Medicaid and SCHIP: States' Enrollment and Payment Policies Can  
Affect Children's Access to Care (10-SEP-01, GAO-01-883).	 
								 
States provide health care coverage to low-income uninsured	 
children largely through two federal-state programs--Medicaid and
the State Children's Health Insurance Program (SCHIP). Medicaid  
was established in 1965 to provide health care coverage to	 
low-income adults and children. Medicaid expenditures for health 
services to 22.3 million children totaled $32.4 billion in 1998. 
Congress established SCHIP in 1997 to provide health care	 
coverage to children living in poor families whose incomes exceed
the eligibility requirements for Medicaid. SCHIP expenditures for
health services to nearly 2 million children totaled $2 billion  
in 1999. In implementing SCHIP, states could opt to expand their 
Medicaid programs or establish a separate child health program	 
distinct from Medicaid that uses specified public or private	 
insurance plans offering a minimum benefit package. Thirty-five  
states have chosen SCHIP approaches that are, to varying degrees,
separate from their Medicaid programs. Because eligibility for	 
Medicaid and SCHIP can vary with a child's age, children may, at 
different ages, need to move from one program to the other.	 
Access to care,  therefore, is affected by the extent to which	 
health plans and providers are available and participate in	 
Medicaid and SCHIP. Differences in Medicaid and SCHIP enrollment 
requirements--particularly application requirements and 	 
eligibility determination practices--can affect beneficiaries'	 
ability to obtain and keep coverage. To help simplify the process
for applicants, eight of the ten states GAO reviewed used joint  
applications that had similar--but not always			 
identical--requirements for Medicaid and SCHIP applicants. When  
application requirements differed, Medicaid applicants had to	 
provide additional information or documentation, such as proof of
types of income or assets, or participate in interviews.	 
Differences in the health plans and providers that participate in
Medicaid and SCHIP, as well as differences in the payments they  
receive, have implications for beneficiaries' access to care. In 
the 10 states GAO reviewed, SCHIP often required enrollees to	 
join a managed care plan and sometimes did not offer a choice of 
plans, while Medicaid offered families a choice of two or more	 
plans or of care on a fee-for-service basis, including primary	 
care case management. However, such choices did not necessarily  
give beneficiaries greater access to providers because plan	 
choices may be limited to several smaller plans and may exclude  
larger plans with more extensive networks.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-883 					        
    ACCNO:   A01752						        
  TITLE:     Medicaid and SCHIP: States' Enrollment and Payment       
Policies Can Affect Children's Access to Care			 
     DATE:   09/10/2001 
  SUBJECT:   Beneficiaries					 
	     Children						 
	     Eligibility criteria				 
	     Health care programs				 
	     Health insurance					 
	     Disadvantaged persons				 
	     Food Stamp Program 				 
	     Medicaid Program					 
	     State Children's Health Insurance			 
	     Program						 								 
	     Temporary Assistance for Needy Families		 
	     Program						 
								 

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GAO-01-883
     
A

Report to the Ranking Minority Member, Committee on Energy and Commerce,
House of Representatives

September 2001 MEDICAID AND SCHIP States? Enrollment and Payment Policies
Can Affect Children?s Access to Care

GAO- 01- 883

Letter 1 Results in Brief 3 Background 4 While Similarities Often Exist,
Enrollment Differences Can Affect Ability to Obtain and Keep Coverage 11

Health Plan and Physician Participation, and Payment Differences Can Affect
Access to Care 23 Medicaid Offered Families More Choice Between FFS and
Managed

Care Plans 24 Concluding Observations 33 Agency and State Comments 34

Appendix I: Objectives, Scope, and Methodology 38

Appendix II: States? Design Choices Under SCHIP 45

Appendix III: State Income Eligibility Levels in Medicaid and SCHIP 47

Appendix IV: Comments From the Department of Health and Human Services 52

Appendix V: GAO Contact and Staff Acknowledgments 54 Tables Table 1: Key
Differences in Federal Eligibility Requirements

Between Medicaid and SCHIP Separate Child Health Programs, as of June 2001 8
Table 2: Income Eligibility for Medicaid and SCHIP, by Age Group,

in Florida and Vermont 11 Table 3: Information and Documentation
Requirements for Medicaid and SCHIP Applications in 10 States 13

Table 4: Four States? Policies on Payment of SCHIP Premiums 22 Table 5: Use
of FFS and Capitated Plans in Medicaid and SCHIP in

10 States 24 Table 6: Health Plan Participation in Medicaid and SCHIP in 10
States 27

Table 7: Medicaid and SCHIP Physician Fees as a Percentage of Medicare Fees
for Selected Preventive Medical Services for Children in Four States 30

Table 8: Medicaid Physician Fees as a Percentage of SCHIP Fees for Selected
Preventive Medical Services in California and Michigan 31 Table 9: Age-
Adjusted Capitation Rates Paid to Health Plans for Children in Medicaid and
SCHIP in Four States 32

Table 10: Selected CPT 4 Codes for Preventive Medical Services for Children
41 Table 11: States? and the District of Columbia?s Choices for SCHIP

Programs, as of June 2001 45 Table 12: Eligibility Standards by Age and
Program in States With

SCHIP Separate Child Health Programs 47 Figures Figure 1: Medicaid/ SCHIP
Initial Screening Process for States With

Joint Applications 10 Figure 2: Weighted Average Monthly Capitation Rates in
Three States, Adjusted for SCHIP Enrollment Populations 43

Abbreviations

AFDC Aid to Families With Dependent Children CMS Centers for Medicare and
Medicaid Services CPT 4 Current Procedural Terminology, 4th edition EPSDT
Early and Periodic Screening, Diagnostic and Treatment FFS Fee- For- Service
HCFA Health Care Financing Administration HHS Department of Health and Human
Services HRSA Health Resources and Service Administration PCCM Primary Care
Case Management PMPM Per- Member- Per- Month PPO Preferred Provider
Organization SCHIP State Children?s Health Insurance Program SSI
Supplemental Security Income TANF Tempory Assistance for Needy Families

Lett er

September 10, 2001 The Honorable John D. Dingell Ranking Minority Member
Committee on Energy and Commerce House of Representatives

Dear Mr. Dingell: States provide health care coverage to low- income
uninsured children largely through two federal- state programs- Medicaid and
the State Children?s Health Insurance Program (SCHIP). Medicaid was
established in 1965 to provide health care coverage to certain categories of
low- income adults and children; in 1998, Medicaid expenditures for health
services to about 22.3 million children totaled $32.4 billion. 1 The
Congress established

SCHIP in 1997 to provide health care coverage to children living in
lowincome families whose incomes exceed the eligibility requirements for
Medicaid; in 1999, SCHIP expenditures for health services to nearly 2
million children totaled $2 billion. 2 In implementing SCHIP, states could
choose to expand their Medicaid programs, thus affording SCHIP- eligible
children the same benefits and services that the state Medicaid program
provides. Alternatively, states could construct a separate child health
program distinct from Medicaid that uses specified public or private

insurance plans offering a minimum benefit package. Thirty- five states have
chosen SCHIP approaches that are, to varying degrees, separate from their
Medicaid programs. In April 2000, we reported to you that Medicaid and SCHIP
programs in 10 states that have separate SCHIP programs have differences in
the way the programs enroll children and in the scope of benefits they
offer. 3 In

particular, we noted that 5 of the 10 states had more requirements for
Medicaid than for SCHIP, which increased the burden for families applying
for Medicaid. For example, Alabama Medicaid required applicants to 1 The
most recent Medicaid enrollment and expenditure data for children are for
1998.

2 These figures are for children covered from October 1, 1998, through
September 30, 1999. SCHIP enrolled over 3 million children from October 1,
1999, through September 30, 2000. 3 See Medicaid and SCHIP: Comparisons of
Outreach, Enrollment Practices, and Benefits (GAO/ HEHS- 00- 86, Apr. 14,
2000). The 10 states reviewed in that report were Alabama, Arkansas,
California, Colorado, Florida, Kansas, North Carolina, New York,
Pennsylvania, and Utah.

submit proof of income (such as pay stubs), while Alabama SCHIP allowed
applicants to self- report their income without documentation. Because
eligibility for Medicaid and SCHIP can vary with a child?s age, children
may, at different ages, need to move from one program to the other.
Therefore, coordination between Medicaid and SCHIP- which is required under
the

SCHIP statute- can be critical to ensuring that children are promptly
enrolled in the appropriate program so they have access to necessary health
care. Access to care, however, is also affected by the extent to which
health plans and providers are available and participate in Medicaid and
SCHIP. Because of your concern that differences between the programs may
limit children?s access to care, you asked us to analyze, for selected
states? Medicaid and SCHIP programs, differences in (1) states? enrollment
requirements, particularly application requirements and

eligibility determination practices, and (2) health plan and provider
participation and program payments to plans and providers. With regard to
both objectives, you also asked that we examine the implications that these
differences might have for children?s access to care.

To address differences in states? enrollment requirements, we analyzed the
application requirements for Medicaid and SCHIP for 10 states with SCHIP
separate child health programs. These 10 states were Alabama, California,
Colorado, Florida, Kansas, Michigan, New York, North Carolina, Pennsylvania,
and Utah. We chose states with programs that had a mixture of administrative
structures, ranging from SCHIP programs that were administered by the
states? Medicaid program to those that were operated

separately. In addition, we selected states whose SCHIP programs had been in
operation since January 1999 and that represented a range of geographic
locations. We selected 4 of the 10 states for site visits (California,
Colorado, Michigan, and New York), based in part on the number of enrollees
in both programs and variation in administrative structure. In our site
visits, we obtained supporting data on Medicaid and SCHIP application and
eligibility determination practices and interviewed

representatives of programs, including state, county, and private sector
officials, as well as health plan officials, child health advocates, and
representatives of provider organizations. We reviewed with these groups the
steps necessary for beneficiaries to obtain, maintain, and renew their
eligibility. To obtain broader information about health plan and provider
participation in the two programs, we interviewed Medicaid and SCHIP

officials in the 10 states. We also collected and analyzed information and
data on payments in the four states we visited. In conducting our payment
analysis, we focused on comparing the two programs? (1) physician fees for
primary care services and (2) plan capitation rates, which are paid to
health

plans prospectively on a per- member- per- month (PMPM) basis. Finally, we
conducted interviews with officials from the Department of Health and Human
Services (HHS), including the Centers for Medicare and Medicaid Services
(CMS), formerly called the Health Care Financing Administration (HCFA), 4
which has oversight responsibilities for both programs, and the Health
Resources and Services Administration (HRSA), which shares oversight
responsibilities for SCHIP with CMS. We performed our work

from June 2000 through July 2001 in accordance with generally accepted
government auditing standards. (See app. I for details on our scope and
methodology.)

Results in Brief Differences in Medicaid and SCHIP enrollment requirements-
particularly application requirements and eligibility determination
practices- can affect beneficiaries? ability to obtain and keep coverage. To
help simplify the process for applicants, 8 of the 10 states we reviewed
used joint applications that had similar- but not always identical-
requirements for Medicaid and SCHIP applicants. When application
requirements differed, Medicaid applicants had to provide additional
information or documentation, including items such as proof of types of
income or assets,

or participate in interviews. The extent of coordination between the
programs affected applicants? ability to enroll because joint applications
often were transferred between the Medicaid and SCHIP offices to ensure
enrollment in the appropriate program. Delays in these transfers or in
identifying applications as missing required information could also delay
eligibility determination and program enrollment. In two of the four states
we visited, where comparable data were available, the average processing
time for applications was longer for Medicaid than for SCHIP. While
differences in processing times could be affected by poor coordination,
other factors, such as additional time allowed to process applications for
individuals with special needs, can contribute to Medicaid?s longer average

processing times. Once enrolled, Medicaid and SCHIP families faced different
requirements for maintaining coverage, such as a more complex
redetermination process for Medicaid, and monthly premiums or an annual
enrollment fee in SCHIP. A family?s failure to pay required SCHIP premiums
can result in the loss of coverage for children, which happened for 10
percent of enrolled children in one state.

