State Children's Health Insurance Program: Program Structure,	 
Enrollment and Expenditure Experiences, and Outreach Approaches  
for States That Cover Adults (26-NOV-07, GAO-08-50).		 
                                                                 
In 2006 about 4.5 million individuals were enrolled in the State 
Children's Health Insurance Program (SCHIP). Congress created	 
SCHIP with the goal of significantly reducing the number of	 
low-income uninsured children. Under certain circumstances,	 
states may also cover adults, and in June 2006 about 349,000	 
adults were enrolled. Each state receives an annual allotment of 
federal funds, available as a federal match based on the state's 
expenditures. Generally, states have 3 years to use each fiscal  
year's allotment, after which unspent federal funds may be	 
redistributed. Congress initially authorized SCHIP for 10 years, 
from 1998 through 2007, and provided approximately $40 billion	 
for that period. GAO examined (1) how 10 states that cover	 
adults--parents, childless adults, or both--in SCHIP structured  
their programs; (2) these states' enrollment and expenditure	 
experiences for adults, which GAO considered in the context of	 
those for all other SCHIP populations (children and pregnant	 
women); and (3) the approaches these states adopted to attract	 
all eligible individuals. To accomplish this, GAO reviewed 10	 
states that covered adults in SCHIP as of 2007. GAO interviewed  
officials in the 10 states; reviewed states' 2006 annual reports 
and information available on states' Web sites; and analyzed	 
enrollment and expenditure data obtained primarily from the 10	 
states, as well as from the Centers for Medicare & Medicaid	 
Services (CMS) and published sources.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-50						        
    ACCNO:   A78350						        
  TITLE:     State Children's Health Insurance Program: Program       
Structure, Enrollment and Expenditure Experiences, and Outreach  
Approaches for States That Cover Adults 			 
     DATE:   11/26/2007 
  SUBJECT:   Child health services				 
	     Data integrity					 
	     Eligibility criteria				 
	     Federal funds					 
	     Federal/state relations				 
	     Health care costs					 
	     Health care programs				 
	     Health care reform 				 
	     Health care services				 
	     Health insurance					 
	     Medicare						 
	     Program evaluation 				 
	     Program management 				 
	     State programs					 
	     Statistical data					 
	     State Children's Health Insurance			 
	     Program						 
                                                                 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-50

   

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Report to the Ranking Member, Committee on Finance, U.S. Senate:

United States Government Accountability Office:

GAO:

November 2007:

State Children's Health Insurance Program:

Program Structure, Enrollment and Expenditure Experiences, and Outreach 
Approaches for States That Cover Adults:

GAO-08-50: 

GAO Highlights:

Highlights of GAO-08-50, a report to the Ranking Member, Committee on 
Finance, U.S. Senate. 

Why GAO Did This Study:

In 2006 about 4.5 million individuals were enrolled in the State 
Childrenï¿½s Health Insurance Program (SCHIP). Congress created SCHIP 
with the goal of significantly reducing the number of low-income 
uninsured children. Under certain circumstances, states may also cover 
adults, and in June 2006 about 349,000 adults were enrolled. Each state 
receives an annual allotment of federal funds, available as a federal 
match based on the stateï¿½s expenditures. Generally, states have 3 years 
to use each fiscal yearï¿½s allotment, after which unspent federal funds 
may be redistributed. Congress initially authorized SCHIP for 10 years, 
from 1998 through 2007, and provided approximately $40 billion for that 
period. 

GAO examined (1) how 10 states that cover adultsï¿½parents, childless 
adults, or bothï¿½in SCHIP structured their programs; (2) these statesï¿½ 
enrollment and expenditure experiences for adults, which GAO considered 
in the context of those for all other SCHIP populations (children and 
pregnant women); and (3) the approaches these states adopted to attract 
all eligible individuals. To accomplish this, GAO reviewed 10 states 
that covered adults in SCHIP as of 2007. GAO interviewed officials in 
the 10 states; reviewed statesï¿½ 2006 annual reports and information 
available on statesï¿½ Web sites; and analyzed enrollment and expenditure 
data obtained primarily from the 10 states, as well as from the Centers 
for Medicare & Medicaid Services (CMS) and published sources. 

What GAO Found:

SCHIP program structures for adults in the 10 states varied, 
particularly in terms of the categories of adults coveredï¿½whether they 
were parents or childless adultsï¿½and the types of coverage offered. For 
fiscal year 2007, 5 of the 10 states (Arizona, Minnesota, New Jersey, 
Rhode Island, and Wisconsin) covered parents only, 1 state (Michigan) 
covered childless adults only, and 4 states (Idaho, Illinois, New 
Mexico, and Oregon) covered both. Three states offered direct coverage 
only (where the state provides coverage through contracts or agreements 
with managed care organizations, providers, and suppliers), 3 states 
offered premium assistance only (where the state pays for a portion of 
the premium costs of employer-sponsored or privately purchased 
insurance), and 4 states offered both. All 10 states required adults to 
contribute to the cost of their coverage.

Enrollment and expenditure experiences with adult coverage varied 
widely across the states reviewed. In 2006, adult enrollment as a 
proportion of the total number of individuals covered through SCHIP was 
less than 25 percent in 3 states, 33 to 50 percent in 4 states, and 
more than 50 percent in 3 states. Overall, the 343,000 adults covered 
in the 10 states comprised about 40 percent of the total number of 
individuals covered through SCHIP in these states. Adults accounted for 
widely varying proportions of total SCHIP expenditures in the 9 states 
for which GAO had fiscal year 2006 expenditure dataï¿½1 percent in 1 
state, 32 to 42 percent in 3 states, and more than 50 percent in 5 
states. Overall, adults accounted for about 54 percent of total SCHIP 
expenditures in the 9 states. 

The 10 states reviewed used three approaches in their outreach efforts: 
targeting hard-to-reach populations, targeting families instead of 
adults specifically, and relying on new and established partnerships to 
locate and enroll all eligible individuals. In some cases, statesï¿½ 
current outreach approaches reflected smaller state budgets for such 
activities, and most states reviewed said they relied on new and 
existing partnerships with entities that, for example, regularly come 
into contact with families in their efforts to find and enroll eligible 
individuals. Statesï¿½ efforts to assess the effectiveness of different 
outreach approaches ranged from little or no evaluation to more formal 
methods of analyzing outcomes.

In commenting on a draft of this report, CMS stated that the report 
mischaracterized coverage of unborn children in SCHIP as coverage for 
adults, thereby inflating adult enrollment and expenditures for states 
that cover unborn children, and that the report did not use CMS data 
systems and therefore did not use consistent data. Regarding coverage 
of unborn children, CMS is incorrect: the report categorized coverage 
of unborn children as coverage for pregnant women, not as coverage for 
adults. Regarding the data systems, GAO relied on state data primarily 
because CMS data systems do not provide enrollment and expenditure data 
broken out by all of the population and coverage categories that were 
important to this analysis. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-50]. For more information, contact James 
C. Cosgrove at (202) 512-7114 or [email protected]. 

[End of section] 

Contents:

Letter:

Results in Brief:

Background:

State SCHIP Program Structures Vary in the Adults Covered and Type of 
Coverage Offered:

Enrollment and Expenditures for Adults Varied Widely across States 
Reviewed:

States' Outreach Approaches Target Specific Populations and Use 
Partnerships to Locate and Enroll All Eligible Individuals:

Agency and State Comments and Our Evaluation:

Appendix I: Premium Assistance Programs:

Appendix II: Comments from the Centers for Medicare & Medicaid Services:

Appendix III: GAO Contact and Staff Acknowledgments:

Tables:

Table 1: Upper Threshold of Income Eligibility as a Percentage of the 
Federal Poverty Level in 10 States' SCHIP Programs, by Adult Coverage 
Category and Type of Coverage, Fiscal Year 2007:

Table 2: Benefit Packages Provided to Adults Covered in SCHIP in 10 
States, Fiscal Year 2007:

Table 3: Enrollee Premiums Required for Covered Adults in 10 States' 
SCHIP Programs, Fiscal Year 2007:

Table 4: Crowd-Out Prevention Strategies for Adults in SCHIP, Fiscal 
Year 2007:

Table 5: Parents and Childless Adults as a Percentage of Total Adult 
Enrollment in the Four States That Covered Both Groups in 2006:

Table 6: Six States' Examples of Current Approaches to Evaluating the 
Effectiveness of Outreach Strategies:

Table 7: Premium Assistance Provided to SCHIP-Covered Adults in States' 
SCHIP Programs, Fiscal Year 2007:

Figures:

Figure 1: Corridor of SCHIP Eligibility for Children Aged 6 through 18 
Years, Fiscal Year 2005:

Figure 2: Adults as a Percentage of the Total Number of Individuals 
Covered through SCHIP in 10 States That Covered Adults, 2006:

Figure 3: Expenditures for Adults as a Percentage of Total SCHIP 
Expenditures in Nine States That Covered Adults, 2006:

Figure 4: Status of States' SCHIP Allotment Expenditures and Whether 
States Faced Projected Shortfalls, Fiscal Years 2001-2007:

Figure 5: SCHIP Allotments and Federal Expenditures for Two Groups of 
States, Fiscal Year 2006:

Figure 6: SCHIP Allotments and Federal Expenditures for Nine States 
That Covered Adults, Fiscal Year 2006:

Abbreviations:

CMS: Centers for Medicare & Medicaid Services: 

DRA: Deficit Reduction Act of 2005: 

FPL: federal poverty level: 

HHS: Department of Health and Human Services: 

HIFA: Health Insurance Flexibility and Accountability Initiative: 

MBES/CBES: Medicaid Budget and Expenditure System/State Children's 
Health Program Budget and Expenditure System: 

SCHIP: State Children's Health Insurance Program: 

SEDS: Statistical Enrollment Data System:

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548:

November 26, 2007:

The Honorable Charles E. Grassley: 
Ranking Member Committee on Finance: 
United States Senate: 

Dear Senator Grassley:

In June 2006 about 4.5 million children and adults were enrolled in the 
State Children's Health Insurance Program (SCHIP). Congress created 
SCHIP, a joint federal-state program, in August 1997 with the goal of 
significantly reducing the number of low-income uninsured children, 
especially those who live in families with incomes too high to qualify 
for health care coverage under the Medicaid program.[Footnote 1] Under 
certain circumstances, states may also cover adults in their SCHIP 
programs, and in June 2006 about 349,000 adults were enrolled.[Footnote 
2] States with approved SCHIP plans receive an annual allotment of 
federal funds, based on a funding formula that takes into account the 
number of low-income children in each state. Each state's SCHIP 
allotment is available as a federal match based on state expenditures. 
Subject to certain exceptions, states have 3 years to use each fiscal 
year's allotment, after which unspent federal funds may be 
redistributed among the states that have used all of that fiscal year's 
allotments. Congress initially authorized the program for a 10-year 
period from fiscal year 1998 through 2007 and provided approximately 
$40 billion for the 10 years.

States have a choice of three approaches in designing their SCHIP 
programs: (1) a Medicaid expansion program, which affords SCHIP- 
eligible children the same benefits and services that a state's 
Medicaid program provides; (2) a separate child health program with 
more flexible rules than Medicaid's and increased control over program 
structure and operations; or (3) a combination program, which has both 
a Medicaid expansion program and a separate child health program. Under 
the SCHIP statute, states operating separate child health programs have 
the option of using different bases for establishing their benefit 
packages, including using one of several benchmarks specified in the 
SCHIP statute, such as the Federal Employees Health Benefits Program or 
state employee coverage.[Footnote 3]

States may cover adults in their SCHIP programs if certain conditions 
are met, including approval from the Department of Health and Human 
Services (HHS). First, the SCHIP statute allows the purchase of 
coverage for adults in families with children eligible for SCHIP if a 
state can show that it is cost-effective to do so.[Footnote 4] As of 
September 2007, the Centers for Medicare & Medicaid Services (CMS), the 
agency within HHS that oversees states' Medicaid and SCHIP programs, 
identified 2 states that cover adults in their SCHIP state plan on the 
basis of meeting these cost-effectiveness requirements. Second, under 
section 1115 of the Social Security Act, states may receive approval 
from the Secretary of Health and Human Services to waive certain SCHIP 
requirements or authorize expenditures that would not otherwise be 
authorized under the program.[Footnote 5] As of August 2007 we 
identified 14 states that cover adults--including parents, pregnant 
women, and childless adults--through the use of section 1115 waivers. 
However, the Deficit Reduction Act of 2005 (DRA), enacted February 8, 
2006, prohibits the Secretary of Health and Human Services from 
approving new section 1115 waivers that permit the use of SCHIP funds 
for covering nonpregnant childless adults. Waivers for covering these 
adults that were approved before October 1, 2005, as well as any 
extensions, renewals, or amendments of those waivers, are not affected 
by this provision of the DRA.

Opinions differ on the appropriateness of using SCHIP funding for adult 
populations. Proponents argue that covering some adults brings more 
children into the program and leads to better access to services for 
families. Others counter that the intent of the SCHIP legislation is to 
cover children and that states should not be permitted to use limited 
SCHIP funds to cover adults when many children remain uninsured. As 
Congress considers reauthorization of SCHIP, you were interested in 
learning more about adult coverage in SCHIP.

This report examines (1) how states that cover adults under SCHIP 
structured this coverage, (2) states' enrollment and expenditure 
experiences covering adults in their SCHIP programs, and (3) approaches 
states that covered adults adopted to attract all individuals eligible 
for SCHIP and the extent to which these states have evaluated their 
outreach approaches.

