[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
H.R. 5998, THE PROTECTING
CHILDREN'S HEALTH COVERAGE ACT OF 2008
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
MAY 15, 2008
__________
Serial No. 110-118
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, JOE BARTON, Texas
Chairman Ranking Member
HENRY A. WAXMAN, California RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts FRED UPTON, Michigan
RICK BOUCHER, Virginia CLIFF STEARNS, Florida
EDOLPHUS TOWNS, New York NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey ED WHITFIELD, Kentucky
BART GORDON, Tennessee BARBARA CUBIN, Wyoming
BOBBY L. RUSH, Illinois JOHN SHIMKUS, Illinois
ANNA G. ESHOO, California HEATHER WILSON, New Mexico
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York CHARLES W. ``CHIP'' PICKERING,
GENE GREEN, Texas Mississippi
DIANA DeGETTE, Colorado VITO FOSSELLA, New York
Vice Chairman ROY BLUNT, Missouri
LOIS CAPPS, California STEVE BUYER, Indiana
MIKE DOYLE, Pennsylvania GEORGE RADANOVICH, California
JANE HARMAN, California JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine MARY BONO MACK, California
JAN SCHAKOWSKY, Illinois GREG WALDEN, Oregon
HILDA L. SOLIS, California LEE TERRY, Nebraska
CHARLES A. GONZALEZ, Texas MIKE FERGUSON, New Jersey
JAY INSLEE, Washington MIKE ROGERS, Michigan
TAMMY BALDWIN, Wisconsin SUE WILKINS MYRICK, North Carolina
MIKE ROSS, Arkansas JOHN SULLIVAN, Oklahoma
DARLENE HOOLEY, Oregon TIM MURPHY, Pennsylvania
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah MARSHA BLACKBURN, Tennessee
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
_________________________________________________________________
Professional Staff
Dennis B. Fitzgibbons, Chief of
Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
David Cavicke, Minority Staff
Director
(ii)
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York Ranking Member
BART GORDON, Tennessee RALPH M. HALL, Texas
ANNA G. ESHOO, California BARBARA CUBIN, Wyoming
GENE GREEN, Texas HEATHER WILSON, New Mexico
DIANA DeGETTE, Colorado JOHN B. SHADEGG, Arizona
LOIS CAPPS, California STEVE BUYER, Indiana
Vice Chair 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..................................... 9
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 10
Hon. Heather Wilson, a Representative in Congress from the State
of New Mexico, opening statement............................... 11
Hon. Gene Green, a Representative in Congress from the State of
Texas, prepared statement...................................... 122
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, prepared statement.............................. 128
Witnesses
Peter Orszag, Director, Congressional Budget Office.............. 12
Prepared statement........................................... 14
Dayna Shah, Managing Associate General Counsel, U.S. Government
Accountability Office.......................................... 32
Prepared statement........................................... 34
Morton Rosenberg, Specialist in American Public Law, American Law
Division, Congressional Research Service....................... 49
Prepared statement........................................... 52
Gary Alexander, director, Rhode Island Department of Human
Services....................................................... 75
Prepared statement........................................... 78
Lesley Cummings, executive director, The California Managed Risk
Medical Insurance Board........................................ 83
Prepared statement........................................... 85
Submitted Material
H.R. 5998........................................................ 4
.................................................................
H.R. 5998, THE PROTECTING CHILDREN'S HEALTH COVERAGE ACT OF 2008
----------
THURSDAY, MAY 15, 2008
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:10 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Frank
Pallone Jr. (chairman) presiding.
Members present: Representatives Pallone, Green, Baldwin,
Engel, Dingell (ex officio), Deal, Wilson, Burgess, and Barton
(ex officio).
Staff present: Bridgett Taylor, Amy Hall, Brin Frazier,
Lauren Bloomberg, Hasan Sarsour, Jason Powell, Ryan Long,
Brandon Clark, and Chad Grant.
Mr. Pallone. The meeting of the subcommittee is called to
order, and today we are having a hearing on ``H.R. 5998, the
Protecting Children's Health Coverage Act of 2008.'' And I will
now recognize myself for an opening statement.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. The legislation before us is a bill that I
introduced recently with my friend and colleague from New
Hampshire, Representative Carol Shea-Porter. And our
legislation would invalidate the so-called CMS August 17
Directive preventing CMS from applying any of the provisions
included in the directive when it reviews state plans. It also
requires CMS to review within 30 days the original proposals
from States whose plans were either rejected or amended based
on that directive.
As you know, for over 10 years, the State Children Health
Insurance Program, or SCHIP, has had remarkable success in
covering millions of low-income children, who would otherwise
have nowhere else to turn, to obtain health coverage. And
thanks to SCHIP, more than seven million children annually are
able to obtain health coverage and receive the medical care
that they need to live happy and healthy lives.
Last year we tried to build on the success of SCHIP by
passing the Children's Health Insurance Program Reauthorization
Act, or CHIPRA, of 2007, a bill that was negotiated on a
bipartisan, bicameral basis. This bill would have provided
states with the financial resources and tools they need to
maintain their current programs as well as help them reach
millions of low-income children who are presently eligible but
not enrolled.
CHIPRA passed the House two times with significant support
from both parties, but sadly, even though a majority of
Americans and their representatives in Congress agreed that it
was the right thing to do to cover more kids, the President
disagreed. And the President actually vetoed the CHIP
Reauthorization twice, and the majority of the House
Republicans refused to join us in overriding the veto.
But blocking the will of Congress and the American public
was not enough. The President also decided that he would try to
single-handedly undermine the CHIP program to administrative
PHEAA. In the earning evening of Friday, August 17, last year
during the midst of a congressional recess, after many people
had gone home for the weekend, the Bush Administration issued a
letter to state health officials that has come to be known as
the August 17 Directive, and I have taken issue with this
directive on two grounds.
First, the substance contained within it, as well as the
process in which it came to be. The policies put forward by the
Administration and its directive fly in the face of SCHIP's
intended purpose as well as what we were trying to accomplish
with last year's reauthorization. The August 17 Directive would
impose strict new requirements on states and beneficiaries that
are not only impossible to achieve but make little, if any,
sense.
For example, under the new directive, states would be
prohibited from covering children in families with incomes
above 250 percent of the federal poverty level or $44,000 for a
family of three, unless 95 percent of all children eligible for
Medicaid and CHIP with incomes below 200 percent are already
enrolled. After talking with numerous state health officials,
it is unclear how many states would be able to meet this
requirement, if any.
Even more mind-boggling, the directive prevents states from
enrolling for 1 year eligible children who lose their private
health insurance. The Administration has yet to provide an
answer on what these children should do during this year, other
than the President's suggestion that the uninsured can simply
go to the emergency room when they need care.
If implemented, the August 17 Directive will severely limit
state flexibility, which has been the hallmark of SCHIP since
its inception, and also the directive will greatly restrict
enrollment. We have already seen its effects. The directive has
already been used to either reject or scale back plans in
states like Indiana, Louisiana, Ohio, Oklahoma, and New York
that had planned to expand their programs in order to provide
health care coverage to tens of thousands of presently
uninsured children.
I am also alarmed about what will happen in places like my
home state of New Jersey, which already covers children in this
income range. If this directive were to go into effect, it
would severely limit my State's ability to develop solutions
that meet the unique needs of our State's uninsured population.
According to our state officials, this directive could reduce
enrollment of children in this income range by 84 percent, and
I think that is appalling.
Aside from the substance of this directive, I am dismayed
by the process in which it was developed and issued. The Bush
Administration broke the law when it issued this directive
because it bypassed Congress and blocked any opportunity for
public comment. As we will hear today, this is not just my
opinion. Both GAO and CRS have concluded that the directive and
the way it was issued violates the Congressional Review Act.
And I am looking forward to hearing their testimony in that
regard.
In sum, I am clearly opposed, as you can tell, to the
Administration's August 17 Directive. It does nothing to move
the ball forward in terms of covering more uninsured kids and,
in fact, turns the clock back on our efforts over the past 10
years.
For those reasons, I think that we must block the directive
from taking effect, which my legislation would do, and refocus
our efforts on strengthening SCHIP.
And I now recognize Mr. Deal, our ranking member, for an
opening.