4 In June 2001, HCFA?s name was changed to the Centers for Medicare and
Medicaid Services (CMS). Since our fieldwork was conducted while the agency
was known as HCFA, we are referring to it in the report findings section by
its former name.

Differences in the health plans and providers that participate in Medicaid
and SCHIP, as well as differences in the payments they receive, have
implications for beneficiaries? access to care. In the 10 states we
reviewed,

SCHIP often required enrollees to join a managed care plan and sometimes did
not offer a choice of plans, while Medicaid offered families a choice of two
or more plans or of care on a fee- for- service (FFS) basis, including
primary care case management. However, having such choices did not
necessarily give beneficiaries greater access to providers because plan

choices may be limited to a number of smaller plans- and exclude larger
plans with more extensive networks. Plans that do not participate in both
Medicaid and SCHIP can create problems with continuity of care, since
children can shift between programs as family income or a child?s age
changes. Where differences in health plan and physician participation
existed, a family with children in both programs- possible in all 10 states
we reviewed- potentially had to use two different sets of providers for its

children. Some states did not know the extent to which physicians
participated in both programs. Payment disparities between Medicaid and
SCHIP also could affect access to care, and low payments have been a
longstanding issue affecting provider participation in Medicaid. In two of
the four states we visited, where comparisons between Medicaid and SCHIP
physician fees were possible, the fees were consistently lower in Medicaid
than in SCHIP. Comparisons of plan capitation rates were more difficult
because of differences in the benefits included in these rates. In one state
with comparable benefits, SCHIP paid more than Medicaid; in the remaining
three states, capitation rates were less comparable because of differences
in the benefits or the populations included in the capitation

rate, or both. In commenting on a draft of this report, HHS generally
concurred with our observations, also noting the important policy
considerations associated with differences in physician participation and
payment rates between Medicaid and SCHIP, and their comparability with other
payers for similar services.

Background For over 35 years, Medicaid has operated as a joint federal-
state entitlement program to finance health care coverage for certain
categories of low- income individuals. Medicaid eligibility is based in part
on a family?s

income in relation to the federal poverty level. Federal law requires states
to extend Medicaid eligibility to children aged 5 and under if their family
income is at or below 133 percent of the federal poverty level and to
children aged 6 to 16 in families with incomes at or below the federal

poverty level. 5 At their discretion, most states have set income
eligibility thresholds that expand their Medicaid programs beyond the
minimum federal statutory levels.

For most populations, state Medicaid programs must offer certain benefits,
such as physician services, inpatient and outpatient hospital services, and
nursing facility and home health services. In addition to the benefits that
are federally mandated, states may offer optional services, such as dental,

physical and occupational therapy, prescription drugs, and case management
services. For most children, states must provide Early and Periodic
Screening, Diagnostic, and Treatment (EPSDT) services. 6 These services are
intended to provide comprehensive, periodic evaluations of health and
developmental history, as well as vision, hearing, and dental

screening services, to most Medicaid- eligible children. States are required
to cover any service or item that is necessary to correct or ameliorate a
condition detected through an EPSDT screening, regardless of whether the
service is otherwise covered under a state?s Medicaid program.

Across the nation, 48 states and the District of Columbia have Medicaid
managed care programs, which require approval from CMS. These managed care
programs can be targeted to specific geographic areas within

a state or can be statewide. As of June 2000, 36 states and the District of
Columbia had Medicaid mandatory managed care programs. In such programs,
certain beneficiaries may choose between at least two capitated managed care
plans, and states pay prospectively for each enrolled beneficiary on a PMPM
basis. As a part of their managed care programs, states can provide
beneficiaries a FFS based alternative, such as primary care case management
(PCCM). Under PCCM, primary care providers are paid a nominal fee to manage
the care of beneficiaries, and all services received are paid on a FFS
basis. 7 The remaining 12 states have managed

5 Medicaid eligibility is mandatory for all children born after September
30, 1983 whose family incomes are less than or equal to the poverty level.
By September 2002, mandatory Medicaid eligibility will apply to all children
(up to age 19) who meet the income requirements. See 42 U. S. C. sect. 1396a(
a)( 10)( A)( i)( VII), (l)( 1)( D), (l)( 2)( C). 6 EPSDT is optional for the
medically needy population, a category of individuals who generally have too
much income to qualify for Medicaid but have ?spent down? their income by
incurring medical and/ or remedial care expenses. See 42 U. S. C. sect. 1396(
a)( 10)( C). 7 For this report, we included PCCM as a FFS- based arrangement
because PCCM arrangements pay providers predominantly on a FFS basis.

care programs that are voluntary for beneficiaries, including a FFS- based
alternative (such as PCCM), or both. The Congress created SCHIP in 1997 as a
means of providing health

benefits coverage to children living in families whose incomes exceed the
eligibility limits for Medicaid. 8 Although SCHIP is generally targeted to
families with incomes at or below 200 percent of the federal poverty level,
each state may set its own income eligibility limits, within certain
guidelines. 9 Using the flexibility built into the statute, states? upper
income eligibility for SCHIP ranged from 133 percent to 350 percent of the
federal poverty level for separate SCHIP programs as of October 2000. 10
States have three options in designing SCHIP: they may expand their Medicaid

programs, develop a separate child health program that functions
independently of the Medicaid program, or do a combination of both. 11
Fifteen states and the District of Columbia have created Medicaid expansion
programs, 16 states have separate child health programs, and 19 states have
a combination Medicaid expansion and separate child health component. (See
app. II for a summary of states? SCHIP design choices and app. III for
states? income eligibility levels in SCHIP and Medicaid.) 8 Established as
title XXI of the Social Security Act by P. L. 105- 33, SCHIP is codified as
42 U. S. C. sect. 1397aa et seq. 9 In general, the SCHIP statute targets
children in families with incomes at or below 200 percent of the poverty
level-$ 35, 300 for a family of four in 2001. Recognizing the variability in
state Medicaid programs, the statute allows a state to expand eligibility up
to 50 percentage points above its Medicaid income eligibility standard in
1997. See 42 U. S. C. sect. 1397jj( b)( 1)( B)( ii)( I). 10 Neither Medicaid nor
SCHIP dictates how a state defines income for purposes of eligibility

determination. Thus, some states have expanded income eligibility levels for
families through ?income disregards,? which ignore certain types of family
income for purposes of determining eligibility. For instance, one state has
imposed income disregards as high as 100 percent of the federal poverty
level, which means that a family with an income equal to 200 percent of the
federal poverty level is treated as if its income were equal to the federal
poverty level. See 42 U. S. C. sect. 1396u- 1( b)( 2).

11 States? SCHIP programs that expand Medicaid and create a separate
component are termed combination programs. Combination programs can involve
small increases in eligibility for states? Medicaid programs. For example,
five states added coverage only for children aged 17 and 18 in families with
incomes at or below the federal poverty level. This group is already being
phased into mandatory Medicaid coverage under current federal law;
consequently, these Medicaid expansions will not exist after September 2002.
See 42 U. S. C.

sect. 1396a( a)( 10)( A)( i)( VII), (l)( 1)( D), (l)( 2)( C).

While Medicaid expansion programs under SCHIP must use Medicaid?s enrollment
structures, benefit packages, and provider networks, SCHIP separate child
health programs may depart from Medicaid requirements, particularly with
regard to benefits and the plans, providers, and delivery systems available
to enrollees. SCHIP separate child health programs generally cover basic
benefits, such as physician services, inpatient and

outpatient hospital services, and laboratory and radiological services, and
may provide other benefits at the state?s discretion, such as prescription
drugs and hearing, mental health, dental, and vision services. In contrast
to Medicaid, SCHIP does not require that beneficiaries have freedom to

choose among providers or plans, and permits states to implement mandatory
managed care; thus, states may place SCHIP enrollees in a single managed
care plan without an alternative. Medicaid and SCHIP separate child health
programs may differ in other respects, particularly in terms of their
application requirements, eligibility determination processes, cost- sharing
requirements, and periods of eligibility. Some of these differences are
based in federal statute, while others are the result of federal
regulations. For example, federal law has

been interpreted to require that public employees determine Medicaid
eligibility, 12 while SCHIP contains no such requirement; consequently,
states are currently permitted to use private contractors to determine

SCHIP eligibility. Also, while federal Medicaid regulations generally do not
permit cost- sharing for children, the SCHIP statute allows states to
require beneficiary cost- sharing, which some states have implemented as a
way to mirror private insurance and encourage appropriate use of services.
(See

table 1.) 12 By statute, a state or local agency must determine Medicaid
eligibility. See 42 U. S. C. sect. 1396a( a)( 5).

Table 1: Key Differences in Federal Eligibility Requirements Between
Medicaid and SCHIP Separate Child Health Programs, as of June 2001

SCHIP separate child health Element Medicaid program

Application Social Security number Social Security number not required. a

requirements required. Eligibility Public employee must Private entities may
determine determination determine eligibility.

eligibility and conduct other administrative functions.

States must have a system in Income verification not required.

place to verify family?s income after eligibility determination. Cost-
sharing Generally, no cost- sharing Cost- sharing, such as premiums or
allowed for children. b annual enrollment fees, allowed for children in
families with incomes above

150 percent of the poverty level, up to 5 percent of family income. For
children in families with incomes below 150 percent of the poverty level,
nominal cost- sharing is allowed.

a Effective August 24, 2001, states may choose to require a Social Security
number for children applying for SCHIP. b In general, Medicaid does not
allow premiums, deductibles, copayments, or other charges for

children. However, CMS may waive these restrictions and allow states to
require nominal costsharing. Source: GAO analysis.

Medicaid and SCHIP also differ in terms of the proportion of their program
expenditures that come from federal funds and in whether eligible
individuals are considered entitled to the program benefits and services.
State expenditures for Medicaid are matched by the federal government

using a formula that results in federal shares ranging from 50 to 77 percent
of expenditures, depending on a state?s per capita income in relationship to
the national average. The national average federal share of Medicaid
expenditures is about 57 percent. The SCHIP statute provides for an

?enhanced? federal matching rate, with each states? SCHIP rate exceeding its
Medicaid rate. Federal shares of SCHIP expenditures range from 65 to 84
percent with the national average federal share equaling about 72

percent. 13 In the Medicaid program, all eligible individuals are entitled
to program benefits. No overall federal budget limit exists for the Medicaid
program. In contrast, for SCHIP, federal matching for each state is limited.
The Congress appropriated $40 billion over 10 years (from fiscal year 1998
to 2007), with a specified amount allocated annually to each of the 50
states, the District of Columbia, Puerto Rico, and the U. S. territories.
States? choices to operate a Medicaid expansion or separate child health
program determine whether eligible individuals are entitled to receive the

benefits and services offered. States opting for a Medicaid expansion under
SCHIP must provide Medicaid benefits to all eligible children. The state
must continue to serve those children even if its allocated federal funds
are exhausted. 14 In contrast, SCHIP separate child health programs are not

entitlements to coverage or services; once federal funds are exhausted,
states have the option to discontinue providing services or cover the
services with other funds. Both statutory and regulatory requirements for
coordination between

Medicaid and SCHIP exist at the federal level. The SCHIP statute requires
the program to coordinate with Medicaid, including first screening SCHIP
applicants for Medicaid eligibility. 15 On the basis of this initial screen,
applications (which in most states are the joint Medicaid/ SCHIP

applications) are directed to either Medicaid or SCHIP, where each program
is responsible for final eligibility determination and enrollment. (See fig.
1.) In addition, as of August 24, 2001, SCHIP regulations also require that
state Medicaid agencies adopt a process that facilitates

enrollment in a state child health program when a child is determined
ineligible for Medicaid. 16 13 Each state?s SCHIP enhanced match is equal to
70 percent of its Medicaid matching rate plus 30 percentage points, not to
exceed a federal share of 85 percent. Thus, a state with the minimum 50-
percent Medicaid match receives a 65- percent match under SCHIP. 14 However,
states that expend their available SCHIP funds may then claim a Medicaid
matching rate for benefits and services provided under a Medicaid expansion.

