Health Insurance for Children: Private Insurance Coverage Continues to
Deteriorate (Letter Report, 06/17/96, GAO/HEHS-96-129).

Pursuant to a congressional request, GAO provided information on the
number of uninsured Medicaid-eligible children in 1994.

GAO found that: (1) the percentage of children without health insurance
was 14.2 percent in 1994; (2) the percentage of children with private
health insurance has steadily decreased since 1987; (3) while there has
been a decline in coverage for poor children, coverage for nonpoor
children has remained stable; (4) Medicaid coverage for children was
lower in 1994 due to methodological changes in the Current Population
Survey; (5) there were 2.9 million Medicaid-eligible children that were
not enrolled in Medicaid in 1994; (6) these children represented 30
percent of all uninsured children from birth to 5 years old, and had
family incomes that fell below the federal poverty level; (7) the number
of children eligible for Medicaid will increase in the next 6 years to
include poor teens aged 13 to 19 years old; and (8) Medicaid will cover
even more uninsured children as soon as the families of eligible
uninsured children learn that they qualify for Medicaid.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-129
     TITLE:  Health Insurance for Children: Private Insurance Coverage 
             Continues to Deteriorate
      DATE:  06/17/96
   SUBJECT:  Disadvantaged persons
             Children
             Health insurance
             Public assistance programs
             Managed health care
             Eligibility criteria
             Health care programs
             Population statistics
             Income statistics
IDENTIFIER:  Medicaid Program
             Census Bureau Current Population Survey
             Civilian Health and Medical Program of the Uniformed 
             Services
             Medicare Program
             Aid to Families With Dependent Children Program
             Head Start Program
             AFDC
             CHAMPUS
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Subcommittee on Children and
Families, Committee on Labor and Human Resources, U.S.  Senate

June 1996

HEALTH INSURANCE FOR CHILDREN -
PRIVATE INSURANCE COVERAGE
CONTINUES TO DETERIORATE

GAO/HEHS-96-129

Children's Health Insurance in 1994

(101395)


Abbreviations
=============================================================== ABBREV

  AFDC - Aid to Families With Dependent Children program
  CHAMPUS - Civilian Health and Medical Program of the Uniformed
     Services
  CPS - Current Population Survey
  HCFA - Health Care Financing Administration
  HMO - health maintenance organization
  WIC - Special Supplemental Food Program for Women, Infants, and
     Children

Letter
=============================================================== LETTER


B-271717

June 17, 1996

The Honorable Christopher J.  Dodd
Ranking Minority Member
Subcommittee on Children and Families
Committee on Labor and Human Resources
United States Senate

Dear Senator Dodd: 

As the U.S.  health care marketplace changes, having health insurance
coverage has become increasingly important for children.  The
transition into greater reliance on managed care has left hospitals
and physicians less willing to provide charity care for those who
lack insurance.  Children are particularly vulnerable to the lack of
health insurance.  Although a healthy group, they need preventive and
acute care for their optimum development.  If they do not get care
when they need it, their health can be affected for the rest of their
lives. 

As we have reported earlier,\1 private health insurance coverage for
children decreased between 1987 and 1993.  Expanding children's
coverage through the publicly funded Medicaid program helped to
cushion the effect of this decrease.  The Medicaid expansion
increased health insurance coverage for poor children.\2

However, it did not lead to an overall increase in the percentage of
children covered because children above the poverty level lost
private coverage but were less likely to be eligible for Medicaid. 
Since our earlier report, the Congress has considered restructuring
the Medicaid program, including children's eligibility for coverage. 
It has also considered proposals that would change the private
insurance marketplace.  In addition, the shift toward managed care in
the health care marketplace has continued, which reduces providers'
willingness to care for uninsured patients. 

Concerned about these issues and their impact on children, you asked
us to provide you with updated information for 1994 on whether health
insurance coverage for children had increased and in particular how
poor children were affected.  You also asked us

  -- whether more children in working families were depending on
     Medicaid than had previously been reported,

  -- how many uninsured children might be eligible for Medicaid but
     not enrolled in 1994, and

  -- why families of uninsured but Medicaid-eligible children might
     not be seeking Medicaid coverage for their children. 