[H.R. 5998 follows:]
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OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Deal. Thank you, Mr. Chairman. Thank you for calling
this hearing today, which will give us an opportunity to review
your legislation, which addresses the August 17 letter from
CMS. The letter outlines some guidelines that CMS planned to
use when considering whether or not a state SCHIP plan
adequately discouraged individuals from leaving private
coverage in order to enroll in a government-financed health
care plan.
This concern about government coverage crowding out private
health insurance is a legitimate one. When the nonpartisan
Congressional Budget Office reviewed past iterations of
legislation to reauthorize the SCHIP Program, they concluded
that for every 100 children who gain public coverage as a
result of SCHIP, there is a corresponding reduction in private
coverage of between 25 and 50 children.
More specifically in the case of the reauthorization, CBO
concluded that about one-third of the children who would be
newly covered under SCHIP and Medicaid programs in the bill
would otherwise have had private coverage.
In last year's reauthorization efforts, I fully supported
reforms to SCHIP which would prevent crowd out of private
insurance. I also supported creating a meaningful test to
ensure that states covered the poorest children before moving
up the income scale. As my chairman has indicated, his State of
New Jersey, which has dramatically increased the income
eligibility under SCHIP, they have not only left their poorest
citizens behind, but they have also increased the likelihood of
crowd out because wealthier populations are more likely to have
access to private insurance.
If the chairman is dissatisfied with the method used by CMS
to implement policies to discourage crowd out, I believe that
members on our side of the aisle would be willing to work with
him to achieve these goals through legislative means. However,
as I read this legislation that we are considering, it appears
to be an attempt to prohibit CMS from taking reasonable steps
to ensure that states like New Jersey, which have left nearly a
quarter of their poorest citizens behind, would actually do the
hard work to cover the neediest children.
In fact, New York submitted a state plan amendment to
receive federal SCHIP matching payments for covering children
with family incomes up to 400 percent of the federal poverty
level, or $84,800 for a family of four. So far, this is the
only state plan amendment to be denied based upon the policies
described in the August 17 guidance letter.
H.R. 5998 would force the secretary to promptly reconsider
New York's state plan amendments to go to 400 percent of the
federal poverty level without using the policies in the August
17 guidance letter. It seems all too likely that this
legislation is an attempt to allow New York to receive federal
taxpayer dollars to subsidize the health expenditures of New
Yorkers making nearly $85,000 a year. Coming from a state where
the median income is just above $45,000, it is difficult for me
to contemplate sending the federal taxpayers' dollars from my
state to families making nearly twice the median household
income of my state of Georgia.
I look forward to the testimony of our witnesses today and
in particular the insights of the officials from Rhode Island,
whose State was able to comply with the requirements of the
August 17 letter. And I think our witnesses should be able to
provide us an important perspective on these issues, and I
thank all of you for your attendance here today.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you, Mr. Deal. The gentlewoman from
Wisconsin, Ms. Baldwin.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. I appreciate the fact
that you are holding this important hearing, and I am proud to
also be an original cosponsor of your bill, ``The Protecting
Children's Health Coverage Act of 2008.''
Mr. Chairman, I know that you and other members of this
committee were very disappointed last year when the
Administration failed to work with us in ensuring health care
access to the 10 million kids who would have been covered under
the House-passed SCHIP bill. And these administrative actions,
like the August 17 Directive and the Medicaid regulations that
the House recently voted to temporarily halt, are really like
pouring salt into the wounds left by that disappointment last
year with SCHIP being vetoed.
Mr. Chairman, I believe that every American has a right to
comprehensive, affordable health care, and I believe that 8.7
million uninsured kids is 8.7 million too many. I believe that
the SCHIP Program has proven to be an effective partnership
between the Federal Government and the states in covering
uninsured children. And I believe that states who want to
expand their SCHIP Programs to cover more uninsured children
should not be prevented from doing so.
The August 17 Directive is harmful. It is overreaching, and
it is an attack on SCHIP. Both the Government Accountability
Office and the Congressional Research Service have issued legal
opinions that the August 17 Directive violates the
Congressional Review Act. This directive will result in more
uninsured children, and that is simply unacceptable.
So, Mr. Chairman, I am proud to be an original cosponsor of
H.R. 5998. This bill would nullify the August 17 Directive and
will ensure that states can continue to cover uninsured
children to the extent that they can.
Mr. Chairman, thank you for holding this hearing. Thank you
to our witnesses who will testify today. I am disappointed that
the Administration did not accept our invitation to defend
their actions, but I look forward to today's discussion. And I
yield back the balance of my time.
Mr. Pallone. Thank you. The gentlewoman from New Mexico,
Ms. Wilson.
OPENING STATEMENT OF HON. HEATHER WILSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW
MEXICO
Ms. Wilson. Thank you, Mr. Chairman. I am actually a
supporter of the Children's Health Insurance Program. I think
it has been an important program to reduce the number of
uninsured children in America. In New Mexico, 25,000 low-income
children get access to health care through the Children's
Insurance Program. In New Mexico, we call it New MexiKids.
I also agree with those who say that SCHIP should be
targeted to the lowest income kids. I actually was a cabinet
secretary for child welfare in New Mexico when we implemented
the program initially, and it is a very good and effective
program. But it needs some things to be fixed.
In particular, the legislation as it was initially passed
10 years ago did not have the same requirements that exist in
other federal programs to make sure that those who sign up are
American citizens. It also does not have any cap, an upper-
income cap, and a lot of states have involved adults in the
program. This is a program that is intended to provide health
insurance to low-income children who are American.
The August 17 letter attempts to offer states guidance on
how to comply with some principles which were embodied in the
original SCHIP legislation and strengthen bipartisan SCHIP
reauthorization legislation considered by Congress last year
and vetoed by the President. But I think there are some
important questions to be asked about the August 17 Directive.
First, does the policy outlined in the letter clarify
existing requirements and law, or does it go beyond to limit
the ability of states to design their own SCHIP Programs as
they see fit? Second, if it does amend existing regulations,
should these policy changes go through the rule-making process
to give states and interested parties the ability to provide
public comment? And third, if it does amend existing law or
congressional intent, should Congress consider these policy
changes and give them statutory authority?
I look forward to hearing the answer to some of these
questions here today, and I hope that in this next Congress we
can stop some of the demagoguery from the far left and the far
right and reauthorize a program that has been effective at
helping low-income children get access to health care and it
also fixes some problems with SCHIP by getting adults out of
the program, limiting it to low-income American children.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you, Ms. Wilson. I believe that
concludes our opening statements by members of the
subcommittee, so we will now turn to our panel. And we do have
but one panel today, a very good one. And I want to welcome
everybody, welcome all of you for being here today.
Let me introduce you from left to right, starting with Dr.
Peter Orszag, who is Director of the Congressional Budget
Office. Welcome. And then next to him is Ms. Dayna Shah, who is
Managing Associate General Counsel for the GAO. And next to her
is Mr. Morton Rosenberg, who is a specialist in American Public
Law from the American Law Division of the Congressional
Research Service, or CRS. And next to him is Mr. Gary
Alexander, who is Director of the Rhode Island Department of
Human Services. And then we have Ms. Lesley Cummings, who is
Executive Director of the Managed Risk Medical Insurance Board
in Sacramento, California. Welcome.
We have 5-minute opening statements. They become part of
the hearing record. The committee may also ask you, as you will
notice from some of our questions as we proceed, to provide us
some statements in writing as follow up. And we will get back
to you with those questions so you can respond in writing. And
those would also be included in the record once you get back to
us.
But we will start with Peter Orszag. Thank you for being
here, and thank you for all you do over the years.
STATEMENT OF PETER ORSZAG, DIRECTOR, CONGRESSIONAL BUDGET
OFFICE
Mr. Orszag. Thank you very much, Mr. Pallone, Mr. Deal,
members of the Committee. I will be brief, and let me make four
points. First, SCHIP has significantly reduced the number of
low-income children who lack health insurance in the United
States. You can see in Figure 1 of my testimony on page 8 that
there was a dramatic reduction, about 25 percent, in the share
of children between 100 and 200 percent of the poverty level
who are uninsured in any given year at around the time that
SCHIP was enacted. Those are the children who represent the
bulk of beneficiaries under the SCHIP Program.
