to say we are a bit 
progressive. We like to provide incentives so that we can do 
more outreach to many of these vulnerable populations, but I 
see that my governor, Arnold Schwarzenegger, has his hands 
tied. He can't expand outreach. He can't reach the vulnerable 
populations that need assistance. So while yes, we want to 
provide coverage to all low income individuals, we don't even 
have half of the individuals in my own district currently 
enrolled, and I am sorry to say that more are going to be left 
out.
    I will submit my statement for the record and really want 
to hear from our governors here because I think we should find 
a solution. I think we should put families and children first, 
and especially those that are disabled and need our assistance. 
I think that is what I was voted into office to do. I look 
forward to hearing your statements.
    Thank you, and I yield back.
    [The prepared statement of Ms. Solis follows:]

                    Statement of Hon. Hilda L. Solis

    Mr. Chairman, thank you for convening this hearing today.
    Children face many barriers to health care.
    Yet rather than increase coverage, President Bush continues 
to issue misguided policies that will result in more uninsured 
children and individuals with disabilities and overall 
reduction of access to care for vulnerable individuals enrolled 
in Medicaid.
    CMS' ill-advised rules affect 6.7 million individuals in 
California's Medicaid program alone.
    More than 170,000 individuals in my district are Medi-Cal 
beneficiaries and in East LA alone, at least 1 of every 4 
persons received health coverage through the Medi-Cal program.
    Despite Healthy Families (SCHIP in California), which 
serves more than 19,000 children in my district, 18,000 
children are still uninsured!
    CMS' regulations will reverse any progress that we have 
made and almost ensure these children and vulnerable 
populations do not receive care.
    This is particularly troublesome for communities of color.
    69% of Medi-Cal beneficiaries in my district are Latino and 
another 18% are Asian.
    Congress must protect Medicaid and SCHIP.
    We must also do better for children who are eligible for 
public programs.
    7 in 10 uninsured Latino children are eligible for public 
programs such as Medi-Cal and Healthy Families, but language 
and cultural barriers may delay or block enrollment.
    We must increase outreach and enrollment efforts, and one 
way to do this is to support community health workers, also 
known as promotoras.
    They work in all communities and provide a wide array of 
services, such as health education, advocacy, and enrollment in 
health insurance programs.
    However, the Administration is taking away funding for 
outreach and enrollment.
    The Los Angeles Unified School District will likely lose at 
least $7 million in funding for outreach and enrollment 
activities and referral to Medi-Cal eligible services.
    That is why my colleagues from the Congressional Hispanic 
Caucus and I sent a letter to the Administration on September 
25, 2007 urging CMS to reconsider its August 17th directive.
    We must also protect our safety-net hospitals and providers 
from CMS' cuts.
    They provide essential care to individuals who have few 
options and train our future health professionals.
    Unfortunately, with its regulations and directives, CMS is 
denying the wishes of states and barring families from health 
care.
    I look forward to addressing these issues and to improving 
the health of our children, individuals with disabilities, 
their families, and our communities.
                              ----------                              

    Mr. Pallone. Thank you.
    The gentlewoman from Colorado, Ms. DeGette.

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

    Ms. DeGette. Thank you, Mr. Chairman. I want to add to the 
many plaudits being heaped on our former colleague and my 
former seatmate, Governor Strickland, who was sitting next to 
me in 1997 when we passed the first SCHIP bill out of this 
Committee, and at that time the SCHIP bill was really a 
bipartisan effort. We had President Clinton in the White House. 
We had Newt Gingrich as Speaker of the House. And the SCHIP 
bill was really an effort to help the States find state-based 
solutions to insuring children who were just above the level of 
poverty.
    So imagine my surprise last year when we went to 
reauthorize the SCHIP program and it suddenly became a big 
political football with the White House and the Congress. 
Because in truth, the State-based solutions that we enacted in 
1997 were solutions that worked for many years and all we 
really needed was a way to improve on the efficiency of the 
system and to give the States more resources so they could 
target those kids who needed it.
    All of these horror stories that we heard about when we 
were doing the reauthorization were things that were mainly 
waivers that had been instituted by the Bush White House to 
allow States to cover these children.
    And so we were really dismayed, everybody has talked about 
it, about this August 17th directive that limited States' 
ability to cover children in families above 250 percent of the 
federal poverty level, and you know, right now in Colorado we 
don't cover children above this level but I talked to some 
people about States that have a higher cost of living, like the 
Chairman's state, New Jersey, where in New Jersey and New York 
a family of four can often pay up to $20,000 in insurance 
premiums. So you tell me, if you have a family that is making 
$40,000, which is 250 percent of poverty, and they are paying 
half of that in insurance premiums, what choice are they going 
to make? The choice they are going to make is to go without 
insurance because they can't afford housing, food and 
insurance.
    That is why we have to give the States flexibility on SCHIP 
and that is why in any reauthorization we need to make sure 
that we balance that. We don't want to be insuring rich 
children. Their parents should pay for their insurance. But we 
do need to make sure that of the 9 million kids in this country 
who are eligible for SCHIP right now under the current rules 
that we can cover all those kids because it is just like 
Congresswoman Eshoo said, how can I as a Member of Congress 
take two children who are in the same economic situation and 
play God and say you get health insurance, you get well baby 
insurance but you have to go to the emergency room. It is 
unconscionable and we should not be doing this as the greatest 
country in the world.
    Mr. Pallone. Thank you.
    I recognize the gentlewoman from Illinois, Ms. Schakowsky.

 OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman, and I too want to 
welcome all of our governors here today. Governor Strickland, 
you know how these opening statements go. I am going to make 
mine as short as possible and speak on behalf of, although not 
authorized by my governor in Illinois, where we have a strong 
SCHIP and Medicaid program and he has fought to improve 
coverage in our State by increasing our income threshold and 
making healthcare affordable to every child in the State 
through his program. It covers immunizations and doctor visits 
and many other health services such as hospital stays and 
prescription drugs and vision care and dental care and 
important devices such as eyeglasses and asthma inhalers.
    We have a really good program in Illinois. We are proud 
that we have so many children that are covered but its future 
is now threatened by these cruel and shortsighted regulations 
that will affect the health of thousands and thousands of 
Illinois children, and that is just the fact of this August 
17th directive. It will force many, many children in our 
country to lose access to healthcare and undo State programs. 
That is just the fact of the matter. Under this directive, it 
is unbelievable to me that States would be required to let 
children who lose private coverage languish for an entire year 
before accessing public coverage. It would require States to 
cover 95 percent of children from families under 250 percent of 
the poverty level before meeting the needs of other children, 
and that may sound good on paper but actually that is a very 
unrealistic goal, and it is going to make it impossible to help 
other children who absolutely need the care.
    And so I really look forward--I have read your testimony 
and I am also involved in this other hearing so I will be in 
and out but I appreciate the suggestions that you made and look 
forward to hearing your testimony.
    Thank you. I yield back. And I would like to put the rest 
of my statement in the record.
    [The prepared statement of Ms. Schakowsky follows:]

                    Statement of Hon. Jan Schakowsky

    Thank you, Mr. Chairman. I also want to thank each of the 
governors for being here today. We appreciate your time and 
your interest in this critical issue.
    All of you know how important it is to provide children 
with quality health coverage and most of your testimonies will 
illustrate just how critical it is that we not undermine the 
State Children's Health Insurance Program. I strongly support 
SCHIP and Medicaid, as does my governor, Rod Blagojevich. He 
has fought to improve coverage in our state by increasing our 
income threshold and making healthcare affordable to every 
child in the state through his All Kids program.
    Governor Blagojevich's All Kids program covers 
immunizations, doctor visits, and many other healthcare 
services such as hospital stays, prescription drugs, vision 
care, dental care, and important devices such as eyeglasses and 
asthma inhalers.
    We have a good program in Illinois but its future is and 
the health of thousands of children are threatened by these 
cruel and short-sighted regulations.
    Yet as we move forward in Illinois, this Administration 
seems bent not just on throwing up barriers but even on undoing 
some of the progress we have made. So now, rather than 
capitalizing on what we've already accomplished, we are 
spending valuable time defending these successful programs 
against the Administration's harmful regulatory cuts.
    The August 17th directive will force children to lose 
access to healthcare and undo State's progress. As we head 
toward recession, families are going to have an even more 
difficult time getting medical care for their children. 
Employer coverage is declining, and premiums and out-of-pocket 
costs are rising. SCHIP and Medicaid are essential for filling 
in the gaps. Under this directive, states would be required to 
let children who lose private coverage languish for an entire 
year before accessing public coverage. It would also require 
states to cover 95% of children from families under 250% of the 
poverty level before meeting the needs of other children--an 
unrealistic goal.
    The Administration claims that their objective is to reach 
the lowest-income children--but let me tell you what would 
truly accomplish that goal: the SCHIP legislation that was sent 
to the President's desk repeatedly--legislation that would have 
rewarded states for increasing their enrollment, not penalized 
them.
    I look forward to confronting these issues and again thank 
our witnesses for being here.
                              ----------                              

    Mr. Pallone. So ordered.
    Ms. Hooley.

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

    Ms. Hooley. Thank you, Mr. Chair, and I thank our 
distinguished guests for being here today, one from a 
neighboring state and the other a member that I served with. 
Welcome to all of you.
    The State Children's Health Insurance Program and Medicare 
and Medicaid play a vital role as a healthcare safety net for 
children and low-income families. As our economy continues to 
appear headed toward a recession, it is more critical than ever 
to ensure that the lifelines of coverage for our most 
vulnerable children continue to provide robust healthcare 
coverage. In Oregon, we have over 115,000 uninsured children. 
This is simply unacceptable in this day and age. Like every 
debate that costs money, it is all about how we want to spend 
our money, what are our priorities. And when I look at 
healthcare for children, it seems to me it has to come to the 
top of our list.
    While a bipartisan coalition of colleagues in the House and 
the Senate passed multiple bills to expand SCHIP to 4 million 
more children, the President and a minority of the House 
blocked that commonsense legislation. Very disappointing. 
Oregonians and Americans across this country deserve better 
than stale, partisan warfare. Instead, the Administration has 
systematically sought to create barriers to coverage often 
defying bipartisan congressional opposition through its use of 
rulemaking authority. State flexibility--and I used to serve in 
the State legislature, I know how important that State 
flexibility is--has been I think a keystone of the success of 
SCHIP.
    I am disappointed that the Center for Medicare and Medicaid 
Services directive severely limits States' ability to expand 
their SCHIP program and reverses gains in covering uninsured 
children already made. The directive establishes unattainable 
requirements for States that wish to cover children with family 
incomes above 250 percent of the federal poverty level. A State 
wishing to do so would have to enroll at least 95 percent of 
all children eligible for Medicaid and SCHIP under 200 percent 
of the federal poverty level. No means-tested programs like 
Medicaid or SCHIP have ever been able to achieve those 
unrealistically high targets. Great goals, just hard to 
achieve.
    Unfortunately, the August 17th directive is only one of the 
problems States face as they fight to keep their children 
covered. The six Medicaid regulations that will cost States 
more than $13 billion over the next 5 years will have an 
equally devastating impact. Limitations on reimbursement for 
public providers and elimination of graduate medical education 
would have a devastating impact on Oregon Health and Science 
University. As Oregon's only medical school, OHSU would be 
forced to scale back its training of the next generation of 
physicians with the cuts to GME and public providers.
    I am also concerned with significant new limitations on 
targeted case management. These services provide critical 
assistance in helping Medicaid beneficiaries meet their 
medical, social and educational needs. The meth epidemic in 
Oregon has produced an increased need for foster care because 
addicts often lose custody of their children. These children 
often face significant psychological trauma and need the types 
of services currently provided by targeted case management. If 
the interim final rule is implemented, these children will not 
receive the services that they so desperately need.
    I look forward to learning more from the governors today 
about how the CMS directive and regulations will impact 
children in their States.
    Thank you, Mr. Chair, for having this committee hearing.
    Mr. Pallone. Thank you.
    The gentleman from Washington, Mr. Inslee.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Thank you. I would like to welcome my current 
governor, Governor Gregoire, and my former roommate, Ted 
Strickland, back to Congress. I have to say it has been kind of 
interesting listening to this lavish praise over my former 
roommate, Governor Strickland. I am sure some of that is 
deserved, at least a portion, but I am proud that Ted has been 
a great governor of the State of Ohio. Ted, we really have 
enjoyed seeing you helping your folks in Ohio. We are proud of 
you.
    Governor Gregoire, I want to thank you for coming here to 
continue your long career in children's health starting with 
your efforts to prevent kids from being addicted to tobacco and 
your great work as an attorney general, and now I want you to 
know we are going to continue every way we can to help you in 
our efforts with the problems we have had of not funding States 
that have moved forward as we have under your leadership and 
others. As you know, our bill did solve that problem. We had a 
total solution until the President vetoed this bill. We are 
going to make additional efforts to solve that problem and we 
will engage CMS in this latest battle and I hope we will 
succeed so that you can continue your great career on this, and 
we look forward to your comments. Thanks for being here.
    Mr. Pallone. Thank you, and that concludes the opening 
statements by members of the subcommittee. So we will now turn 
to our panel, and they have been listening to us now for an 
hour. I want to welcome you again, and let me introduce the 
various members of the panel. Starting to my left is the 
Honorable Chris Gregoire, who is the Governor of Washington. 
And second is of course the Honorable Haley Barbour, the 
Governor of Mississippi. Third is Governor Deval Patrick, 
Governor of Massachusetts. And then we go to Governor Sonny 
Perdue from Georgia, and finally Governor Ted Strickland, 
former member of this Committee, the Governor of Ohio.
    Now, the way our rules are, we have 5-minute opening 
statements that become part of the hearing record and each 
witness may in the discretion of the committee submit 
additional brief and pertinent statements in writing for 
inclusion in the record later. So I just want to begin with 
Governor Gregoire for an opening statement. Thank you for being 
here again.