15 See 42 U. S. C. sect. 1397bb( b)( 3). 16 See 42 C. F. R. sect. 431.636.

Figure 1: Medicaid/ SCHIP Initial Screening Process for States With Joint
Applications

Family applies

Fills out and submits joint application

Medicaid makes Appears

Initial Appears

SCHIP makes final eligibility

Medicaid- eligible screen

SCHIP- eligible final eligibility

determination for Medicaid

determination and completes

eligibility and completes

enrollment process enrollment process

Source: GAO analysis.

In part because Medicaid and SCHIP eligibility represent a continuum of
income levels, coordination between the programs is important. Several
states have found that many families applying for SCHIP actually have

incomes that qualify them for Medicaid. 17 In addition, families may need to
apply to both Medicaid and SCHIP to obtain health care coverage for all of
their children because Medicaid eligibility standards can vary according to
the age of the child. Table 2 illustrates for two states (Florida and
Vermont), how income eligibility can- but does not always- vary by age.
(App. III shows the eligibility standards for SCHIP and Medicaid in the 35
states with SCHIP separate child health programs.)

17 See Children?s Health Insurance Program: State Implementation Approaches
Are Evolving (GAO/ HEHS- 99- 65, May 14, 1999).

Table 2: Income Eligibility for Medicaid and SCHIP, by Age Group, in Florida
and Vermont Florida income eligibility

Vermont income eligibility as a percentage of federal poverty level as a
percentage of federal poverty level Age group Medicaid SCHIP Medicaid SCHIP

Infants Up to 185 Over 185 to 200 a Up to 225 Over 225 to 300 1- 5 years Up
to 133 Over 133 to 200 Up to 225 Over 225 to 300 6- 16 years Up to 100 Over
100 to 200 Up to 225 Over 225 to 300 17- 18 years Up to 28 Over 28 to 200 b
Up to 225 Over 225 to 300

a Infants in this income eligibility range are covered under Florida?s
Medicaid expansion component of its SCHIP program. b Children aged 17 to18
in families with incomes ranging from above 28 percent to 100 percent of the
federal poverty level are covered under Florida?s Medicaid expansion
component of its SCHIP program. The remaining children are covered under the
state?s SCHIP separate child health program.

While Similarities Differences in Medicaid and SCHIP enrollment
requirements- particularly Often Exist,

application requirements and eligibility determination practices- can affect
beneficiaries? ability to obtain and keep coverage. To help simplify
Enrollment Differences the process for applicants, 8 of the 10 states we
reviewed used joint Can Affect Ability to applications that had similar- but
not always identical- requirements for

Obtain and Keep Medicaid and SCHIP applicants. When application requirements
differed,

Medicaid applicants had to provide additional information or Coverage
documentation. The extent and effectiveness of coordination between the
programs affected applicants? ability to obtain coverage because joint
applications often were transferred between the Medicaid and SCHIP

offices to ensure that applicants were enrolled in the appropriate program.
Poor coordination meant that applications that were transferred or
incomplete risked being delayed or denied. In two of the four states we
reviewed, Medicaid applications generally took more time to process.
However, different processing times could not be attributed solely to lack

of coordination efforts because other factors may affect processing times as
well. Once enrolled, Medicaid and SCHIP families faced different
requirements for maintaining coverage, such as a more complex
redetermination process for Medicaid, and premium and annual fee
requirements in SCHIP.

Joint Applications Had Joint Medicaid/ SCHIP applications are used widely-
31 of the 35 states Similar, but Not Always with SCHIP separate child health
programs (including 8 of the 10 states we

reviewed) have them. 18 In most states, joint applications are the primary
Identical, Requirements

method for applying for SCHIP; however, families applying for Medicaid and
other public programs may be required to use a separate, different
application form. 19 Joint application forms have helped simplify
application and eligibility determination for both programs. When an

applicant is found ineligible for one program, the joint form can minimize
or eliminate the follow- up needed to determine eligibility for the other
program. While the 10 states we reviewed generally had similar information
and documentation requirements for both programs, some differences remained
with regard to income deductions, asset information, and interview
requirements. With regard to income reporting, 9 of the 10 states we
reviewed established identical requirements for both Medicaid and SCHIP.
Some of the 10 states in our sample have taken other steps to make
application requirements consistent between the programs. For example, most
of the states we reviewed did not ask for information about assets or
require the applicant to complete an interview. California eliminated its
former requirement for

an in- person interview as part of the Medicaid application process and
allowed Medicaid applications to be mailed in like SCHIP applications. (See
table 3.)

18 The remaining four states- Nevada, North Dakota, Texas, and Utah- did not
have joint applications in place as of July 2000. See The Kaiser Commission
on Medicaid and the Uninsured, Making It Simple: Medicaid for Children and
CHIP Income Eligibility Guidelines and Enrollment Procedures (Oct. 2000). 19
While joint applications can be used for children applying for Medicaid, a
state may have a number of different Medicaid application forms. For
example, in addition to its joint Medicaid/ SCHIP application for children,
Florida has a Medicaid application for families that includes food stamps
and cash assistance; similarly Utah and Michigan have more extensive
application forms for families that are applying for Medicaid and other
programs.

Table 3: Information and Documentation Requirements for Medicaid and SCHIP
Applications in 10 States Income Income deductions a Assets Interview State
Medicaid SCHIP Medicaid SCHIP Medicaid SCHIP Medicaid SCHIP

Alabama n n -- n b California

-- - Colorado nnn -- Florida

nn nn -- - Kansas ----- Michigan

nn nn -- - New York --- n b North Carolina nn -- - Pennsylvani a nn -- -
Utah - - n b n

Number of states with different 1 322

requirements Legend

= Information and documentation required.

n = Information required, documentation not required. - = Information not
asked for or required. a Income deductions allow families to deduct from the
family?s monthly income a portion of work- related

expenses, out- of- pocket child care costs, and child support received. b
Alabama and Utah interviews can be conducted over the telephone; New York
interviews are face- toface. Source: GAO analyses of states? joint
applications and eligibility practices as of March 2001.

Documenting income and income- related information has been cited as a
barrier to program eligibility- but also as a means of ensuring that only
eligible individuals are enrolled in the appropriate program. In particular,

the need to offer documentation, such as pay stubs or proof of child care
expenses, can be problematic for families. For instance, families that do
not receive regular paychecks can have difficulty showing several months

of pay stubs. Similarly, child care expenses can be difficult to document,
particularly if an individual pays cash or with a money order. Seven of the
10 states we reviewed were consistent in requiring applicants to document
their income for both programs. However, individuals in four states could

report income deduction information for both programs, such as child support
or day care expenses, without supplying proof. Only one state required both
Medicaid and SCHIP applicants to document income

deductions, while three states required documentation for Medicaid
applicants but not for SCHIP. Of the 10 states we reviewed, 2 states-
Florida and Michigan- had no income documentation requirements for Medicaid
or SCHIP. For example, Medicaid and SCHIP officials in Michigan told us that
they eliminated documentation requirements because they were a barrier to
application

and enrollment. Before the state eliminated the documentation requirements,
Michigan officials reported that 75 percent of the applications received
were incomplete because individuals failed to provide adequate
documentation. Michigan eliminated income

documentation for both programs and, as a result, the proportion of
incomplete applications received for both programs dropped to below 20
percent. 20 While application requirements for both Medicaid and SCHIP in
the 10 states we reviewed were generally similar, they were not always
identical.

Where differences existed, Medicaid required more information or
documentation, particularly with regard to income deductions, assets, or the
need to participate in an in- person interview. For example, Colorado
required applicants to report income deductions and assets for Medicaid but
not for SCHIP, and New York required in- person interviews and proof of
income deductions for Medicaid applicants but not for SCHIP. (See table 3.)
New York?s Medicaid interview requirement was part of its facilitated

enrollment strategy intended to assist applicants in completing the
enrollment process. This strategy uses community- based organizations (such
as hospitals, clinics, schools, and libraries) as sites where such
interviews can be conducted. SCHIP applicants can also use the facilitated
enrollment process for assistance in applying for the program, but they are
not subject to the in- person interview requirement. The states we visited
had various strategies for addressing the differences

between Medicaid and SCHIP requirements on their joint applications. In
California, application questions that were Medicaid- specific- such as the
need for a Social Security number- were clearly marked as not required for a
SCHIP applicant. Colorado joint applications, on the other hand, 20 Michigan
officials asserted that self- reported income has not resulted in a high
error rate for Medicaid and SCHIP applications. In particular, an official
told us that posteligibility audits, which are conducted by taking a sample
of Medicaid and SCHIP applications and verifying the information reported by
applicants, showed an error rate of 3 percent. These posteligibility reviews
began in October 2000. Data on prior error rates were not available.

asked for information without differentiating between items required by one
program versus another. For example, its joint application asked for
information about assets, although this was only required for Medicaid, to
lessen the need for additional information if an applicant appeared
Medicaid- eligible. Both policies have implications for applicants- either
the applicant submits information that may not be necessary or risks

having to provide additional information later, which could prolong the
approval process.

Delayed or Denied Coverage Delayed or denied coverage often was associated
with a lack of Often Linked to

coordination between the programs and other processing issues. In
Coordination and particular, delays or denials were at risk when Medicaid
and SCHIP

Processing Issues applications were transferred between programs, or when
applications

were deemed incomplete. The amount of risk depended on how closely the
programs coordinated. Generally, states that had identical Medicaid and
SCHIP application requirements and that maintained geographically close or
colocated eligibility determination offices for both programs, reduced the
risk of delayed or denied coverage. However, different application

requirements for Medicaid and SCHIP, as well as poor coordination between
the programs could delay coverage for families. In two of the four states we
visited where we could obtain comparable data, processing Medicaid
applications took longer than for SCHIP; however, longer processing times
could be due to a variety of factors besides differences in application
requirements and insufficient coordination.

Application Transfers Between Increased coordination between Medicaid and
SCHIP was important in Programs Increased the Need for

part because joint applications were often transferred between programs.
Coordination

Application and eligibility determination processes for Medicaid and SCHIP
include an initial eligibility screen for Medicaid and a final eligibility
determination in the appropriate program. 21 Across the four states we
visited, the initial eligibility screening generally took place when an

applicant submitted a joint application to a SCHIP processing location. 22
SCHIP eligibility determination officials were responsible for performing
the initial screen; applications deemed potentially Medicaid- eligible were
typically sent to the Medicaid office in the county where the applicant
resided, while those deemed potentially SCHIP- eligible remained at the
SCHIP office for final eligibility determination. In the four states we
visited, the proportion of joint applications transferred between the
programs was substantial. For example, Michigan officials reported that one-
half of the applications submitted to SCHIP were determined to be
potentially Medicaid- eligible and were forwarded to Medicaid, and
California SCHIP officials estimated that about 30 percent of the
applications received by mail were eligible for Medicaid and thus required
transfer. Applications could also flow in the opposite direction.

For example, SCHIP application processing sites for Colorado and Michigan
each reported that about 20 percent of their applications were transferred
from county offices that determine Medicaid eligibility to the

SCHIP processing location. Colorado officials estimated that, although
average times were not available, such transfers could take anywhere from 2
weeks to 6 months.