To examine these issues, we limited our review to 10 of the 14 states 
that covered adults--specifically, parents, childless adults, or both-
-through the use of section 1115 waivers as of August 2007. These 10 
states were Arizona, Idaho, Illinois, Michigan, Minnesota, New Jersey, 
New Mexico, Oregon, Rhode Island, and Wisconsin. We excluded 4 states-
-2 states (Arkansas and Nevada) that implemented adult coverage in 
fiscal year 2007 and thus had less than 2 years' experience with this 
coverage at the time we began our review, and 2 more states (Colorado 
and Virginia) that did not meet our criteria because they covered only 
pregnant women.[Footnote 6] In our analysis of how the 10 states 
structured adult coverage, we focused on parents and childless adults. 
However, for our analysis of enrollment and expenditure trends, in 
addition to adults, we considered two other categories of individuals-
-children and pregnant women. We separated pregnant women from other 
coverage categories because pregnant women can be treated differently 
depending on how states have obtained approval to cover them.[Footnote 
7] For example, pregnant women can be covered under section 1115 
waivers or covered through states' SCHIP plans under provisions for the 
unborn.[Footnote 8] Our approach of placing pregnant women in a single 
category is different from that used by CMS, which treats pregnant 
women differently depending on whether they are covered through state 
plan provisions for the unborn, in which case they are considered 
children, or covered under a section 1115 waiver, in which case they 
are considered adults. In our analysis of states' outreach approaches, 
we considered efforts directed to all eligible individuals.

To gather information about how the 10 states structured their SCHIP- 
funded coverage for adults, we interviewed officials in the 10 states 
and reviewed materials such as waiver documents, information available 
on state Web sites, and states' 2006 annual reports. We examined 
several dimensions of SCHIP program structure in our review. Two 
dimensions we examined were the categories of adults covered and the 
type of coverage offered--whether it was direct coverage (where the 
state provides coverage through contracts or agreements with managed 
care organizations, providers, and suppliers), premium assistance 
(where the state pays for a portion of premium costs of employer- 
sponsored or privately purchased insurance), or both. Other dimensions 
we examined included the benefit packages offered and cost-sharing 
requirements. To examine states' enrollment and expenditure experiences 
covering adults under their SCHIP programs, we analyzed the share of 
enrollment and expenditures attributable to adults--parents and 
childless adults--and compared this with the share attributable to 
other SCHIP populations--pregnant women and children. We also compared 
the relative share of enrollment and expenditures across states, 
including monthly expenditures for different SCHIP populations. 
Finally, we examined the extent to which states' spending met or 
exceeded their SCHIP allotment amounts. In conducting these analyses, 
we relied primarily on data obtained from the states or from state 
annual reports. Our enrollment analysis covered all 10 states (using 
estimated enrollment figures for one state), while our expenditure 
analysis covered the 9 states that provided data.[Footnote 9] We also 
drew on national data on SCHIP allotments and federal expenditures, 
obtained from CMS and published sources, to place information about the 
10 states in a national context.[Footnote 10] To assess the reliability 
of the data obtained from the states, we compared them with one another 
and with data available in published sources--such as states' 2006 
annual reports and CMS enrollment and expenditure reports--and sought 
clarification from the states on any inconsistencies we identified. 
Although some of the data are preliminary and subject to change--for 
example, as states submit additional claims--we determined that they 
were sufficiently reliable for the purpose of characterizing states' 
enrollment and expenditure experiences. To gather information about the 
approaches the 10 states adopted to attract all individuals eligible 
for SCHIP and the extent to which these states have evaluated their 
outreach approaches, we drew on information obtained in interviews with 
state officials, from states' 2006 annual reports, and from states' Web 
sites. We conducted our work from April 2007 through November 2007 in 
accordance with generally accepted government auditing standards.

Results in Brief:

SCHIP program structures for adults varied, particularly in terms of 
the categories of adults covered and the type of coverage offered in 
the 10 states we reviewed. For fiscal year 2007, 5 of the 10 states 
covered parents only, 1 state covered childless adults only, and 4 
states covered both categories of adults. States were almost evenly 
divided in terms of whether they offered direct coverage only, where 
the state provides coverage through contracts or agreements with 
managed care organizations, providers, and suppliers (3 states); 
premium assistance only, where the state pays for a portion of the 
premium costs of employer-sponsored or privately purchased insurance (3 
states); or both (4 states). In both direct coverage and premium 
assistance SCHIP programs, states were more likely to offer Medicaid 
and SCHIP benefit packages to parents than they were to childless 
adults. Moreover, all 10 states required adults to contribute to the 
cost of their coverage under SCHIP, and all established crowd-out 
prevention strategies intended to prevent the substitution of SCHIP for 
private health care coverage.

In 2006, enrollment and expenditure experiences for adult coverage 
varied widely across the states we reviewed. As a proportion of the 
total number of individuals covered through SCHIP in 2006 (adults, 
pregnant women, and children), adults--defined in this report as 
parents and childless adults--represented less than 25 percent in 3 
states, 33 to 50 percent in 4 states, and more than 50 percent in 3 
states. Overall, the 343,000 adults covered in the 10 states comprised 
about 40 percent of the total number of individuals covered through 
SCHIP for these states. As a proportion of total SCHIP expenditures 
(expenditures for adults, pregnant women, and children), adults 
constituted widely varying proportions in the 9 states for which we had 
fiscal year 2006 expenditure data--1 percent in 1 state, 32 to 42 
percent in 3 states, and more than 50 percent in 5 states. Overall, 
adults accounted for about 54 percent of total SCHIP expenditures in 
the 9 states. Per capita expenditures for parents ranged from 41 to 135 
percent higher than those for children in 5 of the 6 states that 
offered direct coverage to parents; the sixth state did not provide 
data. Projected shortfalls--meaning that states were expected to have 
SCHIP expenditures that would call for federal matching funds in excess 
of those available to them--occurred at least once for 6 of the 10 
states during 2005 through 2007; in comparison, 10 of the 41 other 
states faced projected shortfalls at least once during the same time 
period. Because HHS requires that priority be given to children over 
adults if available federal funds are not sufficient, 2 of the 10 
states stopped using SCHIP funds to cover certain adults for at least 
some period of time in fiscal year 2006 and used Medicaid funds for 
their coverage instead.

The 10 states we reviewed used three approaches in their outreach 
efforts: targeting hard-to-reach populations, targeting families, and 
relying on new and established partnerships to locate and enroll all 
eligible individuals. Six of 10 states reported targeting specific 
populations they considered hard to reach, such as immigrant, non- 
English-speaking, or ethnic populations. Most of the states also 
reported that they targeted outreach efforts toward families as a whole 
instead of adults specifically. In some cases, states' current outreach 
approaches reflected smaller state budgets for such activities. Most 
states we reviewed said they relied on new and existing partnerships 
with entities that, for example, regularly come into contact with 
families in their efforts to find and enroll eligible individuals. 
States' efforts to assess the effectiveness of different outreach 
approaches ranged from little or no evaluation to more formal methods 
of analyzing outcomes.

We received responses on a draft of this report from CMS and 5 of the 
10 states that we reviewed. In its comments, CMS stated that the report 
mischaracterized SCHIP coverage of unborn children as coverage for 
adults, thereby inflating enrollment and expenditures for adults in 
states the cover unborn children, and that the report did not use CMS 
data systems and therefore did not use consistent data. Regarding 
coverage of unborn children in SCHIP, CMS is incorrect: the report 
categorized coverage of unborn children as coverage for pregnant women, 
not as coverage for adults. Regarding the data systems, we relied on 
state data primarily because CMS data systems do not provide enrollment 
and expenditure data broken out by all of the population and coverage 
categories that were important to this analysis. CMS also commented on 
the scope of our work and provided technical comments for our 
consideration. Four of the five states also provided technical 
comments. We incorporated technical comments as appropriate.

Background:

The SCHIP program targets children, but states may also receive 
approval from the Secretary of Health and Human Services to cover 
certain adults.

SCHIP Eligibility for Children:

In general, the SCHIP statute allows states to cover children up to 200 
percent of the federal poverty level (FPL) or 50 percentage points 
above their existing Medicaid eligibility standard in existence as of 
March 31, 1997.[Footnote 11] Each state's starting point essentially 
creates a "corridor"--generally, SCHIP coverage begins where Medicaid 
ends and then continues upward to a level determined by each state's 
SCHIP eligibility policy.[Footnote 12] In fiscal year 2005, 27 states 
covered children in families with incomes up to 200 percent of the FPL, 
which was $38,700 for a family of four in 2005; 14 states covered 
children in families with incomes above 200 percent of the FPL; and 9 
states covered children in families with incomes below 200 percent of 
the FPL (see fig. 1).

Figure 1: Corridor of SCHIP Eligibility for Children Aged 6 through 18 
Years, Fiscal Year 2005:

[See PDF for image] 

This figure is vertical bar graph depicting the corridor of SCHIP 
eligibility for children aged 6 through 18 Years, fiscal year 2005. The 
vertical axis of the graph represents percentage of FPL from 0 to 375. 
The horizontal axis of the graph represents states. The following data 
is depicted: 

14 states covered children in families with incomes above 200 percent 
of the FPL: 
New Jersey; 
Maryland; 
Missouri; 
Hawaii; 
New Hampshire; 
Connecticut; 
Vermont; 
Minnesota[A]; 
California; 
Rhode Island; 
New York; 
Washington; 
Georgia; 
New Mexico. 
27 states covered children in families with incomes up to 200 percent 
of the FPL: 
Alabama; 
Delaware; 
Florida; 
Kansas; 
Kentucky; 
Nevada; 
South Dakota; 
West Virginia; 
Wyoming; 
Arizona; 
District of Columbia; 
Indiana; 
Louisiana; 
Mississippi; 
North Carolina; 
Pennsylvania; 
Texas; 
Utah; 
Illinois; 
Iowa; 
Virginia; 
Colorado; 
Arkansas{A]; 
Massachusetts; 
Maine; 
Michigan; 
Ohio. 
9 states covered children in families with incomes below 200 percent of 
the FPL: 
Idaho; 
Nebraska; 
Oklahoma; 
Oregon; 
Wisconsin; 
Alaska; 
South Carolina; 
Montana; 
North Dakota. 
No data: 
Tennessee[B]. 

Source: GAO analysis of states' annual SCHIP reports for 2005 and the 
National Academy for State Health Policy. 

Notes: The corridor represents the FPL levels in states' SCHIP programs 
above the levels offered by their Medicaid programs. A state's starting 
point for SCHIP eligibility is dependent on the eligibility levels 
established in its Medicaid program. However, a state's SCHIP program 
may provide coverage to individuals who have incomes at the Medicaid 
level if they cannot otherwise qualify for Medicaid. In their 
determination of income eligibility for both programs, states may 
exclude certain family income, referred to as income disregards, in 
order to increase eligibility for both programs.

For some states, we obtained data from Neva Kaye, Cynthia Pernice, and 
Ann Cullen, Charting SCHIP III: An Analysis of the Third Comprehensive 
Survey of State Children's Health Insurance Programs (Portland, Me.: 
National Academy for State Health Policy, September 2006).

[A] State did not have an FPL eligibility level for SCHIP that was 
above its Medicaid eligibility level for this age group because its 
Medicaid program also covered children up to this FPL level. The state 
provided SCHIP coverage to individuals whose incomes were at the 
Medicaid level but who could not otherwise qualify for Medicaid.

[B] State did not have a SCHIP program in 2005. In January 2007, HHS 
approved Tennessee's SCHIP plan, which covers children and pregnant 
women covered through their unborn children in families with incomes up 
to 250 percent of the FPL.

[End of figure]

HHS SCHIP policies have evolved. In August 2007, HHS sent a letter to 
states clarifying the agency's position on coverage of children in 
families whose income exceeds 250 percent of the FPL.[Footnote 13] HHS 
expressed concern that setting upper eligibility thresholds above this 
income level would increase the likelihood of crowd-out. HHS noted that 
states have adopted what can be characterized as one or more of five 
specific strategies for preventing crowd-out. HHS stated that it will 
require states that cover children above 250 percent of the FPL to 
implement all five of these strategies.[Footnote 14] In addition, HHS 
will require states to make assurances that they have enrolled at least 
95 percent of SCHIP-or Medicaid-eligible children in families with 
incomes below 200 percent of the FPL if they wish to offer SCHIP 
coverage to individuals with incomes above 250 percent of the FPL. In 
communicating this new policy, the letter stated that HHS will apply 
this review strategy to SCHIP state plans and section 1115 
demonstration waivers that include SCHIP populations and will work with 
states that currently provide services to children with effective 
family incomes above 250 percent of the FPL. HHS noted that it expected 
affected states to amend their SCHIP programs within 12 months to 
conform to the new requirements.

SCHIP Eligibility for Adults:

The SCHIP statute allows states to provide coverage for adults with 
children eligible for SCHIP if the state can show that it is cost- 
effective to do so and that the purchase of coverage for the family 
does not substitute for private coverage that would otherwise be 
available, which is one form of crowd-out.[Footnote 15]

States may also cover adult populations using SCHIP funding under an 
approved section 1115 waiver. Section 1115 of the Social Security Act 
allows the Secretary of Health and Human Services to waive certain 
statutory requirements or approve expenditures that would not otherwise 
be allowable under the program in the case of experimental, pilot, or 
demonstration projects that the Secretary determines are likely to 
promote the objectives of the program whose requirements are being 
waived.[Footnote 16] The use of section 1115 waivers for purposes of 
covering adults in SCHIP has changed over time.