      STATEMENT OF CHRIS GREGOIRE, GOVERNOR OF WASHINGTON

    Governor Gregoire. Thank you, Mr. Chair, for the 
opportunity to be here, and Ranking Member Deal and all the 
members of the Committee. I am honored to make our presentation 
on behalf of the people of the great State of Washington today.
    In my home State of Washington, we set a goal. Our goal is 
all children covered by health insurance by the year 2010. We 
are well on our way but we cannot do it alone so I come before 
this Committee to ask you to work with us, to work with the 
governors of our respective States to provide healthcare to 
America's children. Covering children we believe is a moral 
imperative but it also brings with it very important societal 
benefits and it makes a strong economic case.
    I chaired a Blue Ribbon Commission on Health Care Costs and 
Access in my home State. It was a bipartisan commission charged 
with delivering a 5-year plan to provide access to safe, high-
quality, affordable healthcare to all Washingtonians. During 
that process we learned a lot about the healthcare system, its 
challenges, its opportunities, its people and its impact. We 
agreed that healthcare is a shared responsibility, virtually a 
three-legged stool balanced between government, business and 
individuals, and in the case of children, the parents.
    First we learned that healthy children are far more likely 
to succeed in school and in life and that the health of the 
next generation is critically important to the future of our 
country. Healthy children learn better. They grow better and 
they have a better chance to succeed in life.
    Second, we heard from practitioners, pediatricians at one 
of our country's first-class institutions in children's health, 
the Seattle Children's Hospital and Medical Center. Their 
testimony was made clear to us that it is far more costly to 
taxpayers for children to access routine medical care via the 
emergency room than having the kind of insurance that the SCHIP 
program provides.
    Third, that by the time children receive care in the 
emergency room, it is often too late. Their healthcare 
conditions are more severe, the consequences to the child much 
more painful and the cost to society much greater. We also know 
that uninsured children sometimes can cause other children to 
get sick in the classroom they are in because their care has 
been delayed.
    So what is Washington State doing? Last year I signed a 
comprehensive bill that truly lays a strong foundation to 
ensure that all children living in Washington State have health 
insurance coverage by the year 2010. We raised the eligibility 
rate for all children's programs to 250 percent of poverty and 
we anticipate enrolling half of the remaining uninsured under 
that limit this biennium. We allowed for an active outreach 
effort to ensure that over the next 18 months all eligible are 
contacted and cared for. We increased our reimbursement rates 
for pediatricians by nearly 50 percent on January 1, 2008, 
knowing full well that health insurance without providers is 
not going to make it happen so we want to make sure that they 
have access to providers. We intend to increase our eligibility 
rate for all children by legislation to 300 percent of poverty 
on January 1, 2009. We provided for a reimbursement system so 
that families above 300 percent of poverty who still cannot 
afford to purchase health insurance on the private market will 
be able to buy children's coverage from Medicaid at the State's 
full cost, that to go in effect January 1, 2009, and we 
established a framework and track measures to improve the 
healthcare system for children and tie future rate increases to 
providing a medical home for our children to improve their 
health status.
    As I mentioned, our coverage is based on the three-legged 
stool. Dependent on eligibility levels in Washington, parents 
are participating in the cost of their child's care. For 
example, with respect to SCHIP, unlike Medicaid, SCHIP families 
pay a monthly premium, currently $15 a month for each child up 
to a maximum of three children, and when our eligibility level 
increases from 250 to 300 percent in January, the family 
participation rate will increase.
    What Washington is achieving is really quite remarkable. 
Our uninsured rate for children has dropped significantly. 
Eighty-four thousand more children have access to healthcare 
today than they did in 2005. By our own State survey, we are 
covering 94 percent of our children below 200 percent of 
poverty today. While we may disagree with the Center for 
Medicare and Medicaid Services as to the data that they use, 
nonetheless, we have made extraordinary efforts to cover all 
children. Our State's insurance programs for children currently 
provide coverage to 583,000 children. Another 1.2 million are 
covered by private insurance, most employer plans. Despite that 
success, 70,000 children in our State are still without 
coverage.
    Medicaid and SCHIP provide the backbone for covering 
uninsured children. To truly cover all those children and 
throughout the Nation, we need a partnership with the Federal 
Government and we need to ensure that that same unity of 
purpose as was passed in 1997 is present today. I want to thank 
my congressional delegation--Jay Inslee is here today--and 
through their attempts to reauthorize SCHIP, they have been 
stalwarts. Because we have been an early leader in healthcare 
for our children, one of the handful of States to raise 
Medicaid eligibility to 200 percent prior to the enactment of 
SCHIP, we have been punished ever since by a longstanding 
inequity that prevented the State from using its full allotment 
of SCHIP funds. By delegation work, you cleared that problem up 
and I want to thank you for that.
    Without SCHIP reauthorization, our partnership to achieve 
our goal will fail. We need that partnership. Based on the 
August 17th letter through CMS that was sent to State health 
officials announcing new requirements, those requirements which 
have been described to you today together with eight other 
States I am challenging that rule. If allowed to go forward, 
8,100 children in Washington State will not receive coverage.
    Why am I bringing legal action based on the rule? Picture a 
single mother with two children trying to make ends meet with 
an annual income of $45,000 a year, just over 250 percent of 
poverty, and imagine how she is going to pay in Seattle, 
Washington, for lodging, for food, for clothing, for 
transportation and still have 700 to 900 a month to buy health 
insurance. That is roughly one-fourth of her income. This 
problem does not go away if we go to 300 percent of poverty in 
Seattle or for that matter in eastern Washington. In fact, it 
even makes things more desperate. By CMS measurements, no State 
that I know of will comply with the August 17th guidance. The 
effect of the rule intended or otherwise is to preclude the 
States from covering these children in low-income households.
    One of the justifications for the August 17th letter is 
known as crowd-out. The crowd-out argument suggests that by 
making public health coverage affordable, families will drop 
private insurance and enroll in SCHIP, but in our State we have 
structured a program to get at that very issue by creating an 
employer-sponsored insurance program. When cost-effective, we 
keep otherwise Medicaid-eligible families in private insurance, 
paying the premium assessments for parents' employer plans to 
keep those kids in their employer plans and avoid them having 
to come onto Medicaid and SCHIP.
    In discussing the need for a stronger partnership between 
the States and the Federal Government, I would be remiss if I 
did not mention the frustration that my colleagues and I share 
with respect to a number of Medicaid regulations being pursued 
by the Administration around targeted case management, graduate 
medical school education, school-based services and coverage of 
rehabilitative services, to name a few. Joining as we did in 
our annual winter meeting just this past weekend, governors are 
showing a united front in our opposition to these CMS 
regulations that will cause significant harm to our children, 
our seniors, persons with disabilities while shifting greater 
and greater costs to the States, an estimated $15 billion over 
5 years. States simply cannot shoulder these costs. I urge you 
to place a moratorium on these regulations.
    As Governor, I face challenges like you do at the federal 
level in developing a budget. There is no question we are in 
struggling times and that we are having to absorb ever-
increasing costs of healthcare, families, employers and 
government alike, but in Washington I want to let you know that 
we are driving down the cost of healthcare, driving up the 
quality. We are making the healthcare system more affordable 
and accountable to improve results to actually improve the 
health and the health outcomes of all Washingtonians but kids 
come first. Washington State is committed to preparing them for 
the very best that they can be with the tools, the education 
and the health that they need to succeed and to be productive 
members of our society. We need your help. I would ask you to 
put a moratorium on the August 17th letter and to proceed with 
the reauthorization of SCHIP. Our children need you very much.
    Thank you, Mr. Chair and members of the Committee.
    [The prepared statement of Mr. Gregoire follows:]
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    Mr. Pallone. Thank you, Governor.
    Next is Governor Haley Barbour. You are recognized.

      STATEMENT OF HALEY BARBOUR, GOVERNOR OF MISSISSIPPI

    Governor Barbour. Mr. Chairman, thank you and Congressman 
Deal, members of the committee. I am going to try to stay 
within the 5 minutes but remember, I talk slower than the rest 
of them.
    Together between SCHIP and Medicaid, we have about 625,000 
people in Mississippi that are served. SCHIP is a very 
important part of that. Our SCHIP program in Mississippi covers 
only children at or under 200 percent of the federal poverty 
level. It is built to the 1997 law and that is all that we 
cover, and that is one reason that we are very concerned about 
the bill that was passed last year and was vetoed. The current 
distribution formula for Mississippi consistently shortchanges 
our State. Even though we only cover children under 200 percent 
of poverty, the current formula doesn't provide enough money to 
pay the federal share for even half of the children in 
Mississippi who are under 200 percent of poverty.
    Mississippi's total costs of covering 63,000 children in 
SCHIP is $133 million. Under the current law, the Federal 
Government pays 83 percent of that. We have the highest match 
rate in the country. Thank you very much. It means the Federal 
Government should be giving us $111 million to cover the 
federal share for SCHIP but our State's SCHIP allotment for 
fiscal year 2008 was $61.7 million, leaving us $50 million 
short of the full federal share, even for the children that are 
signed up and this has been the case from the beginning. The 
formula shortchanges us very badly. And for years Congress and 
members of our delegation and the Administration have allowed 
us to depend on redistributed funds from other States. These 
redistributions were possible because other States weren't 
spending their whole allocation on children under 200 percent 
of poverty. However, when those States starting getting waivers 
where they could cover adults and we have States where more 
than half the people covered under SCHIP are not children, that 
redistributed pool of money got soaked up. Thus far, because of 
a lot of hard work by a lot of people, even though we are 
tremendously shortchanged, we have been able to scramble around 
and get the federal money for the federal share to cover these 
children. We have never turned anybody away from SCHIP, even 
though we got shortchanged.
    The bill that Congress sent to the President last fall 
wouldn't have funded Mississippi's SCHIP program at an amount 
adequate just cover the children under 200 percent of poverty. 
It would though have allowed other States to greatly expand 
coverage so here we are, the poorest State in the country, 
getting shortchanged. I can't support a bill that doesn't give 
Mississippi enough money to fulfill even the original intent of 
the program while other States get to expand their programs to 
cover higher income children and even adults who don't have 
children. Even with the additional money that Congress provided 
for SCHIP in last year's bill, under the proposed formula we 
would still be shortchanged. According to the U.S. Census 
Bureau 2006 survey, there are 71,851 children in Mississippi 
under 200 percent of poverty that don't have healthcare 
coverage either from Medicaid or from SCHIP.
    With few exceptions, these children are eligible for SCHIP. 
To cover them all, Mississippi should receive a federal 
allotment of $232 million a year. Last year's wouldn't have 
given us but $142 million, leaving us $90 million short, still 
nearly 40 percent shortchanged by the bill. Even if we got 100 
percent from the Child Enrollment Contingency Fund, we would 
still be shortchanged by 27 percent to cover all our children.
    Again, I can't support a bill that shortchanges my State, 
the children of my State under 200 percent of poverty. We are 
not talking about covering middle-class children. We are not 
talking about covering adults. I can't be for a bill that 
shortchanges us for doing the basics.
    I would like to mention the big thing you all can do for 
us: fix the formula. Fix the formula where States like mine get 
enough money to pay for their poor children, for the under 200 
percent of poverty.
    I would like to mention the Medicaid rules. We think that 
the Medicaid rule for changing the definition of public 
hospital is a very bad idea. Our Medicaid program was crowding 
out spending on higher education when I became governor as was 
noted in a Brookings Institution study. We have gotten control 
of Medicaid spending. Our problem now is, every time we get 
control of spending, the Federal Government disallows part of 
our State share so we are $90 million in the hole, not because 
we haven't controlled spending. We are $90 million in the hole 
because they told us this won't count anymore, part of it 
because of public hospitals. So we don't like changing the 
public hospital definition, and for us also the idea that 
changing the rule for graduate medical education is not a 
Medicaid issue. It wouldn't hurt Medicaid. It would hurt our 
Medicaid program. Our University Hospital has about 200 
residents a year. It is the biggest provider of healthcare to 
Medicaid and SCHIP beneficiaries in the State, and if you took 
that $15 million away from the medical center for graduate 
medical education, you would be taking away the people that 
provide care.
    So I wanted to share our views on SCHIP. I don't know how 
many other States are like us. But I also did want to put my 
oar in the water that we appreciate you all putting a 
moratorium last year on reducing the provider--you know, they 
wanted to reduce the provider fee where it could be 6 percent 
and you all limited the reduction to 5\1/2\ percent. It would 
certainly suit us if you would do that for some of these 
changes and rules which we don't really think are necessary or 
well thought out.
    Thank you, Mr. Chairman. I am sorry I ran over.
    [The prepared statement of Mr. Barbour follows:]

                  Statement of Governor Haley Barbour

    Mr. Chairman, Congressman Deal, and members of the 
subcommittee:
    I am happy to be before you today to discuss important 
issues surrounding the State Children's Health Insurance 
Program and Medicaid. Together, these two programs provide 
health coverage to approximately 626,000 Mississippians and 
they are an essential component of our health care safety net, 
especially for our most vulnerable children.
    I thank you for your continued work on the reauthorization 
of the SCHIP program. As you proceed, I ask you to remember the 
intent of the SCHIP program: to cover low-income uninsured 
children.
    That's what we are focused on in Mississippi. Our SCHIP 
program covers only children at under 200% of the Federal 
Poverty Level. For a family of four, this means an annual 
income of less than $42,400.
    For several years, the current distribution formula has 
resulted in Mississippi being consistently shortchanged. Flaws 
in the formula have resulted in an inequitable distribution of 
funds and a redistribution allotment has been needed to cover 
costs. The current formula does not provide enough money for 
even half of the children in Mississippi below 200% of the 
federal poverty level.
    In Mississippi, the total cost of covering the 63,000 kids 
in our SCHIP program is $133 million. According to current law, 
the federal government is supposed to pay 83% of these costs, 
which means the federal government should be giving us $111 
million for SCHIP. But our state's SCHIP allotment for federal 
Fiscal Year 2008 is only $61,687,048, leaving us $50 million 
short.
    In past years, to make up this difference, we have depended 
upon redistributed funds from other states. These 
redistributions from other states were possible because their 
allocation was more than they needed to run their SCHIP 
program.
    Not surprisingly, instead of sending that money back to 
Washington, other states started expanding their SCHIP 
programs. Instead of covering low-income children, as Congress 
intended when you created the program, other states began 
covering adults, even adults that did not have any kids!
    Since then, the pool of funds available to be redistributed 
to states such as mine has shrunk and we are faced with 
significant shortfalls and much uncertainty.
    The bill Congress sent to the President last fall would not 
have funded Mississippi's SCHIP program at an amount adequate 
to cover all children at or below 200% of the federal poverty 
level, even though it would have allowed other states to expand 
coverage. I cannot support a bill that does not give 
Mississippi enough money to fulfill the original intent of the 
program while allowing other states the opportunity to expand 
their programs to cover higher-income children and adults who 
don't have any children.
    Even with the additional money Congress proposed for SCHIP, 
the proposed formula still causes serious concern for those of 
us charged with actually administering the program. According 
to the U.S. Census Bureau 2006 survey, there are 71,851 
children in Mississippi under 200% of the Federal Poverty Level 
who are uninsured. With rare exception, all of these children 
likely are eligible for Medicaid or SCHIP.
    In order to cover all children under 200% of the federal 
poverty level eligible for SCHIP, Mississippi would require a 
federal allotment of $232 million. But under the proposed new 
formula, Mississippi's FY 2008 allotment would have been $142 
million. In other words, our state would still be shortchanged 
by $90 million, or nearly 40%. Even the ``Child Enrollment 
Contingency Fund'' you included in the bill for states that 
significantly increase enrollment only would provide a maximum 
of an extra $28 million, leaving us 27% underfunded.
    Again, I cannot support an SCHIP bill that shortchanges 
Mississippi to such a degree we cannot even provide insurance 
to all our children at 200% of federal poverty level, but that 
allows wealthy states to provide insurance under SCHIP to 
children in families with an income of $85,000/year.
    To that end, I agree with the guidance issued by CMS on 
August 17, 2007, which will ensure that before states expand 
their SCHIP coverage beyond 250% of the Federal Poverty Level, 
they should have enrolled at least 95% of the eligible children 
in their state below 200% of the Federal Poverty Level in 
either Medicaid or SCHIP.
    I urge you to enact an SCHIP reauthorization bill which 
will provide states like Mississippi the federal support 
necessary for us to enroll all of our eligible kids.
    In addition to SCHIP, I am glad to have the opportunity 
today to visit with you about the status of our state's 
Medicaid program. Since I have been Governor, we have made 
significant progress in saving Medicaid for the nearly 600,000 
Mississippians who rely on it. We have enacted reforms because 
we know it is wrong for a family to work hard at two or three 
jobs, to raise their kids and pay for their healthcare, and 
then have to turn around and pay extra taxes so others who are 
able to work and take care of themselves choose not to but 
instead get free healthcare at taxpayers' expense. That's not 
right.
    Under my Administration, the Division of Medicaid checks 
people's eligibility face-to-face, and the Medicaid rolls have 
decreased. This drop is what you should expect when the number 
of people employed has increased by more than 50,000 as it has 
in the last four years in Mississippi.
    We've changed our prescription drug program to better 
utilize generic drugs. That, along with Medicare Part D, is 
saving taxpayers tens of millions of dollars on pharmaceuticals 
with no negative effect on beneficiary health.
    But even with these common-sense, successful savings 
efforts, our Medicaid budget faces a large shortfall this year. 
This is primarily because the federal government has forced us 
to stop using certain funds to cover the state Medicaid match 
requirement.
    For example, we have to replace the $90 million of state 
match that was previously provided by public hospitals through 
an inter-governmental transfer program. Considering the fact 
that our state appropriation for Medicaid is $513 million for 
the current fiscal year, this is a significant budget 
challenge.
    Now, CMS is proposing more changes to the state-federal 
relationship that will have additional fiscal consequences. 
Given the strait-jacket of federal rules on how we can run our 
Medicaid program, these changes, if allowed to proceed, will 
likely result in reduced reimbursement rates for providers or 
reduced services for the beneficiaries. This morning, I will 
highlight two rules changes that would be especially harmful to 
the Mississippi Medicaid program.
    First, CMS has issued a rule which changes the definition 
of a public hospital, thereby putting new restrictions on 
payments to hospitals in my state. In effect, this rule change 
would eliminate hospitals from the governmental classification 
if they are non-profit corporations that receive a government 
appropriation. The result would be that our county-owned public 
hospitals, mostly in rural areas, would be negatively impacted. 
This would be another $90 million hit to our Medicaid program.
    Congress has approved a moratorium that delays 
implementation of this rule until May 25, 2008. CMS should 
either reconsider this rule, or Congress should act again.
    Secondly, CMS has proposed to eliminate Medicaid payments 
for Graduate Medical Education. In an attempt to justify this 
proposal, a CMS official testified on November 1, 2007, to the 
House Committee on Oversight and Government Reform that 
training doctors ``is outside the scope of Medicaid's role, 
which is to provide medical care to low-income populations.''
    In the case of the University of Mississippi Medical 
Center, the GME program makes it possible to train 200 
residents a year and it has proved to be an effective physician 
retention program. If a doctor does his or her residency in 
Mississippi, there is an 85% chance he or she will live and 
practice in Mississippi afterwards.
    Having doctors in under-served rural areas is necessary for 
there to even be a Medicaid program. Enacting the CMS proposal 
would cost the University of Mississippi Medical Center $15 
million in FY 09 and would threaten future access to care.
    In addition, the University Medical Center is our state's 
largest Medicaid provider. If the GME program is eliminated, 
UMC's ability to provide care for our Medicaid beneficiaries 
will be threatened.
    Thank you again for allowing me the opportunity to be here 
today. I look forward to any questions you may have.
                              ----------                              

    Mr. Pallone. Thank you, Governor.
    Mr. Markey has asked to introduce the Governor of 
Massachusetts. Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Governor Deval Patrick of Massachusetts has dedicated 
himself and Massachusetts to the implementation of a universal 
health care system for our State. He is a visionary leader. It 
is our honor to have him before the Committee today. Welcome, 
Governor.