At higher income levels, there was no reduction in
uninsurance rates and it is therefore reasonable to conclude
that the program had a lot to do with the reduction in
uninsurance between 100 and 200 percent of poverty. There was
also a reduction below the poverty level, and that is likely a
reflection of the outreach efforts that were involved in SCHIP
increasing enrollment in Medicaid where children below 100
percent of poverty are disproportionately concentrated.
The enrollment of children in public coverage in both SCHIP
and Medicaid, however, as a result of SCHIP, has not led to a
one-for-one reduction in the number of low-income children who
are uninsured. In the specific case of SCHIP, the program
provides a source of coverage that is less expensive to
enrollees and often provides a broader range of benefits than
alternative coverage, making it attractive to families.
On the basis of our review of the research literature, CBO
has concluded that for every 100 children covered under SCHIP,
there is a corresponding reduction in private coverage of
between 25 and 50 children.
Third, CBO's analysis of CHIPRA, as passed by the House of
Representatives, suggests that the legislation would increase
coverage under Medicaid and SCHIP in 2012 by 5.8 million
children, of whom 3.9 million would otherwise be uninsured and
roughly two million would have otherwise had insurance. In
other words, about a third of the children who would be newly
covered under the legislation who would otherwise have had
private coverage.
Given the scale of the increase in coverage that was
entailed in that program, it is extraordinarily unlikely that
you would be able to get crowd-out rates significantly below a
third through any feasible policy intervention.
Finally, on August 17, 2007, as has already been mentioned,
the Administration issued a directive to state health officials
under CBO's baseline in which funding in future years is
constrained to be $5 billion a year. That directive has only
very minimal effects on enrollment of children in SCHIP
primarily because States are so constrained under that baseline
funding that whether children above 250 percent are newly
covered or not doesn't matter that much because there is so
much downward pressure on enrollment in general under that
baseline concept.
If you provided additional funding to the program, the
effect of the directive could be somewhat larger, and we could
have a discussion of that during the question-and-answer
period.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Orszag follows:]
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Mr. Pallone. Thank you, Doctor. Ms. Shah.
STATEMENT OF DAYNA SHAH, MANAGING ASSOCIATE GENERAL COUNSEL,
U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Shah. Mr. Chairman and members of the subcommittee, I
am pleased to be here this morning to discuss GAO's recent
opinion about the August 17 letter issued by CMS concerning
crowd-out or the substitution of SCHIP for other insurance
coverage.
In GAO's opinion, the August 17 letter is a rule. Under the
Congressional Review Act and as required by that Act, the
letter must be submitted to Congress and to the GAO before it
can take effect.
Before I get to the heart of GAO's opinion, I would like to
note that the definition of rule in the Review Act adopts the
definition in the Administrative Procedure Act, or APA, with
some exceptions, none of which are applicable here.
While the focus of inquiry under the APA is often whether a
statement is binding and whether it must follow notice and
comment requirements, there are many types of agency statements
that are not binding, do require notice and comment, but
nevertheless are rules under the APA's broad definition.
As a result, the answer to the question of whether a
particular agency statement is a rule under the APA and under
the Congressional Review Act does not turn on whether the rule
is binding or subject to notice and comment requirements.
Three particular elements of the APA definition were
relevant to our review of the August 17 letter. Specifically,
the letter was applicable generally. It extended to all States
seeking to cover children with effective family incomes above
250 percent of the federal poverty level, as well as those
States already covering such children.
Second, the letter had future effect. It was not concerned
with present or past conduct. Finally, the letter was designed
to implement, interpret, or prescribe law or policy, in that it
purported to clarify and explain the manner in which CMS
supplied statutory and regulatory requirements to these states
and sought to promote the implementation of SCHIP statutory
requirements. The letter therefore met the general definition
of rule.
Three additional features of the August 17 letter supported
our view that it is a rule that should have been submitted for
review by Congress. First, the letter represented a marked
departure from CMS's settled interpretation of the regulatory
provision governing crowd-out. Case law indicates that a change
in settled interpretation may only be made by a rule.
Second, the letter gave a deadline for states to come into
compliance by telling states currently covering children with
effective family incomes over 250 percent of the federal
poverty level that CMS expected those states to implement the
letter's provisions within 12 months or face possible
corrective action.
Third, we found it striking that CMS expressly relied on
the August 17 letter last September when it disapproved New
York's request to amend its SCHIP plan. CMS's application of
the letter in this way confirmed that it viewed the letter as
having a binding effect.
Finally, a note about general statements of policy. CMS
told us that the August 17 letter was a statement of policy
announcing the course that the agency intended to follow in
adjudications concerning compliance with regulatory
requirements. In addition, the Justice Department characterized
the letter as being either a statement of policy or an
interpretive rule.
Courts have generally held that a statement of policy is a
type of rule, although not the type of rule requiring notice
and comment. That said, the August 17 letter does not have the
characteristics of statements of policy identified in case law.
Its language has little of the tentativeness that courts had
associated with policy statements.
In addition, as I mentioned earlier, CMS itself treated the
letter as a binding rule rather than a policy statement when it
expressly relied on it to disapprove a State's plan amendment.
Mr. Chairman, that concludes my statement. I would be
pleased to address any questions that you or other members of
the subcommittee may have.
[The prepared statement of Ms. Shah follows:]
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Mr. Pallone. Thank you, Ms. Shah. Mr. Rosenberg.
STATEMENT OF MORTON ROSENBERG, SPECIALIST IN AMERICAN PUBLIC
LAW, AMERICAN LAW DIVISION, CONGRESSIONAL RESEARCH SERVICE
Mr. Rosenberg. I am Morton Rosenberg, a Specialist in
American Public Law in the American Law Division of the
Congressional Research Service. I thank you for inviting me
here today to comment on the legal and practical issues
associated with the August 17, 2007 letter issued by the
Director of the Center of Medicaid and State Operations of the
Centers for Medicare and Medicaid Services to all State health
officials.
That letter, as you are aware, ostensibly clarified how CMS
would apply existing statutory and regulatory requirements in
its review of state request to extend eligibility of the SCHIP
Program to children and families with effective income levels
above 250 percent of the federal poverty level.
Our analysis of the statutory scheme of the CRA, its
legislative history, opinions of the general counsel of GAO,
indicates that the drafters of the congressional review
provision were concerned with the then-prevalent actions that
had the practical effect of imposing binding norms on non-
agency parties without being promulgated in conformance with
requirements of notice and comment rulemaking. And in response,
Congress adopted a very broad definition of the term rule that
would capture such actions for congressional review. The
rulings of several appellate courts recognizing the invalidity
of such actions support the CRA's history and the GAO
interpretations.
The courts have also indicated that past practices of an
agency in implementing a rulemaking may be looked at for
insight as to the understanding the reliance that regulated
parties and beneficiaries have placed on such past agency
practices. In such instances, the courts have held that an
abrupt change of course requires a new rulemaking proceeding to
substantively alter those practices and relied-on
interpretations.
In this instance, the CMS practice under the 2001 crowd-out
rules arguably have created a binding norm, and therefore
changing such practices would be an action that is covered by
the CRA and that such changes may not be implemented until they
are reported to Congress and the Controller General.
And so concluding, I have taken into account CMS's May 7
clarification of its August 17, 2007 clarification, which does
not alter the nature, I believe, of the 2007 letter.
I thought it would be useful to you if I focused to provide
you with my understanding of the nature, purpose and intent of
the review scheme established by the CRA and how and why it
differs from the scheme of judicial review with final agencies
rules under the Administrative Procedure Act.
In particular, I want to focus on Congress's adoption of a
broader definition of the rule under the CRA that is applicable
to judicially reviewable rules under the APA and why that may
make a difference in how Congress might address the current
controversy.
The congressional review mechanism, properly known as the
Congressional Review Act, requires that all agencies
promulgating a covered rule must submit that report to each
house of Congress and to the controller general. And it must
accompany it with a copy of the rule, a concise general
statement describing the rule, and a proposed effective date. A
covered rule under the statute cannot take effect if the report
is not submitted.