* Initially, HHS would not consider the use of section 1115 to waive 
SCHIP requirements until states had 1 year of operational experience 
with their SCHIP programs and had completed an evaluation.

* In July 2000, HHS formally notified states it would begin considering 
section 1115 demonstration proposals for covering populations other 
than SCHIP's targeted population of uninsured low-income children, such 
as uninsured parents of SCHIP-and Medicaid-enrolled children.

* In August 2001, HHS indicated that it would allow states greater 
latitude in using section 1115 demonstration projects (or waivers) to 
modify their Medicaid and SCHIP programs and that it would expedite 
consideration of state proposals. This initiative, termed the Health 
Insurance Flexibility and Accountability Initiative (HIFA), focused on 
proposals for covering more uninsured people.[Footnote 17]

Officials in states that cover adults offer a variety of reasons for 
doing so, including their belief that covering adults will increase 
coverage rates for children; improve access, quality of care, or health 
status for families; and decrease inappropriate use of high-cost 
emergency room services. Other reasons officials cite for using SCHIP 
funds to cover adults include having already enrolled a high proportion 
of eligible children and having a surplus of SCHIP allotments.

SCHIP Coverage for Pregnant Women:

Pregnant women who would not otherwise qualify for SCHIP can be covered 
through SCHIP either under a section 1115 waiver or through SCHIP state 
plan provisions for the unborn.[Footnote 18] In July 2000, when HHS 
formally notified states it would begin considering section 1115 
demonstration proposals for covering populations other than uninsured 
low-income children, the agency specifically noted that it would 
consider SCHIP demonstration requests to cover pregnant women. In 
October 2002, HHS published a regulation that provided states with a 
means to offer this coverage without having to request and obtain a 
waiver from HHS.[Footnote 19] The regulation revised the definition of 
child for purposes of SCHIP to include the period from conception to 
birth, thereby permitting states to offer prenatal care and delivery to 
mothers and their unborn children. According to the preamble discussion 
to the regulation, the expectant mother's immigration status is not a 
relevant consideration for purposes of determining whether such 
benefits can be provided consistent with federal law that places 
restrictions on the receipt of public benefits by certain 
noncitizens.[Footnote 20]

SCHIP Funding:

SCHIP funds are allotted to each state annually based on an allocation 
formula that takes into account (1) the number of eligible 
children[Footnote 21] and (2) state variation in health care 
costs.[Footnote 22] Under the SCHIP statute, subject to certain 
exceptions, states generally have 3 fiscal years to use each fiscal 
year's allotment, after which any remaining funds may be redistributed 
among the states that have used all of a fiscal year's 
allotment.[Footnote 23] States are generally given 1 year to spend any 
redistributed funds, but the statute also allows states additional time 
in which to spend redistributed funds before they revert to the U.S. 
Treasury. SCHIP offers a financial incentive for states to participate 
by providing a federal matching rate that exceeds each state's Medicaid 
federal matching rate.[Footnote 24] In addition, under certain 
circumstances, states can obtain Medicaid reimbursement for individuals 
enrolled in SCHIP or move Medicaid populations into the SCHIP 
program.[Footnote 25]

In relation to total funding, SCHIP spending was low at the start of 
the program but has grown to exceed available funding. Since 1998, some 
states have consistently spent more over the period of availability 
than the available allotment, while others have consistently spent 
less. Early in the program, states that overspent their annual 
allotments over the 3-year period of availability could receive 
redistributions of a portion of the unspent SCHIP allotment funds from 
other states. By fiscal year 2002, however, states' aggregate annual 
spending began to exceed annual allotments. As spending grew, available 
funds for redistribution shrank. To cover projected shortfalls, 
Congress has, on occasion, appropriated additional funds to states 
facing shortfalls.

State SCHIP Program Structures Vary in the Adults Covered and Type of 
Coverage Offered:

During fiscal year 2007, SCHIP program structures for adults varied, 
particularly in terms of the categories of adults covered and the type 
of coverage offered in the 10 states we reviewed. In both direct 
coverage and premium assistance SCHIP programs, states were more likely 
to offer a Medicaid benefit package to parents than they were to 
childless adults. All 10 states required adults to contribute to the 
cost of their coverage under SCHIP, and all established crowd-out 
prevention strategies intended to prevent the substitution of SCHIP for 
private health care coverage.

Adult Populations Covered and Types of Coverage They Were Offered 
Varied across the 10 States:

For the states we reviewed, the adult populations covered, and the type 
of coverage offered--direct, premium assistance, or both--varied. 
During fiscal year 2007, of the 10 states we reviewed that covered 
adults in SCHIP, 5 covered parents only, 1 covered childless adults 
only, and 4 covered both parents and childless adults.[Footnote 26] The 
upper threshold of income eligibility for parents ranged from 133 to 
200 percent of the FPL, while the upper threshold of income eligibility 
for childless adults ranged from 35 percent to 200 percent of the FPL. 
(See table 1.) In some cases, states that covered adult populations in 
SCHIP had previously covered them in Medicaid. In 2001, HHS approved 
requests by Minnesota and Wisconsin to roll over from Medicaid to SCHIP 
parents with household incomes ranging from 100 to 200 percent of the 
FPL, and by Rhode Island to do the same for parents with household 
incomes ranging from 100 to 185 percent of the FPL.

Table 1: Upper Threshold of Income Eligibility as a Percentage of the 
Federal Poverty Level in 10 States' SCHIP Programs, by Adult Coverage 
Category and Type of Coverage, Fiscal Year 2007:

State: Arizona[C]; 
Direct coverage[A]: Parents: 200; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Idaho; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 185; 
Premium assistance coverage[B]: Childless adults: 185.

State: Illinois; 
Direct coverage[A]: Parents: 185[D]; 
Direct coverage[A]: Childless adults: 185[D]; 
Premium assistance coverage[B]: Parents: 185; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Michigan; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: 35; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Minnesota; 
Direct coverage[A]: Parents: 200; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: New Jersey[E]; 
Direct coverage[A]: Parents: 133; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 133; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: New Mexico[F]; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 200; 
Premium assistance coverage[B]: Childless adults: 200.

State: Oregon; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 185; 
Premium assistance coverage[B]: Childless adults: 185.

State: Rhode Island; 
Direct coverage[A]: Parents: 185; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 185; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Wisconsin[G]; 
Direct coverage[A]: Parents: 200; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: 200; 
Premium assistance coverage[B]: Childless adults: [Empty].

Sources: GAO analysis of federal and state waiver data.

Notes: An empty cell indicates that the state did not offer this type 
of coverage to a specific adult population.

Adult coverage categories include parents and childless adults, but do 
not include pregnant women.

No states covered adult populations in their SCHIP programs at income 
thresholds higher than any of their child populations. Four additional 
states provided coverage to adults: Arkansas and Nevada implemented 
adult coverage in fiscal year 2007, and Colorado and Virginia covered 
only pregnant women.

[A] Direct coverage means the state itself provides health benefit 
coverage through contracts or agreements with managed care 
organizations, providers, and suppliers.

[B] Premium assistance means the state pays for a portion of the 
premium costs of employer-sponsored or privately purchased insurance.

[C] State officials informed us that the state has authority to cover 
childless adults with SCHIP funds, but in fiscal year 2007 childless 
adults were enrolled in Medicaid, not in SCHIP.

[D] According to CMS officials, the state covered a small group of 
parents and childless adults in its programs for hemophiliacs and in 
the state high-risk pool for the uninsurable.

[E] State initially covered parents (which includes caretaker adults) 
up to 200 percent of the FPL, but closed enrollment in June 2002. The 
state reopened enrollment in September 2005 at 100 percent of the FPL, 
increased it to 115 percent of the FPL in September 2006, and then 
increased it to 133 percent of the FPL in September 2007. Parents 
covered up to 200 percent of the FPL prior to June 2002, who otherwise 
remained eligible after subsequent reduction in income eligibility 
thresholds, were permitted to continue participating in the program.

[F] State defined its target population as uninsured working adults, 
which includes both parents and childless adults. At present, 
unemployed adults are also permitted to buy into the state's premium 
assistance program by paying both employer and employee shares of the 
premium.

[G] State covered new applicants up to 185 percent of the FPL, but 
enrollees remain eligible until their income exceeds 200 percent of the 
FPL.

[End of table] 

States were nearly evenly divided in the type of coverage offered to 
adults, with three states offering direct coverage only, three states 
offering premium assistance only, and four states offering both. Three 
of the four states that offered both types of coverage required adults 
to enroll in the premium assistance program if they had access to 
employer-sponsored coverage that met state requirements, such as a 
prescribed employer contribution toward premium costs. Premium 
assistance programs varied in their structures and operations (see app. 
I).

States Were More Likely to Offer a Medicaid Benefit Package to Parents 
than They Were to Childless Adults:

In direct coverage programs, states were more likely to offer a 
Medicaid benefit package to parents than they were to childless adults. 
(See table 2.) The two states that offered direct benefits to childless 
adults offered these adults a less comprehensive benefit package than 
Medicaid. For example, Michigan, which covered childless adults but not 
parents, offered a primary care package with no inpatient coverage. 
According to CMS, the benefit packages of states with premium 
assistance SCHIP programs could vary depending on the benefit packages 
that individual employers offered. However, in three states (New 
Jersey, Rhode Island, and Wisconsin), individuals who needed benefits 
not provided through their employer-sponsored or individually purchased 
insurance could obtain them through states' direct coverage Medicaid or 
SCHIP programs.

Table 2: Benefit Packages Provided to Adults Covered in SCHIP in 10 
States, Fiscal Year 2007:

State: Arizona; 
Direct coverage[A]: Parents: Medicaid benefit package; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Idaho; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: Other benefit package; 
Premium assistance coverage[B]: Childless adults: Other benefit package.

State: Illinois; 
Direct coverage[A]: Parents: Medicaid benefit package[C]; 
Direct coverage[A]: Childless adults: Other benefit package[C]; 
Premium assistance coverage[B]: Parents: Other benefit package; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Michigan; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: Other benefit package; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [D].

State: Minnesota; 
Direct coverage[A]: Parents: Medicaid benefit package; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: [Empty]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: New Jersey; 
Direct coverage[A]: Parents: SCHIP benchmark benefit package; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: SCHIP benchmark benefit 
package[E]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: New Mexico; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: Other benefit package; 
Premium assistance coverage[B]: Childless adults: Other benefit package.

State: Oregon; 
Direct coverage[A]: Parents: [Empty]; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: Other benefit package[F]; 
Premium assistance coverage[B]: Childless adults: Other benefit 
package[F].

State: Rhode Island; 
Direct coverage[A]: Parents: Medicaid benefit package; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: Medicaid benefit package[E]; 
Premium assistance coverage[B]: Childless adults: [Empty].

State: Wisconsin; 
Direct coverage[A]: Parents: Medicaid benefit package; 
Direct coverage[A]: Childless adults: [Empty]; 
Premium assistance coverage[B]: Parents: Medicaid benefit package[E]; 
Premium assistance coverage[B]: Childless adults: [Empty].

Sources: GAO analysis of federal and state waiver data.

Notes: An empty cell indicates that the state did not offer this type 
of coverage to a specific adult population.

Adult coverage categories include parents and childless adults, but do 
not include pregnant women.

[A] Direct coverage means the state itself provides health benefit 
coverage through contracts or agreements with managed care 
organizations, providers, and suppliers.

[B] Premium assistance means the state pays for a portion of the 
premium costs of employer-sponsored or privately purchased insurance. 
According to CMS, benefit packages could vary according to specific 
state regulations governing benefit requirements of employer-sponsored 
insurance.

[C] According to CMS officials, the state covered a small group of 
parents and childless adults in its programs for hemophiliacs and in 
the state high-risk pool for the uninsurable.

[D] According to state officials, state has authority to operate a 
premium assistance program; however, as of May 2007, no one has 
qualified to participate.

[E] State provides directly any Medicaid or SCHIP benefits not covered 
in the employer-sponsored or individually purchased insurance (also 
known as wraparound coverage).

[F] According to an Oregon state official, to qualify to participate in 
Oregon's SCHIP premium assistance program, private insurance plans must 
offer benefit packages that are the actuarial equivalent to Medicaid 
mandated services.

[End of table] 

All States Required Enrollee Contributions toward Cost of Coverage:

All 10 of the states that we reviewed required adults to contribute to 
the cost of their coverage under SCHIP. Enrollee contributions included 
premiums--a payment required for insurance coverage for a given period 
of time--and cost-sharing--an out-of-pocket payment for part of the 
cost of services used by a beneficiary.

Premiums:

Nine of the 10 states required at least some adults to pay premiums or 
some contribution toward premium costs in their direct coverage 
program, their premium assistance program, or both. (See table 3.) Six 
of the 7 states providing direct coverage required at least some 
covered adults to pay monthly premiums, with 4 states charging covered 
adults premiums if family income equaled or exceeded 150 percent of the 
FPL, and 2 states charging covered adults if family income equaled or 
exceeded 100 percent of the FPL. All 7 states providing premium 
assistance also required at least some covered adults to contribute to 
premium costs. Of the 7 states providing premium assistance, 4 charged 
covered adults premiums if family income equaled or exceeded 100 
percent of the FPL. The other 3 states required premium contributions 
from all enrolled adults. Of these 3 states, 2 required covered adults 
to pay premium costs remaining after the states paid out their premium 
subsidies. One state charged all covered adults premiums on a sliding 
scale based on family income.