    STATEMENT OF DEVAL L. PATRICK, GOVERNOR OF MASSACHUSETTS

    Governor Patrick. Thank you, Congressman Markey, and thank 
you for the honor of the introduction and your presence here, 
and thank you, Mr. Chairman and Congressman Deal and also to 
Chairman Dingell and Congressman Barton, I guess, who just had 
to step out, all the members of the Committee for convening 
today's hearing. This is an enormously important issue or 
Massachusetts and for the Nation in terms of both our public 
health and our economy.
    A child with quality healthcare is a child with a better 
chance in every aspect of life. The Rand Corporation's 2005 
report entitled ``Children at Risk'' found, for example, that 
access to healthcare through regular well-child visits enables 
early developmental screenings and encourages parental 
behaviors to assist all facets of child development: physical, 
cognitive, emotional and social. Quality healthcare enables 
children to better engage as students and fosters better 
lifelong health outcomes. These differences can set the course 
for life.
    That is why SCHIP is a national success story. It is an 
important tool for fulfilling a most fundamental responsibility 
for any civilized society: to help parents give every child the 
care and support they need to reach their highest potential. 
Though there are differences on just what shape reauthorization 
should take, I do want to acknowledge and thank you for the 
broad bipartisan support in the Congress for continuing the 
SCHIP program.
    In Massachusetts, SCHIP also plays an important role in our 
Healthcare Reform Initiative, as Congressman Markey referred. 
Healthcare Reform in Massachusetts is a mosaic of approaches 
and programs and contributions: individual contributions, 
employer contributions. The State has stepped up its funding 
and its contribution, obviously the Medicaid waiver and SCHIP, 
and at the center of it all is the private insurance market. 
Though these are still early days, we are only in the early 
weeks of the second year of implementation. Our reform plan has 
already been very successful. Three hundred thousand adults and 
children who were uninsured last year are insured today, 
reducing our uninsured population by almost half. Free care 
utilization has dropped. Between federal fiscal years 2006 and 
2007, our uncompensated care pool saw roughly 9 percent fewer 
inpatient discharges and 12 percent fewer outpatient visits. A 
recent report by the Massachusetts Hospital Association shows 
that a number of hospital low-income uncompensated care 
accounts has decreased by 28 percent since October 2004 and 
there are initial signs of a leveling off in overall system 
healthcare costs with premiums for subsidized programs 
increasing at an average of 5 percent, less than half what 
increases in the general market have been.
    As part of our partnership with the Federal Government, 
SCHIP has been an indispensable part of our plan. The Centers 
for Medicare and Medicaid Services agreed to permit 
Massachusetts to expand SCHIP to children at or below 300 
percent of the federal poverty level. I just want to pause here 
because that was an agreement we reached with CMS as a part of 
developing this mosaic for our own plan. As a result, Medicaid 
and SCHIP enrollment has grown by 40,000 children including 
18,000 newly eligible because of the expansion from 200 to 300 
percent of the federal poverty level. CMS's approval of the 
Massachusetts SCHIP rules 2 years ago was a crucial part of the 
success we are experiencing today and I am happy to add that we 
have achieved that success without having residents use SCHIP 
to substitute for private coverage. In other words, the anti-
crowd-out provisions are working.
    I am here to ask you not to undermine our success. That is 
why the August 17th CMS guidance letter is so troubling for my 
State and for our goals with healthcare reform. We are in the 
process of creating seamless, integrated, market-based coverage 
for all individuals and families across the Commonwealth. Our 
success depends on the stability and reliability of the 
commitments the Federal Government has made to us. A retreat in 
any of those commitments could have devastating effects on our 
progress, particularly our ability to cover families who have 
no affordable options in the unsubsidized private marketplace.
    The August 17th CMS directive imposes new enrollment, 
administrative and procedural requirements that impair the 
Commonwealth's Medicaid and SCHIP programs. Though couched as 
guidance by CMS, there are in fact significantly new 
requirements for States like Massachusetts that cover children 
over 250 percent of the federal poverty level. They are 
particularly worrisome in our case because we have a specific 
agreement with CMS on which we relied in designing and 
implementing our reforms.
    Specifically, the August 17th directive may prevent us from 
covering eligible children who are not yet enrolled. They will 
inevitably lead to delays in care for many children while 
eligibility nuances are worked out. Unless the Congress acts, 
many families will be discouraged from enrolling in SCHIP all 
together. More costly emergency rooms will replace the 
pediatrician's office for families in need of care for a sick 
child with the consequent upward pressure on overall system 
costs. Not only are these the very outcomes we are trying to 
avoid but they would represent a giant step backward in one of 
the most successful innovations in healthcare reform in the 
country today, if I may say so myself. Indeed, as a practical 
matter in Massachusetts, this directive would leave thousands 
of children between 250 and 300 percent of the federal poverty 
level uninsured while their parents are covered by other 
features of our federally approved healthcare reform. This 
inconsistency compromises an otherwise comprehensive coverage 
strategy.
    So I want to be as clear as I can. Without continued 
federal support for and flexibility within the SCHIP program, 
healthcare reform in Massachusetts and I believe in other 
States is in jeopardy. Given the benefits to children, to 
families and to our economy, and the many salient lessons to be 
learned from Massachusetts and other States on solutions that 
could work nationally, it is hard for me to understand why we 
would seriously consider limiting or reducing the reach of 
either the Commonwealth agreements with CMS or the SCHIP 
program as a whole.
    I ask you to give reauthorization of SCHIP another try 
before the end of this Congress. Our success in enrolling low-
income children means our federal SCHIP allotments have not 
been sufficient and I am grateful that Congress has 
consistently addressed this shortfall issue for my State. 
However, the instability caused by the absence of a 
reauthorization bill creates problems in long-term planning for 
the program in Massachusetts and other States across the 
country, as I think you must appreciate.
    At a minimum, I join my fellow governors here in asking you 
to rescind CMS's August 17th guidance letter on SCHIP.
    And finally, I want to briefly make a point about several 
other CMS Medicaid regulations to which my colleagues have 
referred that have been put forth in the past year which will 
also affect healthcare reform in Massachusetts. CMS has issued 
seven new Medicaid regulations that will shift between $13 and 
$15 billion in costs from the Federal Government to the States, 
and we simply cannot afford it in Massachusetts.
    The regulations restrict how Medicaid pays for hospital 
services and graduate medical education--we have very similar 
concerns in Massachusetts as Governor Barbour has expressed in 
Mississippi for those reasons--outpatient services, school-
based health services, services for individuals with 
disabilities and case management services.
    Congress has thankfully delayed some of these regulations 
but they will soon take effect if you do not overturn or 
further postpone them. Without your actions, States will be 
forced to make choices that are more than just unpleasant but 
wasteful, costly, impractical and ultimately harmful to our 
common interests and good personal and economic health. So 
while you are at it, I urge Congress to rescind CMS's new 
regulations on Medicaid as well.
    I thank you very much for convening the hearing and for 
allowing me the extra time.
    [The prepared statement of Mr. Patrick follows:]

                 Statement of Governor Deval L. Patrick

    Good morning. Thank you, Mr. Chairman, Congressman Deal, 
and all the Members of this Committee for convening today's 
hearing. This is an enormously important issue for 
Massachusetts and for the Nation in terms of both our public 
health and our economy.
    A child with quality healthcare is a child with a better 
chance in every aspect of life. The Rand Corporation's 2005 
report entitled ``Children at Risk'' found, for example, that 
access to health care through regular well-child visits enable 
early developmental screenings and encourage parental behaviors 
to assist all facets of child development: physical, cognitive, 
emotional and social. Quality healthcare enables children to 
better engage as students and fosters better lifelong health 
outcomes. These differences can set the course for a life.
    This is why SCHIP is a national success story. It is an 
important tool for fulfilling a most fundamental responsibility 
for any civilized society: to help parents give every child the 
care and support they need to reach their highest potential. 
Though there are differences on just what shape reauthorization 
should take, I want to acknowledge and thank you for the broad, 
bipartisan support in the Congress for continuing the SCHIP 
program.
    In Massachusetts, SCHIP also plays an important role in our 
Healthcare Reform initiative.
    Healthcare Reform in Massachusetts is a mosaic of different 
programs, contributions and approaches. Though these are still 
early days (we are only in the early weeks of the second year 
of implementation), our reform plan has already been very 
successful. 300,000 adults and children who were uninsured just 
a year ago are insured today, reducing our uninsured population 
by about half. Free care utilization has dropped. Between 
federal fiscal years 2006 and 2007, our uncompensated care pool 
saw roughly 9% fewer inpatient discharges and 12% fewer 
outpatient visits. A recent report by the Massachusetts 
Hospital Association shows that the number of hospital low-
income uncompensated care accounts has decreased by 28% since 
October 2004. And there are initial signs of a leveling off in 
health care costs, with premiums for subsidized programs 
increasing at an average of 5%, roughly half what increases in 
the general market have been.
    As part of our partnership with the federal government, 
SCHIP has been an indispensable part of our plan. The Centers 
for Medicare & Medicaid Services (CMS) agreed to permit 
Massachusetts to expand SCHIP to children at or below 300% of 
the federal poverty level. As a result, Medicaid and SCHIP 
enrollment has grown by 40,000 children, including 18,000 newly 
eligible because of the expansion from 200% to 300% of the 
federal poverty level. CMS' approval of the Massachusetts SCHIP 
rules two years ago was a crucial part of the success we are 
experiencing today. And I am happy to add that we have achieved 
that success without having residents use SCHIP to substitute 
for private coverage. (The so-called ``anti-crowd-out'' 
provisions are working.)
    I am here to ask you not to undermine this success. That's 
why the August 17th CMS guidance letter is so troubling for my 
state and for our goals with Healthcare Reform. We are in the 
process of creating seamless, integrated, market-based coverage 
for all individuals and families across the Commonwealth. Our 
success depends on the stability and reliability of the 
commitments the federal government has made to us. A retreat in 
any of those commitments could have devastating effects on our 
progress, particularly our ability to cover families who have 
no affordable options in the unsubsidized private marketplace.
    The August 17th CMS directive imposes new enrollment, 
administrative and procedural requirements that impair the 
Commonwealth's Medicaid and SCHIP programs. Though couched as 
``guidance'' by CMS, they are in fact significant new 
requirements for states, like Massachusetts, that cover 
children over 250% of the federal poverty level. They are 
particularly worrisome in our case, because we have a specific 
agreement with CMS on which we relied in designing and 
implementing our reforms.
    Specifically, the August 17th directive may prevent us from 
covering eligible children who are not yet enrolled. They will 
inevitably lead to delays in care for many children while 
eligibility nuances are worked through. Unless the Congress 
acts, many families will be discouraged from enrolling in SCHIP 
altogether. More costly emergency rooms will replace the 
pediatrician's office for families in need of care for a sick 
child--with the consequent upward pressure on overall system 
costs. Not only are these the very outcomes we are trying to 
avoid; but they would represent a giant step backward in one of 
the most successful innovations in healthcare reform in the 
country today. Indeed, as a practical matter in Massachusetts, 
this directive would leave thousands of children between 250% 
and 300% of the federal poverty level uninsured while their 
parents are covered by other features of our federally-approved 
Healthcare Reform. This inconsistency compromises an otherwise 
comprehensive coverage strategy.
    So, I want to be as clear as I can be. Without continued 
federal support for and flexibility within the SCHIP program, 
Healthcare Reform in Massachusetts and elsewhere is in 
jeopardy. Given the benefits to children, to families and to 
our economy, and the many salient lessons to be learned from 
Massachusetts and other states on solutions that could work 
nationally, it is hard for me to understand why we would 
seriously consider limiting or reducing the reach of either the 
Commonwealth's agreements with CMS or the SCHIP program as a 
whole.
    I ask you to give reauthorization of SCHIP another try 
before the end of this Congress. Our success in enrolling low-
income children means our federal SCHIP allotments have not 
been sufficient. I'm grateful that Congress has consistently 
addressed this short-fall issue for my state. However, the 
instability caused by the absence of a reauthorization bill 
creates problems in long-term planning for the program in 
Massachusetts and other states across the country.
    At a minimum, I join my fellow governors here in asking you 
to rescind CMS' August 17th guidance letter on SCHIP.
    Finally, I want briefly to make a point about several other 
CMS Medicaid regulations that have been put forth in the past 
year which will also affect Healthcare Reform in Massachusetts. 
CMS has issued seven new Medicaid regulations that will shift 
$15 billion in costs from the federal government to states. We 
simply cannot afford it.
    The regulations restrict how Medicaid pays for hospital 
services, graduate medical education, outpatient services, 
school-based health services, services for individuals with 
disabilities, and case management services.
    Congress has delayed some of the regulations, but they will 
soon take effect if you do not act to overturn or further 
postpone them. Without your action, states will be forced to 
make choices that are more than just unpleasant, but wasteful, 
costly, impractical and ultimately harmful to our common 
interests in good personal and economic health.
    So, while you are at it, I urge Congress to rescind CMS' 
new regulations on Medicaid as well.
    Thank you again for convening today's hearing and for the 
opportunity to offer our views. I am happy to try to address 
any questions you may have.
                              ----------                              

    Mr. Pallone. Thank you, Governor Patrick.
    Mr. Deal would like to introduce the governor of Georgia.
    Mr. Deal. Thank you, Mr. Chairman.
    I am indeed pleased to have my governor, Governor Sonny 
Perdue, and our First Lady, Mary Perdue, with us today. I had 
the great honor of serving with Governor Perdue when we were 
both State senators in the Georgia legislature. He rose through 
the ranks of leadership there and is now serving his second 
term as the governor of our State as I believe his colleague 
Mr. Barbour is serving his second term as governor of his 
State. So we are pleased to have him here today. Our 
legislature is in session so I don't know whether he is just 
relieved that we got him out of town or whether he is anxious 
to return, but I do appreciate him taking the time to be with 
us on this very important issue. We welcome you.