The broad definition of a rule found in the CRA is adopted
from 5514 of the Administrative Procedure Act, which provides
that the term rule means the whole or part of agency statement
of general applicability and future effect desired to
implement, interpret, or prescribe law policy. The legislative
history of that 5514 indicates that term is to be very broadly
construed and that is covers all kinds of documents and is not
limited to substantive rules but embraces interpretative,
organizational, and procedural rules as well. And the courts
have recognized that it covers virtually every statement an
agency can make.
The drafters of the Congressional Review Act arguably
purposely adopted the broadest possible definition of the term
rule when they incorporated that provision from the APA. The
history of the CRA makes it clear that adoption of the broad
definition of rule, the review process would not be limited to
coverage of only rules that were required to comply with the
notice and comment provisions of the APA or any other
statutorily required variations of the notice and comment
procedures but would rather encompass a wide spectrum of agency
activities characterized by their effect on the regulated
public.
The committee stated the committee's intent in these
subsections is to include matters that substantially affect the
rights and obligations of outside parties. The essential focus
of this inquiry is not on the type of rule but on its effect on
the rights and obligations of the parties.
The drafters of the CRA indicated their awareness of the
practice of agencies at that time of avoiding the notification
and public participation requirements of the APA by utilizing
the issuance of other documents as a means of binding the
public either legally or practically. And know that it was the
intent of the legislation to subject just such documents to
cvongressional scrutiny.
Again the framers emphasize the adoption of the broad
definition of a covered rule was to focus Congress not on the
type of rule but on the rule's effect on the rights or
obligations of non-agency parties.
In sum, it is arguable that the heart of the drafters'
design of the CRA was the creation of a review mechanism that
would uncover and remedy in a timely manner what were viewed as
agency attempts to evade congressional oversight, presidential
executive order review, and the requirements of public comment
and judicial review under the APA.
Time-consuming legislation was seen as an anathema to
achieving accountable agency public policy results. The
critical point here then is that Congress does not have to rely
on the uncertainty of lengthy civil litigation. It can call up
for review any covered rule it wishes. It is not required to
demonstrate standing, rightness, finality, jurisdiction, or any
showing of arbitrariness or unreasonable decision making. You
simply have to determine that it is contrary to the way that
you expect the program to be administered. And if you use the
CRA properly, you have the benefit of expedited consideration
of a disapproval measure, which, if not vetoed, accomplishes a
retroactive nullification that is not subject to judicial
review.
Finally, this process can be initiated even though the
document has not been reported. Thank you.
[The prepared statement of Mr. Rosenberg follows:]
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Mr. Pallone. Thank you, Mr. Rosenberg. Thank you.
Mr. Alexander.
STATEMENT OF GARY ALEXANDER, DIRECTOR, RHODE ISLAND DEPARTMENT
OF HUMAN SERVICES
Mr. Alexander. Thank you very much, Mr. Chairman, Ranking
Member Deal, and other members of the Committee. My name is
Gary Alexander. I am the director of the Rhode Island
Department of Human Services. The Rhode Island Department of
Human Services is entrusted with, among other programs, the
Medicaid program, the TANF Program, food stamps, and the
State's department of Veterans' Affairs.
I would like to talk to you today about Rhode Island's
experience with Medicaid and SCHIP crowd-out and our ability to
comply with the provisions outlined in the CMS State health
official letter from August 17, 2007.
Rhode Island's Medicaid program recognized the potential
for crowd-out of private health insurance and its managed care
program known as Right Care almost a decade ago. As we
experienced an increase in enrollment in the late 1990s,
policymakers quickly identified the risks to Right Care's
fiscal sustainability and viability and in response, adopted a
series of health reforms aimed at stabilizing the program.
Those reforms were guided by the following principles. The
preservation of employer-sponsored insurance, ensuring that
there are no incentives for employers to shift or dump their
employees from private to public coverage, the wise and
responsible use of public dollars, ensuring continued health
coverage for long-income beneficiaries, and to promote personal
responsibility through beneficiary cost sharing.
As a result, Rhode Island created the Right Share Premium
Assistance Program and established cost-sharing requirements
for Right Care and Right Share beneficiaries above 150 percent
of the federal poverty level. Rhode Island sought and received
approval from CMS through a state plan amendment to create the
Right Share Public/Private Partnership. This program is aimed
at helping eligible beneficiaries maintain employer-sponsored
insurance.
In the Right Share program, the State pays the
beneficiary's portion of the employer-sponsored insurance and
provides wraparound services through the State Medicaid
program. A portion of that state share may be paid by the
beneficiary as a monthly premium. This arrangement has been
extremely successful at maintaining the employee/employer link.
CMS has agreed that this is an acceptable alternative to a
1-year waiting period because we are able to effectively
capture the employer coverage and avoid any crowd-out issues.
Right Share has been very successful helping lower-income
families maintain employer-sponsored insurance and avoid moving
to a completely government-funded health program. Currently 90
percent of Right Share families have an income below 185
percent of the federal poverty level. Those families are at
greatest risk for dropping their employer-sponsored insurance
and becoming crowd-out statistics.
The Right Share approach has maintained the employer share
at a savings of $1 million for every 1,000 enrollees every
single year. Those are costs that would have likely come to the
state as employers have passed higher commercial premiums onto
their employees, creating an affordability problem for lower
income families.
Rhode Island also received approval to require monthly
premiums for families with incomes over 150 percent of the
federal poverty level. For higher income enrollees, monthly
premiums have lessened the gap between the cost of maintaining
employer-sponsored insurance and enrolling in a government
program. This is intended to dissuade employees from dropping
commercial health plans for less expensive, government-funded
coverage.
To avoid losing the lower-income enrollees to relatively
high cost sharing efforts, Rhode Island has opted for a sliding
scale monthly premium based on income. Our ability to maintain
a high percentage of eligible persons enrolled is evidence that
we have been successful at balancing these competing interests.
Additional measures contained in the CMS letter include the
monitoring of possible health coverage through non-custodial
parents, a requirement that 95 percent of eligible children
under 200 percent of the poverty level are ensured, and an
assurance that the number of children under 200 percent of the
federal poverty level covered by private insurance has not
decreased by more than 2 percent over the past 5 years.
As part of Rhode Island's Medicaid program, Integrity
Procedures, the state routinely conducts third-party liability
checks in an effort to determine any other source of insurance
coverage, which would include coverage associated with non-
custodial parents. These checks are conducted routinely and in
conjunction with commercial insurers.
Rhode Island has complied with the assurance that 95
percent of eligible children under 200 percent of the federal
poverty level are insured. Compliance was achieved through
long-term outreach and a commitment to sustaining commercial
insurance through the Right Share premium assistance program.
Rhode Island has a history of strong community advocacy.
With these community partners, the state has been able to
enroll tens of thousands of children in this program. Efforts
to educate the public about this program continue on a daily
basis. The assurance that limits the potential decrease in
commercial insurance coverage for this population to 2 percent
over 5 years is the most difficult provision to meet.
Statewide insurance initiatives to expand access and
affordability are not under the purview of the state Medicaid
program. But in Rhode Island, they have played an active role
in those strategic discussions. The ability for long-income
Rhode Islanders to afford commercial health insurance is
important to the governor and to the fiscal integrity of the
State's Medicaid program.
In conclusion, compliance with the CMS letter dated August
17, 2007 was not the result of last minute program changes or
quick fixes by the Medicaid department. Rhode Island has been
able to avoid crowd-out issues because of a long-term reasoned
approach that seeks to maintain an enrollee's existing
coverage, which will not create disincentives so that
beneficiaries will migrate to big government programs.
I thank you very much for the chance to speak.
[The prepared statement of Mr. Alexander follows:]
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Mr. Pallone. Thank you, Mr. Alexander. Ms. Cummings.
STATEMENT OF LESLEY CUMMINGS, EXECUTIVE DIRECTOR, THE
CALIFORNIA MANAGED RISK MEDICAL INSURANCE BOARD
Ms. Cummings. Thank you, Mr. Chairman and Mr. Deal and
other members of the Committee. We really appreciate the
opportunity that you invited us here to talk to you about how
we would see the effect of the August 17 directive applying to
California.
First, I wanted to note that SCHIP, one of the things that
we have all loved about it and continue to love about it, is
that it has provided States with a lot of flexibility to look
at the circumstances in its State and decide what it needs in
terms of coverage of children. This is really important because
every State has a difference in its rates of uninsurance, in
the income of people in the State, of the incidents of
employer-sponsored coverage. So it is really important to take
those things into consideration when designing a program.