Table 3: Enrollee Premiums Required for Covered Adults in 10 States' 
SCHIP Programs, Fiscal Year 2007:

State: Arizona; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 100; 
Direct coverage[A]: Amounts vary with income?: Yes; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): [Empty]; 
Premium assistance coverage[B]: Amounts vary with income?: [Empty].

State: Idaho; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): [Empty]; 
Direct coverage[A]: Amounts vary with income?: [Empty]; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 0[C]; 
Premium assistance coverage[B]: Amounts vary with income?: No.

State: Illinois; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 150[D]; 
Direct coverage[A]: Amounts vary with income?: Yes[E]; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 33[C, F]; 
Premium assistance coverage[B]: Amounts vary with income?: No.

State: Michigan; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): N/A[G]; 
Direct coverage[A]: Amounts vary with income?: N/A[G]; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): [Empty]; 
Premium assistance coverage[B]: Amounts vary with income?: [Empty].

State: Minnesota; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 100[D]; 
Direct coverage[A]: Amounts vary with income?: Yes; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): [Empty]; 
Premium assistance coverage[B]: Amounts vary with income?: [Empty].

State: New Jersey; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 150; 
Direct coverage[A]: Amounts vary with income?: Yes; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 150; 
Premium assistance coverage[B]: Amounts vary with income?: Yes.

State: New Mexico; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): [Empty]; 
Direct coverage[A]: Amounts vary with income?: [Empty]; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 100; 
Premium assistance coverage[B]: Amounts vary with income?: Yes.

State: Oregon; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): [Empty]; 
Direct coverage[A]: Amounts vary with income?: [Empty]; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 0[C, H]; 
Premium assistance coverage[B]: Amounts vary with income?: Yes.

State: Rhode Island; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 150; 
Direct coverage[A]: Amounts vary with income?: Yes; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 150; 
Premium assistance coverage[B]: Amounts vary with income?: Yes.

State: Wisconsin; 
Direct coverage[A]: Income level at which premiums start (percent of 
FPL): 150; Direct coverage[A]: Amounts vary with income?: Yes; 
Premium assistance coverage[B]: Income level at which premiums start 
(percent of FPL): 150; 
Premium assistance coverage[B]: Amounts vary with income?: Yes.

Sources: GAO analysis of federal and state waiver data.

Notes: An empty cell indicates that the state did not offer this type 
of coverage to adults.

Adult coverage categories include parents and childless adults, but do 
not include pregnant women.

[A] Direct coverage means the state itself provides health benefit 
coverage through contracts or agreements with managed care 
organizations, providers, and suppliers.

[B] Premium assistance means the state pays for a portion of the 
premium costs of employer-sponsored or privately purchased insurance.

[C] State required covered adults to pay any additional premium costs 
that exceeded its subsidy.

[D] State scaled premiums for covered adults according to number of 
family members.

[E] State charged premiums for some childless adults (high-risk pool).

[F] Percentage represents the FPL for a family size of one or two 
individuals. The FPL eligibility level changes depending on family size.

[G] State did not require covered adults to pay premiums.

[H] State charged all covered adults premiums on a sliding scale based 
on family income.

[End of table] 

Cost-Sharing:

Five of seven states providing direct coverage charged cost-sharing for 
covered adults (Arizona, Illinois, Michigan, Minnesota, and New 
Jersey). The other two states (Rhode Island and Wisconsin) did not 
charge covered adults cost-sharing.[Footnote 27] In all 7 states that 
provided premium assistance, covered adults were responsible for cost- 
sharing. Some states--for example, Rhode Island--reimbursed covered 
adults for a portion of the cost-sharing.

All States Established Crowd-Out Prevention Strategies:

All 10 states we reviewed discouraged crowd-out of SCHIP for private 
coverage, using one or more strategies. Most states required adults to 
be uninsured for periods ranging from 3 to 6 months before they could 
become eligible for enrollment in SCHIP. (See table 4.) Some states 
exempted people from waiting periods if they lost coverage 
involuntarily (e.g., through the loss of a job or because their 
employer no longer offered coverage).

Table 4: Crowd-Out Prevention Strategies for Adults in SCHIP, Fiscal 
Year 2007:

State: Arizona; 
Must be uninsured to enroll in SCHIP?: Yes; 
Length of waiting period (months): 3[A]; 
Same crowd-out prevention strategies for children?: Yes.

State: Idaho; 
Must be uninsured to enroll in SCHIP?: Yes; 
Length of waiting period (months): 6[A]; 
Same crowd-out prevention strategies for children?: Yes.

State: Illinois; 
Must be uninsured to enroll in SCHIP?: Yes[B]; 
Length of waiting period (months): 0; 
Same crowd-out prevention strategies for children?: Yes.

State: Michigan; 
Must be uninsured to enroll in SCHIP?: Yes[B]; 
Length of waiting period (months): 0; 
Same crowd-out prevention strategies for children?: No[C].

State: Minnesota; 
Must be uninsured to enroll in SCHIP?: Yes[B]; 
Length of waiting period (months): 4[D]; 
Same crowd-out prevention strategies for children?: No.

State: New Jersey[E]; 
Must be uninsured to enroll in SCHIP?: Yes[B]; 
Length of waiting period (months): 3[A, G]; 
Same crowd-out prevention strategies for children?: Yes.

State: New Mexico; 
Must be uninsured to enroll in SCHIP?: Yes; 
Length of waiting period (months): 6; 
Same crowd-out prevention strategies for children?: Yes.

State: Oregon[E]; 
Must be uninsured to enroll in SCHIP?: Yes; 
Length of waiting period (months): 6[A]; 
Same crowd-out prevention strategies for children?: Yes.

State: Rhode Island[E]; 
Must be uninsured to enroll in SCHIP?: Yes; 
Length of waiting period (months): 0[C]; 
Same crowd-out prevention strategies for children?: Yes.

State: Wisconsin[E]; 
Must be uninsured to enroll in SCHIP?: Yes[B]; 
Length of waiting period (months): 3[A, F]; 
Same crowd-out prevention strategies for children?: Yes.

Sources: GAO analysis of federal and state data.

Notes: Crowd-out refers to the substitution of SCHIP (or other public 
coverage) for private insurance coverage.

Adult coverage categories include parents and childless adults, but do 
not include pregnant women.

Unless otherwise noted, length of the waiting period is the same for 
all covered adults enrolled in direct coverage and premium assistance 
programs.

[A] State made exceptions to the waiting period if the applicant had 
lost private insurance through no fault of his or her own (i.e., 
employer-driven) or due to hardship.

[B] State allowed some insured adults to be covered under Medicaid.

[C] State did not allow children in its separate SCHIP program to have 
had other insurance coverage during the past 6 months.

[D] State did not allow parents to enroll if their employers had 
dropped employer-sponsored coverage within the past 18 months.

[E] State required individuals to enroll in qualifying employer- 
sponsored insurance if available.

[F] State waiting period for covered adults in premium assistance was 6 
months.

[G] According to CMS officials, state waiting period for covered adults 
in premium assistance was 6 months.

[End of table] 

Enrollment and Expenditures for Adults Varied Widely across States 
Reviewed:

Enrollment and expenditure experiences with adult coverage varied 
widely across the states we reviewed. Adults constituted widely varying 
proportions of the total number of individuals covered through SCHIP in 
the 10 states in 2006, ranging from 2 percent to 87 percent. Similarly, 
expenditures for adults as a proportion of total expenditures ranged 
from 1 percent to 80 percent for 2006. Six of the 10 states, compared 
with 10 of the 41 other states, were projected to face shortfalls in 
SCHIP funds in at least one of the years from 2005 through 2007.

Adult Enrollment in SCHIP Varied Widely across the 10 States:

Enrollment experiences with adult coverage varied widely across the 
states we reviewed. Adults constituted widely varying proportions of 
the total number of individuals covered through SCHIP in the 10 states 
in 2006--less than 25 percent in 3 states, 33 to 50 percent in 4 
states, and more than 50 percent in 3 states. (See fig. 2.) About 
343,000 adults were enrolled, comprising about 40 percent of the total 
number of individuals covered through SCHIP in these states.[Footnote 
28] The 3 states with the largest overall SCHIP enrollment (Illinois, 
Michigan, and New Jersey) accounted for over two-thirds of the total 
number of adults enrolled, with numbers ranging from approximately 
67,000 to approximately 107,000 apiece. In contrast, 5 states had fewer 
than 15,000 adults enrolled, and 1 of the 5 states (Idaho) had only 
about 300 adults enrolled.

Figure 2: Adults as a Percentage of the Total Number of Individuals 
Covered through SCHIP in 10 States That Covered Adults, 2006: 

This figure is a series of pie-charts depicting adults as a percentage 
of the total number of individuals covered through SCHIP in 10 States 
that covered adults, 2006. Each pie-chart depicts portions as children, 
pregnant women or adults. The following data is depicted: 

[See PDF for image] 

State: Arizona; 
Adults covered: 14,189 adults enrolled (20% of 71,662). 

State: Idaho; 
Adults covered: 311 adults enrolled (2% of 16,013). 

State: Illinois; 
Adults covered: 106,511 adults enrolled (38% of 276,815). 

State: Michigan; 
Adults covered: 66,837 adults enrolled (53% of 126,436). 

State: Minnesota; 
Adults covered: 19,946 adults enrolled (87% of 22,801). 

State: New Jersey; 
Adults covered: 72,363 adults enrolled (38% of 191,944). 

State: New Mexico; 
Adults covered: 4,147 adults enrolled (33% of 12,455). 

State: Oregon; 
Adults covered: 9,259 adults enrolled (21% of 43,126). 

State: Rhode Island; 
Adults covered: 12,127 adults enrolled (49% of 24,643). 

State: Wisconsin; 
Adults covered: 37,327 adults enrolled (54% of 69,355). 

Source: GAO analysis of state data. 

Notes: Adults include parents and childless adults. Pregnant women 
include individuals covered through state plan provisions for coverage 
of the unborn and under section 1115 waivers. In New Jersey, the number 
of pregnant women covered is too small (0.03 percent) to be visible in 
the chart.

The numbers represent point-in-time enrollment. Point-in-time 
enrollment for Illinois was estimated from the number of adults and 
children ever enrolled during the year; no data were available on 
pregnant women. Data for New Jersey and Wisconsin were as of June 2006 
and December 2006, respectively. Data for the other seven states were 
as of September 2006.

The pie charts vary in size with the total number of individuals 
covered through SCHIP. 

[End of figure] 

In the four states that covered both parents and childless adults under 
SCHIP in 2006, the percentage of total adult enrollment that each group 
represented varied widely, although parents were in the majority in 
three of the four states (see table 5).

Table 5: Parents and Childless Adults as a Percentage of Total Adult 
Enrollment in the Four States That Covered Both Groups in 2006:

State: Idaho; 
Parents: 76; 
Childless adults: 24.

State: Illinois; 
Parents: 99; 
Childless adults: 1.

State: New Mexico; 
Parents: 43; 
Childless adults: 57.

State: Oregon; 
Parents: 55; 
Childless adults: 45.

Source: GAO analysis of state data.

Notes: These numbers represent point-in-time enrollment as of September 
2006. For Illinois and New Mexico, point-in-time enrollment for these 
groups of adults was estimated from the number ever enrolled during the 
year. Data for Idaho and Oregon were as of September 2006.

Adult coverage categories include parents and childless adults, but do 
not include pregnant women.

Arizona covered childless adults in SCHIP from fiscal year 2002 through 
fiscal year 2005. To avoid a shortfall of SCHIP funds in 2006, the 
state covered these adults in Medicaid. In 2005, parents and childless 
adults represented 44 percent and 56 percent, respectively, of the 
state's adult enrollment in SCHIP.

[End of table]

In two states that offered both direct coverage and premium assistance, 
enrollment in the direct coverage program was at least 74 times greater 
than in the premium assistance program. In New Jersey, 72,086 adults 
were enrolled in direct coverage, compared with 277 in premium 
assistance. In Wisconsin, 36,829 adults were enrolled in direct 
coverage, compared with 498 in premium assistance.[Footnote 29]

The percentage of SCHIP enrollment that adults comprised in each state 
likely reflected a combination of characteristics unique to the state, 
including the income eligibility levels the state set for children in 
Medicaid prior to SCHIP (which affected the levels of income it could 
cover in SCHIP), the type of coverage offered to adults and how that 
coverage was structured, and how long the state had enrolled adults. 
Examples from either end of the enrollment spectrum illustrate the 
variation among states with regard to these characteristics:

* Minnesota, the state in which adults comprised the highest percentage 
of the total number of individuals covered through SCHIP (87 percent), 
had only 22 children enrolled at the end of fiscal year 2006, compared 
with about 20,000 adults.[Footnote 30] Prior to the enactment of SCHIP, 
Minnesota had the nation's highest income eligibility levels for 
children in Medicaid, covering children with family incomes up to 275 
percent of the FPL. The state implemented only a small Medicaid 
expansion in SCHIP, covering children under age 2 with family incomes 
between 275 and 280 percent of the FPL. With so few children enrolled 
in SCHIP, the state spent only 0.02 percent of its allotments in the 3 
years before it enrolled adults in 2001. In 2006, nearly all of the 
children whose parents were covered in SCHIP were themselves covered in 
Medicaid.[Footnote 31]

* Idaho, the state in which adults comprised the lowest percentage of 
the total number of individuals covered through SCHIP (2 percent), 
provided only premium assistance and was also one of the last of the 10 
states we reviewed to implement coverage for adults in SCHIP--in July 
2005. Idaho restricts enrollment in the premium assistance program to 
employees of small businesses and initially required that employers pay 
at least 50 percent of premiums for employees' spouses as well as 
employees. An Idaho official reported that employer participation was 
low in the program's first year because of this requirement, leading 
the state to eliminate it in December 2006.[Footnote 32]

In several states, adult enrollment has fluctuated over the years as 
the states implemented enrollment caps or shifted adults previously 
covered in SCHIP to Medicaid:

* Michigan closed enrollment for childless adults in July 2004, just 6 
months after implementing coverage, when enrollment exceeded the 
state's target of 60,000. As a result, the number of adults ever 
enrolled during the year dropped by 24 percent from 2004 to 2005. The 
state has restricted open enrollment periods to between 1 and 3 months 
per year in order to keep expenditures within budget.