         STATEMENT OF SONNY PERDUE, GOVERNOR OF GEORGIA

    Governor Perdue. Thank you and good morning, Mr. Chairman 
and to my Congressman, Mr. Deal, and other members of the 
committee. Thank you very much for the opportunity to come 
before you today to discuss the progress that I believe we have 
made in Georgia in covering our State's uninsured children and 
more specifically the reauthorization of the State Children's 
Health Insurance Program nationally.
    As most of you know, SCHIP is an issue about which I have 
been very vocal. I have been vocal because in Georgia this is a 
program that has worked. Ten years ago Congress made the health 
of our children a priority. A Republican Congress and a 
Democratic President worked together to create SCHIP, a 
federal-State partnership that would offer the children of low-
income, hardworking parents the healthy start in life that they 
deserve.
    I have been vocal because SCHIP is a success. I think 
nationally and I know in Georgia it works. It works because it 
promotes shared responsibility, shared between a family doing 
what it can and a compassionate public. SCHIP is not simply a 
government handout. It is not for unemployed families on 
welfare. It helps the children of working parents who not only 
pay their taxes but also pay premiums for the insurance that 
these children receive.
    In Georgia, we have maintained that shared responsibility 
and integrity in our program by verifying income and 
citizenship for each of our applicants. We require monthly 
premiums for coverage, and yes, like anything else in life, 
there are consequences for failing to pay premiums.
    I have been vocal because I know that the families who buy 
coverage through SCHIP want for their children what we all want 
for our children. They simply want them to have an annual 
checkup, to get basic immunizations, get regular screenings 
just like your children receive and my children receive.
    In Georgia, we have been successful in providing basic 
preventative treatment. Roughly 90 percent of our young 
children enrolled in Georgia's SCHIP program--we call it 
PeachCare for Kids--for at least 10 months received the 
immunizations to prevent debilitating diseases and over 80 
percent had a medical home, a family primary care doctor.
    I have been vocal because it is a program that works, a 
program that has a 10-year record of proven success and faces 
extinction because we cannot agree on how to continue. I 
believe if SCHIP were a snail darter or a purple bank climbing 
mussel, we would be suing the Federal Government under the 
Endangered Species Act. In the last 2 years, a growing number 
of States have been forced to appeal to our federal partners to 
fund the federal share just so that we could continue through 
the end of the year. Watching this, wondering how they will 
afford the rising costs of healthcare, are the working parents 
of millions of our Nation's children.
    Georgia has done very well in implementing SCHIP. In fact, 
we have done too well. In fact, we have been penalized for it 
as Governor Barbour indicated in Mississippi. We have enrolled 
so many children in SCHIP that our percentage of uninsured 
children has dropped dramatically. And because of this flawed 
funding model that partially bases States' allotments on the 
number of uninsured children, Georgia along with our neighbors 
in Mississippi and North Carolina, are facing growing 
shortfalls.
    Think of this: the better you are at implementing SCHIP, 
the less funding you receive. If our State was 100 percent 
successful and reached all uninsured children, the funding next 
year would be drastically cut because no children would be 
uninsured. Imagine if we used the same logic on our education 
system. A school that was tasked with reducing the dropout rate 
and who achieved their goal of graduating 100 percent of their 
students would be rewarded with significantly less funding the 
next year. That just doesn't make sense.
    The current funding formula is also flawed because it hurts 
fast-growing States like Georgia by lagging behind in factoring 
quickly changing population numbers.
    In our 2007 fiscal year, the Federal Government was using 
population numbers from 2004, 2003 and as far back as 2002. 
Ladies and gentlemen, Georgia has grown by almost 1 million 
people since 2002. We need data that is reflective of the 
actual population and need.
    I have been vocal about SCHIP because this formula flaw 
threatens the great progress that we have made. I want to thank 
my good friend, Congressman Nathan Deal, and others for their 
efforts along with Congress for addressing the funding 
shortfall while discussions continue on reauthorization of this 
important program. These debates give you the opportunity to 
revisit issues like this flawed formula, and I ask that you 
address it in any new bill signed into law.
    I have been disappointed that the ongoing debate in 
Congress over the size of the program has completely 
overshadowed the great success that the last 10 years have 
seen. Equally overshadowed is our opportunity to recalibrate 
the program to better target funding to States and programs 
that need it. There are several lessons and principles I would 
like to share with you as your discussions continue.
    The key principle of SCHIP is that children should always 
be the top priority. Our resources must focus first on 
children. This is not the case in every State right now. Some 
States have expanded their programs to include health insurance 
for other groups, even childless adults, but the goal of this 
program all along was to provide an answer to an insurance need 
for our most vulnerable population: low-income children.
    It is a grave mistake to expand taxpayer-funded insurance 
to a level that undermines personal responsibility for those 
who are able to purchase private insurance on their own. By 
focusing funding and enrollment efforts on low-income children, 
we are reaching those most in need and those who have no other 
options. There is a point of diminishing returns when you 
create a program that becomes so large that States can't afford 
to participate.
    As governor of a State with a constitutional requirement 
for a balanced budget, I recognize that we simply do not have 
unlimited funds for SCHIP. Today we are in an uncertain 
economic environment where some States face daunting revenue 
shortfalls. Balancing State budgets means not everyone can 
continue to enroll uninsured children, and a program expansion 
will only cause less participation, enrollment caps or benefit 
reductions.
    With a balanced budget on a yearly basis, a growing State 
match in a year of revenue shortfalls means cutting funding 
elsewhere. Additionally, knowing that States including our 
State of Georgia have had to struggle to anxiously persuade 
Congress to fund the program as originally conceived, how can 
we be confident that the money will be available to match an 
expanded program. While Georgia stood ready to meet our State 
obligations, we ran out of federal funds. What do you think 
happened then? The citizens of Georgia turned to us and the 
State to insure that PeachCare would continue to cover their 
children. We had made a promise together and Georgia was left 
to keep it alone, borrowing funds from other sources to 
continue our program's operation while Congress and the 
Administration debate it.
    Reauthorization of SCHIP allows us to revisit a program 
that is a nationwide success. It allows us to reevaluate what 
has worked well and what has not. It gives us an opportunity to 
update an over a decade-old formula that we as a Nation have 
outgrown, and to make sure that we do not forget the mandate of 
the program: to ensure the health of our Nation's low-income 
children.
    Is more funding needed? Yes. Both Congress and the 
Administration recognize that. But I am very concerned that the 
vast unsustainable expansions will harm the long-term viability 
of the good program we have now. By focusing funding on low-
income children and retargeting a distribution formula that has 
not changed in a decade, States will continue to make progress 
in reaching and insuring our children.
    As I have said many times, I am grateful that America is a 
very compassionate Nation. We must continue to take care of our 
most vulnerable citizens. SCHIP is a success story. It is a 
program that has proven to work. The proof is in the millions 
of children who would not have otherwise had vaccinations, 
would go without treatment for earaches and sore throats, 
without diagnosis of chronic diseases such as diabetes and 
asthma.
    I have been vocal because there is no doubt in my mind that 
this is a program that must be preserved with its original 
intent in mind.
    Thank you again for giving us the opportunity to testify, 
and I will be happy to address any questions you have.
    [The prepared statement of Mr. Perdue follows:]

                   Statement of Governor Sonny Perdue

    Good morning, Mr. Chairman, and members of the Committee. 
Thank you for the opportunity to come before you today to 
discuss the progress we have made covering our nation's 
uninsured children--more specifically, reauthorization of the 
State Children's Health Insurance Program (SCHIP).
    As most of you know, SCHIP is an issue about which I have 
been very vocal. I have been vocal because this is a program 
that works.
    Ten years ago Congress made the health of our children a 
priority. A Republican Congress and a Democratic President 
worked together to create SCHIP, a federal-state partnership 
that would offer the children of low-income, hard-working 
parents the healthy start in life they deserve.
    I have been vocal because SCHIP is a success. It works. And 
it works because it promotes shared responsibility--shared 
between a family doing what it can and a compassionate public.
    SCHIP is not a government handout. It is not for unemployed 
families on welfare. It helps the children of working parents 
who not only pay their taxes, but who also pay premiums for the 
insurance their children receive.
    In Georgia we've maintained that shared responsibility and 
integrity in our program by verifying income and citizenship 
for each of our applicants. We require monthly premiums for 
coverage. And like anything else in life, there are 
consequences for failing to pay premiums.
    I have been vocal because I know that families who buy 
coverage through SCHIP want for their children what we all want 
for our children. They simply want to have an annual check-up, 
to get basic immunizations, and to get regular screenings, just 
like my children received and your children received.
    In Georgia, we've been successful in providing basic 
preventative treatment: roughly 90% of our young children 
enrolled in Georgia's SCHIP Program-PeachCare for Kids-for at 
least 10 months received the immunizations they needed to 
prevent debilitating diseases, and over 80% had a primary care 
doctor.
    I have been vocal because a program that works, a program 
that has a ten year record of proven success, faces extinction 
because we can't agree on how to continue.
    If SCHIP were a snail darter or a purple bank climbing 
mussel, we would be suing the federal government under the 
Endangered Species Act!
    In the last two years a growing number of states have been 
forced to appeal to our federal partners to fund their share--
just so that we could continue through the end of the year. 
Watching this, wondering how they will afford the rising costs 
of health care, are the working parents of millions of our 
nation's children.
    Georgia has done well in implementing SCHIP. We've done too 
well--in fact, we've been penalized for it. We've enrolled so 
many kids in SCHIP that our percentage of uninsured children 
has dropped dramatically.
    And because of a flawed funding model that partially bases 
states' allotments on the number of uninsured children, 
Georgia, along with our neighbors like Mississippi and North 
Carolina, are facing growing shortfalls.
    The better you are at implementing SCHIP, the less funding 
you receive. If a state was 100% successful and reached all 
eligible uninsured children, its funding the next year would be 
drastically cut--because no children would be uninsured.
    Imagine if we used this same logic in our education system: 
a school that was tasked with reducing their drop-out rate and 
who achieved their goal of graduating 100% of their students 
would be rewarded with significantly less funding the following 
year. This just doesn't make sense.
    The current funding formula is also flawed because it hurts 
fast-growing states, like Georgia, by lagging behind in 
factoring quickly-changing population numbers.
    In our 2007 fiscal year, the federal government was using 
population numbers from 2004, 2003 and as far back as 2002. 
Folks, Georgia has grown by almost a million people since 2002! 
We need data that is reflective of the actual population and 
need.
    I have been vocal about SCHIP because this formula flaw 
threatens the great progress we have made. I thank my good 
friend Congressman Nathan Deal for his efforts, along with 
Congress for addressing the funding shortfall while discussions 
continue on reauthorization of the program.
    These debates give you the opportunity to revisit issues 
like this flawed formula, and I ask you now to address it in 
any bill signed into law.
    I have been disappointed that the ongoing debate in 
Congress over the size of the program has completely 
overshadowed the great success the last ten years have seen.
    Equally overshadowed is our opportunity to re-calibrate the 
program, to better target funding to states and programs that 
need it. There are several lessons and principles I would like 
to share with you as your discussions continue.
    The key principle of SCHIP is that children should always 
be top priority. Our resources must focus first on children. 
This is not the case in every state right now.
    Some states have expanded their programs to include health 
insurance for other groups, even childless adults. But the goal 
of this program all along was to provide an answer to an 
insurance need for our most vulnerable population: low income 
children.
    It is a grave mistake to expand taxpayer funded insurance 
to a level that undermines personal responsibility for those 
who are able to purchase private insurance on their own. By 
focusing funding and enrollment efforts on low income children, 
we are reaching those most in need, those who have no other 
options.
    There is a point of diminishing returns when you create a 
program that becomes so large that states can't afford to 
participate. As Governor of a state with a constitutional 
requirement for a balanced budget, I recognize that we simply 
do not have unlimited funds for SCHIP.
    Today we are in an uncertain economic environment where 
some states face daunting revenue shortfalls. Balancing state 
budgets means not everyone can continue to enroll uninsured 
children and a program expansion will only cause less 
participation, enrollment caps or benefit reductions.
    With a budget balanced on a yearly basis, a growing state 
match in a year of revenue shortfalls means cutting funding 
elsewhere.
    Additionally, knowing that states, including our state of 
Georgia, have had to struggle anxiously to persuade Congress to 
fund the program as originally conceived. How can we be 
confident that money will be available to match an expanded 
program?
    While Georgia stood ready to meet our state obligations, we 
ran out of federal funds. What do you think happened then? The 
citizens of Georgia turned to us to ensure that Peach Care 
would continue to cover their children.
    We had made a promise together, and Georgia was left to 
keep it alone; we were borrowing funding from other sources to 
continue our programs operation while Congress and the 
administration debated.
    Reauthorization of SCHIP allows us to revisit a program 
that is a nationwide success. It allows us to reevaluate what 
has worked well and what has not.
    It gives us an opportunity to update the over a decade-old 
formula that we as a nation have outgrown, and to make sure we 
do not forget the mandate of the program--to ensure the health 
of our nation's low-income children.
    Is more funding needed? Yes. Both Congress and the 
administration recognize that. But I am very concerned that 
vast, unsustainable expansions will harm the long term 
viability of the good program we have now. By focusing funding 
on low income children and re-targeting a distribution formula 
that has not changed in a decade, states will continue to make 
progress in reaching and insuring our children.
    As I have said many times, America is a compassionate 
nation. We must continue to take care of our most vulnerable 
citizens.
    SCHIP is a success story. It's a program that is proven to 
work. The proof is in the millions of American children who 
would have otherwise gone without vaccinations, without 
treatment for earaches and sore throats, without diagnosis of 
chronic diseases such as diabetes and asthma.
    I have been vocal because there is no doubt in my mind that 
this program must be preserved with its original intent in 
mind. Thank you again for giving me the opportunity to testify. 
I am happy to address any questions you may have.
                              ----------                              

    Mr. Pallone. Thank you, Governor.
    I was going to look around for somebody from Ohio to 
introduce you but after you and Sherrod left we couldn't find 
anybody of your caliber on the Committee, so we just have to go 
without it. I recognize the governor, Governor Strickland.