In California, we designed a program that began in July
1998 with coverage of children to 200 percent of the federal
poverty level with the application of income disregards used by
Medicaid. Why did we do that? Because we wanted somebody to go
into Medicaid if they should, and if you use a different
standard, you wouldn't be able to do that. This was approved by
the Federal Government.
In 1999, we expanded coverage to children up to 250 percent
of poverty again using this net income standard. Another thing
that was a future of our program then and was approved by CMS
at that time was a 3-month waiting period for our entire
program.
Next in 2006, at the urging of the administration,
California elected to cover pregnant women with SCHIP dollars,
and that is to an income of 300 percent of federal poverty
level and coverage for the woman's children for 2 years at 300
percent poverty level. We have built a fabulous program in
California. We cover a million people. That is through
Medicaid, through our pregnancy program, through our program
for children. So we have really taken the opportunity and
worked with it to create what I think anybody in our state said
would be a fabulous program.
Nevertheless, despite the fact that we cover up to 250
percent in our SCHIP program, up to 300 percent for pregnant
women, the average family income for a child in our program is
165 percent. Now, why? Because the incidents of employer-
sponsored coverage increases as you get higher up in the income
so fewer people need it. But that doesn't mean there aren't
uninsured people there. They are there, and they don't have
access to employer-sponsored coverage. It is just that it is to
a fewer of them. So our state would like to go to 300 percent
of coverage would be not allowed to under the terms of the
August 17 letter, but we see the need in that population.
What has happened as a result of the letter? Coverage has
been affected now in a number of other states that wanted to
expand their coverage, and they have been denied, coverage like
Louisiana, Oklahoma, Ohio. We ourselves in California are one
of the 14 states that CMS has said you have a year to come into
compliance. So we are in that category where we haven't asked
for an expansion, but we are expected to make changes to our
program if we are going to continue to serve children or
pregnant women with incomes above 250 percent of the poverty
level.
Well, so how able are we to make these changes? People have
talked to you about a number of these. I am not going to
mention all of them again, but I would like to just go through
a couple of them that seem particularly challenging to us.
One, the provision that there have not been a decline in
employer-sponsored coverage for children over a five-year
period. We have had a decline higher than that for adults where
there is no public program waiting to take somebody out. So
that is not a feature of crowd-out. That is a feature of the
fact that employer-sponsored coverage is declining. And that is
true not just in California but in other states.
Cost sharing. The letter would require you to increase your
cost sharing up to 5 percent of family income, unless you can
demonstrate in some way that is totally unclear that the
relationship between private coverage and your program coverage
is less than 1 or 2 percent. Well, I don't see how anybody
would ever do that, and if you have to increase to 5 percent,
in our State, you would be increasing families' premiums by
thousands and thousands of dollars.
We are aware of the issue of cost sharing. We also pay a
third of the cost of this program. Our governor has proposed
increasing premiums in the budget year but not up to 5 percent
of family income. He has proposed it to 2.7 percent.
So that is just a couple of the things I would bring to
your attention, a number of them are laid out in my testimony.
What will it mean to us in California if 817 is implemented? We
won't be able to expand to 300. We will have to reduce services
to children who have net incomes at 250 percent rather than
gross. That is about 14,000 children per year. And we don't
know what it means about our pregnant women because the
application of these rules to pregnant women is unclear.
And on that point of things being unclear, we think that
one of the really challenging things about the August 17 letter
is that it is not transparent. There are not uniform standards.
There are negotiations going on with States on a one-on-one
basis where you can come forward and see if this particular
database or that particular database would satisfy.
One of the really challenging things about doing that
particularly to meet the 250 percent standard--I am sorry, 90
percent of children at 200 percent, is that that is a way that
you could then be falsely indicating that you don't have as
many uninsured children as you really do. And it will affect
your formula when it comes down to passing out state SCHIP
dollars. Because if you jerry-rig databases and come in and go
good news, according to this database, we are at 92 percent.
But if in fact you are--and nobody will ever really know this
number, but at 80 percent and your economy is going down and
more people are qualifying, you will just deny your state the
money that you need to serve those children.
So that is my comments. Thank you.
[The prepared statement of Ms. Cummings follows:]
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Mr. Pallone. Thank you very much, Ms. Cummings. And thank
you to all the panel. I think you have been very succinct in
explaining to us the impact of the August 17 memo.
We will now turn to questions. I will recognize myself for
5 minutes, and I will start with Dr. Orszag. One of the
Administration's stated goals in issuing the August 17
directive is to improve enrollment of low-income children in
families with incomes below $35,200, which is the 200 percent
of the federal poverty level. But many of us have questioned
whether this directive will actually achieve this goal. Can you
tell me how many currently eligible but unenrolled children in
families with incomes below $35,200 a year does CBO assume gain
new coverage as a result of the directive?
Mr. Orszag. Under our baseline?
Mr. Pallone. Yes.
Mr. Orszag. Effectively zero.
Mr. Pallone. OK, does the CBO assume that the net effect of
the directive is to help improve enrollment of eligible but
uninsured children in families with incomes below that $35,200
a year? Or does CBO assume the net effect of the directive is
to prevent states that cover children in families with incomes
above the $44,000 a year from continuing to cover those
children?
Mr. Orszag. Again, under our baseline the effect is very
modest, but the fact that it is there is mostly because of the
waiting period that is imposed on children above 250 percent.
Mr. Pallone. Which is the $44,000?
Mr. Orszag. Right.
Mr. Pallone. OK, I personally believe, Dr. Orszag, that the
August 17 directive is punitive to both states and children,
and I also believe that we can increase enrollment of the
poorest children without harming moderate-income children.
The CHIPRA bill, the bill that we passed last year that the
President vetoed, the expansion, that actually helps states
enroll more of the lowest income children without penalizing
States looking to cover children at moderate income levels. And
I just wanted to ask you from CBO's standpoint, do you believe
that the CHIPRA bill would have been more effective at reaching
the lowest-income eligible but not insured children than this
August 17 directive?
Mr. Orszag. It is quite difficult to compare something that
significantly expands the program to the effect of a directive.
Again, as I said earlier, the effect of the directive relative
to our baselines is effectively zero on take-up among low- or
moderate-income children. Whereas the legislation that was
proposed did have a significant increase in enrollment
including among those who are currently eligible but
unenrolled.
Mr. Pallone. You may have heard Mr. Alexander's comments
that having a beneficiary pay a portion of the state's share
would reduce crowd-out. Would you agree with that?
Mr. Orszag. I think the evidence on that is quite
inconclusive. In fact, the leading researcher in this area is
Professor John Gruber of MIT, and with regard to both waiting
periods, but especially with regard to cost sharing, his
results suggest that it is not clear. I actually have the study
with me, and I will just quickly read: ``Findings suggest that
state efforts to increase financial barriers to public
barriers''--that would be cost sharing--``may deter the use of
those programs by those who need them''--he means uninsured
people--``at a faster rate than it is deterring the use of
those programs by those who are crowded out. While the results
are imprecise, there is certainly no evidence that imposing
costs on beneficiaries is reducing crowd-out of private
insurance.''
Mr. Pallone. OK, thank you. Now, let me ask Mr. Rosenberg.
CMS has said repeatedly that they will work with states to help
them meet some of these tests in the August 17 directive. For
example, CMS has initially indicated informally that there
would be no exceptions to the 1-year waiting period or
requirement that children must be uninsured for a full year
before qualifying for CHIP. But in the May letter, you know,
that they recently did, CMS now says it will consider
exceptions.
My fear is that working with states and these exceptions
could be applied arbitrarily in the absence of any regulations
and any specificity. Doesn't this give CMS the power to approve
one state and disapprove another even if they are in the exact
same circumstances? And for example, while Rhode Island did not
have to change the way it calculates eligibility levels for
CHIP, other states like Indiana and Tennessee have already been
told by CMS that they must change that part of their program.
I will ask either Ms. Shah or Mr. Rosenberg actually.
Doesn't this approach have the potential to undermine
requirements for a fair, transparent, and equitable review
process? Mr. Rosenberg or Ms. Shah or both of you?