21 Across the 10 states we reviewed, the applications were sent to various
locations. For example, states instructed applicants to mail their
applications directly to health plans, to county- based Medicaid eligibility
determination offices, to SCHIP, or gave them a choice of locations. 22 In
California, Colorado, and Michigan, families mailed joint applications to a
single location within the state that was run by SCHIP workers. In New York,
an applicant for SCHIP could mail in the application to the health plan he
or she selected; applicants for Medicaid submitted their applications at the
time of the required in- person interview.

Application transfers took less time if the program offices were
geographically close or colocated. For example, Michigan established a
state- operated Medicaid eligibility determination office in the same
building as the SCHIP enrollment contractor responsible for processing

joint applications. At this SCHIP processing center, joint applications that
appeared Medicaid eligible were to be transferred immediately to this
Medicaid office instead of being sent to various county Medicaid offices for

eligibility determination. 23 Different Application When joint applications
ask for different information for Medicaid and Requirements Increased the
Risk

SCHIP, applications transferred between programs can be considered of
Incomplete Applications

incomplete, which will delay processing until the needed information is
supplied. For instance, if required Medicaid information, such as a Social
Security number, is missing from a joint application, Medicaid processing
can be delayed because the application is incomplete. 24 When applications
were incomplete for these or other reasons, it increased the likelihood of
follow- up and often prolonged the completion of the eligibility

determination process. For example, community assistance workers in
California told us that families who were required to supply additional
information or documentation did not always return to complete the
application process, and many applications were ultimately denied because
they remained incomplete. 25 California officials noted that it is unknown

whether these families were deterred by the requirements or they did not
follow through because they believed they were not eligible for the program.
While incomplete information on applications resulted in some denials,
states varied in the extent to which they could provide data on denials. For
example, California and Colorado were able to provide data on SCHIP

23 A Michigan State official noted that, despite this centralized processing
of Medicaid applications, about 25 percent of applications that appeared
Medicaid- eligible were still sent from the colocated Medicaid office to the
county offices for processing. Under certain circumstances, the joint
applications that appear Medicaid- eligible are sent to the Medicaid office
in the county where the applicant lives. For example, when a family that is
already

receiving Medicaid or whose enrollment is under review in Medicaid submits a
joint application for a child, the case will be flagged and sent to the
county office. 24 California allows applicants that appear Medicaid-
eligible 60 days to submit their Social Security number. 25 Some states
denied coverage after a certain time period if the information was not
provided.

denials that resulted from incomplete information. California indicated that
27 percent of applications received are denied; of these, almost half were
denied because of incomplete information. In 2000, Colorado reported that 31
percent of all applications received were denied because they were
incomplete. Beginning January 2001, however, the state changed its
application, which an official told us reduced the percentage of denials due
to incomplete applications to about 24 percent. In contrast, Michigan
indicated that less than 3 percent of applications were denied for
incomplete information. A Michigan official attributed this low denial rate
to the state?s policy to minimize the amount of required documentation for
both Medicaid and SCHIP, which has reduced the number of applications that
are incomplete and require follow- up. Better Program Coordination Officials
gave us examples of poor coordination between the programs that Helped Avoid
Delays

resulted in delayed coverage or inconvenience to families. In California,
application assistants reported that SCHIP coverage could be denied if the
family had not been promptly taken off Medicaid?s rolls after becoming
ineligible. For example, when a Medicaid family?s income rose enough to make
the family ineligible for Medicaid but eligible for SCHIP, as long as the
family was still recorded as enrolled in Medicaid, its SCHIP application
would be denied. Other difficulties could occur if program eligibility
information was not provided to the family. For example, some Colorado
families that were denied Medicaid were not informed that their applications
had been sent to SCHIP and only discovered they were eligible for SCHIP when
they received a notice that SCHIP premiums were due.

Michigan has made efforts to improve coordination between the programs by
avoiding repeated transfers of the same application that occurred when
Medicaid and SCHIP eligibility workers disagreed on an applicant?s
eligibility. To address this, the state developed a policy in which Medicaid
and SCHIP eligibility workers accept each other?s calculations for purposes
of determining program eligibility. To ensure that only eligible individuals
are enrolled in the appropriate program, the state checks applications for

calculation errors. If any problems consistently occur with workers from
either program, the state conducts eligibility worker training to minimize
the incidence of errors.

Limited Data Indicated Longer Differences in the application requirements
and processes could affect how

Medicaid Processing Times long it took children to obtain coverage in the
two programs. However,

only SCHIP offices were able to provide information on application and
eligibility determination processing times in all four states; for Medicaid
in these states, comparable processing times were only available in Colorado

and Michigan. 26 In these two states, Medicaid application and eligibility
determination processing generally took longer than SCHIP. For example,
Colorado reported statewide average processing times that were longer for
Medicaid (38 days) than for SCHIP (14 days for a completed application

and 30 days for those requiring follow- up). Michigan reported that average
processing times were 19 days for Medicaid and 8 days for SCHIP. 27 While
differences in processing times could be affected by poor coordination,
other factors can contribute to Medicaid?s longer average processing times.
For example, the Medicaid eligible population includes adults and
individuals with special needs in addition to children, which also can
affect how quickly applications are processed.

26 We did not include Medicaid processing times from California and New York
because the data received were not comparable to SCHIP data. For example, in
California, Los Angeles County provided an average processing time for
Medicaid that included eligibility determinations for applicants with
disabilities, while SCHIP reported an average processing time for joint
applications only. Under Medicaid, states have 90 days to determine Medicaid
eligibility for disability- related coverage. See 42 C. F. R. sect. 435. 911(
a)( 1), (2). While New York actually provided a shorter average processing
time for Medicaid eligibility determinations than for SCHIP, Medicaid?s
processing times did not include the time it took to complete the
requirement for an in- person interview. 27 The state?s average Medicaid
application processing time was shortened to fewer than 10 days for
applications processed at the Medicaid office that was colocated with the
SCHIP eligibility processing center.

States may allow families to receive covered services while applications are
being processed by adopting a presumptive eligibility policy, an option
available to states under both programs. Presumptive eligibility allows a
child to receive coverage immediately while eligibility determination is in
process. Nationally, however, few states have opted for presumptive
eligibility in their Medicaid and SCHIP programs. As of July 2000, 28 five
states had adopted and implemented presumptive eligibility in their Medicaid
programs- Massachusetts, Nebraska, New Hampshire, New

Jersey, and New Mexico, while three states- Massachusetts, New Jersey, and
New York- had adopted and implemented presumptive eligibility for SCHIP. A
Michigan official told us that although the state has allowed health plans
to adopt presumptive eligibility, none of the plans had done so as of May
2001.

Differing Program Once enrolled, Medicaid and SCHIP families faced different
requirements

Requirements Affected for maintaining coverage. SCHIP children were
generally guaranteed a Families? Abilities to

longer period of eligibility regardless of changes in income or family size,
Maintain Coverage

while Medicaid children could lose coverage sooner because of requirements
to report such changes. Also, Medicaid enrollees faced a more complex
redetermination process than SCHIP children did. In

contrast, SCHIP children risked losing coverage for their families? failure
to pay required premiums or enrollment fees, while Medicaid generally did
not have such cost- sharing requirements.

28 The Kaiser Commission on Medicaid and the Uninsured, Making It Simple:
Medicaid for Children and CHIP Income Eligibility Guidelines and Enrollment
Procedures.

The four states we visited generally required redetermination of eligibility
after 12 months for both programs. To maintain coverage during the
eligibility period, two states- Michigan and Colorado- required Medicaid
families to report any significant changes, such as income or family status,
and the families could lose coverage if changes made them ineligible. 29 In
contrast, SCHIP families in these two states had ?continuous eligibility,?
meaning they remained covered for the full 12 months regardless of changes
in income or family status. 30 New York did the opposite: Medicaid

families had continuous eligibility, while SCHIP families did not. At the
end of the coverage period, the programs redetermine enrollees? eligibility
for coverage. Medicaid families in California, Michigan, and New York faced
a more complex redetermination process than SCHIP families.

For example, to begin Medicaid redetermination, Michigan mailed families a
new Medicaid application, but it was a 10- page form, not the 4- page joint
application. In contrast, the state?s SCHIP beneficiaries were mailed a
summary of the information on their last application and asked to update
information that had changed. In New York, families completed
redetermination forms for both Medicaid and SCHIP, but Medicaid again

required an in- person interview. In contrast, Medicaid redetermination in
Colorado may be less burdensome than SCHIP redetermination, depending on the
information the state is able to collect before contacting the family. The
state first searches other program files, such as Food Stamps and Temporary
Assistance for Needy Families (TANF), to determine whether it already has
the necessary application information. If the state does not find the
information with this process, it sends families a redetermination form that
essentially has the same information requirements as the joint application.
For SCHIP redetermination, families must submit another joint application.
While Medicaid, under federal law, generally does not allow premiums or fees
for children under age 18, 31 the SCHIP legislation permits states to 29 In
June 2001, California changed its Medicaid program to allow eligible
children to remain covered for at least 1 year, regardless of changes in
family circumstance, income, or resources. 30 Continuous eligibility is
available for children as a state option in both Medicaid and

SCHIP. This option guarantees coverage for 12 months, or a designated
eligibility period, regardless of changes in family income or composition.
Without continuous eligibility, families are required to report any
significant changes in income or household status. 31 See 42 U. S. C. sect.
1396o.

require limited cost- sharing. SCHIP families in the four states we visited
faced varying degrees of risk of losing coverage for failure to pay monthly
premiums or annual enrollment fees. The percentage of children who lost
SCHIP coverage because of their families? failure to pay premiums ranged
from 0 percent in Colorado to 10 percent in Michigan. (See table 4.)

Table 4: Four States? Policies on Payment of SCHIP Premiums Percentage of
Maximum Is coverage lost upon Time allowed for children who lost State
Premium a family premium failure to pay? premium payment

coverage b

California $4-$ 9/ child/ month $27/ month Yes 60 days 9 Colorado $0-$ 25/
child/ year c $35/ year c Yes 30 days c 0 d Michigan $5/ month $5/ month Yes
30 days 10

New York $0-$ 15/ child/ month $45/ month Yes 30 days 4 a In some states,
premiums can vary per child based on family income, household size, and, in
one state, (California) by the health plan in which the child is enrolled. b
Loss- of- coverage data is expressed as a percentage of total enrollment.
The data represented

different time frames, depending on what the state was able to provide. The
percentages represented 11 months of data in California, over 24 months in
Colorado, 12 months in Michigan, and 3 months in New York. c Data represent
a new state policy instituted in spring 2001, when Colorado began charging
SCHIP

families an annual enrollment fee. Before this, the state had charged
certain SCHIP families monthly premiums that ranged from $9 to $30,
depending on a family?s income and number of children. d Data represent
disenrollment activity under the former policy of monthly premiums.
According to a

state auditor?s report, the state never put a policy in place to make
collections on premiums, so no families lost coverage for failure to pay.
Source: State information.