       STATEMENT OF HON. TED STRICKLAND, GOVERNOR OF OHIO

    Governor Strickland. Thank you, Mr. Chairman and Ranking 
Member Deal and all of my former colleagues on this great 
Subcommittee on Health. I am here today to talk about SCHIP, 
Medicaid and the unfortunate failed partnership between CMS and 
the States, especially the State of Ohio. But first I would 
like to thank you and others on this committee for the 
bipartisan work you have done to give those least among us 
access to healthcare. Your work on SCHIP is greatly 
appreciated, and I hope that we can continue to work together 
to get this vital program reauthorized.
    Last spring in Ohio, I as a Democratic governor joined with 
Ohio's Republican House and Senate and we passed a budget that 
passed through both chambers and the conference committee 
processes almost unanimously. No dissenting votes in the Senate 
and only one dissenting vote in the House of Representatives. 
And in that bipartisan budget, we agreed that a priority of our 
State was to ensure that all of Ohio's uninsured children had 
access to healthcare. Therefore, we funded SCHIP coverage from 
200 to 300 percent of the federal poverty level and also we 
authorized a State-only program to allow children above 300 
percent of the federal poverty level to buy into an insurance 
program. I signed that budget on June 30, but then came the 
memo on August 17, not a new law or a new rule but a memo from 
CMS that severely limited what States could do under SCHIP, and 
because of that memo, the provisions in Ohio's historic 
bipartisan budget that were consistent with the Bush 
Administration's previous SCHIP and Medicaid policy came to a 
halt, and at that moment 20,000 children in Ohio between 200 
and 300 percent of the federal poverty level were doomed to 
remain uninsured and they remain that way today.
    This memo I believe is a true violation of the State-
federal partnership that is SCHIP. We had no warning and there 
was no process to debate the impact of this major change that 
so negatively affects uninsured children in States like Ohio 
where we have made them a priority. In fact, it is more than a 
violation of a partnership. I believe it is a violation of 
authority. CMS took this action unilaterally outside the normal 
rulemaking process, not only denying input from the States but 
also denying input from even you, the Members of Congress.
    Knowing that CMS was now rejecting our State plan 
amendments that covered children up to 300 percent under SCHIP, 
we decided to take another route. If there was one thing I knew 
from serving on this committee, it was that there was 
flexibility for States when it came to Medicaid, and there were 
other States that have been able to cover kids up to 300 
percent. So while we were forfeiting the enhanced federal match 
under SCHIP, we knew what we had to do to get these kids 
covered: apply for the expansion under Medicaid, and that is 
exactly what we did. But in December, we got a denial letter 
from CMS. We were the first State to be officially denied 
Medicaid coverage for children up to 300 percent of the poverty 
line. The stated reason given to us: that we didn't apply for 
the expansion under SCHIP. That was the stated reason. But we 
all knew what would have happened if we had applied under 
SCHIP. The reason we were denied was not based in law or 
administrative rule. I believe the real reason we were denied 
is that we had found a legal and a legitimate way around their 
August memo.
    Unfortunately, this August memo isn't the only thing that 
CMS is doing that exceeds their authority. Because CMS wants to 
enact policies that are contrary to the will of this Congress, 
they are going around you and issuing other devastating rules 
and directives. I applaud you for placing a temporary 
moratorium on some of these lawless policy changes and I hope 
this moratorium will be extended. I would also ask that you 
pass language that would overturn the August 17th memo and 
expressly prohibit such significant unilateral policy changes 
in the first place.
    Before I close, I would like to ask you to consider 
Medicaid fiscal relief for the States. Ohio is struggling with 
both increased unemployment and Medicaid caseloads. Though Ohio 
faces a budget shortfall, we have committed to living within 
our means and investing in what matters. In a bipartisan way, 
Ohio has clearly stated in our budget that the uninsured, 
especially uninsured children, matter. So they will continue to 
be our priority and I ask that the Medicaid recipients continue 
to be a priority of this Congress. I ask that you vote to 
supplement help for our States, Medicaid help, as you vote for 
the supplemental funding in Iraq and Afghanistan. I want you, 
when that bill passes to help Afghanistan and Iraq, to also 
include in that bill supplemental Medicaid spending for the 
States.
    Mr. Chairman, I appreciate being here today, appearing 
before this, the greatest committee and the greatest 
subcommittee of the Congress. I look forward to working with 
you. It is good to see all of my former colleagues. I will be 
happy to answer any questions you may have of me.
    [The prepared statement of Mr. Strickland follows:]

                  Statement of Governor Ted Strickland

    Mr. Chairman, Ranking Member Deal, and my former colleagues 
of the Subcommittee on Health, it is my honor to be sitting on 
the other side of this committee room today to talk with you 
about the state-federal partnership that makes Medicaid and 
SCHIP. I want to begin by thanking many of you and the majority 
leadership of Congress who have worked on a bipartisan basis to 
reauthorize SCHIP. It is unfortunate that the President has 
twice vetoed these measures, but I hope that Congress will 
continue to press this issue until the program is reauthorized.
    As Governor of the State of Ohio, I have come to know well 
how the administrative actions of a federal agency can scuttle 
the carefully developed and negotiated bipartisan agreements 
that state legislatures reach to provide health coverage for 
those who need it most. I am here today to talk about three 
major topics:
    1. The Center on Medicare and Medicaid Services (CMS) 
August 17 directive is a blatant attempt to thwart the will of 
Congress and its apparent extension to Medicaid is without any 
basis in law. The result in Ohio is that 20,000 uninsured 
children with family incomes between 200 and 300 percent of the 
federal poverty level remain uninsured;
    2. There is a clear need for a congressional prohibition on 
CMS regulations and directives that either exceed its authority 
or violate legislative intent. Recently the U.S. Department of 
Health and Human Services (HHS) has gone so far as to propose 
giving the Secretary of HHS authority to overrule any decision 
by its Departmental Appeals Board; and
    3. The urgent need for Congress to enact legislation 
providing enhanced Federal matching funds to states such as 
Ohio that are experiencing both an economic slump and 
increasing Medicaid caseloads and to reject the President's 
ill-conceived Medicaid budget proposals.
    Ohio is currently facing tough economic times and Ohio 
families are struggling with the increased costs of food, 
energy, and other everyday expenses. For many of these 
struggling families Medicaid or SCHIP provides a lifeline that 
most could not do without. That is why I believe that the 
President could not have picked a worse time to propose cuts in 
Medicaid funding and to limit state flexibility to offer 
assistance to families and their children as well as others who 
depend on these vital programs. The improper denial of Ohio's 
bipartisan plan to cover more children under Medicaid, the 
failure to increase federal Medicaid matching funds during this 
economic downturn, the score of proposed CMS Medicaid 
regulations that violate legislative intent and the President's 
proposed federal budget will result in fewer children having 
access to health care coverage and to health care services. 
This is a tragedy for Ohio's uninsured children and their 
families, for the State of Ohio, and for this country. I 
believe that Congress must take action now to overturn policies 
that violate congressional intent and/or the law and should 
prohibit the administration from adopting similar policies or 
regulations going forward.

   Ohio's Experience in Expanding Health Care for Uninsured Children

    When I was elected Governor 16 months ago, I traveled 
across the State of Ohio and in the course of those travels I 
met scores of families who were without healthcare coverage. 
What was particularly disturbing to me was the fact that there 
were approximately 156,000 Ohio children without health 
insurance. I knew children without access to health care 
coverage were more likely to go without preventive care, and to 
face delays in getting treatment. I also understood that a lack 
of health care coverage could hamper a child's ability to get a 
good education.
    I met a small business owner from Shelby County. I would 
not consider him poor by any means, but certainly not wealthy. 
His son was diagnosed with Leukemia when he was only 18 months 
old. Happily, this youngster was treated and is now ten years 
old. But because commercial health insurers are reluctant to 
cover children with a medical history of Leukemia or other 
serious diseases, this man cannot afford to buy insurance for 
his son.
    I met a single mother from Van Wert, Ohio. Her two children 
are enrolled in Ohio's SCHIP program. She told me she refused a 
promotion at work because the extra salary will not be enough 
to buy health insurance for herself and her children. And the 
increase in salary will put her over the income limit for SCHIP 
coverage.
    Numerous Ohio families find themselves in these same 
situations. These folks have done nothing wrong. They are just 
working and trying to get ahead. And yet, they are victims of a 
system that fails to meet their needs, is lacking in 
compassion, and defies common sense.
    To address this, I worked with the Ohio General Assembly to 
enact a historic, bipartisan biennial budget that was passed 
with only one dissenting vote. This budget funded coverage 
under Ohio's State Children's Health Insurance Program to Ohio 
children whose parents make up to 300 percent of the federal 
poverty line. For a family of three, for example, that's an 
annual family income of about $52,800. We projected an 
additional 20,000 children would receive health care coverage 
under this initiative. Ohio acted in good faith and we believed 
our proposal was consistent with the Bush administration 
approach to Medicaid and SCHIP, an approach often touted by 
former Bush HHS Secretary Tommy Thompson who provided states 
with great flexibility in terms of deciding who got what 
benefits under Medicaid.
    We were trying to help children like Emily Demko, a little 
3-year-old girl in Albany, Ohio whose story we learned about 
through Voices for Ohio's Children. Margaret Demko and her 
husband, of Albany, Ohio (near Athens) waited a long time to 
become parents--nine and a half years of hoping and undergoing 
fertility treatments. Finally, in 2004, Margaret gave birth to 
Emily by emergency C-section after 36 hours of labor. The 
couple had no idea that their baby would be born with any 
difficulties, but nine hours after birth, Emily was transferred 
from the regional hospital where she was born to Columbus 
Children's Hospital. Doctors suspected a congenital heart 
defect, respiratory problems and Down Syndrome.
    After six days in the Neonatal Intensive Care Unit, the 
final diagnosis was Down Syndrome. And so Emily, whom her 
mother describes as ``a happy, healthy little girl with some 
extra chromosomal material,'' was sent home. The couple rapidly 
decided that Emily's special needs and a lack of appropriate 
child care in Athens County meant that it would be best for 
their family if Margaret stayed home to care for Emily. She 
left her job, and that ended the family's health coverage. 
Margaret's husband, a self-employed contractor with fluctuating 
income, has no access to employer-based insurance.
    Being without health coverage ``took awhile to sink in,'' 
Margaret says, especially while adjusting to life with a new 
baby and learning everything she could about Down Syndrome. But 
when it did, Margaret applied for Medicaid for Emily; she 
received coverage beginning in the fall of 2005. Emily began 
speech, physical and occupational therapy at Columbus 
Children's Hospital and made great progress. ``Therapy helped 
Emily learn to walk before the age of 2,'' reports Margaret, 
``which is unusual for a child with Down Syndrome. Her manual 
dexterity is almost age-appropriate and she has recovered from 
other issues typical for children with Down Syndrome.''
    But in early 2007, Emily's Medicaid coverage was up for 
redetermination, according to Margaret, and she was told by a 
new case worker that her husband's income was $300/year over 
the limit for Emily's coverage to continue. And so, in March 
2007, Emily became uninsured. ``Emily needs insurance to cover 
her therapy,'' says Margaret, ``and for the ordinary care that 
all children need. Her therapy costs $479 each week, and it 
helps foster the skills that will give Emily the best ability 
she can develop. I want my daughter to become a self-
sufficient, productive member of society--she, and other people 
with Down Syndrome, is capable of that. Therapy helps make that 
happen, but we need health insurance to help pay for it.''
    When I was in these esteemed halls and on this committee, 
we debated numerous times the need for uninsured children like 
Emily Demko to have access to health care coverage. It was this 
committee that served as a driving force behind enacting the 
original State Children's Health Insurance Program (SCHIP) 
legislation in 1997. I am proud to have supported a policy 
change resulting in millions of uninsured children having 
access to well child visits, immunizations, doctor visits, and 
hospital stays. Without SCHIP, many working parents would not 
be able to afford health care services for their children. So 
after garnering virtually unanimous and bipartisan support of 
the Ohio General Assembly to expand Ohio's Medicaid/SCHIP 
program to serve children with incomes between 200 and 300 
percent, I fully expected that CMS would quickly approve Ohio's 
state plan amendment to accomplish this. But I was wrong, just 
a few months after we passed our budget the federal government 
would unilaterally change the rules of the game.
    We submitted our state plan amendment to the CMS on 
September 28, 2007 and asked for approval of our plan to expand 
Medicaid eligibility for children with incomes between 200 and 
300 percent of the federal poverty level. On December 20, we 
received a letter from the CMS turning down our request to 
expand eligibility. The stated reason for the denial was that 
we had not requested the enhanced SCHIP match rate for our 
expansion. Put another way, we had not asked the federal 
government for enough money. Now I have only been Governor of 
the State of the Ohio for a little over a year, and I have to 
tell you this is the first and only time we have been told by 
the federal government that the reason they are saying ``no'' 
is that we have not asked them for enough money.
    But this clever bureaucratic maneuver was really just an 
attempt to apply the August 17 SCHIP guidance to Ohio even 
though we were applying under Medicaid and not SCHIP. Because 
CMS knew that if we had applied for the same expansion under 
SCHIP at the higher federal match rate, they would have also 
turned us down, and it would not be because we did not ask them 
for the right amount of money, it would have been because 
neither Ohio nor any other state can meet the August guidance. 
To this day, Ohio has seen nothing in federal law that would 
prevent us from covering children in Medicaid at any income 
level using the 1902 (r) (2) income disregards as long as we 
are willing to provide the requisite state match. So while the 
bureaucrats may have congratulated themselves on their clever 
maneuver, nearly 20,000 children remain uninsured and 3-year-
old Emily Demko is still without health insurance.
    Of course, the State of Ohio has not stood still as a 
result of this federal rejection. I have met personally with 
HHS Secretary Michael Leavitt to make our case and our staff 
within the Ohio Department of Job and Family Services have 
worked with CMS to recently submit a state plan amendment under 
SCHIP to cover children with incomes between 200 and 250 
percent of the federal poverty level. We have not received word 
yet from CMS whether or not this plan will be approved. At the 
same time, we are consulting with Ohio's legislative leadership 
regarding how we can offer coverage to those children with 
incomes between 250 and 300 percent of the federal poverty 
level. Emily Demko fits in this category.
    Ohio has filed an administrative appeal of the CMS denial 
of our original proposal to extend Medicaid coverage to 
children between 200 and 300 percent of the federal poverty 
level. At the same time, we have not ruled out further legal 
action pending the outcome of the administrative appeal.
    A much better alternative would be for Congress to 
legislate a prohibition on enforcement of the August 17 
guidance until larger SCHIP reauthorization issues are settled. 
Congress has already wisely approved moratoriums on other 
proposed CMS regulations, but any effort to extend those 
moratoriums should be expanded to include a moratorium on the 
August 17 guidance. Congress thought they were maintaining the 
status quo on SCHIP when they passed the extension last year, 
but CMS' denial of Ohio's expansion shows it is not interested 
in maintaining the status quo and as a result, we are in danger 
of seeing the unraveling of state Medicaid and SCHIP coverage 
for children. In addition, the President's Medicaid budget 
proposals show the administration wants to further expand the 
number of children covered by the guidance to those with 
incomes between 200 and 250 percent of the federal poverty 
level. Such an approach could prevent Ohio and other states 
from offering access to coverage to thousands of uninsured 
children.