* In New Jersey, the number of adults ever enrolled during the year 
dropped by 53 percent from 2002 to 2005, when the state closed 
enrollment due to higher than anticipated enrollment and costs, coupled 
with state revenue shortfalls, and rose by 33 percent from 2005 to 
2006, after enrollment reopened.[Footnote 33]

* Faced with an impending shortfall in SCHIP funds, Arizona rolled over 
childless adults from SCHIP to Medicaid during fiscal year 2006, 
thereby lowering the number of adults covered in SCHIP. Adults 
constituted 20 percent of the total number of individuals covered 
through SCHIP at the end of 2006, compared with 37 percent at the end 
of 2005.

Proportion of Expenditures for Adults Varied Widely across States 
Reviewed:

As with enrollment, adults accounted for widely varying proportions of 
total SCHIP expenditures in the nine states for which we had 
expenditure data--1 percent in one state, 32 to 42 percent in three 
states, and more than 50 percent in five states (see fig. 3).[Footnote 
34] In five states, adults accounted for more than half of total SCHIP 
expenditures.[Footnote 35] For the nine states, SCHIP-funded 
expenditures for adults totaled about $674 million in 2006 and 
comprised 54 percent of total SCHIP expenditures, compared with 41 
percent of enrollment.

Figure 3: Expenditures for Adults as a Percentage of Total SCHIP 
Expenditures in Nine States That Covered Adults, 2006:

[See PDF for image] 

This figure is a series of pie-charts depicting expenditures for adults 
as a percentage of total SCHIP expenditures in nine states that covered 
adults, 2006. Each pie-chart depicts portions as children, pregnant 
women or adults. The following data is depicted (dollars in millions): 

State: Arizona; 
Expenditures for Adults: $46.0 for adults (32% of $141.8). 

State: Idaho; 
Expenditures for Adults: $0.3 for adults (1% of $22.6). 

State: Michigan; 
Expenditures for Adults: $155.9 for adults (62% of $252.1). 

State: Minnesota; 
Expenditures for Adults: $83.1 for adults 80% of $103.8). 

State: New Jersey; 
Expenditures for Adults: $189.5 for adults (51% of $372.5). 

State: New Mexico; 
Expenditures for Adults: $14.1 for adults (37% of $38.1). 

State: Oregon; 
Expenditures for Adults: $33.6 for adults (42% of $80.1). 

State: Rhode Island; 
Expenditures for Adults: $56.7 for adults (55% of $102.3). 

State: Wisconsin; 
Expenditures for Adults: $94.2 for adults (74% of $126.5). 

Source: GAO analysis of state data. 

Notes: Adults include parents and childless adults. Pregnant women 
include individuals covered through state plan provisions for coverage 
of the unborn and those covered under section 1115 waivers. In New 
Jersey, expenditures for pregnant women covered are too low (0.4 
percent) to be visible in the figure.

Illinois did not provide expenditure data. Data for Arizona, Michigan, 
Minnesota, Oregon, Rhode Island, and Wisconsin were obtained directly 
from the states. Data for Idaho, New Jersey, and New Mexico were 
obtained from state annual reports.

The pie charts vary in size with total SCHIP expenditures.

[End of figure] 

Individually, adults generally were more expensive to cover than 
children in the same type of coverage--either direct or premium 
assistance. In the five states that provided information on monthly 
expenditures per enrollee in their direct coverage programs, for 
example, expenditures for parents ranged from 41 percent higher in 
Rhode Island to 135 percent higher in Wisconsin.[Footnote 36] In dollar 
terms,

* monthly expenditures per child ranged from $95 to $201 and averaged 
about $144;

* monthly expenditures per parent ranged from $222 to $333 and averaged 
about $260; and:

* monthly expenditures per childless adult in Michigan, the one state 
that provided direct coverage to these adults in SCHIP in fiscal year 
2006 and provided data to us, were $213.[Footnote 37]

Compared with direct coverage programs, monthly expenditures per parent 
for premium assistance were somewhat lower in one of the three programs 
about which we obtained information ($213 in Oregon) and considerably 
lower in the two others ($64 in New Jersey and $94 in Idaho).[Footnote 
38] In Oregon, most families enrolled in the premium assistance program 
did not have access to employer-sponsored insurance and were therefore 
enrolled in privately purchased insurance with no employer 
contribution. In addition, most enrollees qualified to receive a 95 
percent subsidy from the state. In contrast, both New Jersey and Idaho 
limited their costs for premium assistance by subsidizing only employer-
sponsored insurance and requiring that employers pay a percentage of 
premiums.[Footnote 39] In addition, New Jersey charged participating 
adults with family incomes above 150 percent of the FPL a fixed premium 
contribution, and Idaho capped its monthly subsidy at $100 per adult 
($500 per family).

Six of 10 States That Covered Adults Faced Projected Funding Shortfalls:

Six of the 10 states we reviewed, along with 10 of the 41 other states, 
faced projected shortfalls--that is, they were projected to have SCHIP 
expenditures that would call for federal matching funds in excess of 
those available to them--in at least one of the years from 2005 through 
2007. Illinois and New Jersey, states with above-average enrollments of 
both children and adults, accounted for nearly half (47 percent) of the 
$932 million shortfall projected for 2007 for states nationwide. Seven 
of the 10 states--like 21 of the 41 other states--qualified for 
redistributions of other states' unused allotments in all 3 of these 
years.[Footnote 40] (See fig. 4)

Figure 5: Status of States' SCHIP Allotment Expenditures and Whether 
States Faced Projected Shortfalls, Fiscal Years 2001-2007:

[See PDF for image] 

The following data is depicted: 

Arizona[A]: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2003: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2004: Spent allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2006: Spent allotment within 3-year period of availability; 
FY 2007: Spent allotment within 3-year period of availability. 

Idaho: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Did not spend allotment within 3-year period of availability; 
FY 2004: Did not spend allotment within 3-year period of availability; 
FY 2005: Did not spend allotment within 3-year period of availability 
(Adult coverage begins late in fiscal year); 
FY 2006: Did not spend allotment within 3-year period of availability; 
FY 2007: Spent allotment within 3-year period of availability. 

Illinois: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2004: Did not spend allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability; 
FY 2006: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2007: Spent allotment within 3-year period of availability and faced 
projected shortfall. 

Michigan: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Did not spend allotment within 3-year period of availability; 
FY 2004: Did not spend allotment within 3-year period of availability 
(Adult coverage begins in the middle of the fiscal year); 
FY 2005: Spent allotment within 3-year period of availability; 
FY 2006: Spent allotment within 3-year period of availability; 
FY 2007: Spent allotment within 3-year period of availability; 

Minnesota: 
FY 2001: Did not spend allotment within 3-year period of availability 
(Adult coverage begins late in fiscal year); 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Spent allotment within 3-year period of availability; 
FY 2004: Spent allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2006: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2007: Spent allotment within 3-year period of availability and faced 
projected shortfall. 

New Jersey: 
FY 2001: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2002: Spent allotment within 3-year period of availability; 
FY 2003: Spent allotment within 3-year period of availability; 
FY 2004: Spent allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2006: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2007: Spent allotment within 3-year period of availability and faced 
projected shortfall. 

New Mexico: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Did not spend allotment within 3-year period of availability; 
FY 2004: Did not spend allotment within 3-year period of availability; 
FY 2005: Did not spend allotment within 3-year period of availability 
(Adult coverage begins late in fiscal year); 
FY 2006: Did not spend allotment within 3-year period of availability; 
FY 2007: Did not spend allotment within 3-year period of availability; 

Oregon: 
FY 2001: Did not spend allotment within 3-year period of availability; 
FY 2002: Did not spend allotment within 3-year period of availability; 
FY 2003: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2004: Did not spend allotment within 3-year period of availability; 
FY 2005: Did not spend allotment within 3-year period of availability; 
FY 2006: Did not spend allotment within 3-year period of availability; 
FY 2007: Spent allotment within 3-year period of availability; 

Rhode Island: 
FY 2001: Spent allotment within 3-year period of availability (Adult 
coverage begins early in fiscal year); 
FY 2002: Spent allotment within 3-year period of availability; 
FY 2003: Spent allotment within 3-year period of availability; 
FY 2004: Spent allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2006: Spent allotment within 3-year period of availability and faced 
projected shortfall; 
FY 2007: Spent allotment within 3-year period of availability and faced 
projected shortfall. 

Wisconsin: 
FY 2001: Did not spend allotment within 3-year period of availability 
(Adult coverage begins early in fiscal year); 
FY 2002: Spent allotment within 3-year period of availability; 
FY 2003: Spent allotment within 3-year period of availability; 
FY 2004: Spent allotment within 3-year period of availability; 
FY 2005: Spent allotment within 3-year period of availability; 
FY 2006: Spent allotment within 3-year period of availability; 
FY 2007: Spent allotment within 3-year period of availability and faced 
projected shortfall. 

41 states not included in our review, FY 2001: 
Did not spend allotment within 3-year period of availability: 30; 
Spent allotment within 3-year period of availability: 11; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 0. 

41 states not included in our review, FY 2002: 
Did not spend allotment within 3-year period of availability: 31; 
Spent allotment within 3-year period of availability: 10; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 0. 

41 states not included in our review, FY 2003: 
Did not spend allotment within 3-year period of availability: 30; 
Spent allotment within 3-year period of availability: 11; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 0. 

41 states not included in our review, FY 2004: 
Did not spend allotment within 3-year period of availability: 27; 
Spent allotment within 3-year period of availability: 14; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 0. 

41 states not included in our review, FY 2005: 
Did not spend allotment within 3-year period of availability: 20; 
Spent allotment within 3-year period of availability: 19; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 2. 

41 states not included in our review, FY 2006: 
Did not spend allotment within 3-year period of availability: 8; 
Spent allotment within 3-year period of availability: 25; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 8. 

41 states not included in our review, FY 2007: 
Did not spend allotment within 3-year period of availability: 6; 
Spent allotment within 3-year period of availability: 29; 
Spent allotment within 3-year period of availability and faced 
projected shortfall: 6. 

Source: GAO analysis of data obtained from CMS and Federal Register. 

Note: The years refer to the fiscal years in which unspent allotments 
from 3 years prior became available for redistribution. Under the SCHIP 
statute, subject to certain exceptions, states were given 3 years to 
spend each allotment, after which any unspent funds could be 
redistributed among states that had spent their entire allotments. 
States projected to face shortfalls were those projected by CMS to have 
SCHIP expenditures that would call for federal matching funds in excess 
of those currently available to them. 

[A] Arizona began enrolling childless adults on October 1, 2001, and 
parents on October 1, 2002. 

[End of figure] 

The states that implemented adult coverage earlier were more likely 
than states that implemented it later to consistently spend their 
entire allotments. Minnesota, New Jersey, Rhode Island, and Wisconsin, 
all of which began enrolling adults in SCHIP-funded direct coverage 
with Medicaid benefits in the first year HHS approved such coverage 
(2001), qualified for redistributions in at least 5 of the 7 years in 
which funds were redistributed.[Footnote 41] In contrast, Idaho and New 
Mexico, which began enrolling adults in SCHIP-funded premium assistance 
programs in 2005, were among the small number of states in the nation 
that either never spent their entire allotments within the 3-year 
period of availability or did so only in one year. 

Collectively, the 9 states that we reviewed for which we had 
expenditure data by population--like the group of 41 states we did not 
review--spent more federal dollars in fiscal year 2006 than they were 
allotted for that year (see fig. 5).[Footnote 42] 

Figure 6: SCHIP Allotments and Federal Expenditures for Two Groups of 
States, Fiscal Year 2006: 

[See PDF for image] 

This figure is a multiple vertical bar graph depicting the SCHIP 
allotments and federal expenditures for two groups of states, fiscal 
year 2006. The vertical axis of the graph represents dollars in 
billions from 0 to 5. The horizontal axis of the graph represents the 
two groups of states. The following data is depicted: 

41 states not included in our review: 
Allotment: $3.34 billion; 
Expenditures for pregnant women, adults, and children: $42.5 billion. 

9 of 10 states included in our review: 
Allotment: $0.53 billion; 
Combination of expenditures for pregnant women, expenditures for 
adults, and expenditures for children: $0.86. 

Source: GAO analysis of CMS and state data. 

Notes: Adults include parents and childless adults. Pregnant women 
include individuals covered through state plan provisions for coverage 
of the unborn and those covered under section 1115 waivers. 