Health Plan and Differences in the plans and physicians that participate in
Medicaid and

Physician SCHIP and in payments the programs make to these plans and
physicians have implications for beneficiaries? choices and access to care.
In the 10

Participation, and states we reviewed, SCHIP often required enrollees to
join a managed care Payment Differences

plan and sometimes did not provide a choice of plans. In contrast, Can
Affect Access to

Medicaid beneficiaries had a choice of at least two capitated plans in
locations offering managed care or could receive care on a FFS basis,

Care including through PCCM. 32 However, having such choices did not

necessarily mean greater access to providers. For example, FFS options do
not necessarily provide greater access to physicians than managed care plans
do, since physicians may choose to limit participation or not participate in
Medicaid. Similarly, one program may have a number of smaller plans, while
larger plans with more extensive provider networks

may not participate in the program. Payment disparities between Medicaid and
SCHIP also had the potential to affect access to care. In two states where
comparable data were available, Medicaid FFS payments to physicians for
children?s preventive services were lower than the rates physicians were
paid for the same services in SCHIP. We also compared Medicaid and SCHIP
physician fees with those of Medicare and found

Medicaid fees consistently lower in all four states, while our comparison of
SCHIP and Medicare fees showed a less consistent relationship. Comparisons
of capitation rates were difficult because of differences in the benefits
included within these rates. In one state with comparable benefits covered
by the capitation rate, SCHIP paid more than Medicaid. In the remaining
three states, capitation rate comparisons were not feasible because of
differences in the benefits or populations covered, or both.

32 Capitated managed care plans are paid on a PMPM basis, while a PCCM pays
primary care physicians a nominal fee to manage beneficiary care and makes
FFS payments for services provided.

Medicaid Offered In terms of the broad choices available- obtaining health
care through FFS

Families More Choice or enrollment in a managed care plan- families with
children in Medicaid generally had more choice than SCHIP families. In the
10 states we Between FFS and

reviewed, Medicaid generally offered families a choice of receiving services
Managed Care Plans on a FFS basis; 33 selecting between a capitated managed
care plan and FFS, including PCCM; or choosing from at least two capitated
plans. Across the

nine states with capitated managed care, enrollment of Medicaid
beneficiaries in capitated plans ranged from 4 percent to 75 percent. 34 In
contrast, virtually all children enrolled in SCHIP in 8 of the 10 states
were enrolled in capitated managed care plans; the remaining two states
offered

only FFS care. 35 (See table 5.) Table 5: Use of FFS and Capitated Plans in
Medicaid and SCHIP in 10 States Option Percentage of beneficiaries enrolled
in FFS a Capitated

capitated plans State Medicaid SCHIP Medicaid SCHIP Medicaid b SCHIP

Alabama n c n 0 0 California d n 54 100 Colorado d n 40 100 e Florida n e nn
37 98 f Kansas n n 26 100 Michigan n d n 67 100 New York d n 32 100 North
Carolina nn g 4 g 0 Pennsylvani a d n 70 100 Utah d n 75 100

33 To participate in Medicaid, providers must have a provider agreement with
the state Medicaid agency; the availability of FFS providers is based on the
number of agreements a state has in place, as well as how many of these
providers are currently accepting patients. 34 We did not include Alabama
among these states because both Medicaid and SCHIP are FFS programs. We
included North Carolina Medicaid- although its Medicaid and SCHIP programs
are predominantly FFS- because the state does enroll Medicaid beneficiaries
in one county in capitated plans.

35 Capitated managed care plans refers to how states pay health plans in
Medicaid and SCHIP, which is on a PMPM, capitated basis. Managed care plans
participating in Medicaid or SCHIP may choose to pay their providers on a
capitated or FFS basis.

Legend

n - Option is available for nearly all beneficiaries.

- Option is rarely or not available to beneficiaries.

- The extent to which option is available varies across the state. Note:
This table refers to the financial relationship between the state and
participating plans or providers. Under FFS, the state pays providers
directly for services delivered to eligible beneficiaries. Under capitation,
the state pays managed care plans on a capitated PMPM basis, and the managed

care plans are responsible for paying providers. a FFS here includes PCCM
programs and preferred provider organization (PPO) arrangements that are not
capitated. b With the exception of Colorado Medicaid, all Medicaid
capitation percentages include adults as well

as children. c While Alabama?s Medicaid is primarily FFS- based, inpatient
hospital services are provided on a

capitated basis. Since the focus of this study is on primary care, we
classified this program as FFS. d The state requires Medicaid beneficiaries
in some geographic areas- but not others- to enroll in capitated plans. e
May include some beneficiaries whose physicians are paid on a FFS basis. f A
small portion of SCHIP children in this state- those under age 5- must use
Medicaid plans and PCCM physicians. g North Carolina Medicaid enrolls
beneficiaries in one county in capitated plans. Source: GAO analysis.

Medicaid beneficiaries? choices within a state depended on where they lived.
The Medicaid programs in seven states- California, Colorado, Michigan, New
York, North Carolina, Pennsylvania, and Utah- mandated that certain Medicaid
beneficiaries enroll in capitated health plans, 36 but the extensiveness of
mandatory enrollment within a state varied greatly. 37 In certain areas of
these states, enrollment in a capitated Medicaid plan

was mandatory for most children:

 in 22 of 58 counties in California,

 in urban areas of Colorado,

 in 73 of 83 counties in Michigan,  in 16 of 57 counties in New York and
in parts of New York City,  in one county in North Carolina, 36 Medicaid
programs typically target certain beneficiary groups, such as families in
TANF, for enrollment in mandatory managed care programs. Sometimes other
groups, such as certain children with special health care needs, are
exempted or excluded from mandatory enrollment in managed care. 37 In
Florida and Kansas, Medicaid programs required beneficiaries to enroll in
managed care but included a PCCM option in most counties.

 in the Pittsburgh and Philadelphia areas of Pennsylvania, 38 and  in 4
urban counties in Utah. While enrollment was mandatory in these locations,
Medicaid beneficiaries could still choose among two or more capitated plans.
For example Medicaid beneficiaries could choose among 9 capitated plans in
Wayne County, Michigan, and among 13 to16 plans in New York City, depending
on the area in which they live.

SCHIP beneficiaries generally had less choice between managed care plans and
FFS than Medicaid beneficiaries, and these choices also depended on where
the beneficiaries lived. Four of the states we reviewed with capitated
managed care plans in SCHIP- Colorado, Florida, New York, and

Pennsylvania- had geographic regions in which the SCHIP program offered a
single managed care plan and no FFS option. In addition, SCHIP children
throughout Kansas were enrolled in the single available plan in their area
and did not have a FFS option, while Medicaid children were enrolled in
either a PCCM or a capitated plan. While SCHIP children did not always have
a choice of FFS, this did not mean that choices were necessarily limited.
For example, California SCHIP officials noted that in the five counties with
the largest enrollment (over 60 percent of the SCHIP

enrollment statewide), SCHIP beneficiaries have between 7 and 9 health plan
choices. Similarly, in New York City, SCHIP beneficiaries have between 10
and 15 plan choices, depending on where they live.

Degree to Which Plans and The degree to which health plans and physicians
participated in both Physicians Participated in Medicaid and SCHIP varied
among the 10 states we reviewed. Several Both Programs Varied

states, such as Colorado, Kansas, New York, and Utah, reported that Among
States generally the same health plans participated in both programs, but in
Florida, Michigan, and Pennsylvania, there was limited overlap between the
health plans participating in Medicaid and those participating in SCHIP.
(See table 6.) This difference was especially pronounced in Michigan,

where 80 percent of SCHIP beneficiaries were enrolled in a single capitated
plan that did not participate in Medicaid and that contracted with over 95
percent of the physicians in the state. Michigan officials told us that in
one

quarter, 27 percent of children that reapplied for SCHIP were eligible for
Medicaid; to the extent that these children were enrolled in the plan that
38 Pennsylvania officials noted that Medicaid beneficiaries are required to
enroll in mandatory managed care as soon as managed care plans become
available in their area.

did not participate in Medicaid, the transfer to Medicaid would require that
they select a new health plan.

Table 6: Health Plan Participation in Medicaid and SCHIP in 10 States Number
of capitated managed care plans

Participation in State

Medicaid SCHIP both programs

Alabama a a a California 27 b 26 22 Colorado 5 6 c 5 Florida 14 15 6 Kansas
1 2 1 Michigan 26 14 10 New York 29 31 29 North Carolina 3 a a a Pennsylvani
a 6 7 2 Utah 4 3 3 Note: The table above represents the number of capitated
managed care plans that participate in a state, and does not reflect the
choices available to beneficiaries in any particular location. Across these
10 states, the number of plans available to beneficiaries in a single area
ranged from 1 plan for Medicaid and SCHIP in various states and counties to
13 to 16 plans for Medicaid and 10 to 15 for

SCHIP in New York City, depending on the borough. a The program is largely
FFS for beneficiaries in this state. b This number represents an
unduplicated count of the capitated plans that participate in Medicaid. In
California, the Medicaid managed care program known as the ?two- plan model?
limits 12 counties in the state to having two health plans per county
participating in the Medicaid program. Within these 12 counties, however,
the two health plans sometimes subcontract with additional managed care
plans. For example, in Los Angeles County, 10 plans participate in Medicaid
either directly or through

subcontracts. c This number does not include Colorado?s state managed care
network, where the state pays primary

care providers on a capitated basis. However, we did not include this plan
in the table because the state?s insurance department does not recognize
this entity as a health plan. Source: State data.

When plans do not participate in both programs, continuity- of- care
problems can arise as beneficiaries shift between programs because of
changes in family income or children?s ages. For example, because Medicaid
eligibility changes with a child?s age in all 10 of the states we reviewed,
a child may have to move from Medicaid to SCHIP at certain ages

even when family income remains constant. (See app. III.) Losing eligibility
in one program and becoming eligible for the other can therefore mean
joining a new plan and possibly seeing a new physician. In addition, a
family with more than one child could have children enrolled in each
program, so having the same providers in both programs would make obtaining
health care easier for the family as a whole. 39 To facilitate continuity of
care, a few states reported taking action to ensure that plans and
physicians participated in both Medicaid and SCHIP. For example, in 1998,
New York began requiring that new plans participate in both programs and
that existing plans serve both Medicaid and SCHIP in any new service areas.
Similarly, Colorado required managed care plans

contracting with SCHIP to be willing to contract with Medicaid, and it has
allowed only one exception to this requirement. Colorado state officials
reported that they also intend to request that health plans submit Medicaid
and SCHIP physician networks for review so that the state can independently
determine the degree of participation in both programs. The remaining six
states we reviewed with Medicaid and SCHIP capitated

programs did not require health plans to participate in both programs.
However, officials in one of the six states- Kansas- said that in the future
they intend to require plans? participation in both Medicaid and SCHIP.
Neither requiring health plan participation in both programs nor having

FFS options can guarantee, however, that the two programs will have the same
physicians, since physicians may choose not to participate in one or the
other program or plans may establish different physician networks for

each program. 40 Medicaid and SCHIP officials in the 10 states seldom were
able to report whether physicians participated in both programs- and the

39 For additional information on differences in provider networks and
complexities for ?split? families (that is, families with a child (or
children) in each program), see Implementation of the State Children?s
Health Insurance Program: Momentum Is Increasing After a Modest Start, First
Annual Report (Mathematica Policy Research Inc. for HCFA, Jan. 2001).

40 Moreover, the level of physician participation in each program also can
vary. For example, physicians may participate fully in Medicaid or SCHIP,
accepting all patients that present themselves; participation could be less
extensive if a physician limits the number of patients he or she accepts, or
if the physician refuses to take new patients from either program.

extent of their participation. A few states- such as Michigan and New York
noted that their state insurance departments were responsible for reviewing
network adequacy. In most cases, however, states did not have the data
needed to compare physician participation in both Medicaid and SCHIP,
particularly where a significant portion of care was provided by capitated
plans. Colorado officials noted that provider data systems in Medicaid and
SCHIP were not comparable and that comparisons also

would be difficult because provider participation changes frequently within
and between networks. Payment Rates Can Affect Payment rates- whether they
are physician fees or capitation rates to Physician Participation and,
health plans- can affect the degree to which physicians and health plans

Ultimately, Access to Care participate in Medicaid and SCHIP, and thereby
affect beneficiaries? choices and access to care. The relative fees paid by
different insurers- Medicare, 41 Medicaid, SCHIP, and private health plans-
can also affect providers? willingness to participate. 42 Nationally, low
Medicaid physician

fees and physician participation have been long- standing areas of concern.
In a recent national survey, pediatricians cited low fees as one of the most
important factors in their decision to limit participation in Medicaid. 43
In

three of the four states we visited- California, Colorado, and Michigan- the
percentage of pediatricians accepting Medicaid patients was below the
national average of 67 percent. Some plans and physicians have demonstrated
their dissatisfaction with Medicaid?s fees by taking legal

action. In New York, for example, two provider groups recently initiated
lawsuits that resulted in increases in Medicaid dental fees, and physician
fees for office visits were increased from $7 to $30. In both cases, these
were the first Medicaid fee increases in more than 30 years.