     Proposed CMS Regulations Will Weaken Ohio's Health Care System

    In 2007 the U.S. Department of Health and Human Services, 
Centers for Medicare and Medicaid Services issued a number of 
Medicaid regulations that have enormous consequences for states 
and millions of Americans served by the Medicaid program. Many 
of these regulations alter long-standing Medicaid policy, but 
they have been proposed without any corresponding legislative 
action. CMS estimated just six of these regulations could 
result in an estimated $12 billion reduction in federal 
Medicaid spending over the next five years. In our view these 
are really budget cuts disguised as regulations.
    We applaud Congress for wisely implementing a moratorium on 
several of these regulations that CMS has attempted to 
implement. We believe Congress must now act quickly to 
expressly prohibit implementation of these burdensome and ill 
thought out regulations. Without such action, costs will simply 
be shifted to states and local governments that are already 
being hard pressed by a weakened economy. It is not just state 
Medicaid programs that will be affected by these cuts. The 
impact will be felt by our schools, child welfare agencies, 
colleges and universities, and many others.
    For example, one of these regulations deals with the issue 
of targeted case management.
    The Deficit Reduction Act (DRA) of 2005 contained a section 
to clarify the Medicaid definition of case management when 
covered as a Medicaid state plan service. This clarification 
intended to curb improper billing of non-Medicaid services to 
the Medicaid program. CMS issued an Interim Final Rule (IFR), 
effective on March 3, 2008, to implement this section of the 
DRA. Ohio is concerned CMS is using this IFR as a vehicle to 
eliminate administrative case management as an option for the 
1915(c) Home and Community-Based Services (HCBS) waiver 
programs through which states provide less-expensive community 
care as an alternative to more expensive institutional care. 
Waiver case managers are key to assuring waiver consumer health 
and safety, and cost-effective community service delivery. The 
elimination of administrative case management goes well beyond 
the congressional intent of the DRA and will have a devastating 
impact on several of Ohio's 1915c HCBS waivers.
    Though the proposed rules do not specifically address HCBS 
waivers, CMS has gone on record stating their intention that 
states will no longer be permitted to choose to provide case 
management as an administrative activity under an HCBS waiver. 
Historically, administrative case management combined what the 
IFR now defines as case management, such as designing and 
coordinating service plans, with certain Medicaid 
administrative activities, sometimes referred to as gate 
keeping activities. Gate keeping includes such activities as 
pre-admission review, prior authorization and eligibility 
determination. Ohio questions CMS' authority to extend the 
provisions for state plan services as contained in the Deficit 
Reduction Act to other forms of case management, including case 
management services provided through a 1915(c) waiver or under 
an administrative reimbursement mechanism.
    CMS is differentiating case management from administrative 
activities, and indicating any willing, qualified provider may 
furnish case management, whereas only the state Medicaid agency 
can perform administrative activities. The provision 
prohibiting case managers from serving as gatekeepers will 
limit their ability to effectively coordinate services and 
manage program costs, especially as part of an HCBS waiver 
program. Limiting administrative functions such as level of 
care determinations, service plan approval and prior 
authorization of waiver services to only Medicaid state agency 
staff will have a major impact on access, efficiency and cost.
    An advantage of administrative case management is the 
state's ability to limit providers to entities having expertise 
in serving an HCBS waiver's target population. For instance, in 
Ohio's PASSPORT HCBS Waiver that serves more than 27,000 
elderly consumers, a network of 13 PASSPORT Administrative 
Agencies (PAAs), located in the state's 12 Area Agencies on 
Aging as well as one not for profit agency, operate the program 
regionally and provide administrative case management to 
PASSPORT waiver consumers. Ohio has used administrative case 
management in the PASSPORT waiver for 24 years with approval 
from CMS. The PAAs currently employ approximately 550 licensed 
social workers and registered nurses to perform the case 
management function. If CMS eliminates the option of 
administrative case management, the PAAs will be forced to lay 
off their current case managers.
    The IFR requires a consumer have only one Medicaid case 
manager, and most individuals in Ohio's Medicaid HCBS system 
have only one. However, Ohio's system also supports the use of 
an inter-disciplinary approach, when consumer needs cross 
delivery systems. Requiring a consumer to have only one 
Medicaid-funded case manager may result in an individual 
receiving case management services from a case manager 
inexperienced in serving certain populations or needs. Case 
managers will need to expand their expertise and devote extra 
time to manage across all service delivery systems and 
providers. This will result in the need for smaller case loads 
to accommodate an increase in case management intensity, which 
will lead to increased program operation, costs.
    The IFR allows individuals to decline case management 
services in contradiction to CMS' HCBS waiver program 
requirements. HCBS waiver provisions require each participant 
receive services furnished under a comprehensive plan of care 
clearly delineating the consumers' needs. Creating such a plan 
is a case management function under a HCBS waiver. If the case 
manager has no role in developing, coordinating and monitoring 
a comprehensive plan of care, Ohio can neither responsibly 
manage waiver program costs nor assure participating consumers' 
health and safety.
    Historically, to avert the possibility of conflict of 
interest, Ohio has prohibited direct care service providers 
from also providing case management. The IFR allows direct 
service providers to also furnish case management, inviting the 
possibility of self-dealing.
    Ohio also is concerned about the new 60-day limitation 
introduced in the IFR on coverage of community transition 
coordination, a state plan case management service component, 
consisting of all the tasks involved in helping an 
institutionalized individual relocate to the community. 
Currently, Ohio's MR/DD targeted case management service, 
provided as a state plan service and not as an HCBS waiver 
service, covers community transition during the last one 
hundred eighty days (180) of an individual's stay in an 
institution. This amount of coverage is consistent with CMS 
policies issued in response to the Olmstead court decision. In 
some cases, 180 days is not enough time to put into place all 
the necessary community supports to effectively transition an 
individual from an institution to a community setting. 
Moreover, the IFR requirement that FFP is not available until 
the consumer leaves the institution and is receiving medically 
necessary services coordinated by a community case management 
provider, coupled with the IFR requirement that a consumer can 
decline case management services, creates a disincentive for 
community-based case management providers to deinstitutionalize 
individuals.
    CMS projects the IFR will produce Medicaid cost savings. 
With potentially many new agencies and individuals providing 
case management and with the loss of key oversight for Medicaid 
waiver spending, it is simply not possible to achieve the 
savings CMS assumes in its impact statement. This is even more 
evident by the fact that if administrative case management is 
eliminated in favor of targeted case management, states like 
Ohio will be able to bill case management at the higher FMAP 
rate. Ohio projects an increase in CMS expenditures of $5 
Million from this change alone. Ohio believes the changes will 
result in an additional increase in costs due to increased 
staffing needs, decreased controls, and significant changes to 
information technology systems to accommodate a fifteen minute 
billing unit, newly introduced in the IFR. For example, for 
Ohio's waiver for the elderly, such changes may result in 
increased costs of over $6.1 million (all funds) to accommodate 
the regulatory provisions.
    CMS indicates the only entity impacted by the proposed 
regulations is the state. In Ohio, these regulations, 
especially if applied to 1915(c) waivers, impact local entities 
currently responsible for case management activities whether 
the activity is currently conducted as an administrative 
function or as a service.
    As I mentioned at the beginning of my testimony, we are 
also concerned about proposed HHS/CMS regulations published in 
the Federal Register on December 28, 2007 entitled Revisions to 
the Procedures for the Departmental Appeals Board and Other 
Departmental Hearings which would significantly weaken the 
Departmental Appeals Board (DAB) and cause a wholesale revision 
of the current method of resolving disputes between states and 
the federal government. Congress commissioned the DAB to give 
states a method of seeking review of Secretarial decisions and 
made a conscious decision not to give the Secretary the 
authority to review any decision by the DAB. The regulations 
seek to undo current practice and propose to give the Secretary 
the power to overturn decisions by the DAB. In this instance 
the Secretary is asking to be both the judge and the jury. The 
proposed regulations go even further by forbidding the DAB from 
invalidating any federal decision if such a decision runs 
contrary to published or even unpublished guidance. This means 
that states could be held accountable to follow rules or 
guidance that was never properly released or were released 
without any proper notice. This is yet another example of HHS 
and CMS seeking to act in a way that is contrary to the law, 
and to well established notions of due process and fair play.
    Another area of concern is the administration's regulations 
that would wipe out Medicaid reimbursements for Graduate 
Medical Education (GME). The regulations declare that state 
Medicaid programs ``must not include payments for graduate 
medical education to any provider or institution or include 
costs of graduate medical education as an allowable cost under 
any cost-based payment system.'' The Association of American 
Medical Colleges (AAMC) has filed comments that the rules 
``represent a major and abrupt reversal of long standing 
Medicaid policy.'' They also contend the rules could have a 
negative impact on the health care system. According to the 
AAMC, teaching hospitals represent 20 percent of all hospitals, 
and 42 percent of all Medicaid discharges. Ohio's teaching 
hospitals will lose millions of dollars if these regulations 
and or proposals are allowed to proceed and it will undercut 
their ability to train the next generation of physicians who 
will be called upon to treat our Medicaid consumers.
    Other regulations of concern include those on 
rehabilitation services, school-based services, hospital cost 
limits, and provider taxes. Each of them has the potential to 
undermine the state's health care system and limit access to 
health care.

          Federal Fiscal Relief Needed To Avert Medicaid Cuts

    It is clear to me that Ohio's economy is struggling, with 
both unemployment and Medicaid caseloads increasing. As of 
December 2007, our Medicaid caseloads were 22,821 over our 
budgeted projections and there is every reason to believe that 
our Medicaid caseloads will continue to exceed budgeted levels. 
When we started to see these caseload numbers rise we delayed 
planned increases in the Medicaid rates for community providers 
and hospitals, and also delayed restoration of adult dental 
benefits, which was eliminated by my predecessor. Since that 
time, we have decided to proceed with the planned rate increase 
for community providers and to restore adult dental benefits, 
but we were unable to afford a planned rate increase for 
hospitals. Even though Ohio faces a biennial budget shortfall 
of $733.4 million we are committed to living within our means 
and investing in what matters to Ohio, and what matters in this 
instance is access to health care coverage for children and 
other vulnerable populations.

    Bush Medicaid Budget Puts Children, Families, and Persons with 
                          Disabilities At Risk

    According to the American Public Human Service Association, 
the budget submitted by President George Bush seeks to cut 
Medicaid spending by $17.3 billion over the next five years, 
and over half of these cuts are the result of simply reducing 
the federal financial participation in Medicaid expenditures. 
The administration is proposing to reduce federal financial 
participation for the following activities:
     Compensation or training of skilled professional medical 
personnel (and their direct support staff) of the state 
Medicaid or other public agency;
     Preadmission screening and resident review for 
individuals with mental illness or mental retardation who are 
admitted to a nursing facility;
     Survey and certification of nursing facilities;
     Operation of an approved Medicaid Management Information 
System (MMIS) for claims and information processing;
     Performance of medical and utilization review activities 
or external independent review of managed care activities;
     Operation of a state Medicaid fraud control unit (MFCU);
     Family planning services;
     Targeted case management; and
     Medicare Part B Premium Costs (Q1 Program Match Rate).
    There is no justification for these proposals, and many of 
them defy common sense. The federal government should be 
encouraging states to do more in areas like fraud prevention, 
preadmission screening for nursing facilities, automation, and 
health information technology, not less.
    Another area of concern in the President's Medicaid budget 
is the proposal to extend the August 17 guidance to children 
whose families have incomes between 200 and 250 percent of the 
federal poverty level. States would be required to enroll 95 
percent of their eligible Medicaid and SCHIP child populations 
with annual family income less than 200 percent of the federal 
poverty level. States failing to comply, and we do not know of 
any state that could comply with this standard, are subject to 
a 1% reduction in their federal financial participation rate.
    We are also opposed to another apparent proposal placing 
new limits on how states calculate a family's income for 
purposes of qualifying for Medicaid or SCHIP. Most states, 
including Ohio, determine family income by deducting a certain 
portion of income (through earned income disregards) to account 
for work related expenses and child care. If these new budget 
provisions/rules are allowed to go into effect, it is virtually 
certain many Ohio children who are eligible today would no 
longer be eligible for our state children's health insurance 
program and would find themselves uninsured.
    Finally, it is not clear to us the President's budget 
contains sufficient funding to either expand the program to 
serve additional eligible children in Ohio or to even serve all 
the Ohio children who currently depend upon the program.
    In closing, I want to end my testimony where I started, by 
calling on Congress to assert its rightful authority over the 
Medicaid and SCHIP programs and to prohibit CMS from enforcing 
the August 17 directive; to prohibit CMS from promulgating 
regulations, directives or guidance that either exceed their 
authority or violate legislative intent; and to immediately 
pass legislation providing enhanced Federal matching funds to 
states such as Ohio that are experiencing both an economic 
slump and increasing Medicaid caseloads and finally to reject 
the Presidents Medicaid budget proposals which, if passed, 
would have the effect of reducing access to health care for 
thousands of Ohioans.
    Thank you again for the opportunity to testify I would 
welcome any questions that you may have.
                              ----------                              