Illinois did not provide expenditure data. For expenditures by 
population group, data for Arizona, Michigan, Minnesota, Oregon, Rhode 
Island, and Wisconsin were obtained directly from the states, and data 
for Idaho, New Jersey, and New Mexico were obtained from state annual 
reports. 

[End of figure] 

Of these nine states, seven had federal expenditures in excess of their 
allotments in fiscal year 2006. In two of the seven states (New Jersey 
and Rhode Island), federal expenditures for children alone exceeded the 
state's allotment, and in four of the seven states (Minnesota, New 
Jersey, Rhode Island, and Wisconsin), expenditures for adults alone 
exceeded the state's allotment. (See fig. 6.) 

Figure 7: SCHIP Allotments and Federal Expenditures for Nine States 
That Covered Adults, Fiscal Year 2006: 

[See PDF for image] 

This figure is a multiple vertical bar graph depicting the SCHIP 
allotments and federal expenditures for nine states that covered 
adults, fiscal year 2006. The vertical axis of the graph represents 
dollars in millions from 0 to 250. The horizontal axis of the graph 
represents the nine states. The following data is depicted: 

Arizona: 
Allotment: $107.4 million; 
Combined expenditures for adults and children: $109.0 million. 

Idaho: 
Allotment: $20.6 million; 
Expenditures for children: $18.5 million. 

Michigan: 
Allotment: $117.2 million; 
Combined expenditures for pregnant women, adults and children: $175.5 
million. 

Minnesota: 
Allotment: $39.4 million; 
Combined expenditures for pregnant women and adults: $66.1 million. 

New Jersey: 
Allotment: $89.5 million; 
Combined expenditures for adults and children: $66.1 million. 

New Mexico 
Allotment: $42.2 million; 
Combined expenditures for adults and children: $31.4 million. 

Oregon: 
Allotment: $46.9 million; 
Combined expenditures for adults and children: $58.4 million. 

Rhode Island: 
Allotment: $9.8 million; 
Combined expenditures for pregnant women, adults and children: $69.7 
million. 

Wisconsin: 
Allotment: $55.8 million; 
Combined expenditures for adults and children: $88.2 million. 

Source: GAO analysis of CMS and state data. 

Notes: Adults include parents and childless adults. Pregnant women 
include individuals covered through state plan provisions for coverage 
of the unborn and those covered under section 1115 waivers. 

Illinois did not provide expenditure data. For expenditures by 
population group, data for Arizona, Michigan, Minnesota, Oregon, Rhode 
Island, and Wisconsin were obtained directly from the states, and data 
for Idaho, New Jersey, and New Mexico were obtained from state annual 
reports. 

[End of figure] 

Officials in 2 of the 10 states we reviewed reported that they stopped 
covering some adults in SCHIP for some period of time in fiscal year 
2006 to comply with the allotment neutrality requirements for section 
1115 waivers and instead covered those adults in Medicaid. The 
allotment neutrality policy requires states covering adults under 
waiver authority to ensure that all necessary SCHIP funds are available 
for children. States are not permitted to reduce coverage for children-
-by capping enrollment, decreasing eligibility standards, increasing 
cost-sharing or decreasing benefits--while covering adults. In 
addition, states are required to monitor their expenditures to ensure 
priority is given to children over adults if available federal funds 
are not sufficient to cover both populations. Seven of the 10 states in 
our review have joint Medicaid-SCHIP waivers and therefore may be 
permitted to roll over adults from SCHIP to Medicaid and claim the 
lower Medicaid federal matching rate for these populations. Two of the 
states have done so to comply with SCHIP allotment neutrality 
requirements. 

* Arizona, as noted earlier, covered in Medicaid in 2006 childless 
adults who were previously covered in SCHIP. Under the terms of 
Arizona's waiver agreement, priority for funding coverage goes first to 
children, next to parents, and last to childless adults. 

* Minnesota claimed Medicaid rather than SCHIP federal funding for 
parents for the last month of fiscal year 2006 because it anticipated 
having insufficient SCHIP allotment dollars to cover this population 
along with children and pregnant women for the entire year. 

States' Outreach Approaches Target Specific Populations and Use 
Partnerships to Locate and Enroll All Eligible Individuals: 

The 10 states we reviewed used three approaches in their outreach 
efforts: (1) targeting populations they considered hard to reach, such 
as immigrant, non-English-speaking, or ethnic populations; (2) 
directing outreach to entire families; and (3) relying on established 
relationships and new partnerships to continue outreach because in some 
cases changes in state budgets constrained funding for these efforts. 
States' efforts to assess the effectiveness of different outreach 
approaches ranged from little or no evaluation to more formal methods 
of analyzing outcomes. 

States' Outreach Approaches Targeted Hard-to-Reach Populations: 

Six of the 10 states that we reviewed reported targeting populations 
that they considered hard to reach--immigrant, non-English-speaking, or 
ethnic populations--generally because of language barriers and the 
individuals' concerns about immigration status. Two of the states we 
reviewed--Idaho and Illinois--noted that citizen children of 
undocumented workers in particular are difficult to identify and enroll 
in SCHIP because their parents are reluctant to approach a government 
program for fear of being identified. States provided some examples of 
their efforts to target program materials or outreach to immigrant or 
non-English-speaking populations in their 2006 SCHIP Annual Reports: 

* Illinois distributed fact sheets about its SCHIP program in many 
different languages, and its program call line used a language 
translation service to enable staff to speak to callers in their native 
language; 

* New Jersey used cable television, radio, and print media geared 
toward the minority community to inform them about the program; 

* New Mexico placed a special emphasis on reaching out to Native 
American populations and told us that they held health fairs in local 
Native American chapter houses and worked with the Indian Health 
Service on media campaigns; 

* Oregon, Rhode Island, and Wisconsin reached out to Hispanic 
communities through the use of foundations, community-based 
organizations, and outreach materials; and: 

* Wisconsin provided materials such as fact sheets for the SCHIP 
prenatal program in English, Spanish, Russian, and Hmong. 

Most States' Outreach Approaches Targeted Entire Families: 

Most of the states we reviewed reported that they directed their 
outreach efforts toward families as a whole and not specifically toward 
adults. For example, an Arizona SCHIP official said that outreach now 
is directed toward the whole family, a contrast to initial outreach 
efforts that targeted children in the program's early years. SCHIP 
officials from Minnesota, Oregon, and Rhode Island told us that they 
also reached out to the entire family or uninsured persons in general 
in their campaigns, and SCHIP officials from New Jersey cited a change 
in application and enrollment materials to notify applicants that the 
entire family may be eligible for coverage under SCHIP. 

While most states did not direct their outreach to adults in 
particular, three states--Idaho, Oregon and New Mexico--reported 
reaching out to employers to generate participation in the states' 
premium assistance programs. An Idaho SCHIP official explained that the 
state's SCHIP program trains insurance brokers all over the state to 
conduct outreach to small businesses to generate interest in the 
state's premium assistance program. Oregon similarly trains insurance 
agents, and New Mexico reaches out to small businesses to generate 
participation in its adult coverage program. 

States Relied on Established Relationships and New Partnerships for 
Outreach: 

Of the 10 states we reviewed, 8 indicated that they relied on 
established relationships or new partnerships to continue outreach 
because in some cases changes in state budgets constrained funding for 
these efforts. Seven of the 10 states that we reviewed indicated that 
they either had little funding budgeted for outreach or were spending 
less than they had spent at the beginning of the program, as the 
following examples illustrate. 

* An Arizona SCHIP official noted that the state did not have much 
funding budgeted for outreach since the initial push to get children 
enrolled at the beginning of the program. Estimates indicate that 
funding for outreach declined from 1999, when the program spent 
$217,246, to 2006, when it spent $17,000. However, in commenting on a 
draft of this report, officials told us that, in the fiscal year 2008 
budget, the Governor and the State Legislature appropriated $480,000 
for additional outreach activities at various sites, including schools. 
Arizona SCHIP officials indicated that an advocacy group continues to 
conduct outreach activities such as health fairs and enrollment events 
with the state even though there is no longer funding for these 
efforts. 

* In two states--Michigan and Wisconsin--declines in funding reflected 
the perceived level of outreach needed. SCHIP officials in Michigan 
said that while the state conducted a great deal of outreach in SCHIP's 
early years, that level of effort was no longer needed because the 
public now has broad knowledge of the program. Additionally, Michigan 
officials explained that the state's early outreach activities 
established relationships and partnerships that continue to conduct 
outreach despite the change in funding and focus for these efforts that 
has occurred in the state. 

Some states' SCHIP programs indicated that they also partnered with 
other state agencies that regularly come in contact with families in an 
effort to find and enroll eligible children, as shown in the examples 
below. 

* New Jersey SCHIP officials noted that the state focused on what it 
termed "in-reach," meaning partnering with other state government 
programs and agencies. New Jersey SCHIP has partnered with agencies 
such as the Women, Infants, and Children program, which is a 
nutritional program for women and children at risk for poor nutrition; 
the state's Department of Health, which provides free immunizations; 
the Department of Motor Vehicles; and the Office of Unemployment to 
provide information about the program to parents who may be in need. 

* In New Mexico, the state hospital association assists the state in 
enrolling applicants or referring them to the SCHIP or Medicaid 
programs. The state also works with community-based centers, health 
centers, and other interested associations across the state. 
Additionally, the SCHIP program has developed partnerships with tribal 
organizations and has stationed outreach workers at sites convenient to 
tribal members in an effort help enroll individuals. 

States Varied in the Extent to Which They Analyzed Outreach 
Effectiveness: 

States' efforts to assess the effectiveness of different outreach 
approaches ranged from little or no evaluation to more formal methods 
of analyzing outcomes. Six states reported that they evaluate the 
effectiveness of their outreach approaches. (See table 6 for a 
description of the six states' evaluation efforts.) The remaining four 
states indicated that they did not evaluate outreach approaches; had 
evaluated outreach in the past, but were not doing so currently; or had 
plans in place to better assess how well outreach was working. A SCHIP 
official from Wisconsin said that the state had evaluated outreach 1 
year after Wisconsin implemented its SCHIP program but had since scaled 
back its evaluation and outreach efforts. Oregon SCHIP officials 
indicated that the state was working with advocates that perform 
outreach to help the state collect better data, which will help the 
state become more sophisticated in evaluating its outreach approaches. 

Table 6: Six States' Examples of Current Approaches to Evaluating the 
Effectiveness of Outreach Strategies: 

State: Arizona; 
Effort to evaluate outreach approaches: 
* Monitors volume of calls received by the program call line and 
incoming applications following an outreach campaign. 

State: Idaho; 
Effort to evaluate outreach approaches: 
* Monitors program call line, including asking callers how they heard 
about the program. 

State: Michigan; 
Effort to evaluate outreach approaches: 
* Monitors the program call line and Internet Web site; 
* Tracks the number of applications received and enrollment approvals 
from various sources, such as local public health departments; 
* Reviews reports submitted by an enrollment broker on the number of 
applications processed and outreach performed under the contract. 

State: New Jersey; 
Effort to evaluate outreach approaches: 
* Determines where applications originated by application assistance 
site; 
* Codes projects and sites to determine effectiveness of particular 
effort or location. 

State: New Mexico; 
Effort to evaluate outreach approaches: 
* Tracks calls made to program call line, including asking callers how 
they heard about the program; 
* Examines the volume of applications associated with particular 
outreach efforts. 

State: Rhode Island; 
Effort to evaluate outreach approaches: 
* Evaluates the effectiveness of its outreach partners' programs by 
monitoring the number of applications submitted and the number of 
children and adults enrolled. 

Source: GAO evaluation of information provided by state officials. 

[End of table] 

Agency and State Comments and Our Evaluation: 

We provided copies of a draft of this report to CMS and the 10 states 
we reviewed: Arizona, Idaho, Illinois, Michigan, Minnesota, New Jersey, 
New Mexico, Oregon, Rhode Island, and Wisconsin. We received written 
comments from CMS. (See app. II.) We address CMS comments below and 
incorporated CMS technical comments as appropriate. We also received 
responses from Arizona, Idaho, Michigan, Oregon, and Rhode Island. 
Arizona, Idaho, Oregon, and Rhode Island provided technical comments, 
which we incorporated as appropriate. Michigan reviewed the draft and 
did not have any comments. 

In commenting on a draft of this report, CMS stated that because SCHIP 
is a very important program for the Administration and Congress the 
information that is conveyed to Congress must accurately reflect the 
operation of the program. The agency commented on four general issues 
in our report: (1) the characterization of services to unborn children; 
(2) the data sources we used; (3) the lack of information, in the 
states' outreach activities section, about whether the provision of 
coverage to parents resulted in the increased coverage of children; and 
(4) the information we included or did not include about recent HHS 
actions pertaining to SCHIP. These comments are addressed below. 