41 Medicare is a federal health insurance program for elderly and disabled
persons and persons with end- stage renal disease; about 4,000 children also
are enrolled in the program. Private insurance companies have often based
their payments to physicians on Medicare rates. 42 Stephen Norton, Recent
Trends in Medicaid Physician Fees, 1993 -1998, The Urban Institute,
Assessing the New Federalism (Washington, D. C.: Sept. 1999), p. 1. Some
evidence also exists to show that fees must increase to a certain level
before participation is affected; see Oral Health: Factors Contributing to
Low Use of Dental Services by Low- Income Populations (GAO/ HEHS- 00- 149,
Sept. 11, 2000). 43 Yudkowsky, Tang, and Siston, American Academy of
Pediatrics, Division of Health Policy Research, Pediatric Participation in
Medicaid/ SCHIP: Survey of Fellows of the American Academy of Pediatrics,
2000 (Chicago, Ill.: American Academy of Pediatrics, n. d.).

Across the four states we visited, Medicaid fees were consistently lower
than Medicare fees for the same preventive services for children, while
SCHIP and Medicare fees had a less consistent relationship in the two states
where comparable data were available. 44 Medicaid fees ranged from 29
percent to 61 percent of what Medicare would pay for selected preventive
medical services for children. SCHIP fees as a percentage of

Medicare fees varied, with two large health plans in California paying 44 to
72 percent of what Medicare would pay and one large health plan in Michigan
paying 103 to 124 percent of what Medicare would pay. 45 (See table 7.)

Table 7: Medicaid and SCHIP Physician Fees as a Percentage of Medicare Fees
for Selected Preventive Medical Services for Children in Four States
Physician fees as a percentage of Medicare fees State Medicaid a SCHIP b

California 42 - 55 44 - 72 Colorado 42 - 58 c Michigan 56 - 61 103 - 124 New
York 29 - 39 c Note: The range of Medicaid, SCHIP, and Medicare FFS ratios
are based on fees paid for seven preventive medical services for children,
by age group. These services are listed in app. I, table 10. a We obtained
Medicare fees for preventive medical services for children for calendar year
2000 and, where there was geographical variation, we used the lowest payment
for Medicare in the state. Within a state, Medicaid fees did not vary by
geographic location.

b SCHIP fee comparisons are based on what two health plans in California
enrolling about 40 percent of the SCHIP children statewide and one large
plan in Michigan enrolling about 80 percent of SCHIP children paid their
physicians on a FFS basis. c We were unable to make FFS comparisons in
Colorado and New York. In Colorado, the state paid

fewer than 1 percent of physicians for SCHIP beneficiaries on a FFS basis,
and the plan we visited did 44 We were unable to make FFS comparisons for
Colorado?s or New York?s SCHIP programs. Colorado had a small percentage of
providers- less than 1 percent- who provided services to SCHIP beneficiaries
on a FFS basis. In New York, SCHIP was entirely a capitated program. Among
the three plans we visited in New York, only one paid its providers on a FFS
basis. Since this plan enrolled only 4 percent of all SCHIP children in New
York, we did not include these data in our analysis.

45 Even though SCHIP programs in California and Michigan were 100 percent
capitated managed care, we were able to compare fees in SCHIP because a
large health plan in each state paid providers on a FFS basis. Two plans in
California served approximately 40 percent of SCHIP beneficiaries in the
state, while a plan in Michigan served approximately 80 percent of the SCHIP
beneficiaries in the state.

not pay its physicians on a FFS basis. In New York, where SCHIP was entirely
a capitated program, only one of the three plans we visited paid its
providers on a FFS basis. This plan enrolled only 4 percent of all SCHIP
children in New York. Source: GAO analysis of FFS payments, March 2001.

In comparing Medicaid and SCHIP fees for the same children?s preventive
medical services, Medicaid fees in two states- California and Michigan- were
consistently lower than what physicians were paid for the same services in
SCHIP. Medicaid fees were 46 percent to 58 percent of what one dominant
health plan in Michigan paid SCHIP physicians and 83 percent of

what a large plan in California paid SCHIP physicians. (See table 8.)

Table 8: Medicaid Physician Fees as a Percentage of SCHIP Fees for Selected
Preventive Medical Services in California and Michigan

Medicaid physician fees as a percentage of SCHIP physician fees California a
Michigan b Preventive medical service category Plan A Plan B

New patient, under 1 year 83 100 58 New patient, 1 - 4 years 83 100 52 New
patient, 5 - 11 years 83 72 51 Established patient, under 1 year 83 92 52
Established patient, 1 - 4 years 83 83 47 Established patient, 5 - 11 years
83 88 47 Established patient, 12 - 17 years 83 92 46

a California SCHIP payments are based on what two large plans, enrolling
about 40 percent of SCHIP children statewide, paid its FFS physicians. b
Michigan SCHIP payments are based on what a large plan, enrolling about 80
percent of SCHIP

children statewide, paid its FFS physicians. Source: State and health plan
data.

Just as physician fees can affect physician participation, capitation rates
can affect plan participation. Capitation rates can be difficult to compare,
however, because the PMPM rates do not always encompass the same benefits.
In Michigan, Medicaid capitation rates were lower than SCHIP rates by $26
PMPM, even though the two programs contracted for essentially the same
services. 46 In California, differences in benefits and in the populations
included in the rates complicated rate comparisons.

Medicaid?s capitation rate included both adults and children, while SCHIP?s
rate was limited to children. In the remaining two states, the benefits were
not comparable between the two programs, which precluded any

conclusions regarding the comparability of capitation rates. (See table 9.)

Table 9: Age- Adjusted Capitation Rates Paid to Health Plans for Children in
Medicaid and SCHIP in Four States Medicaid

SCHIP rate Key benefits excluded from capitation

State rate a (PMPM) (PMPM) rates b

California $95 c $80 Medicaid:  selected psychiatric and AIDS prescription
drugs  mental health benefits

 substance abuse treatment Colorado $54 d $70 Medicaid:

 most mental health benefits

SCHIP:

 dental benefits Michigan $47 $73 Medicaid:

 mental health benefits

 substance abuse treatment

 dental benefits

SCHIP:

 mental health benefits

 substance abuse treatment

 dental benefits New York $90 e $110 Medicaid: f

 prescription drugs

 newborn inpatient hospital costs

SCHIP:

 newborn costs (program starts at 1 mo.)

46 Responding to concerns regarding Medicaid rates, Michigan?s state
legislature increased the capitation rates in the fall of 2000. These rate
increases are included within our rate analysis.

Note: Medicaid and SCHIP capitation rates are comparable only in Michigan;
in the remaining three states, direct comparisons are not feasible because
of differences in benefits and populations covered in the capitation rate.
Appendix I describes the methods used to develop weighted average capitation
rates based on the age distribution of enrollees in each state. a Medicaid
rates exclude rates for enrollees receiving Supplemental Security Income
(SSI) to achieve a

closer match in the health status of Medicaid and SCHIP enrollees for
comparison purposes. b Where Medicaid excludes benefits from its capitation
rate, such benefits are provided either on a FFS basis or through a separate
capitated arrangement. EPSDT benefits are covered under Medicaid but not
typically under SCHIP.

c The California Medicaid capitation rate is not for children only; it is a
family rate that adults, primarily parents who are also eligible for
Medicaid under the Temporary Assistance to Needy Families (TANF) program. d
These rates are for children up to age 18 in Colorado Medicaid?s Baby Care
Kids Care, foster care, and Aid to Families With Dependent Children (AFDC)
categories. Maternity care was not included in the Medicaid rate; however, a
SCHIP official said that very few enrollees in the SCHIP program required
maternity benefits. e We excluded a one- time inpatient hospital payment for
newborns from the Medicaid weighted average PMPM rate to make it more
comparable with New York SCHIP, which does not cover children under 1 month
old. f Rates for New York Medicaid include plans? optional benefits, which
are dental, emergency transportation, nonemergency transportation, and
family planning.

Source: GAO analysis of state data.

Concluding Although states have a significant amount of flexibility to
design their Observations Medicaid and SCHIP programs, differences in
enrollment policies have a

bearing on how easily children gain and retain access to health care.
Differing application requirements and processing times can lead to delayed
coverage- and in some cases, to no coverage- if families find the

application process too difficult to complete. Well- coordinated programs,
however, can minimize the effect of such differences and facilitate
enrollment and continuity of care for children. Differences in provider
participation and in the relative payment rates also have implications for
children's access to health care. Few states,

however, could assess the degree to which the same physicians were available
to both Medicaid and SCHIP children. Since physicians decide whether to
participate in Medicaid and SCHIP partly on the basis of the payment rates,
lower Medicaid payments relative to other payers continue to be a source of
concern, although some states have recently increased Medicaid provider
payments. While comparing payment rates in a managed care environment is
often complicated by differences in covered benefits, differential rates
between the two programs can affect plans? and physicians? willingness to
participate and, in turn, beneficiaries? access to care.

Agency and State We provided the Secretary of Health and Human Services an
opportunity to

Comments comment on a draft of this report. In its comments, HHS generally
agreed

with our concluding observations that differences in enrollment policies,
provider participation, and relative payment rates in Medicaid and SCHIP can
have implications for program enrollment as well as access to care. HHS
expressed uncertainty, however, about the degree to which our concluding
observations provide a national assessment of enrollment and payment
policies. The report notes throughout that our findings on

enrollment policies and provider participation were based on the experience
of 10 states and that our comparisons of payment rates were limited to 4
states. Our intent was not to generalize nationwide, but to illustrate how
selected states are addressing challenges that other states might also face
in administering their Medicaid and SCHIP programs.

HHS noted that the influence of relative reimbursement levels on physician
and dentist participation in the Medicaid program is an important policy
consideration. It expressed concern, however, about comparing Medicare

physician fees to Medicaid fees for selected pediatric preventive medical
services because of differences in the populations eligible for these
programs. We made this comparison for several reasons. First, while Medicare
is a federal health insurance program primarily for the elderly and persons
with disabilities, its fee schedule includes fees for pediatric medical
services. Second, both public and private health care insurers often base
their payments to physicians on the Medicare fee schedule. For

example, in California, Medicare payment levels were used as a benchmark for
revisions to the Medicaid fee schedule in August 2000. 47 Finally, research
on Medicaid payment frequently considers Medicare fee

47 In addition, almost half of the Medicaid programs across the country have
adopted Medicare?s methodology as a benchmark for establishing physician FFS
payments. See Sandra Hunt et al, Applying RBRVS to Medi- Cal; Case Studies
in Seven States,

PricewaterhouseCoopers (Oakland, Calif.: Medi- Cal Policy Institute, June
2001), pp. 2 and 42.

schedules as a point of comparison for Medicaid rates. 48 While HHS also
suggested that a comparative analysis of payment data from commercial plans
would be helpful, such an analysis was beyond the scope of this review.