To answer these questions, we analyzed the Bureau of the Census'
March 1995 Current Population Survey (CPS), which can be used to
estimate health insurance coverage for children from birth through 17
years old in 1994.  The methodology for the CPS questionnaire and
data collection had been improved for the March 1995 CPS.  In
addition, the sample frame or sample selection process for families
had been updated by using 1990 census information.  While these
changes provide better estimates of insurance coverage for 1994, in
our opinion and that of Census Bureau officials, some estimates for
1994 are not comparable to prior years' estimates of insurance
coverage primarily because of these methodological changes.  In this
report, we highlight comparisons of 1994 and earlier estimates that
we think are most comparable.  (See app.  I.) Our work was conducted
between January and May 1996 in accordance with generally accepted
government auditing standards. 


--------------------
\1 See Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb.  14,
1995), Health Insurance for Children:  Many Remain Uninsured Despite
Medicaid Expansion (GAO/HEHS-95-175, July 19, 1995), and Medicaid and
Children's Insurance (GAO/HEHS-96-50R, Oct.  20, 1995). 

\2 Poor children are children in families with income at or below the
Federal Poverty Income Guidelines.  These guidelines set income
levels by family size to determine poverty.  In 1996, a family of
three with income at or below $12,980 is considered poor. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The number of children without health insurance coverage was greater
in 1994 than at any time in the last 8 years.  In 1994, the
percentage of children under 18 years old without any health
insurance coverage reached its highest level since 1987--14.2 percent
or 10 million children who were uninsured.  (See fig.  1.) In
addition, the percentage of children with private coverage has
decreased every year since 1987, and in 1994 reached its lowest level
in the past 8 years--65.6 percent or 46.3 million children.  In
comparison, the loss of health insurance coverage for adults 18 to 64
years old appears to have stabilized in the last 2 years.  Between
1993 and 1994, the decline in health insurance coverage for children
was concentrated among children in poor families.  Health insurance
coverage remained stable for nonpoor children. 

Among children whose parents are working, Medicaid continued to be an
important source of insurance coverage.  The Medicaid expansions in
eligibility for low-income children not on welfare allowed more
children of working parents to become insured through Medicaid--a
trend that continued in 1994.  But Medicaid coverage for children as
estimated through the CPS was lower in 1994 than 1993--which may be
due to methodological changes in the CPS.  (See app.  I for more
detail on these CPS changes and their effects.)

Despite greater reliance on Medicaid for covering children of the
working poor, many eligible uninsured children do not enroll in
Medicaid.  For 1994, we estimate that 2.9 million uninsured children
were eligible for Medicaid by federal mandate but did not enroll.\3
These Medicaid-eligible uninsured children represent 30 percent of
all uninsured children.  Unless the Congress changes Medicaid
eligibility law, the group of children eligible for Medicaid will
grow between now and 2002 because current federal law is phasing in
Medicaid eligibility for poor teens 13 to 19 years old.  In 1994,
there were 4.1 million poor teens in this age group.  This continuing
expansion could cover more of the uninsured, because 1.3 million poor
teens 13 to 19 years old were uninsured in 1994.  However, Medicaid
can only increase coverage if families of eligible uninsured children
are informed that their children are eligible for Medicaid and enroll
them. 

   Figure 1:  In 1994, 14.2
   Percent of Children Were
   Uninsured

   (See figure in printed
   edition.)

Note:  M=million.  Uninsured children are children who were reported
to have no insurance coverage at all for the entire year.  Children
reported as having health insurance coverage may have been uninsured
for some part of the year.  Children with more than one source of
coverage reported may have had duplicate coverage at the same time or
may have had different types of coverage at different times of the
year.  CHAMPUS is the Civilian Health and Medical Program of the
Uniformed Services.  The Census Bureau includes other types of public
coverage in the CHAMPUS coverage category, such as health coverage
through the Indian Health Service or state-funded programs.  For this
figure, more than one source of coverage is shown only for children
who have both private insurance and Medicaid coverage.  Children with
Medicare are included with the Medicaid group.  Children with both
private insurance and CHAMPUS coverage will be shown in the group
with private insurance coverage.  Children with Medicaid (or
Medicare) and CHAMPUS insurance will be shown in the section for
Medicaid. 