Ms. Shah. I agree with you that I think it does introduce a
great deal of uncertainty as to what states are expected to do,
and there is a potential for inconsistency. It is especially
unclear since the issuance of the May 7 letter what exactly is
the position of all of the strategies and assurances that are
set out in the August 17 letter. And I think probably further
clarification would be needed.
If CMS's intent was to require uniformity among states by
issuing the August 17 letter, I don't think this strategy is
going to work.
Mr. Pallone. Mr. Rosenberg?
Mr. Rosenberg. I would agree with Ms. Shah and just add
that it provides a certain amount of leverage for CMS to the
States to engage in perhaps disparate action. Once again, it
appears to be an attempt to move toward and to satisfy
potential court scrutiny that will say that we are still being
flexible. In fact, the evidence of past practice in the
departure and the leverage that might be affected by this, I
agree with Ms. Shah that this doesn't change the difficulties
in their potential legal problems that are raised by both the
August 17 letter and the clarification, so to speak, of the May
7 letter.
Mr. Pallone. Thank you. I just wanted to ask unanimous
consent to enter into the record a letter from, I guess, over
100 different organizations that have opposed the August 17
Directive. Mr. Deal.
Mr. Deal. Thank you, Mr. Chairman. I am going to ask you
all to be brief in the responses because I am going to try to
cover a lot. Ms. Shah and Mr. Rosenberg, you have given this
committee something that probably only a third-year law student
who is bogged down in an administrative law class could ever
appreciate, and that is the bureaucracy's minutiae mindset.
Now, the thrust of this whole thing is Congress passed a
statute called the SCHIP Program. Regulations were adopted by
CMS, the administrative executive branch agency designed to
implement that statutory program. And now we are arguing about
whether a letter is a rule that must go through some
bureaucratic process in order to have force and effect. I want
to go back to a more simplistic approach.
I would like to ask the two of you, the experts, and please
be brief, can an executive branch agency such as CMS enforce a
statute passed by Congress that delegates them the authority to
enforce the statute without this minutiae? Does it depend on
how specific the statute is?
Mr. Rosenberg. Supreme Court case law and court of appeals
case law make it clear that in delegating authority to an
agency to promulgate rules and when that agency promulgates
such rules, if it then----
Mr. Deal. I am not talking about rules. I am talking about
statute. Let me read you the statutory language. Statutory
language says that through intake and follow-up screening, that
only targeted low-income children are furnished child health
assistance under state child health plan. And it also goes on
to say that the state child health plan does not substitute for
coverage under group health plans. That is the statutory
language. The regulatory language as to part of it says the
state plan must include a description of reasonable procedures
to ensure that health benefits coverage provided under state
plan does not substitute for coverage provided under group
health plans as defined in the code section that it is designed
to enforce.
Now what I hear you saying is that--and you quoted it--said
that a rule covers every statement that an agency can make. It
becomes a rule and must follow the procedures of adoption of a
rule. I would like to ask you this question, Ms. Shah, since
you used the illustration of the New York plan being denied.
Could CMS have denied the New York state plan amendment if they
just never issued the August 17 letter based on the authority
given them under the statute and under the regulation?
Ms. Shah. Well, CMS would have to follow whatever the
regulation and the established interpretation of that
regulation was over the years.
Mr. Deal. I take that to be a yes.
Ms. Shah. But you see in the case of New York, they applied
that letter requiring a whole host----
Mr. Deal. I am saying if they had never written the
letter----
Ms. Shah. Yes.
Mr. Deal [continuing]. Could they have denied the plan if
they had just never written the letter?
Ms. Shah. They may not have. It might have been viewed as--
--
Mr. Deal. Well, then how did they approve Mr. Alexander's
Rhode Island plan?
Ms. Shah. But to require a whole host of strategies, which
they required New York to comply with here, without having
required that of any other State previously, might have been
viewed as arbitrary and capricious and again have resulted in a
lawsuit.
Mr. Deal. In other words, you are really making the
argument that some of us have made before when our colleagues
on the other side have said and criticized the Administration
for approving state plans that have allowed them to go above
200 percent of poverty for their SCHIP program. You are
basically saying that the Administration had no discretion to
deny those plans. Is that right?
Ms. Shah. The Administration has a great deal of discretion
in the way it implements programs, but where there has been a
settled interpretation of how a statute or regulation is to be
implemented, case law is very clear that there has to be a--it
is considered a rule and----
Mr. Deal. OK. So in other words, we can't pass a statute
that is specific enough that says that you don't have crowd-out
and that you ensure poor children first. The statute is not
specific enough. The regulation that goes further detail to
saying how to implement that statute is not detailed enough,
that we then have to go to implementing rules that deal with
this minutiae before CMS can do anything to enforce this SCHIP
Program?
Ms. Shah. Well, very interestingly, when this rule was
promulgated----
Mr. Deal. Well, you said it was a letter, and the letter is
the equivalent of a rule.
Ms. Shah. No, I am talking about the regulation.
Mr. Deal. OK.
Ms. Shah. When the regulation was promulgated, there was a
debate at that time as far as what the crowd-out strategies
should be. And CMS at that time said that they considered
requiring a set of specific procedures that each state would
have to use. They rejected that option because the statute
authorizes states to design approaches to prevent substitution,
not the Federal Government. In other words, they questioned
whether they had the authority to impose a certain set of
procedures.
Mr. Deal. Are you saying CMS has no discretion then in the
administration of this program?
Mr. Rosenberg. CMS, when it promulgated the 2001 rule,
provided guidelines, provided the rules by which they would
grant or deny. They gave great flexibility. If they want to
change that flexibility and put in more rigid rules, they have
to, according to the Supreme Court, go back and change the rule
the same way they promulgated it, which is by notice and
comment rulemaking. But remember what Ms. Shah and I are
dealing with is not the APA. We are dealing with the
Congressional Review Act, which has much broader standards for
review by Congress. And if Congress wants to look at the
amendment that has been made, or the document of August 17,
they can do that, and they can use different kinds of analysis
and reasons for overturning it if they can get majorities to
affect a disapproval resolution.
Mr. Deal. I think you both illustrated the point I was
making in my first statement. Thank you.
Mr. Pallone. Thank you, Mr. Deal. Next is our vice chair,
Mr. Green.
Mr. Green. Thank you, Mr. Chairman, for, one, holding the
hearing, and I apologize for jumping back and forth because we
have a nursing home hearing downstairs in O&I, those of us who
are on that committee. But I would like to ask unanimous
consent to have my full statement placed into the record.
[The prepared statement of Mr. Green follows:]
Statement of Hon. Gene Green
Thank you Mr. Chairman for holding this hearing today on
H.R. 5998, the Protecting Children's Health Coverage Act of
2008. As an original cosponsor of this bill, I am pleased we
are moving this quickly through the legislative process.
The SCHIP program has been a priority for me because my
home state of Texas has one of the highest uninsured rates of
children in the US with nearly 20 percent uninsured compared to
11 percent nationwide.
Today, we will discuss H.R. 5998, which will nullify the
August 17th directive. The August 17th directive is a letter
the Administration sent to State Medicaid and SCHIP directors
outlining certain conditions states must meet if they want to
cover children in families with incomes above 250% of the
federal poverty level.
One other provision outlined in the directive bars children
who have been dropped from employer based insurance from
participating in CHIP for a full 12 months. These types of
hurdles do not help get those uninsured children who are
eligible for CHIP in the program.
In Texas, SCHIP only covers children at 200% and below the
federal poverty level, but we have still experienced some
significant problems enrolling children in the CHIP program. In
fact, Texas CHIP participation has never been above 85%.
The State of Texas has not been wise with the SCHIP program
and has lost over $850 million in matching funds due to many
missteps including kicking children off of the SCHIP roles and
forcing them to reregister every 6 months.
According to the US Census Bureau, 1.5 million Texas
children are uninsured. Many of those children are actually
eligible for Medicaid or CHIP, but are not enrolled in either
program. The fact of the matter is,the number of insured
children is growing, not only in Texas, but throughout the US
and the August 17 directive does not help reduce the number of
uninsured children.
The two SCHIP reauthorization bills that we passed and that
the President vetoed actually allowed states to sustain current
programs and cover an additional 4 million uninsured children
by 2012.