CMS commented that the report mischaracterized SCHIP coverage of unborn 
children as coverage for adults. While acknowledging that SCHIP 
coverage benefits both the unborn child and its mother, CMS underscored 
that it is the unborn child who is eligible for coverage. CMS stated 
that the report disregarded the SCHIP definition of a child as "an 
individual under the age of 19, including the period from conception to 
birth";[Footnote 43] that we classified coverage of unborn children as 
coverage of adults; and that, as a result, we inflated enrollment and 
expenditures for adults in states that cover unborn children in SCHIP. 
CMS's description of our analysis is incorrect. We did not categorize 
coverage of unborn children as coverage of adults, but as coverage of 
another category of individuals--pregnant women. We reported enrollment 
and expenditures separately for adults (parents and childless adults), 
pregnant women, and children. Our characterization of SCHIP coverage 
for unborn children as coverage for pregnant women reflects the common 
understanding that the coverage offered--prenatal care and delivery--is 
care that a pregnant woman receives for both her benefit and that of 
her unborn child. Moreover, CMS acknowledged this in the preamble 
discussion to the regulation that revised the definition of child for 
the purposes of SCHIP to include the period from conception to 
birth.[Footnote 44] In response to comments on the regulation, CMS 
stated that the regulation was "simply an option to make it faster and 
easier for States that want to use SCHIP funds to expand prenatal 
services for low-income women and to do so without having to go through 
the 1115 [waiver] process or wait for the passage of 
legislation."[Footnote 45] CMS also objected to the report's statement 
that a state's SCHIP program may provide coverage to individuals who 
have incomes at the Medicaid level but do not meet U.S. citizenship 
requirements, a reference to the mothers of unborn children covered in 
SCHIP, and stated that unborn children do not have immigration status 
as "aliens" and therefore are not precluded by federal law from 
receiving federal means-tested benefits. We recognize that this 
statement may require more explanation than is warranted in this report 
and have therefore deleted it. 

Regarding our use of data sources, CMS commented that we did not use 
information from the approved demonstration terms and conditions, 
Statistical Enrollment Data System (SEDS), or Medicaid Budget and 
Expenditure System/State Children's Health Program Budget and 
Expenditure System (MBES/CBES) and therefore did not use consistent 
data. We did use information from the approved demonstration terms and 
conditions for the states we reviewed. We did not use SEDS or MBES/CBES 
data primarily because neither data system provides enrollment and 
expenditure data broken out by all of the population and coverage 
categories that were important to our analysis. In addition, because 
both data systems contain information submitted by the states and we 
would have needed to address any questions about the data to them, we 
chose to obtain data directly from the states. We also had concerns 
about the quality of the SEDS data. For example, in its technical 
comments, CMS questioned the number of adults (37,327) that we reported 
were enrolled in Wisconsin's SCHIP program as of December 31, 2006, and 
stated that SEDS showed 68,091 adults enrolled. A state official 
confirmed that the number we reported for SCHIP was correct and 
explained that the SEDS figure included adults covered in Medicaid. 

Regarding states' outreach activities, CMS commented that our 
investigation of outreach activities did not consider whether the 
provision of coverage to parents resulted in increased enrollment of 
children. While this is an important question, analyzing the many 
factors that affect program enrollment was beyond the scope of our 
work. 

Regarding its fourth issue, CMS commented that the report included some 
information that was not relevant--and failed to include some 
information that was. Regarding information that was not relevant, CMS 
cited our discussion of its August 2007 letter that clarified its 
position on regulations related to coverage of children in families 
whose income exceeds 250 percent of the FPL. CMS did not believe that 
this letter was of concern regarding adult enrollment. We agree that 
the contents of this letter are more relevant to the coverage of 
children in the SCHIP program. However, we included this description 
because it provides context with regard to how SCHIP policies have 
changed over time. Regarding information that was relevant but not 
included, CMS commented that the draft report did not summarize the 
Administration's plan to transition adult coverage from SCHIP, 
including ongoing efforts to move adults from SCHIP into Medicaid 
coverage. In the draft report, we noted that Illinois, Oregon, and 
Wisconsin have made or are planning changes in the extent to which they 
are using SCHIP funds to cover adults, based on some examples that CMS 
shared with us in September 2007. In its comments, CMS provided 
additional details about these and other planned changes. 

As agreed with your office, unless you publicly announce 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 to the 
Administrator of CMS and interested congressional committees. We will 
also make copies available to others upon request. In addition, this 
report will be available at no charge on GAO's Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or [email protected]. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Key contributors to this report are 
listed in appendix III. 

Sincerely yours, 

Signed by: 

James C. Cosgrove: 
Acting Director, Health Care: 

[End of section] 

Appendix I: Premium Assistance Programs: 

Seven of the 10 states we reviewed provided premium assistance for 
adults. (See table 7.) Three of the 7 states also subsidized the 
purchase of private individual health insurance for enrollees who, for 
example, were unemployed, worked for an employer that did not offer 
coverage, or could not afford employer-offered coverage. 

Table 7: Premium Assistance Provided to SCHIP-Covered Adults in States' 
SCHIP Programs, Fiscal Year 2007: 

State: Idaho; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Empty]; 
State also provides direct coverage?: No. 

State: Illinois; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Check]; 
State also provides direct coverage?: Yes. 

State: New Jersey; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Empty]; 
State also provides direct coverage?: Yes[A]. 

State: New Mexico; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Check]; 
State also provides direct coverage?: No. 

State: Oregon; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Check]; 
State also provides direct coverage?: No[A]. 

State: Rhode Island; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Empty]; 
State also provides direct coverage?: Yes[A]. 

State: Wisconsin; 
Type of premium assistance: Employer-sponsored: [Check]; 
Type of premium assistance: Private individual: [Empty]; 
State also provides direct coverage?: Yes[A]. 

Sources: GAO analysis of federal and state waiver data. 

Notes: An empty cell indicates that the state did not offer this type 
of coverage to a specific adult population. 

Adult coverage categories include parents and childless adults, but do 
not include pregnant women. 

[A] State required adults to enroll in qualifying premium assistance 
programs if they are available. 

[End of table] 

States structured and operated their premium assistance programs in 
various ways, as noted in the following examples: 

* Five of the seven states providing premium assistance required 
employers to contribute part of an enrollee's premium (Idaho, New 
Jersey, New Mexico, Oregon, and Wisconsin). One state defined employer 
contributions in dollar amounts, while others defined contributions as 
percentages of the total premium. For example, New Mexico required 
employers to pay $75 per enrollee per month, while Idaho required 
employers to pay 50 percent of the premium per enrollee per month. 

* Five of the seven states set enrollee premiums on a sliding scale. 
Three of these five states required enrollees to pay graduated premiums 
only if their family income exceeded 150 percent of the federal poverty 
level (FPL) (New Jersey, Rhode Island, and Wisconsin); one required 
enrollees to pay graduated premiums only if their family income 
exceeded 100 percent of the FPL (New Mexico); and one scaled premiums 
throughout the income eligibility range, beginning at 0 percent of the 
FPL (Oregon). 

* To reduce financial risk, three of the seven states capped their 
subsidies to beneficiaries (Illinois), or health plans (Idaho and New 
Mexico). 

Three states reported facing challenges implementing their premium 
assistance programs, as noted in the following examples: 

* Rhode Island, New Jersey, and Wisconsin cited program administration 
as labor intensive, especially in maintaining current information and 
changes in employer-sponsored health plans. 

* These three states also stressed that rapidly increasing premiums and 
cost-sharing requirements made insurance less affordable. 

Some states modified their premium assistance programs to attract and 
retain employers into the insurance market, as noted in the following 
examples: 

* New Mexico implemented a unique insurance product to make coverage 
more affordable to small employers and their employees. The product is 
called a "three-share" model in which the state combines funds 
contributed by federal, state, and private employer/employee sources to 
finance coverage. Employers contribute $75 per employee per month, and 
employees pay their share of the premium based on a sliding scale 
according to family income. 

* Rhode Island modified its premium assistance program to encourage 
employers to retain their health plans. For instance, the state began 
paying participating employees' premium share amounts directly to the 
employees without employers having to sign up and participate in the 
premium assistance program. 

[End of section] 

Appendix II: Comments from the Centers for Medicare & Medicaid 
Services: 

Department Of Health & Human Services: 
Centers for Medicare & Medicaid Services: 
Office of the Administrator: 
Washington, DC 20201: 

Date: October 12, 2001: 

To: James Cosgrove: 
Director:
Health Care: 
Government Accountability Office: 

From: Kerry Weems [signature included]; 
Acting Administrator: 

Subject: Government Accountability Office (GAO) Draft Report: "State 
Children's Health Insurance Program: Program Structure, Enrollment and 
Expenditure Experiences, and Outreach Approaches for Slates That Cover 
Adults" (GAO-08-50): 

Background: 

The GAO examined: (1) how 10 States (Arizona, Idaho, Illinois, 
Michigan, Minnesota, New Jersey, New Mexico, Oregon. Rhode Island, and 
Wisconsin) that cover adults (parents, childless adults, or both) in 
the State Children's Health Insurance Program (SCI IIP) structured 
their programs; (2) these States' enrollment and experiences for 
adults, which GAO considered in the context of those for all other 
SCHIP populations (children and pregnant women); and (3) the approaches 
these States adopted to attract eligible individuals. To accomplish 
this, GAO reviewed 10 States that covered adults in SCHIP as of 2007. 
GAO interviewed officials in the 10 States; reviewed States' 2006 
annual reports and information available on States' Web sites; and 
analyzed enrollment and expenditure data obtained from 9 of the 10 
States. and published sources. 

Report Findings: 

* The SCHIP program structures vary for adults in the 10 study States 
in terms of the categories of adults covered and the type of coverage. 
For example. for fiscal year 2007, 5 of the 10 States only covered 
parents, 1 State only covered childless adults. and 4 States covered 
both. 

* Enrollment and expenditure experiences with adult coverage varied 
widely across the States reviewed. According to the report, in 2006, 
adult enrollment as a proportion of total SCHIP enrollment was less 
than 25 percent in 3 States, 33 to 50 percent in 4 States, and more 
than 50 percent in 3 States. 

* The 10 States reviewed used 3 approaches in their outreach efforts: 
targeting hard-to-reach populations, targeting families, and relying on 
new and established partnerships to locate and enroll all eligible 
individuals. 

General Comments: 

Thank you for the opportunity to comment on this report. Although there 
are no recommendations in this report, SCHIP is a very important 
program for the Administration and for Congress, and therefore the 
information that is conveyed to Congress must accurately reflect the 
actual operation and administration of the program. To that end, we 
have several substantive issues that must be corrected before the 
report is transmitted to Congress. We also have a lengthy set of 
technical comments which we believe will greatly improve the accuracy 
of the report. 

Issue 1. Inaccurate Characterization of Services to Unborn Children as 
Adult Coverage. 

In this report, GAO disregards the SCHIP definition of a "child," 
articulated in Federal Regulations since 2002, (a child as an 
individual under the age of 19, including the period from conception to 
birth" (42 CFR 457.10) and inappropriately characterizes this coverage 
as coverage for adults. This reclassification of children (from 
conception to birth) as pregnant women and adults, colors and 
mischaracterizes numerous explanations and conclusions throughout the 
report, specifically regarding enrollment numbers, expenditure 
information, and statements about eligibility. 

Specifically, mischaracterizing coverage for unborn children as 
coverage for adults inflates the enrollment and expenditures for States 
included in this report that provide coverage of unborn children. 
Additionally, this report also makes the erroneous statement numerous 
times that `"a State's SCHIP program may provide coverage to 
individuals who have incomes at the Medicaid level but do not meet U.S. 
citizenship requirements," a reference to the mothers of the unborn 
children covered in SCHIP. Unborn children do not have immigration 
status as "aliens" and thus are not precluded from receiving Federal 
means-tested benefits under the provisions of Title IV of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (PWORA). 
SCHIP coverage will obviously benefit both the unborn child and mother 
through the delivery of services; however, it is the unborn child who 
is eligible for coverage as clarified in our regulations. 

We strongly believe that all the enrollment numbers, expenditure 
information. and statements relating to eligibility be reviewed to 
clearly address the legal status of these children, and that their 
eligibility category should not be arbitrarily included as adult 
services as determined by GAO. 

Issue 2. Use of Data Sources. 

The GAO did not use information from the approved demonstration special 
terms and conditions, Statistical Enrollment Data System (SEDS), or the 
Medicaid and State Children's Health Insurance Budget Program and 
Expenditure System (MBES/CBES), which would have enabled them to use 
consistent data. For example, this report contains enrollment 
information with different dates for point in time enrollment numbers 
for States, and one State without any expenditure information. Not 
using the consistent data sources negates the ability for State-to-
State comparisons and compromises GAO's analysis. 

Issue 3. Investigation of Outreach Activities. 

The section on outreach did not consider the question of whether the 
provision of coverage to parents resulted in the increased coverage of 
children. Since this was the Secretary's rationale for approving these 
demonstrations, it seems that this would be an important issue to 
answer, rather than providing a description that concludes that States 
did not specifically target adults in their outreach strategies. 

Issue 4. Inclusion of Information not Relevant to the Purpose of the 
Report & Failure to Report Information Highly Relevant to the Purpose 
of the Report. 

The GAO erroneously states that "recent actions by HHS have the 
potential to affect coverage of both adults and children under SCHIP," 
and cites the August 2007 letter concerning the coverage of children 
above 250 percent of the Federal poverty level (FPL). In fact, the 
August 2007 letter does not concern adult coverage, since coverage for 
adults under title XXI has never been approved to go above 200 percent 
of the FPL. Additionally, this report does not address information on 
the Administration's plan to transition adult coverage from SCHIP which 
CMS discussed extensively with GAO and believes is a critical point 
missed by this report that needs to be included. 

We would first like to point out that under the Special Terms and 
Conditions (STCs) of section 1115 SCHIP demonstrations, all States are 
required to demonstrate allotment neutrality and have agreed to use 
State-only funds and/or explore other options for providing coverage to 
demonstration populations, should their allotment be exhausted. 
Specifically, CMS is currently working with States with section 1115 
demonstrations to move their adult populations from SCHIP into Medicaid 
upon renewal of the demonstration. 