--------------------
\3 For 1993, these were children from birth to 5 years old with
family income at or below 133 percent of the federal poverty level
and poor children 6 to 10 years old.  Because coverage is being
phased in for children born after Sept.  30, 1983, for 1994, we
considered children as Medicaid-eligible according to federal mandate
if they were from birth to 5 years old with family income at or below
133 percent of the federal poverty level or if they were poor
children 6 to 11 years old. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Studies have shown that uninsured children are less likely than
insured children to get needed health and preventive care.  The lack
of such care can adversely affect children's health status throughout
their lives.  Without health insurance, many families face
difficulties getting preventive and basic care for their children. 
Children without health insurance or with gaps in coverage are less
likely to have routine doctor visits or have a regular source of
medical care.  When they do seek care, they are more likely to get it
through a clinic rather than a private physician or health
maintenance organization (HMO).\4 They are also less likely to get
care for injuries,\5 see a physician if chronically ill, or get
dental care.\6 They are less likely to be appropriately immunized to
prevent childhood illness--which is considered by health experts to
be one of the most basic elements of preventive care.\7

The Medicaid program is the major public funding source for
children's health insurance.  It is a jointly funded federal-state
entitlement program that provides health coverage for both children
and adults.  It is administered through 56 separate programs,
including the 50 states, the District of Columbia, Puerto Rico, and
the U.S.  territories.  States are required to cover some groups of
children and adults and may extend coverage to others.  Children and
their parents must be covered if they receive benefits under the Aid
to Families With Dependent Children (AFDC) program.  Children and
adults may also be eligible for the program if they are disabled and
have low incomes or, at state discretion, if their medical expenses
are extremely high relative to family income. 

Beginning in 1986, the Congress passed a series of laws that expanded
Medicaid eligibility for pregnant women on the basis of family
income, and for children on the basis of family income and age. 
Before these eligibility expansions, most children received Medicaid
because they were on AFDC.  Before 1989, coverage expansions were
optional for states, although many states had expanded coverage.\8
Starting in July 1989, states had to cover pregnant women and infants
with family incomes at or below 75 percent of the federal poverty
level.  Two subsequent federal laws further expanded mandated
eligibility for pregnant women and children.  By July 1991, states
were required to cover (1) pregnant women, infants, and children up
to 6 years old with family income at or below 133 percent of the
federal poverty level and (2) children 6 years old and older born
after September 30, 1983, with family income at or below 100 percent
of the federal poverty level.  Current law expands the group of poor
children over 6 years old eligible for Medicaid year by year until
all poor children up to 19 years old are eligible in the year 2002. 
In addition, states may expand Medicaid eligibility for infants and
children beyond these requirements by either phasing in coverage of
children up to 19 years old more quickly than required, by increasing
eligibility income levels, or both.  (See table II.2 for current
eligibility levels in states.)

These expansions partially fueled the increase in Medicaid costs in
the 1990s, but children still represent less than one-fourth of
Medicaid expenditures.  In 1994, nondisabled children represented a
large percentage of Medicaid recipients--49 percent--compared with
the percentage of Medicaid expenditures for medical care that they
accounted for--16 percent.\9

Nonetheless, Medicaid's overall cost and the rate of cost increases
have raised concerns about the program's impact on the federal
budget.  Medicaid costs are projected to increase from about $156
billion in 1995 to $243 billion by the year 2000, according to the
Congressional Budget Office.  The Congress has recently considered
different options to lower the cost of the program, including
removing guaranteed eligibility for some types of current recipients
and giving capped funding to the states as block grants. 


--------------------
\4 See Barbara Bloom, "Health Insurance and Medical Care:  Health of
Our Nation's Children, United States, 1988," Advance Data From Vital
and Health Statistics of the National Center for Health Statistics,
No.  188, U.S.  Department of Health and Human Services, Public
Health Service, Centers for Disease Control, National Center for
Health Statistics (Hyattsville, Md.:  1990), pp.  1-8; and Alexander
M.  Kogan, and others, "The Effect of Gaps in Health Insurance on
Continuity of a Regular Source of Care Among Preschool-Aged Children
in the United States," Journal of the American Medical Association,
Vol.  274, No.  18 (1995), pp.  1429-35. 

\5 Mary D.  Overpeck, and Jonathan B.  Kotch, "The Effect of U.S. 
Children's Access to Care on Medical Attention for Injuries,"
American Journal of Public Health, Vol.  85, No.  3 (1995), pp. 
402-04. 