Finally, HHS commented that findings from the American Academy of Pediatrics
on physician participation and payments- noted in this report- might warrant
further investigation by GAO. We agree that additional analysis of
children?s access to care and payments to physicians in both Medicaid and
SCHIP is warranted, and are continuing to address these issues in other
work.

We also provided a copy of our draft report to Medicaid and SCHIP officials
in the 10 states included in our analysis. We received comments from the
Medicaid and SCHIP programs in California, Colorado, Kansas, Michigan, and
Pennsylvania. We also received comments from the Medicaid program in
Alabama, and the SCHIP programs in North Carolina and New York. Several
states, including Michigan, and Pennsylvania, commented that differences in
health plan participation in their Medicaid and SCHIP

programs did not necessarily mean that the same physicians do not
participate in both programs. We agree that physician participation can be
similar even when health plans differ; however, states generally could not
provide documentation of the extent of physician participation in both

programs. California and Colorado also commented on the difficulty of making
capitated payment comparisons between the two programs. We agree that it is
difficult to compare Medicaid and SCHIP capitated rates,

particularly when program benefits or populations differ. As a result, we
noted benefit and population differences throughout the report and did not
draw conclusions about comparative payment rates where such differences
existed.

48 See Joel Menges, and others, Comparing Physician and Dentist Fees Among
Medicaid Programs, The Lewin Group (Oakland, Calif.: Medi- Cal Policy
Institute, June 2001); Sandra Hunt, and others, Comparing CPT Code Payments
for Medi- Cal and Other California Payers, PricewaterhouseCoopers (Oakland,
Calif.: Medi- Cal Policy Institute, June 2001); Stephen Norton and Stephen
Zuckerman, ?Trends in Medicaid Physician Fees, 1993- 1998?, Health Affairs,
(Vol. 19, No. 4, July/ August 2000); Stephen Norton, Recent Trends in
Medicaid Physician Fees, 1993- 1998, The Urban Institute, Assessing the New
Federalism (Washington, D. C.: Sept. 1999). In addition, the American
Academy of Pediatrics includes questions about Medicare fees in relation to
Medicaid fees in its survey of pediatricians? Medicaid reimbursement rates
for 2000.

HHS and the states also provided technical and clarifying comments, which we
incorporated where appropriate. (HHS? comments are included in app. IV.) As
arranged with your office, unless you release its contents earlier, we plan
no further distribution of this report until 30 days after its issuance
date. At that time, we will send copies of this report to the Secretary of
Health and Human Services, the Administrators of CMS and HRSA, and

other interested parties. We will make copies available to others upon
request. If you or your staff have any questions regarding this report,
please contact me on (202) 512- 7114 or Carolyn Yocom at (202) 512- 4931.

Key contributors to this report are listed in app. V. Sincerely yours,
Kathryn G. Allen Director, Health Care- Medicaid and

Private Health Insurance Issues

Appendi x I

Objectives, Scope, and Methodology The objectives of this report were to
analyze, for Medicaid and SCHIP in selected states, differences in (1)
enrollment requirements, particularly application and eligibility
determination practices, and (2) health plan and physician participation and
payments to plans and physicians. With regard to both objectives, we were
also asked to consider whether differences between Medicaid and SCHIP might
have implications for children?s access to care.

To do this, we conducted telephone interviews of Medicaid and SCHIP state,
county, and private sector officials responsible for Medicaid and SCHIP
administration in 10 states. We visited four states, and we analyzed data
from states? programs as well as federal Medicaid and SCHIP program reports
and documents. Because states? Medicaid programs varied considerably, data
collected from states did not always represent the same time frames. We
asked states to provide their latest available data, which

ranged from 1999 to the summer of 2001. In addition, we reviewed published
studies and reports on application and eligibility determination practices,
plan and physician participation, and provider payment issues in Medicaid
and SCHIP. We also relied on information from our previous work. 1 To
analyze the extent of programmatic differences for the two reporting
objectives, we selected 10 states that had SCHIP programs with separate

child health programs. These states were Alabama, California, Colorado,
Florida, Kansas, Michigan, New York, North Carolina, Pennsylvania, and Utah.
With one exception, these were the same states included in our previous
Medicaid and SCHIP comparison report. 2 In selecting these

states, we considered attributes of SCHIP separate child health programs,
such as administrative structure and the method of providing services
(feefor- service (FFS) or managed care) compared to Medicaid programs in
each state. We also selected states whose SCHIP programs had been in
operation since January 1999 and represented a range of geographic

locations. We made site visits to four of these states (California,
Colorado, Michigan, and New York) to probe certain issues more deeply and
obtain the multiple perspectives needed. We selected these four states
primarily because of their geographic distribution, the varying sizes of
their Medicaid

1 See Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and
Benefits (GAO/ HEHS- 00- 86, Apr. 14, 2000). 2 We substituted Michigan for
Arkansas because the latter did not have a separate SCHIP program.

and SCHIP enrollments, and their different program administration
structures. For example, the Medicaid program in California operates at the
county level, while SCHIP operates statewide; in contrast, Michigan

operates both Medicaid and SCHIP out of the same state agency. During the
four site visits, we interviewed representatives of programs- including
state, county, and private sector officials- as well as a wide range of
groups, including

 state Medicaid and SCHIP directors and their staffs;

 managed care plan officials;

 local organizations responsible for assisting families with applications;

 contractors and other staff responsible for determining eligibility and
for enrolling children in Medicaid and SCHIP;

 physician organizations, such as local chapter officials of the American
Academy of Pediatrics; and

 child health advocacy organizations. We also obtained documentation and
data from states on application and eligibility determination, plan
participation, and plan and physician payments. To compare application
requirements and eligibility determination

practices under Medicaid and SCHIP, we analyzed application requirements
from the 10 states. Our site visits to four states allowed us to obtain a
more in- depth understanding of how Medicaid and SCHIP programs at the state
level determined whether applicants were eligible; how the two programs
referred ineligible applicants; and how both programs enrolled

beneficiaries into managed care plans, where pertinent. In each state we
visited, we obtained data and conducted interviews with state, plan,
physician, and community groups on Medicaid and SCHIP procedures and

requirements, time frames, and coordination efforts. To obtain information
about health plan arrangements and provider participation in the two
programs, we conducted semistructured telephone interviews with Medicaid and
SCHIP directors or their key staff in the 10

states. These interviews allowed us to capture variations between Medicaid
and SCHIP both within and across states. In the four states we visited, we
also obtained more extensive information about the degree of beneficiary
choice of health plans and physicians in each program, in urban

and rural areas and under Medicaid managed care programs. In addition,

we obtained data on the number of plans, degree of plan participation in
each program, enrollment by plan, and provider overlap. Finally, we
collected and analyzed information and data on Medicaid and SCHIP payments
to managed care plans and FFS providers in the four states we visited. In
analyzing payments, we focused on making

comparisons within a state regarding Medicaid and SCHIP (1) FFS payments to
physicians for services for Medicaid and SCHIP beneficiaries and (2)
capitation rates to plans. Plans are paid a fixed amount per member per
month (PMPM), regardless of the services provided, while under FFS,
physicians are paid a specific amount for each service. We performed our
work from June 2000 through July 2001 in accordance with generally accepted
government auditing standards. Methodology for

Since many Medicaid beneficiaries are in a FFS arrangement, we compared
Comparison of FFS

Medicaid payments with SCHIP payments for the same preventive services for
children. While SCHIP programs do not typically use FFS Payment Rates

arrangements, we identified three dominant health plans, two in California
and one in Michigan, that served significant numbers of SCHIP beneficiaries
and that paid their providers on a FFS basis. 3 We compared Medicaid
payments in California and Michigan with the payments that each of these
SCHIP plans paid their providers. 3 We did not make FFS comparisons between
Medicaid and SCHIP in Colorado or New York.

Colorado has a small percentage of providers- about 1 percent- who provide
services to SCHIP beneficiaries in rural areas and are paid on a FFS basis
by the state. In New York, SCHIP was entirely a capitated program and the
state did not develop FFS rates. Among the three plans we visited in New
York, one paid its providers on a FFS basis. Since this plan enrolled only 4
percent of all SCHIP children in New York, we did not include these data in
our analysis.

We obtained fee schedules for pediatric medical services using selected
codes from the most commonly used procedural coding system in states
reporting Medicaid EPSDT services- the standard Physicians Current
Procedural Terminology, 4 th edition (CPT 4). (See table 10.) These CPT 4
codes were the most commonly used procedural codes for reporting Medicaid?s
EPSDT services under capitated managed care programs and

the second most commonly used codes for reporting these services under FFS.
4 Table 10: Selected CPT 4 Codes for Preventive Medical Services for
Children CPT 4 codes Description

99381 New patient, under 1 year 99382 New patient, 1 to 4 years 99383 New
patient, 5 to 11 years 99391 Established patient, under 1 year 99392
Established patient, 1 to 4 years 99393 Established patient, 5 to 11 years
99394 Established patient, 12 to 17 years Source: Current Procedural
Terminology, American Medical Association, 4th edition 1999.

Methodology For Managed care plans often receive different capitation rates
for each risk Comparison of

group or category of eligible populations. For example, plans may be paid
separate rates for infants and teenagers, or for Supplemental Security
Capitation Rates Income (SSI) program beneficiaries in Medicaid, who are
often more costly to serve because of their complex health needs. The
distribution of such population groups and the benefits offered also can
differ between

Medicaid and SCHIP. Because of this, comparing programs? capitation rates to
health plans required analyzing any existing differences between Medicaid
and SCHIP rates based on a program?s enrollment by age, risk groups, and
benefits; where possible, we made adjustments to address the differences we
identified.

4 Elicia J. Herz Medicaid Services for Children: State Programs Under Early
and Periodic Screening, Diagnostic and Treatment (EPSDT), Congressional
Research Service (Washington, D. C.: Library of Congress, Feb. 11, 1999), p.
21.

In general, to compare capitation rates, we first excluded SSI children from
Medicaid?s enrollment figures and calculated or obtained weighted average
capitation rates for non- SSI children to make the Medicaid rates more
comparable to SCHIP. 5 While this approach made the Medicaid and SCHIP
populations more similar, the number of beneficiaries in each age group
varied by program. To adjust for these differences, we used the SCHIP
program?s enrollment distribution by age in each state and applied weighted
average Medicaid capitation rates, thus calculating a populationadjusted
PMPM Medicaid rate that was more comparable to SCHIP. By ageadjusting the
two populations, we arrived at more comparable price- toprice evaluations of
Medicaid and SCHIP capitation rates. For example, in Colorado, infants (aged
0 to 1) made up 8,236 (15 percent),

of all children in Medicaid, while infants composed 633, or 3 percent, of
all children in SCHIP. Capitation rates differ by age groupings- with infant
rates higher than rates for older children under both programs. For example,
the weighted average Medicaid rate for infants in Colorado was $300 PMPM,
while the weighted average rate for ages 1 to 18 was $47 PMPM. 6 Given these
differences, the weighted average monthly capitation rate for a program
enrolling many infants- such as Medicaid- reflects the higher costs of these
beneficiaries. This rate is not comparable to the weighted average rate for
a program with fewer infants. To adjust for these differences in
populations, we used SCHIP?s enrollment distribution by age in Colorado and
applied Colorado?s Medicaid rates to the SCHIP enrollment distribution in
order to calculate a population- adjusted PMPM rate. This gave us comparable
price- to- price evaluations of Medicaid and SCHIP

capitation rates in Colorado of $54 PMPM in Medicaid and $70 PMPM in SCHIP.
We also obtained or calculated price- to- price evaluations of 5 Because SSI
eligibility is frequently a criterion for Medicaid eligibility, children
with severe disabilities are disproportionately represented within the
Medicaid enrollment numbers for children. In addition, Medicaid covers many
services that SSI- eligible children would likely use that are not
represented in SCHIP benefit packages. Thus, including SSI children would
overstate per- child Medicaid expenditures for purposes of comparisons with
SCHIP. 6 These rates are for children up to age 18 in Colorado Medicaid?s
Baby Care Kids Care, foster care, and Aid to Families With Dependent
Children (AFDC).