In fiscal year (FY) 2006, approximately 700,000 adults were served in 
SCHIP waivers, of which 500,000 were parents of Medicaid or SCHIP 
children and 200,000 were childless adults. In some States, this move 
has already begun. For example, in January 2006, Arizona moved 
approximately 85,000 childless adults to Medicaid. Coverage of parents 
in Arizona will be moved from SCHIP to Medicaid once the demonstration 
is up for renewal. Illinois' demonstration, which covered both 
childless adults and parents under SCHIP expired on September 30, 2007, 
and the State is no longer receiving SCHIP funding for the 211,500 
adults covered under its demonstration. The State has indicated that it 
would submit a State Plan Amendment to cover those 210,000 parents 
under the Medicaid State Plan and would use State-only funds for 
childless adults. Wisconsin already moved a significant portion of 
their parents from SCHIP to Medicaid in July 2007 and has indicated 
that the State will no longer he covering any of its adults with SCHIP 
funds as of December 31, 2008. Wisconsin and Illinois represent 320,000 
of the 500,000 parents mentioned above and 1,500 of the childless 
adults. As of October 1, 2007, 296,000 parents and 86,500 childless 
adults or 54 percent of all adults ever enrolled in SCHIP in 2006 have 
been moved out of SCHIP. 

Additionally, CMS will be working with Oregon to move its 13,750 
parents to Medicaid by October 31, 2007, when the current waiver 
expires. And CMS plans to work with the remaining demonstration States 
to transition the adults to Medicaid when their waivers expire. Rhode 
Island's and Minnesota's waivers, covering a combined 55,000 parents in 
FY 2006, will expire in 2008. And New Jersey's waiver, covering 88,000 
parents in FY 2006, will expire in 2009. Michigan's waiver, covering 
102,000 childless adults (half of all childless adults covered in title 
XXI demonstrations) also expires in 2009. Idaho and New Mexico waivers 
also expire in 2009. By the end of 2009, there will be no childless 
adults funded with title XXI and only about 10 percent of the number of 
parents who were enrolled in FY 2006 would remain under SCHIP waivers 
until 2011, when all of the title XXI adult demonstrations will expire. 

All of these States providing coverage to adults are being advised that 
they should consider the flexibilities provided under the "Deficit 
Reduction Act of 2005" (DRA), which provides States with greater 
benefit and cost sharing flexibilities for some Medicaid populations. 
We outlined some of those possibilities in our March 31, 2006 letter to 
State Governors. Pre-print pages related to the flexibility provided 
under the DRA arc available on the CMS Web site. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

James C. Cosgrove, (202) 512-7114, [email protected]: 

Staff Acknowledgments: 

Kathryn Allen, Director, led the engagement through its initial phases. 
In addition, Carolyn L. Yocom, Assistant Director; Nancy Fasciano; Paul 
B. Gold; JoAnn Martinez-Shriver; Peter Mangano; Kevin Milne; and 
Elizabeth T. Morrison made key contributions to this report. 

[End of section] 

Footnotes: 

[1] Medicaid is a federal-state health financing program established in 
1965 to provide health care coverage to certain categories of low- 
income adults and children. 

[2] See The Balanced Budget Act of 1997, Pub. L. No. 105-33, ï¿½ 4901, et 
seq., 111 Stat. 251, 552. 

[3] Other bases for establishing benefit packages are using (1) a 
benchmark-equivalent set of services, as defined under federal law; (2) 
coverage equivalent to state-funded child health programs in Florida, 
New York, or Pennsylvania; or (3) a benefit package approved by the 
Secretary of Health and Human Services. 

[4] The cost-effectiveness test requires a state to demonstrate that 
covering both adults and children in a family under SCHIP is not more 
expensive than covering only the children. A state must also 
demonstrate that the coverage does not substitute for private coverage 
that is available. 

[5] Throughout this report we refer to these arrangements as section 
1115 waivers. 

[6] States' coverage of adults using SCHIP funds is likely to continue 
to change over time. For example, CMS noted that three of the states in 
our sample--Illinois, Oregon, and Wisconsin--have made or are planning 
changes in the extent to which they are using SCHIP funds to cover 
adults. 

[7] Pregnant women accounted for about 1 percent of the total number of 
individuals covered through SCHIP in 2006 in the 10 states. In 4 of the 
5 states that covered pregnant women (generally through coverage of 
their unborn children) in 2006 and that provided data to us, this 
population accounted for less than 3 percent of the total number of 
individuals covered through SCHIP. The exception was Minnesota, where 
pregnant women accounted for 12 percent of the total number of 
individuals covered through SCHIP. Of the 5 other states, 4 states 
either did not offer coverage through SCHIP to pregnant women or enroll 
any in 2006, and 1 state did not provide data on the number covered. 

[8] See 67 Fed. Reg. 61956 (October 2, 2002). Under SCHIP, states may 
choose to extend eligibility to unborn children and provide prenatal 
care and delivery. 

[9] Illinois did not provide enrollment or expenditure data. We 
estimated the number of adults enrolled in the state's SCHIP program at 
the end of fiscal year 2006 from the number ever enrolled as reported 
in the state's 2006 annual report, but we were not able to estimate the 
percentage of expenditures attributable to adults. We provided the 
state with an opportunity to comment on these estimates prior to 
publication. 

[10] Throughout this report, the term states refers to the 50 states 
and the District of Columbia. 

[11] 42 U.S.C. ï¿½ 1397jj(b) (2000). For example, Alabama's Medicaid 
program covered children aged 15 to 18 up to 15 percent of the FPL, 
while Washington covered this same group up to 200 percent of the FPL. 
Therefore, Alabama was allowed to establish SCHIP eligibility for 
children in families with incomes up to 200 percent of the FPL, while 
Washington was allowed to go as high as 250 percent of the FPL. 

[12] The corridor represents the FPL levels in states' SCHIP programs 
above the levels offered by their Medicaid programs. Additionally, a 
state's SCHIP program may provide coverage to individuals who have 
incomes at the Medicaid level if these individuals do not qualify for 
Medicaid. 

[13] HHS, CMS, Dear State Health Official Letter (Baltimore, Md.: Aug. 
17, 2007), [hyperlink, 
http://www.cms.hhs.gov/SMDL/SHO/list.asp?intNumPerPage=all&cmdSubmit=Ret
urn+to+List&sortByDID=1&filterType=none&filterByDID=9&sortOrder=ascendin
g&submit.x=13&submit.y=8] (downloaded Aug. 27, 2007). 

[14] The crowd-out prevention strategies cited by HHS were (1) imposing 
waiting periods between dropping private coverage and enrollment, (2) 
imposing cost-sharing that is approximately equal to the cost of 
private insurance coverage, (3) monitoring health insurance status at 
the time of application, (4) verifying family insurance status, and (5) 
preventing employers from changing coverage policies in such a way as 
to favor a shift to public coverage. 

[15] 42 U.S.C. ï¿½ 1397ee(c)(3) (2000). 

[16] 42 U.S.C. ï¿½ 1315(a)(2000). 

[17] The Secretary of Health and Human Services is prohibited from 
approving new section 1115 waivers that permit SCHIP funds to provide 
coverage of nonpregnant childless adults; waivers approved before 
October 1, 2005, and extensions, amendments, or modifications of those 
waivers are not affected by this provision. See Deficit Reduction Act 
of 2005 (DRA), Pub. L. No. 109-171, ï¿½ 6102, 120 Stat. 131-32 (Feb. 8, 
2006) (codified at 42 U.S.C. ï¿½ 1397gg(f)). 

[18] Pregnant women who meet SCHIP age requirements for children's 
coverage could also be covered in SCHIP. 

[19] See 67 Fed. Reg. 61956 (October 2, 2002); see also 42 C.F.R. 
ï¿½457.310 (2005). 

[20] See 67 Fed. Reg. at 61965-67. 

[21] The number of eligible children is calculated as a weighted 
average of the number of uninsured low-income children and the number 
of all low-income children. For fiscal year 2000, the allocation 
formula gave greater weight to the number of uninsured low-income 
children than to the number of low-income children (75 percent versus 
25 percent). For fiscal year 2001 and subsequent fiscal years, the 
allocation formula gave equal weight to both numbers. 42 U.S.C. ï¿½ 
1397dd(b). See also Congressional Research Service, SCHIP Original 
Allotments: Funding Formula Issues and Options (Washington, D.C.: Apr. 
18, 2006). 

[22] The state health care cost factor is based on wages of employees 
in the health services industry and is intended to adjust for 
geographic variations in health care costs. The ratio of a state's 
average annual wages in the health industry is compared to the national 
average, and the allotments of states with above-average wages in the 
health services industry will increase, while states with averages less 
than the national average will have their allotments reduced. 

[23] The SCHIP statute gives the Secretary of Health and Human Services 
discretion to determine an appropriate procedure for redistribution of 
unused allotments. See 42 U.S.C. ï¿½ 1397dd(e),(f). 

[24] For example, the federal government will reimburse at a 65 percent 
match under SCHIP for a state receiving a 50 percent match under 
Medicaid. 

[25] For example, states that cover children in an SCHIP Medicaid 
expansion program can revert to Medicaid funding if they exhaust their 
SCHIP allotment. States that cover adults in a section 1115 waiver in 
SCHIP may also have the authority under the special terms and 
conditions of the demonstration to revert these populations to coverage 
with Medicaid funds. 

[26] States differed in how they defined parents eligible for SCHIP 
coverage. For example, some states included other caretaker adults, 
while other states did not. 

[27] In Wisconsin, persons who choose to seek care outside the approved 
managed care plans are charged a copayment. 

[28] Point-in-time enrollment for Illinois was estimated from the 
number of adults and children ever enrolled during the year. Data for 
New Jersey and Wisconsin were as of June 2006 and December 2006, 
respectively. Data for the other seven states were as of September 
2006. 

[29] Illinois and Rhode Island, which also offered both types of 
coverage, did not provide data on enrollment in each program. 

[30] Minnesota's SCHIP program also had 2,833 pregnant women covered 
through their unborn children. 

[31] Although Minnesota is an extreme case, many of the children whose 
parents were covered in SCHIP in the other nine states we reviewed were 
covered in Medicaid. Because Medicaid income eligibility levels are 
generally higher for children than for adults in these states, and 
SCHIP eligibility generally begins where Medicaid ends, some parents 
with family incomes below the thresholds for children in Medicaid were 
covered in SCHIP. 

[32] Enrollment was much higher in New Mexico, the other state that 
implemented premium assistance for adults in SCHIP in July 2005. New 
Mexico structured its program so that adults could obtain coverage 
regardless of whether their employers offered it or how that coverage 
was structured if they did. 

[33] The state reopened enrollment for parents with family incomes at 
or below 100 percent of the FPL in September 2005, and then raised this 
threshold to 115 percent a year later, and to 133 percent a year after 
that. 

[34] Illinois did not provide expenditure data. 

[35] We were unable to evaluate the extent to which adults contributed 
to the cost of their coverage in the 10 states, as only 3 states 
provided data on enrollee premium payments by population. In these 3 
states, the share of combined expenditures--state expenditures plus 
enrollee premiums--that parents paid through their premiums varied. The 
percentages were similar in Arizona (7.2 percent) and Minnesota (7.1 
percent) but considerably lower in New Jersey (0.2 percent), probably 
because the state was no longer enrolling parents with incomes above 
150 percent of the FPL, the income level at which premiums were 
imposed. 

[36] Illinois, the other state that provides direct coverage to adults, 
did not provide expenditure data. For Arizona, Minnesota, and New 
Jersey, monthly expenditures per parent were 67 percent, 86 percent, 
and 79 percent higher, respectively, than monthly expenditures per 
child. 

[37] Michigan provided only a limited outpatient service package to 
childless adults. In contrast, Arizona, which rolled childless adults 
over from SCHIP to Medicaid coverage in 2006, provided most Medicaid 
services and reported monthly expenditures per childless adult of $579. 

[38] The other states that offered SCHIP-funded premium assistance to 
adults were Illinois, New Mexico, Rhode Island, and Wisconsin. 

[39] New Jersey required that employers pay at least 50 percent of the 
enrollee's premium, and in fiscal year 2006 Idaho required that 
employers pay at least 50 percent of both the enrollee's and his or her 
spouse's premiums. Since December 1, 2006, Idaho has no longer required 
employers to contribute to spouses' premiums. 

[40] In general, a state that spent its allotment for a given year 
within the 3-year period of availability qualified for redistribution 
of other states' unused allotments. For example, a state that spent its 
fiscal year 2003 allotment by the end of fiscal year 2005 qualified for 
redistribution in fiscal year 2006. 

[41] Twelve of the 41 states not included in our review qualified for 
redistributions in at least 5 of the 7 years in which funds were 
redistributed. 

[42] In general, states were able to draw on unused funds from prior 
fiscal years' allotments to cover expenditures incurred in a given year 
that were in excess of their allotment for that fiscal year, because 
under the SCHIP statute, states generally have 3 years to spend each 
annual allotment. 

[43] See 42 C.F.R. ï¿½457.10 (2005). 

[44] See 67 Fed. Reg. 61956, 61957-58 (2002). 

[45] See id. at 61958. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "Subscribe to Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office: 
441 G Street NW, Room LM: 
Washington, D.C. 20548: 

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Gloria Jarmon, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

*** End of document. ***