    Mr. Pallone. Thank you, Governor Strickland. Thank you to 
all of you. We are now going to take some questions from the 
Members of Congress, and I will recognize myself initially for 
5 minutes.
    I wanted to ask Governor Gregoire, I know that some 
governors have raised the concern that if CMS lets States like 
Washington cover uninsured children in families with incomes 
above $35,200, or 200 percent of the federal poverty level, 
that other States won't have enough money for their own 
programs. That is the concern. But in my view, a robust SCHIP 
reauthorization would solve that problem. The bill that the 
President vetoed, the Children's Health Insurance Program 
Reauthorization Act--we call that CHIPRA--not only fully funded 
every State's SCHIP needs but provided additional payments when 
States enrolled additional eligible but uninsured children. 
Now, I know that Governor Barbour and I may disagree on how our 
formula would have worked and I hope that maybe we can have a 
later discussion to clear that up, Governor, but the purpose of 
these SCHIP changes was to ensure that States didn't have to 
fight with each other for money to help children in need and 
that children in one State didn't have to hope that another 
State's children remain uninsured to get help. So I just 
wondered if you could, Governor Gregoire, to comment on those 
issues.
    Governor Gregoire. Thank you, Mr. Chair, and what you just 
said is the absolute impression that I have of the bill that 
was put before the President. We are a contributing State to 
the likes of Mississippi because we have been penalized since 
the inception of SCHIP in 1997 because we already were covering 
children within 200 percent of poverty. So we have never 
expended our allotment for SCHIP funds. Those funds have gone 
elsewhere. So what you did in your reauthorization in my 
opinion is, addressed the issues that have been raised here 
this morning to include my State where the formula was a 
penalty to us and to address the issues that my colleagues have 
raised where they weren't sufficient in their allotment.
    I would encourage Congress to yet again pass the 
reauthorization of SCHIP. It allowed the States to do what 
these children absolutely needed, gave us the necessary 
flexibility but most importantly, Mr. Chair, I believe it 
adequately funded what is called for in SCHIP throughout the 
country.
    Mr. Pallone. Well, I know that the Administration is 
proposing essentially capping the program so that States can't 
cover uninsured children and families with incomes above the 
$35,000 a year, and then simply taking money away from States 
who can't meet arbitrary targets. But how does that compare 
with the CHIPRA bill? Which approach is better for States who 
wish to cover children and the children who remain uninsured, 
in your opinion?
    Governor Gregoire. We again believe that the idea of 
covering children under 200 percent with the August 17th letter 
is a means by which we will not be able to raise our coverage 
above that threshold to 250 and hopefully ultimately to 300 
percent. And while the Nation has dramatic differences in terms 
of income levels, depending upon where you live, yes, in New 
Jersey and New York and California but also I will tell you in 
a State like Washington State, we are being penalized by 
uninsured children who are absolutely low income. Their 
families are struggling so again what has come forward to us 
through that August 17th letter is virtually a guarantee that 
we can't move forward. The participation rate that has been 
called for there, to this day we do not have adequate 
information as to how that is to be addressed. We believe we 
meet it but we have no indication. New York met it by CMS 
standards and then was denied because it didn't meet it. So 
that is why the rulemaking process is so important, which was 
avoided here, and that is why we brought suit. But again, what 
you did and what you put before the President, in our 
estimation, was the exact right thing for the States.
    Mr. Pallone. Well, thank you.
    You know, Governor Strickland, you mentioned the 
possibility of increasing the federal share of Medicaid 
funding. I think you know that in 2003 Congress enacted a 
stimulus package that provided States fiscal relief to help 
with their budget shortfalls, and one of those was an increase 
in the federal share of Medicaid funding for States that didn't 
roll back Medicaid coverage during the downturn, and we know 
that that assistance did help protect health coverage and 
assisted in the States' economy. I think I mentioned in my 
opening statement that myself, Mr. Dingell, Peter King and 
others on a bipartisan basis, we recently introduced a bill to 
provide a temporary increase in Medicaid funds to States during 
this current recession, and I just wanted you to comment, not 
just yourself but anybody on the panel, whether you believe 
that that State fiscal relief is important and how a temporary 
boost in Medicaid funding would help your State. You don't all 
have to comment but if anyone would like to. I will start with 
Governor Strickland since you mentioned it.
    Governor Strickland. Well, thank you, Mr. Chairman, and we 
have already--I have already reduced State spending by $730 
million due to the economy and budget shortfall in Ohio, and we 
face a possible shortfall over the 2-year period of $1.9 
billion. So we are taking drastic steps to try to keep our 
budget in balance as my friend, Sonny Perdue, indicated that he 
must do as well.
    Before the first stimulus package was enacted by this 
Congress, I called the leadership of both parties and I called 
the leadership in the Congress from Ohio. I talked to Mr. 
Boehner, and at that time I urged him to make Medicaid relief a 
part of the stimulus package in an effort to help the States. 
He indicated to me that he did not think that would be a part 
of the initial stimulus package but he also indicated to me 
that he thought this body would rather soon be dealing with a 
supplemental bill to provide the funding for Iraq and 
Afghanistan, and he said perhaps--no commitment but perhaps 
what I was asking for would be considered as a part of that 
supplemental measure. I would certainly hope so. The people of 
Ohio and of America are suffering greatly because of the 
current state of the economy, and as this body considers 
additional financial support for Iraq and Afghanistan, it seems 
hugely appropriate to me that they would also consider the 
needs of the American people and the needs that the States are 
facing and grant us some relief by increasing the FMAP 
allotment.
    Mr. Pallone. Thank you. My time has run out but I don't 
want to preclude if anybody else wants to comment on that, you 
can. If not, we will--go ahead, Governor.
    Governor Barbour. Thank you, Mr. Chairman. It happens that 
I became governor in 2004, the year after the FMAP was plussed 
up, and of course, I can tell you, if you all got some extra 
money lying around, we would like to have it. But I will tell 
you the unintended consequence is that my predecessor took $200 
million and spent it on Medicaid recurring expenses with that 
one-time money and the next year we had to figure out how we 
were going to replace that $200 million. So we are not ever 
going to look a gift horse in the mouth but it is a little bit 
of moral hazard if you spend the money on recurring expenses 
and the economy doesn't come back the next year.
    Mr. Pallone. Thank you.
    I will move on to Mr. Deal. Oh, I am sorry. Mr. Barton is 
recognized for questions.
    Mr. Barton. Thank you, Mr. Chairman. I am a little bit 
surprised but I would be happy if Mr. Deal wants to.
    My questions are more generic. I mean, I respect these 
governors and what you have to do. My first question is, I 
assume that each of you operate under a balanced budget. Is 
that correct? So we have a little bit different system up here, 
as Governor Strickland knows. We have been working to try to 
hold our deficit down but CBO projects that this year is going 
to go back up. So even though Governor Barbour says if you have 
any money laying around, send it to Mississippi, our problem is 
how to distribute the money that we have. So my generic 
question is, what is wrong with the basic premise that SCHIP, 
one, should be a State-federal partnership, and two, should be 
for children between 100 and 200 percent of poverty? And why 
should we go above that? I understand the governor of 
Washington stated that you need better data. You might quibble 
with 95 percent but why shouldn't we try to cover with whatever 
money we have those children in that bracket before we go above 
that? What is wrong with that?
    Governor Barbour. Well, Mr. Chairman, obviously in my 
State, we don't try to cover anybody above 200 percent of 
poverty but we don't get enough money to cover the ones under 
200 percent of poverty, and I will say it is hard for us to 
understand why the formula would give us half of what it takes 
to cover all the eligible children and other States, wealthier 
States, in fact, can go up the ladder, cover a lot of adults, 
even adults without children. I came to just share my 
information with you but we focus on exclusively people under 
200 percent of poverty, children.
    Mr. Barton. I understand the formula fight. We have formula 
fights on this committee all the time. I could say, if I wanted 
to be mean to you, that Congressman Pickering just hasn't done 
a very good job of fighting your fight, but I am not going to 
do that because he is retiring and he is a good man. So I 
understand that the big States and the industrialized States 
have a different idea what the formula ought to be than the 
rural States and the small States but I want to try to pin down 
this what is wrong before we go above 200 percent that we have 
some criteria to cover people, children in this case, between 
that 100 and 200 percent. And then as Governor Strickland 
points out, if a State wants to go above that, apparently his 
State did and found funding for it, and I don't have any 
problem if people in the Buckeye State want to do it on their 
own but why should we give federal dollars until every child in 
America or 90 or 95 percent of them are covered?
    Governor Strickland. I think you ask a legitimate question, 
but I think there are just practical considerations. There is a 
reason why apparently no State meets the current expectations 
of CMS, and so I think that indicates that it is not because 
the States aren't reaching out and aren't trying to enroll 
these kids, and I guess the answer that I would give to your 
question is that every child without health insurance that 
cannot achieve it or attain it because of costs or because of 
family income, every child is deserving of healthcare coverage, 
and so simply because States may not be able to reach the 
criteria that has been set by CMS does not mean that the 
children that the States are trying to reach and cover are not 
worthy of this coverage.
    Mr. Barton. What is the reason, Governor? Why can't a State 
reach 95 percent or 90 percent? What is the structural reason 
that that is not an achievable goal?
    Governor Strickland. Well, I think there are many reasons 
that may differ from State to State but I don't believe that 
the fact that not a single State to my knowledge has reached 
this criteria means that the States aren't trying to do this 
outreach and to reach these children. But the fact remains that 
even the children that we are wanting to provide coverage to 
are needy kids. I mean, they are kids without health insurance, 
and they are from families that are working families but for a 
variety of reasons just simply cannot afford the coverage. So I 
don't see a legitimate way to make a distinction between one 
child's need of health insurance coverage and another child's 
need of health insurance coverage if both of those children or 
all those children are without coverage and it is through no 
fault of their parents but simply because they can't afford it.
    Mr. Barton. Governor Patrick, did you want to comment?
    Governor Patrick. I just wanted to make a couple comments 
about our experience in Massachusetts. First of all, 96 percent 
of the children we cover are at 200 percent or below. There is 
a sliding scale of subsidy for kids at 200--between 200 and 300 
percent, and I want to make a point about process here because 
as we were developing--and I say we meaning my Republican 
predecessor and in partnership with the Democratic 
legislature--these health reform components, we reached 
agreement with CMS on this structure. So the August 17th 
guidance takes that element of the agreement on which we relied 
away, and that is very, very troubling for us in terms of being 
able to sustain----
    Mr. Barton. But you said you got 96 percent covered so why 
would CMS not approve Massachusetts' petition if you are at 96 
percent?
    Governor Patrick. Well, you should talk to CMS about that, 
and if CMS is here, I hope you will, but if the August 17th 
guidance stands, then we have about a $19 million bill that we 
weren't expecting based on the agreements that we have been 
living with. I would just make one other broad point. We are 
all of us sensitive to your premise of the question about 
having to--because we have to balance budgets every year. We 
are all sensitive to the fact that there is not a lot of money 
lying around, but I do ask that the Congress and the committee 
consider what I have been asking our own legislature to 
consider, which is the cost of inaction. There are costs 
associated by not doing these things, and one of the costs in 
Massachusetts, one that we have begun to moderate down, is the 
system-wide impact of having primary care delivered in 
emergency rooms rather than in a pediatrician's office, and I 
know you appreciate that.
    Mr. Pallone. Please go ahead, but we do have to keep going 
because I don't think you can stay here all day, but go ahead.
    Governor Perdue. To briefly answer Mr. Barton's question, 
this is a voluntary program. You cannot force parents to 
participate. We have--we are at 235 percent. We have--most of 
our population is under 200 percent of poverty. But even with a 
modest premium, as long as parents have a culture that they can 
walk into any emergency room when they need care and get it, 
then they won't even pay a modest premium to cover their 
insurance. They don't value it the way we value it.
    Mr. Barton. So----
    Mr. Pallone. Thank you. I am sorry.
    Mr. Barton. I will yield back. So if we adopted a rule that 
if coverage is offered and the family rejects it, say in 
writing, that would count as an attempt. I mean, if we took who 
is actually covered plus the parents who refuse coverage and 
add those numbers, that would satisfy the rule.
    Mr. Pallone. I have got to move on. I am sorry. Because I 
know all of you can't stay.
    Mr. Dingell is recognized.
    Mr. Dingell. Thank you.
    I would like to commend the governors for their very fine 
statements and tell them how much I appreciated their presence 
and their assistance to the Committee.
    This first question is to Governor Barbour. Your comment at 
page 4 at the top of the page, ``The better you are at 
implementing SCHIP, the less funding you receive. If a State is 
100 percent successful and reached all eligible uninsured 
children, its funding next year would be drastically cut 
because no children would be uninsured.'' Governor, that is a 
very legitimate complaint and I want to commend you for it. I 
would note here that your concerns I think were met by the bill 
which the committee reported out and which passed the House on 
several occasions. First of all, it increased the total funding 
from $25 billion by adding an additional $35 billion so it went 
up to $60 billion. Second, it would more than double the 
current allotment to Mississippi by giving them a $235 million 
increase. Third, it would give bonus payments to your State for 
enrolling new and low-income children. Four, it would make 
contingency payments available to your State where you would 
enroll more uninsured children and exceeded your allotment of 
children to be reached. And last, it would give rebasing, which 
appears to be a very major concern of yours, by having every 2 
years the States' number be based on actual spending so that if 
Mississippi enrolls all of those uninsured kids, their 
allotment will be rebased on a higher number and that will help 
you to account for more children and to provide better services 
to your people. Does that address the concerns that you have 
expressed to us?
    Governor Barbour. Mr. Chairman, let me first of all say 
they retyped this with bigger type so I could read it so the 
pagination that you gave me, I couldn't--it isn't on the top of 
page 4 on this old eyes copy. But to answer your question, what 
you all have proposed is certainly an improvement over where we 
are now but we don't turn away any child that shows up and 
wants to sign up for SCHIP who is eligible but we don't go out 
and try to recruit them because today we don't get enough money 
to pay for the new ones.
    Mr. Dingell. Your complaint about today, Governor, is a 
very legitimate one. I am talking about the future and the 
changes that we were trying to make in the bill which was 
vetoed by the President. I want to address your concerns and I 
want to make sure, Governor, that we have done so.
    Governor Barbour. It certainly is an improvement, Mr. 
Chairman. We believe at the end of the day we would still be 
shorted 27 percent. I would be glad for my staff to sit down 
with your staff and crunch those numbers but that is what we 
believe, that at the end of the day it would be a shortfall of 
27 percent even if we stay at nothing but children under 200 
percent of poverty.
    Mr. Dingell. Governor, thank you.
    Governor Barbour. Thank you, sir.
    Mr. Dingell. These questions are to Governor Strickland. 
Governor, you have talked about CMS and its directives that 
were made. First of all, the first of them says that the 
Federal Government should no longer help States pay for the 
cost of Medicaid outreach and enrollment activities by school 
employees, particularly when States have found this to be a 
very effective way to find and enroll uninsured children. The 
directive also said that the Federal Government should no 
longer pay States for the costs of services to children and 
adults with mental illness, even if the States believe these 
services would help reduce unnecessary institutionalization. 
And last of all, their directive says the Federal Government 
should no longer pay States for the salaries of interns and 
residents in teaching hospitals that serve the States' Medicaid 
patients. Do you favor those actions, Governor?
    Governor Strickland. Mr. Dingell, I think those actions are 
outrageous. I have heard from our hospitals. I have especially 
heard from our children's hospitals. Ohio is a state with just 
marvelous children's hospitals and they are very concerned 
about the graduate medical education issue. That is why we are 
asking and we have asked unanimously--I think there has been 
one dissenting vote among the National Governors Association of 
both political parties--that a moratorium be placed on these 
decisions. It is estimated that they could cost the States $13 
billion over 5 years. The States I can tell you simply cannot 
tolerate that kind of financial burden and so it is our hope--
and I think I am speaking unanimously here for the governors of 
both parties that it is our hope that a moratorium will be 
placed on these changes and that they will not be allowed to go 
into effect.
    Mr. Dingell. Those concerns are set forth in the letter of 
September 17 by Governor Spitzer and Governor Schwarzenegger of 
New York and California and also the one on February 26 by the 
National Governors Association signed by Governors Pawlenty and 
Rendell and Corzine and Douglas. Is that right?
    Governor Strickland. That is right, Mr. Chairman, and if it 
has not already happened, I would ask unanimous consent that 
this--that these letters you referred to be made a part of the 
permanent record.
    Mr. Dingell. You beat me to it. I ask unanimous consent 
that those be inserted into the record.
    Mr. Pallone. So ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Dingell. You know how this place works. My time has 
expired, Mr. Chairman. I thank you.
    Mr. Pallone. Thank you, Mr. Chairman. So ordered.
    Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman.
    First of all, I would like to ask--because there is 
confusion as to what the August 17th letter actually does, I 
would like to insert a response letter from Dennis Smith from 
CMS to Ranking Member Mr. Barton dated January 22 that I think 
does help clarify some of the ambiguity that may have existed.
    Mr. Pallone. So ordered.
    [This information was unavailable at the time of printing.]
    Mr. Deal. Mr. Chairman, before I ask a question, let me 
sort of set the stage for it because I think that one of the 
great opportunities we have is when a piece of legislation has 
a sunset date such as SCHIP did that we have an opportunity to 
review it and its 10-year history and decide what things about 
it need to be changed. I think we have had one in particular 
that has been highlighted by Governor Barbour and by Governor 
Perdue in particular and that is the formula problem. It is the 
ultimate catch-22 where a child who would have been uninsured 
but for being enrolled in SCHIP no longer counts in your 
formula for the allocation. That is just something that 
definitely has to be addressed.
    The other problem we have is data, that is, Governor Perdue 
alluded to the fact that we are being counted against 2002 
data. We need a data system and I think all the governors would 
agree that we need a data system. The governor from Washington 
has indicated that her statistics indicate one thing, federals 
don't. We need some consolidated way, a legitimate way to 
measure how many children are uninsured. Now, assuming we can 
get that reliable data for the measurement, I think the basic 
question that comes back to is this on the funding. We ought 
not to penalize States that have done a good job of enrolling 
the children that were the targets. Assuming we can correct 
that, then the question becomes, well, how do you allocate the 