Adding new challenges and hurdles for states to meet before
they can enroll additional children does nothing to solve the
problems we have insuring children in this country.
The last thing we need to do is make it harder to enroll
children in the CHIP program when states like Texas are
experiencing problems enrolling children in the first place.
The August 17th directive represents a fundamental policy
change in the SCHIP program and was published in the form of a
letter from CMS to state health officials and not moved through
the promulgated rule process, which would have required a
comment period for stakeholders before the rule went into
effect.
Both the GAO and CRS have stated this letter violated the
Congressional Review Act and while the Administration has
attempted to clarify the underlying policy in the August 17th
directive, the fact is it made significant changes to the SHIP
program which made it more difficult for states to expand their
SCHIP programs and violated congressional review processes.
That's why I strongly support H.R. 5998 and I hope we will
move this bill swiftly through the Committee.
Thank you Mr. Chairman, I yield back my time.
----------
Mr. Green. I guess my concern in the hearing is the August
17 Directive. In coming from Texas, I have been so frustrated,
and the members of this committee know that, that using the 1-
year waiting period or even the not having insurance for 1 year
is a way you reduce your enrollment. And I know that happened
in Texas in 2003. 2005 it wasn't corrected, and in 2007, they
did add some children back. And the formula now, I think it is
just below 200 percent of poverty they have the year that you
can have insurance for the full year.
I know we are talking about two different things, but I
think they are interrelated because if you make a child wait a
year from losing their private sector employment--although it
is interesting--and I will ask this question. It is interesting
that CMS said that it didn't include unborn children. So they
are giving health insurance to the same family for a child that
is born within that year period, but if you are a child that is
2 years old, you have to wait that year. I would have to
understand the convoluted reasoning for that. You know I don't
know why we would have an arbitrary year waiting period because
you are the children without health care. And that was the
original intent in '97. A number of us were here when we voted
for that balanced budget act. I didn't vote for the balanced
budget act, but I voted for the CHIP side because I knew that
was needed.
Let me ask--CMS said they will work with the states to help
meet some of these tests to the August 17 Directive. For
example, CMS has initially indicated informally that there will
be no exceptions to the 1-year waiting period, a requirement
that children must be uninsured for a full year before
qualifying for CHIP coverage. In the May letter, CMS now says
it will consider exceptions. My fear is that this working with
the States, these exceptions could be applied arbitrarily and
in the absence of regulations in any specificity. Doesn't this
give the CMS power to approve one state and disapprove another
even if they have the exact same circumstances? Ms. Cummings or
anyone on the panel?
Ms. Cummings. Mr. Green, that is exactly one of the
concerns that we raised in our testimony is this approach of
negotiation and different states being able to use different
databases to make cases is one that does seem to us to lead to
a non-uniform approach, which arouses concern.
The other thing is that we haven't today yet mentioned that
the August 17 letter said you must satisfy all of the
conditions so that we in California, for example, are in a
situation where we could satisfy a couple of them. But, for
instance, this issue about replacement of employer-sponsored
coverage. Given that the adults in our state have an erosion of
employer-sponsored coverage of over that amount, there is no
way we are going to satisfy it with children. And so you just
end up being out of luck.
Mr. Green. Ms. Shah and Mr. Rosenberg, I know from the GAO
and CRS. Do you have anything from your reports on that issue,
the arbitrariness it could have unless we actually have some
regulations that--I like the Federal Government to work with
the States. But I also like it to be on the same playing field,
I guess. That is what my concern is.
Ms. Shah. Well, I know GAO often looks at federal programs
to see how states are implementing them and whether they have
been consistent across states. I don't know about this
particular concern, but I think it is something that, from a
problematic side, they might look into some time in the future.
Mr. Green. Mr. Rosenberg?
Mr. Rosenberg. I did not address that and wasn't asked to
address that in my statements.
Mr. Green. OK. To point out, with regard to CHIP, it seems
that the administration has used a lot of fuzzy math on it. Do
you agree with that?
Mr. Orszag. You are probably referring to the 95 percent
participation rate test----
Mr. Green. Yes.
Mr. Orszag [continuing]. Which has been interpreted--my job
is to evaluate the effects of how they are interpreting a
certain test. They appear to be interpreting the test in a
particular way whereby the vast majority of states would pass
the test, and a substantial number of states would have
participation rates significantly above 100 percent.
Mr. Green. How do you get above 100 percent? Frankly, I
would love to get there in Texas.
Ms. Cummings. Mr. Green.
Mr. Green. Yes?
Ms. Cummings. There are a number of ways you can get 100
percent. According to one set of data, we are at 130 percent.
What does that mean? Does that mean we have served all the
uninsured children? No. If we go to look at the CPS's, is that
130 figure confirmed? No. If we go to our own state survey
data, is that number confirmed? No.
Mr. Green. OK, I know I am out of time, Mr. Chairman. Thank
you for your patience.
Mr. Pallone. Thank you, Mr. Green. Ranking member of the
full committee, Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman, and thank you for
having a hearing on this. It is good. We have been discussing
SCHIP for over a year and a half. For the first year, all we
did was discuss it on the floor. It is good to actually have
real people testifying on real bills. I am not a supporter of
your bill, but I think it is an honest bill and I think it is
worthy of being debated.
My first question is to Dr. Orszag. CMS has stated that of
the 15 states that have submitted data to comply with this
August 17 letter, they have looked at 11 of those data sets.
Nine of those states comply with the 95 percent test, and they
say that they think every state will be able to. I believe CBO
has looked at that same data set and concurs with that
assessment. Is that correct?
Mr. Orszag. I would concur that it appears that given the
way that CMS is interpreting or applying the 95 percent test,
the vast majority of states will either automatically pass it
even with no effort or very close.
Mr. Barton. OK, and you seem to imply in your answer that
CMS isn't looking at the data correctly? The way they look at
it, are they using some unusual, exotic methodology?
Mr. Orszag. I think it would be fair to say that the way
they are applying that test is not the way that most analysts
would do so, yes.
Mr. Barton. Would you say that they are applying the test
more stringently or more loosely?
Mr. Orszag. More creatively.
Mr. Barton. I don't understand creative.
Mr. Orszag. Well, conceptually it is hard to get
participation rates--or not conceptually, just simple
mathematics that are above 100 percent. And the way that they
appear to be applying this test, you can easily get
participation rates above 100 percent. The reason is that they
are looking----
Mr. Barton. Now, what I mean----
Mr. Orszag. What is the underlying reason? The underlying
reason is they are saying you are insured if you have insurance
at any point during the year. So if you have insurance just for
half of January, you are good to go. And obviously that means
that there are a lot of people who are uninsured for the vast
majority or in any given month who would be counted as insured
under their methodology. Or I should say their apparent
methodology.
Mr. Barton. What would a normal analyst use as a length of
insurance? The entire year, half the year?
Mr. Orszag. Or a point in time. You look at the population
at a point in time or over a month or something, average
monthly insurance and average monthly enrollment and what share
of the population would be uninsured over a month. Or you could
do it over different periods of time, but the way that they are
doing both the nominator and denominator in this----
Mr. Barton. Numerator and denominator.
Mr. Orszag. The numerator and the denominator gives you
answers that don't make a lot of sense.
Mr. Barton. OK. Now, Mr. Alexander, your state has received
a compliance letter, I believe, from CMS. Is that correct?
Mr. Alexander. Correct, yes.
Mr. Barton. And what did you do that you weren't doing
before to show the CMS that you could comply with this
directive?
Mr. Alexander. Well, as I had stated in my testimony, Rhode
Island has had a premium assistance program for some time, and
this is not something new that Rhode Island had to do post-
August 17. So not only has Rhode Island had a commitment to
insuring our poorest children, but in regards to the 95
percent, we closely monitor those people that are coming in and
on and off the program. So if somebody had health insurance for
just a month or if somebody has health insurance for 6 months,
we are watching that very closely.
Mr. Barton. So and CMS worked with your state and you to do
this?
Mr. Alexander. CMS has been nothing but a big help to us in
terms of either complying with the provisions in the letter or
on a day-to-day basis with our program. Of course, all states
have challenges. Rhode Island is--I am just a small boy from a
small state. So, as I am sitting up here looking at all the big
states in front of me----
Mr. Barton. A state is a state.