Medicaid and SCHIP capitation rates for children in Michigan and New York. 7
(Figure 2 shows the original capitation rate for Medicaid and SCHIP, as well
as the population- adjusted rate for Medicaid.) Figure 2: Weighted Average
Monthly Capitation Rates in Three States, Adjusted for SCHIP Enrollment
Populations 120

PMPM rates in dollars 100

80 60 40 20

0 Colorado Michigan New York

Medicaid rate based on program enrollment SCHIP rate based on program
enrollment Medicaid rate based on SCHIP enrollment Source: GAO analysis of
state data. 7 We excluded a one- time inpatient hospital payment for
newborns in the Medicaid weighted average PMPM rate to make it more
comparable with New York SCHIP, which does not cover children under 1 month
old.

In California, the Medicaid program developed its capitation rates by
eligibility groupings, not by age ranges, and so it could not provide rates
for children by age. 8 For our capitation rate comparison, we selected a

?family? population grouping that best represented families with children
because it included a Medicaid category of eligibility that is based on
enrollment in the Temporary Assistance to Needy Families (TANF) program. 9
Within this family rate category, capitation rates were the same, regardless
of the age of the child or adult. As a result, creating comparable
populations between Medicaid and SCHIP was not possible. 10 The California
capitation rates cited represent the weighted averages for

Medicaid beneficiaries and for SCHIP beneficiaries in 12 counties that
enrolled the majority of Medicaid- and SCHIP- eligible individuals in
capitated care. 8 In contrast, California SCHIP developed different rates
for children under 1- year- old ($ 187.15 PMPM) and for children 1 year and
older ($ 78. 66 PMPM). 9 TANF is a federal grant program operated by states
that provides cash assistance and other services to needy families. 10
California officials noted that the state?s Medicaid PMPM capitation rate
included both adults and children, thus complicating comparisons with
SCHIP?s capitation rate, which was

limited to children. As a result, we noted population and benefit
differences throughout the report and did not draw conclusions where such
differences existed.

Appendi x II

States? Design Choices Under SCHIP States are allowed three options in
designing SCHIP: expand their Medicaid program, develop a separate child
health program that functions independently of the Medicaid program, or
combine both approaches. (See table 11.) As of June 2001, 35 states have
separate programs or combination programs separate from Medicaid. Fifteen
states and the District of Columbia have chosen to create Medicaid expansion
programs under SCHIP, 16 states have separate child health programs, and 19
states have programs that combine Medicaid expansion and separate child
health programs.

Table 11: States? and the District of Columbia?s Choices for SCHIP Programs,
as of June 2001

Medicaid Separate State expansion program Combination

Alabama n

Alaska n

Arizona n

Arkansas n

California n

Colorado n

Connecticut n

Delaware n

District of Columbia n

Florida n

Georgia n

Hawaii n

Idaho n

Illinois n

Indiana n

Iowa n

Kansas n

Kentucky n

Louisiana n

Maine n

Maryland n

Massachusetts n

Michigan n

Minnesota n

(Continued From Previous Page)

Medicaid Separate State expansion program Combination

Mississippi n

Missouri n

Montana n

Nebraska n

Nevada n

New Hampshire n

New Jersey n

New Mexico n

New York n

North Carolina n

North Dakota n

Ohio n

Oklahoma n

Oregon n

Pennsylvani a n

Rhode Island n

South Carolina n

South Dakota n

Tennessee n

Tex as n

Utah n

Ver mont n

Virginia n

Washington n

West Virginia n

Wisconsin n

Wyoming n

Total 16 16 19

Source: HCFA data.

State Income Eligibility Levels in Medicaid

Appendi x II I and SCHIP Because Medicaid and SCHIP income eligibility
levels vary by age, children in the same family can qualify for different
programs. (See table 12.) Using a family with two children, aged 2 and 7,
and an income at 125 percent of the federal poverty level provides an
example of how family eligibility can

be split between Medicaid and SCHIP. In 21 of the 35 states with separate
child health programs, the 2- year- old would be eligible for Medicaid,
while the 7- year- old would be eligible for SCHIP. 1 Assuming that the
family?s income remains at 125 percent of the poverty level, these children
would be split between Medicaid and SCHIP for 4 years, until the 2- year-
old turned 6 and thus qualified for SCHIP, not Medicaid. Six states have
consistent eligibility levels for all ages: four states- Connecticut,
Indiana, Maryland, and South Dakota- used SCHIP Medicaid expansions, while
two states- Vermont and Washington- already had eligibility levels that were
consistent for all children. The remaining eight states have consistent
levels for all ages with the exception of infants, which are typically
covered

at a higher level in Medicaid.

Table 12: Eligibility Standards by Age and Program in States With SCHIP
Separate Child Health Programs Income as a percentage of federal poverty
level, by age a State Program <1 1- 5 6- 16 17- 18

Alabama Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b bb
100 Medicaid 133 133 100 15 Arizona

Separate SCHIP program 200 200 200 200 Medicaid 140 133 100 30 California

Separate SCHIP program 250 250 250 250 SCHIP Medicaid expansion b bb 100
Medicaid 200 133 100 82

1 The 21 states are Alabama, Arizona, California, Colorado, Delaware,
Florida, Georgia, Kansas, Mississippi, Montana, Nevada, New York, North
Carolina, North Dakota, Oregon, Pennsylvania, Texas, Utah, Virginia, West
Virginia, and Wyoming.

(Continued From Previous Page)

Income as a percentage of federal poverty level, by age a State Program <1
1- 5 6- 16 17- 18

Colorado Separate SCHIP program 185 185 185 185 Medicaid 133 133 100 37
Connecticut

Separate SCHIP program 300 300 300 300 SCHIP Medicaid expansion b bb 185
Medicaid 185 185 185 100 Delaware

Separate SCHIP program 200 200 200 200 Medicaid 185 133 100 100 Florida

Separate SCHIP program c 200 200 200 SCHIP Medicaid expansion 200 b b 100
Medicaid 185 133 100 28 Georgia

Separate SCHIP program 235 235 235 235 Medicaid 185 133 100 100 Illinois

Separate SCHIP program 185 185 185 185 SCHIP Medicaid expansion 200 d b 133
133 Medicaid 133 133 100 46 Indiana

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b 150 150
150 Medicaid 150 133 100 100 Iowa

Separate SCHIP program c 200 200 200 SCHIP Medicaid expansion 200 b 133 133
Medicaid 185 133 100 37 Kansas

Separate SCHIP program 200 200 200 200 Medicaid 150 133 100 100 Kentucky

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b 150 150
150 Medicaid 185 133 100 33

(Continued From Previous Page)

Income as a percentage of federal poverty level, by age a State Program <1
1- 5 6- 16 17- 18

Maine Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b 150
150 150 Medicaid 185 133 125 125 Maryland

Separate SCHIP program 300 e 300 e 300 e 300 e SCHIP Medicaid expansion 200
200 200 200 Medicaid 185 185 185 40 Massachusetts

Separate SCHIP program c 200 200 200 SCHIP Medicaid expansion 200 150 150
150 Medicaid 185 133 114 86 Michigan

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b bb 150
Medicaid 185 150 150 100 Mississippi

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b bb 100
Medicaid 185 133 100 34 Montana

Separate SCHIP program 150 150 150 150 Medicaid 133 133 100 41 Nevada

Separate SCHIP program 200 200 200 200 Medicaid 133 133 100 31 New Hampshire

Separate SCHIP program c 300 300 300 SCHIP Medicaid expansion 300 b bb
Medicaid 185 185 185 185 New Jersey

Separate SCHIP program 350 350 350 350 SCHIP Medicaid expansion b 133 133
133 Medicaid 185 133 100 41

(Continued From Previous Page)

Income as a percentage of federal poverty level, by age a State Program <1
1- 5 6- 16 17- 18

New York Separate SCHIP program 250 250 250 250 SCHIP Medicaid expansion b
bb 100 Medicaid 200 f 133 100 87 North Carolina

Separate SCHIP program 200 200 200 200 Medicaid 185 133 100 100 North Dakota

Separate SCHIP program 140 140 140 140 SCHIP Medicaid expansion b bb 100 g
Medicaid 133 133 100 100 h Oregon

Separate SCHIP program 170 170 170 170 Medicaid 133 133 100 100 Pennsylvani
a

Separate SCHIP program 235 i 235 i 235 i 235 i Medicaid 185 133 100 41 South
Dakota

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion 140 140 140
140 Medicaid 133 133 100 100 Tex as

Separate SCHIP program 200 200 200 200 SCHIP Medicaid expansion b bb 100
Medicaid 185 133 100 17 Utah

Separate SCHIP program 200 200 200 200 Medicaid 133 133 100 100 Ver mont

Separate SCHIP program 300 300 300 300 Medicaid 225 225 225 225 Virginia

Separate SCHIP program 185 185 185 185 Medicaid 133 133 100 100

(Continued From Previous Page)

Income as a percentage of federal poverty level, by age a State Program <1
1- 5 6- 16 17- 18

Washington Separate SCHIP program 250 250 250 250 Medicaid 200 200 200 200
West Virginia

Separate SCHIP program 200 200 200 200 Medicaid 150 133 100 100 Wyoming

Separate SCHIP program c c 133 133 Medicaid 133 133 100 55

a Unless otherwise noted, Medicaid eligibility levels are reported as of
March 31, 1997, while Medicaid expansion and SCHIP eligibility levels are
reported as of October 1, 2000. b State has no SCHIP Medicaid expansion
category of eligibility for this age group. c State has no SCHIP separate
child health category of eligibility for this age group.

d Infants born to Medicaid- enrolled mothers are covered up to 200 percent;
infants for whom application is made independent of their parents are
covered up to 185 percent. e Effective as of July 1, 2001.

f Increased from 185 to 200 percent as of November 1, 2000. g Covers age 18
only. h Covers ages 15 through 17. i No federal matching funds are provided
for children in families with incomes above 200 to 235 percent of the
poverty level. Pennsylvania covers these children with state funds only.
Source: GAO summary of HCFA and state data.

Comments From the Department of Health Appendi x V I and Human Services

Appendi x V

GAO Contact and Staff Acknowledgments GAO Contact Carolyn L. Yocom, (202)
512- 4931 Staff

Key contributors to this analysis were Joy L. Kraybill, JoAnn
Acknowledgments

Martinez- Shriver, and Deborah A. Signer. In addition, Yorick F. Uzes
contributed to the initial design and data collection, Behn Miller provided
legal analysis, and Elizabeth T. Morrison assisted in writing the report.

(201068) Lett er

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a

GAO United States General Accounting Office

Page i GAO- 01- 883 Medicaid and SCHIP

Contents

Contents

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Appendix I

Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix I Objectives, Scope, and Methodology

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Appendix II

Appendix II States? Design Choices Under SCHIP

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Appendix III

Appendix III State Income Eligibility Levels in Medicaid and SCHIP

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Appendix III State Income Eligibility Levels in Medicaid and SCHIP

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Appendix III State Income Eligibility Levels in Medicaid and SCHIP

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Appendix III State Income Eligibility Levels in Medicaid and SCHIP

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Appendix IV

Appendix IV Comments From the Department of Health and Human Services

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Appendix V

United States General Accounting Office Washington, D. C. 20548- 0001

Official Business Penalty for Private Use $300

Address Correction Requested Presorted Standard

Postage & Fees Paid GAO Permit No. GI00
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