money under this SCHIP program so that we don't create a 
situation of having rich States that can do things that poor 
States can't do. That is one of the fears that I have. One of 
my concerns about the formula that was in the bill that we were 
presented with is that you start as a baseline the amount of 
money you spent last year when we had some States who their 
baseline, 74 percent of their enrollees were childless adults, 
but that becomes your baseline on which you build for the 
future. To me, that is a crumbling foundation. It should not be 
the foundation for a formula.
    So let me go back to basics on that. Are there any of you 
who disagree with the concept that a State's allocation under 
SCHIP should be based on the number of children who are below 
200 percent of poverty, assuming that we get the numbers right 
about who those are? Do any of you disagree with that 
proposition, and if so, why?
    Mr. Pallone. Governor Patrick?
    Governor Patrick. No, Congressman, I don't disagree with 
the premise as the starting premise. It is just that that is 
not where I think we should stop. I am with you in terms of 
focusing on the poorest children first and on children rather 
than adults, as we do in Massachusetts. I know there are other 
arguments for that in other States. I am with you there. In our 
own situation, as you know, and I just want to come back to it, 
we have agreements we worked with CMS in order to make our 
healthcare reform work and so we want to make sure those 
agreements are honored in order to continue to make that 
healthcare reform.
    Mr. Deal. And I understand, Governor Gregoire, your concern 
that you were being penalized because you had already gone with 
the 200 percent. I think all of us agree, that needs to be 
fixed. Let me tell you why I think this is critical, because if 
we let the formula go up the economic chain and the allocation 
is based on, let us say, 300 percent of poverty, I don't think 
Mississippi and Georgia will be able to come up with the money 
at the State level even with the enhanced FMAP to meet their 
State's portion to be able take advantage of going to 300 
percent. Is that a concern?
    Governor Perdue. Well, it is a concern, as I indicated in 
my testimony, Congressman Deal, that under a vastly expanded 
program, we may not be able to find the money to match, and 
frankly, based on our last experience of running out of federal 
money, I would be very anxious if we expanded that we would be 
left out to dry again from a funding perspective. So I agree 
that States like Washington, I think Minnesota was one, that 
may have expanded these populations probably ought to be 
rectified. They ought to be looking initially at those children 
under 200 percent and they ought to get credit for that in 
their allocation. I have got a little problem with my friend 
from Massachusetts in that we applied for these waivers as well 
and the spigot was turned off. So not all States are being 
treated equally in the waiver program and I feel very strongly 
about commitments as he does but this has been very much an ad 
hoc position on the waiver process. We tried and we have been 
denied.
    Mr. Deal. Right.
    Governor Strickland?
    Governor Strickland. Yes. I don't think any of us would say 
that the formulas that may injure some States unintentionally 
need to be readjusted and I think my friend from Georgia is 
correct. These waivers have been either approved or disapproved 
indiscriminately and so it is probably appropriate that we look 
at the funding allocations, that we look at a consistency 
across the states but I would hope that we wouldn't remove the 
flexibility that I think we need to have because all of our 
States are different and it is important that we maintain a 
level of flexibility that gives us the ability----
    Mr. Deal. I agree with that, and from a very fundamental 
point of view, if the funding is the same basis for determining 
the formula for every State, if it is the same, and I realize 
waivers have caused all sorts of distortions there, but if the 
funding formula for a State is basically the same funding 
formula, you know, from my point of view, if the State wants to 
do more, then fine. If they have got some money left over that 
they want to do more with, that ought to be their flexibility. 
But it ought not to be the flexibility that every State doesn't 
have the option of taking advantage of is the point I am 
making.
    My time is expired. I realize that.
    Mr. Pallone. Thank you, Mr. Deal.
    The gentlewoman from California, Ms. Solis.
    Ms. Solis. Thank you, Mr. Chairman.
    I would like to direct my question to Governor Gregoire, 
and I want to thank you for your earlier comments. We didn't 
get to hear your testimony regarding the DRA, the Deficit 
Reduction Act, and I noticed some of the problems that your 
State faced in trying to implement the documentation 
requirements. If you could explain what the cost was and if it 
was worth it?
    Governor Gregoire. Yes. Thank you very much for the 
question. As a result of the requirements that were put in 
place, we hired a significant number of employees. We went 
through thousands of people to make sure that we were meeting 
the requirements for citizenship and at the end of the day, 
after looking at thousands and sending millions of dollars for 
employees to do that, we found one person, one person only, a 
person who was from Canada who did not meet the citizenship 
requirement. So what you did in the SCHIP reauthorization is a 
matched capacity for us to look at Social Security numbers, 
which would cut back the cumbersome process and cut back the 
cost to the States dramatically. So that is again why we 
appreciated what you did in the reauthorization and would 
support it again because the strenuous kind of things that CMS 
has us going through are far too costly, the results showing 
virtually nothing.
    Ms. Solis. And if you could use that money to provide more 
coverage, how many more children could you have served? You say 
in your testimony that it cost your state $5 million.
    Governor Gregoire. That is again the problem. 
Washingtonians believe that you ought to put the money where 
its greatest need is and where you can get the results, and I 
can't answer the specific question of how many more children I 
could cover. The $5 million to us for those under 200 percent 
of poverty is a significant contribution to the cost of the 
program. Meanwhile, we are just going through bureaucratic 
procedures and being able to produce nothing other than one 
individual from Canada.
    Ms. Solis. So in your case, it was more of an auditing 
exercise. It is actually costing you more money, which you 
could spend doing outreach. Could you use this money to provide 
assistance to children that are not currently insured?
    Governor Gregoire. Absolutely, and again, in the 
reauthorization, you took care of this in a way that we think 
meets the criteria, and by the way, the way in which we were 
doing it previously had already been supported and said was 
sufficient and then along came the new regulation that made us 
go through a $5 million process with virtually no results. I 
would ask you again to allow us that flexibility in what was 
already approved or the requirements for matching Social 
Security number so we can put the $5 million into children's 
healthcare.
    Ms. Solis. These requirements resulted in extra costs to 
many States that have beenare already overburdened. In fact, 
because some Members of Congress tried to weed out people that 
aren't eligible for coverage, they have actually kept people 
who are U.S. citizens from obtaining assistance. Many U.S. 
citizens weren't able to show original birth certificates, and 
we know in Katrina and Mississippi, there were a lot of folks 
that lost their possessions. Lost items also include 
documentation, and I would like to hear more about that from 
other governors.
    My next question is for the governor from Massachusetts, 
Mr. Patrick. You spoke earlier about your State's efforts to 
increase the pool of people that are eligible and you have 
actually provided assistance to folks that make anywhere from 
$52,000, I believe. What would happen if the August 17 
directive is made permanent? How many people are going to be 
taken out?
    Governor Patrick. Eighteen thousand children would be 
ineligible for benefits, and that is a--there are 6 million 
people in Massachusetts. There are 400,000--excuse me--40,000 
children who are covered now under our Healthcare Reform 
Initiative and 18,000 of those children would come out, and 
there are costs associated with that.
    Ms. Solis. When we talk about that particular ceiling that 
you have implemented, I know inflation and all that has been 
factored into cost of living. I believe your State has a higher 
cost-of-living than----
    Governor Patrick. It is a higher cost-of-living State. We 
are very careful to assure that we are not extending coverage 
to children whose parents have employer-based coverage. We are 
very sensitive to the crowd-out issues. We also don't provide 
the same level of public contribution to kids who are in the 
250 to 300--in other words, it is a sliding scale beyond that 
because with higher income, we expect the families to be able 
to make a greater contribution.
    Ms. Solis. And lastly, for Governor Strickland, I really 
want to thank you for your pointing out that CMS is exceeding 
their authority. What would happen to Ohio if the August 17 
directive is implemented?
    Governor Strickland. Well, at a minimum, 20,000 children 
would be excluded, and if I can just take a minute to say that 
I have talked with and tried to work with Secretary Leavitt, a 
very honorable person. He allowed me to come to D.C. to bring 
my legal counsel and my policy people. We sat around the table, 
and I asked him to give me what legal basis he had to deny Ohio 
doing what we chose to do in a bipartisan way, and I think he 
is unable to provide a legal basis for the decisions that he 
has made, and we are contemplating what actions may be 
available to us including legal action. Quite frankly, I don't 
want to do that. I don't think that kind of confrontation and 
that kind of approach is best but we believe we are asking to 
do something that we are entitled to do under the law, that the 
Secretary does not have a legal basis for preventing us from 
doing it, and so we may have no other course of action other 
than go to the courts because we think there is no legal basis 
for his decision making.
    Ms. Solis. Thank you, Mr. Chairman. I know I have to yield 
back, but thank all of you for being here and testifying.
    Mr. Pallone. Thank you.
    Ms. DeGette.
    Ms. DeGette. Thank you very much, Mr. Chairman. In my 
absence I know many of the members talked about the August 17th 
directive with all of you, and so I am not going to focus on 
that. Instead, what I would simply like to ask each of you 
starting with Governor Gregoire, if you could tell me which of 
the components of the previous SCHIP legislation that you think 
are important for your State to be able to continue to enroll 
as many of the kids as possible. Because one of our great 
frustrations in Congress is that we see 12 million kids right 
now in this country without health insurance. Nine million of 
them are probably eligible for some kind of government 
assistance. Part of the challenges that States have had, I 
think, is how do you reach out and get the kids enrolled who 
are not enrolled right now. Because with the first SCHIP 
program, we sort of got the low-hanging fruit. We got the kids 
that we could get into the system and some States have 
experimented with different--I mean, that is how adults got 
onto SCHIP because some States thought well, if we insure the 
parents we can get the kids in. That is how we were able to 
streamline some of the applications and conform them with the 
Medicaid application so you could have a joint application, and 
I am wondering if there is something we could do as we move 
forward with the SCHIP reauthorization to help you find these 
hard-to-enroll kids?
    Governor Gregoire. Well, what we believe is necessary is a 
significant outreach program. We want to work through the 
schools, we want to work through social service agencies, so we 
have begun that process, which is probably why in our State we 
have a 94 percent participation rate. We don't nor have we ever 
put adults on SCHIP so this is strictly children, and that is 
why we have been able to achieve those goals, those kind of 
results. But what we need is the ability to go out and reach 
out in a collaborative way with all of those groups to make 
sure that we can get parents who otherwise don't know about it, 
find it too cumbersome. The other thing we have done in our 
State is to make it very simple. You make one application. 
Whatever program, we will figure it out for you. We don't make 
it scary. We don't make it difficult and we make it convenient 
to people through the schools or through social service 
agencies.
    Ms. DeGette. Governor, that is an interesting point you 
raised, and I will tell you why, because in the second SCHIP 
bill that we passed that the President vetoed, the bill 
eliminated all outreach and enrollment programs for SCHIP. So I 
guess my follow-up question--the theory was, well, if we give 
them Medicaid outreach and enrollment money, then that will be 
good enough. Do you think you need specific appropriations for 
SCHIP outreach and enrollment?
    Governor Gregoire. Yes. The statement that was made by 
Governor Perdue earlier is to the point. It is a voluntary 
program. A lot of people don't know about it, are virtually 
afraid of it. You need to reach out to talk about what it 
means, how the children can get a medical home and how 
important it is. So outreach efforts are the only----
    Ms. DeGette. For SCHIP?
    Governor Gregoire. For SCHIP, are the only reason that we 
are at 94 percent today so CMS makes the requirement and then 
doesn't fund the outreach. It makes it unachievable.
    Ms. DeGette. Governor Barbour?
    Governor Barbour. Ma'am, I am in kind of the opposite 
position of Governor Gregoire in that one of my predecessors 
aggressively went out to sign up kids for SCHIP in the early 
days of the program, then found out that our formula 
shortchanges us so much that he had a bunch of people he 
couldn't pay for.
    Ms. DeGette. So you don't think we should do outreach if we 
can't pay for it?
    Governor Barbour. No, that is what I was going to say. For 
some reason in my State, according to the Census Bureau, more 
children who are eligible are not signed up than are signed up.
    Ms. DeGette. Right.
    Governor Barbour. But we don't have aggressive outreach 
programs because you all don't give us through the formula 
enough share to pay for the people that are on the program----
    Ms. DeGette. Well----
    Governor Barbour [continuing]. And you all pay for my 
healthcare budget. If I have to pay 5 times more for an SCHIP 
child, where does that put me in trying to deal with my other 
healthcare issues? Nathan Deal, if I could, said something and 
I want to--and I apologize, ma'am, for taking 30 seconds of 
your time. The first time I ever went to a meeting about 
Medicaid as a governor, I thought I was the only one who was 
drowning in Medicaid. And Tom Vilsack, who was an outstanding 
governor of Iowa, made the point to me, his biggest problem was 
he couldn't come up with enough money to pay the State share, 
and if I have to pay 5 times the State share for SCHIP, I 
really am in trouble.
    Ms. DeGette. So it is not just outreach and enrollment, it 
is the money to----
    Governor Barbour. Yes. If we had a good formula, we would 
be doing outreach.
    Ms. DeGette. Mr. Chairman, I would ask unanimous consent to 
allow the rest of the governors to answer very briefly.
    Mr. Pallone. Proceed.
    Governor Patrick. I will be very brief because I think the 
point about the formula, need for formula reform and about 
outreach support is key. I also think flexibility is key. Each 
of us has different circumstances in our States and both fiscal 
and practical circumstances, and being able to work out within 
the confines of SCHIP, how to utilize SCHIP in our States and 
within the right--what parameters within the broad parameters 
are right for us have been enormously important for the success 
of healthcare reform in Massachusetts.
    Ms. DeGette. Thank you.
    Governor Perdue?
    Governor Perdue. Thank you, ma'am. Georgia has been an 
aggressive pursuer of these children ever since the program 
started. We are the ninth-largest State in population. We have 
got the fourth-largest SCHIP population. So we have 
aggressively pursued it through many outreaches but I can 
assure you, ma'am, that it is a disincentive, as Governor 
Barbour says. When there is not enough money to cover the ones 
that you have on there, it is much of a disincentive to try to 
go find more.
    Ms. DeGette. You betcha.
    Governor Strickland?
    Governor Strickland. And I can say that sitting here 
listening to Governor Barbour, he has caused me to feel 
sympathy for his circumstances, and if the formula does to him 
in his State what he describes, then that is a problem and it 
needs to be addressed, and I am very sympathetic to that 
concern. I wish we could come up with some way of enrolling 
children that was simplified and that perhaps could be referred 
to as the presumed or presumptive eligibility so that if a 
child was from a family with certain economic circumstances, 
that child would automatically be considered as enrolled, and I 
don't know if we could ever achieve that but I think that would 
be helpful to us in Ohio and probably helpful to other States. 
Certainly it would help us achieve the standard that CMS has 
put forth for us to meet.
    Ms. DeGette. And, you know, many States have been 
successful with presumptive eligibility. I think we should look 
at that. I agree.
    Thank you very much, Mr. Chairman.
    Mr. Pallone. Thank you.
    I know Mr. Inslee wants to ask questions but we did promise 
you that you would be out of here by noon, so can we take 
another couple minutes? Is that all right? All right. Why don't 
you try to be quick? The gentleman from Washington.
    Mr. Inslee. Briefly. We have had difficulties with this 
Administration basically ignoring the restraints of the law 
when they became inconvenient, and I have to tell you that the 
CMS memo looks to me like it is a continuation of that pattern, 
and Governor Gregoire, you talked about challenging this on a 
legal basis. Putting on your lawyer's hat for a moment, could 
you tell us the basis of that challenge and what you believe 
the law should be and is?
    Governor Gregoire. Well, Congressman Inslee, there are two 
bases for the lawsuit, and let me just say, we don't lightly do 
this. We don't think this is a course of action that we would 
prefer at all and so we first sent a letter asking that they 
reconsider it and then there was a very bipartisan group of 
governors who sent a letter and there was no consideration, so 
we felt we were at wits end. The basis is, number one, it is a 
letter that has the force and effect of a rule without any 
rulemaking done whatsoever, and the second basis has to do with 
the authority of HHS and we believe they exceeded the authority 
granted by Congress and that these are issues better left to 
Congress rather than having them rulemaking beyond the 
authority that has been given them. Those are the bases. Right 
now we are in a motion status with regard to the matter. We 
have a motion for summary judgment. They have a motion to 
dismiss. But again, I regret having to take this action but we 
didn't feel we had any other course but we would really very 
much appreciate if Congress would have that August 17th letter 
set aside so that the States don't have to resort to 
litigation.
    Mr. Inslee. Thank you. Thank you all. Thank you, Governor 
Strickland, for being an advocate for the solution in the 
upcoming stimulus package. We are going to try to make that 
happen. Thank you.
    Mr. Pallone. Let me just thank all of you once again. I 
thought this was very helpful in terms of our efforts on SCHIP, 
Medicaid as well as the FMAP that we are proposing.
    I just wanted to say in closing that members can submit 
additional questions for the record and ask you to answer 
those. They are supposed to do that within 10 days, just so you 
know, and the clerk would notify your offices if that occurs. 
But thank you again, and without objection, this hearing of the 
subcommittee is adjourned.
    [Whereupon, at 12:08 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                    Statement of Hon. Edolphus Towns

    I want to thank the Chairman and Ranking Member for holding 
this hearing. Furthermore, I would like to extend a special 
thanks to the Governors that have come, today, to testify 
before this Committee, and provide the benefit of their unique 
insight on this important issue. Providing healthcare coverage 
to our nation's uninsured children has been the topic of 
numerous discussions in this Subcommittee, in the full 
Committee, and on the floor of the House. Despite these 
discussions, and the actions of this Committee and this 
Congress, our progress toward providing healthcare coverage to 
the millions of uninsured children in this country has been 
reversed through the opposition of the current administration.
    This administration has twice vetoed Children's Health 
Insurance legislation; and allowed the Centers for Medicare and 
Medicaid Services to issue an August 17th directive which 
effectively imposes an income eligibility cap in the State 
Children's Health Insurance Program and Medicaid without 
authority. The administration's actions have had a particularly 
harsh effect on my state of New York, which no longer has the 
flexibility to adapt its Children's Health Insurance Program to 
account for our high cost of living, high cost of healthcare, 
and other income factors unique to New York relative to other 
states. I hope that the panel of Governors, before us today, 
can help us further articulate the issues faced by individual 
states in light of this administration's current policy.
    Thank you, Mr. Chairman and Ranking Member for this 
opportunity.
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