Mr. Alexander. Yes, well you are correct, but Rhode Island
is more like a county. So although----
Mr. Barton. Tell that to the Congressman from Rhode Island.
Mr. Alexander. Well, we will, but although as you know----
Mr. Barton. His vote counts just as much as mine.
Mr. Alexander. As you know, we can bang with the best of
them when it comes to the political arena.
Mr. Barton. Yes.
Mr. Alexander. But in regards to your question of course,
we did not have any major problem complying with the August 17
letter. I can only speak as to----
Mr. Barton. Well, based on your efforts--because my time is
about to expire--do you think that the other states that wish
to comply will be able to work with the CMS and get compliance
at the 95 percent rate?
Mr. Alexander. Based on my experience, I would say yes.
Mr. Barton. OK.
Mr. Alexander. But I am not working the other states.
Mr. Barton. I understand that.
Mr. Alexander. But based on my experience, I would say yes.
I think we have an excellent model in Rhode Island.
Mr. Barton. Mr. Chairman, my time has expired. Let me
simply say this before I yield back. Any states can cover any
child in their state at any level of income with state-only
dollars. All the CMS is trying to do is the law that we passed
10 years ago is that if you want federal matching funds, you
should try to cover your low-income children first at the 95
percent level. And as we have pointed out, the states that are
actually working in a good faith effort to do that seem to be
able to comply with that directive. So I hope that we will take
that into consideration before you attempt to move this piece
of legislation. But I sincerely appreciate you holding this
legislative hearing. I think that is the way to do it. And with
that, I yield back.
Mr. Pallone. Thank you, Mr. Barton. Mr. Engel for
questions.
Mr. Engel. Thank you, Mr. Chairman. As I was saying, right
in the nick of time. Let me follow up on early questions
related to New York's state plan amendment.
New York first submitted a state plan amendment to CMS last
April to expand on the number of individuals covered. Five
times, and let me say that again, five times CMS stopped the
clock on considering the proposal by asking the state of New
York questions about the proposal. New York repeatedly engaged
with CMS and provided answers in a timely fashion.
Only after the draconian August 17 letter was sent out,
which both GAO and CRS says violates the Congressional Review
Act, did CMS deny New York's application. They used the August
17 CMS Directive as the basis for doing so. There is no doubt
about this. They said it time and time and time again.
So the administration's argument that the August 17
Directive is not binding is obviously contrary to actions they
have already taken, as I just explained.
So let me start with Ms. Shah. In the brief file by the
Department of Justice in the case of New Jersey versus the U.S.
Department of Health and Human Services, the DOJ argues that
the directive is non-binding. Isn't it true, however, that the
Department of Health and Human Services has already denied a
number of states' efforts to expand coverage to uninsured
children based on this directive?
Ms. Shah. In the course of our legal opinion, we were
concerned with whether it was a violation of the Congressional
Review Act, so we didn't look at particular states except for
New York because the denial of the New York state plan
amendment, the August 17 letter was specifically cited in that
denial. But I understand that some states, other states have
been affected by the letter.
Mr. Engel. Well, let me ask you this and perhaps Mr.
Rosenberg as well. In addition, hasn't the Department of Health
and Human Services forced the number of States to scale back or
modify proposals to cover uninsured children based on the
requirements in the directive?
Mr. Rosenberg. I have seen reference to those kinds of
allegations. I am not aware of actually factual--that leverage
or whatever was used, on the basis of that, to have the state
scale back. If that can be demonstrated in an APA case, that
could be persuasive to the courts in addition to the New York
state actual rejection.
Mr. Engel. OK, isn't it true though that the Department
of--the argument that the August 17 Directive is not binding is
contrary to actions they have already taken? Perhaps Ms.
Cummings could answer that.
Ms. Cummings. Well, one thing that was in testimony
previously submitted in a congressional hearing by Georgetown,
by the Center for Children and Families, was that Louisiana,
Oklahoma, and Ohio had had to--failed to pursue getting 300
percent of federal poverty level coverage in their state
because of the 8/17 directive.
In our state, for example, the hammer doesn't hit until at
some point in the future because we are one of 14 states that
have been told that we must come into compliance. Our state
would like to go to 300 percent of federal poverty level. If we
tried that right now, we are sure that we would be stopped. But
we don't actually have anything on the table to do that.
What we do have is what happens to children who have
incomes of 250 percent with the application of income
deductions because that is something that CMS has indicated,
although not said in writing, but will no longer be possible.
That affects 14,000 children a year in our state.
Mr. Engel. Thank you. Ms. Shah, let me go back to you. In
spite of DOJ's argument for the district court that the
directive is non-binding, didn't GAO determine that the August
17 letter is, in fact, binding?
Ms. Shah. What we did determine was that it meant the
three-part test that needed to be of an APA rule and had to be
submitted to GAO. But in reinforcing our determination that
this was a rule that had to be submitted to Congress and to
GAO, we noted that there were certain elements of the August 17
letter that did indeed appear to have a binding effect. And one
of those was that it was applied in the case of New York and
also the language of the letter itself imposing a 1-year
deadline for states to come into compliance with what was set
forth in that letter.
Mr. Engel. Let me ask you this, Ms. Shah. If CMS were to
clarify if the August 17 Directive was not intended to be
binding, would the agency still have a problem for failing to
comply with the requirements of a Congressional Review Act?
Ms. Shah. Yes they would because that's not one of the
criteria that is needed to be a rule for the purposes of the
Congressional Review Act. Basically for a rule, it just has to
be a rule that is of general applicability, having future
effect, and designed to implement, interpret or prescribe law
or policy. That reaches a range of statements that are well
beyond those that are binding.
Mr. Engel. Mr. Rosenberg----
Mr. Pallone. We are up to----
Mr. Engel. Am I done?
Mr. Pallone. You are, yes.
Mr. Engel. OK.
Mr. Pallone. Sorry.
Mr. Engel. Thank you.
Mr. Pallone. All right, thank you very much. Thanks. That
concludes our questions. This actually went very quickly, but
it doesn't mean that we didn't learn a lot. I thought it was
very worthwhile and I----
Mr. Deal. Mr. Chairman.
Mr. Pallone. Yes?
Mr. Deal. Since I was very hurried in my questions, I just
want to express to all of you, and I didn't get a chance to ask
all of you questions, I want to thank all of you for being
here. I think this mental exercise, if it is that, and the
substantive issues that lie behind it are much more important,
I think, technically than the issue of the August 17 letter.
That is the underlying purpose of the legislation, and I think
all of us want to work cooperatively with the states in trying
to work out the problems that they face in keeping with what
the purpose of the SCHIP program is. Thank you very much.
Mr. Pallone. Thank you, Mr. Deal. Let me just remind you
that members may submit additional written questions, and we
should have those to the clerk within the next 10 days. So in
another 10 days or so, you may get additional written questions
which obviously we would like you to respond to. But again,
thank you again. And without objection, this meeting of the
subcommittee is adjourned.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Statement of Hon. Anna G. Eshoo
Thank you Mr. Chairman for holding this important hearing
on the future of SCHIP.
In the 10 years since its inception, SCHIP has been
successful in reducing the number of uninsured low-income
children in the United States by one-third. In California, we
cover over 1 million children who otherwise would not have any
coverage and care. I ever American should have healthcare and
above all, every child should be covered, regardless of their
parent's employment situation or wealth.
On August 17th, 2007, CMS adopted a draconian directive
that effectively prevents any state from covering children in
families earning 250% above the federal poverty level ($43,000
for a family of three) unless they can achieve impossible-to-
attain standards. For example, states must enroll 95% of all
eligible children under 200% of poverty before they can expand
their SCHIP program. No federal means-tested program of any
kind comes close to 95% enrollment. The result is that states
are forced to scale back plans to cover thousands of children.
The bill before us today will nullify the harmful, and
likely illegal, directive that the Administration put out last
August. The GAO and CRS have each issued legal opinions that
the directive violates the Congressional Review Act (CRA), a
law intended to keep Congress and the public informed about the
rulemaking activities of federal agencies and to allow
congressional review of such rules.
I look forward to hearing from our witnesses who have had
direct experience with these cuts to SCHIP, as well as from the
GAO and CRS about the legality of CMS's directive.