\6 Alan C.  Monheit, and Peter J.  Cunningham, "Children Without
Health Insurance," The Future of Children:  U.S.  Health Care for
Children, Center for the Future of Children, The David and Lucile
Packard Foundation, Vol.  2, No.  2 (Los Angeles, 1992), pp.  154-70. 

\7 See David L.  Wood, and others, "Access to Medical Care for
Children and Adolescents in the U.S.," Pediatrics, Vol.  86, No.  5
(1990), pp.  666-73; Charles N.  Oberg, "Medically Uninsured Children
in the United States:  A Challenge to Public Policy," Pediatrics,
Vol.  85, No.  5 (1990), pp.  824-33; and David U.  Himmelstein and
Steffie Woolhandler, "Care Denied:  U.S.  Residents Who Are Unable to
Obtain Needed Medical Services," American Journal of Public Health,
Vol.  85, No.  3 (1995), pp.  341-44. 

\8 Thirty-two states and the District of Columbia had expanded
coverage for pregnant women and infants, and 26 states and the
District of Columbia had expanded coverage for older children as of
December 1988.


\9 This is for children under 21 years old and does not include
disabled children.  If disabled children under 21 are included, all
children on Medicaid under 21 represent 52 percent of recipients and
23 percent of medical expenditures.  (HCFA only collects data on
children under 21 years old.)


   HEALTH INSURANCE COVERAGE FOR
   CHILDREN AT LOWEST REPORTED
   LEVEL SINCE 1987
------------------------------------------------------------ Letter :3

In 1994, the percentage of children with private health insurance
reached the lowest level reported in the last 8 years--65.6 percent
or 46.3 million children.\10 (See fig.  1 and table II.1.) Mirroring
this trend, the percentage of children who were uninsured rose to its
highest reported level since 1987--14.2 percent or 10 million
children.  (See figs.  2 and 3 and table II.1.) Compared with adults
18 to 64 years old, for whom private insurance coverage has slightly
increased in the last 2 years, coverage for children appears to be
decreasing. 

   Figure 2:  The Percentage of
   Children and Adults With
   Private Insurance Declined
   Since 1987

   (See figure in printed
   edition.)

Source:  The Bureau of the Census. 

   Figure 3:  The Percentage of
   Uninsured Has Begun to Rise in
   the Last 2 Years for Children
   But Not Adults

   (See figure in printed
   edition.)

Source:  The Bureau of the Census. 


--------------------
\10 These children might also have had other sources of coverage,
such as Medicaid, in the same year. 


      DECREASED COVERAGE REPORTED
      DESPITE INCREASE IN PARENTS
      WORKING FULL-TIME
---------------------------------------------------------- Letter :3.1

The estimated decrease in children's coverage occurred although
slightly more children were reported to be in families with a parent
who worked full-time in 1994 than in 1993.  Children of a parent who
worked full-time for the entire previous year are more likely to have
private health insurance than other children.  However, in 1994,
almost 25 percent of children with a parent working full-time did not
have privately funded employment-based health insurance.  Almost 12
percent of children with a parent working full-time were uninsured. 

Children whose parents worked at less than a full-time job for the
entire year were worse off for health insurance than children whose
parents did not work at all in 1994.  Only 37 percent had
employment-based insurance (36.8 percent).  More children of parents
who worked less than full-time all year were uninsured (21.7 percent)
than were children of parents who did not work at all in 1994 (14.6
percent).  This is because children of parents who are not working
tend to be enrolled in Medicaid. 


      MORE POOR CHILDREN ESTIMATED
      AS UNINSURED IN 1994
      COMPARED WITH 1993
---------------------------------------------------------- Letter :3.2

A higher percentage of poor children were reported as uninsured in
1994--22.3 percent--than in 1993--20.1 percent.  In contrast,
reported rates of being uninsured did not differ significantly
between 1993 and 1994 for children above poverty.  (See table 1.)



                                Table 1
                
                   Percent of Children Without Health
                  Insurance Coverage, by Poverty Level

                         (Figures are percents)

                                                                Percen
                                                                  tage
                                                                 point
                                                                differ
                                                                  ence
                                                                 1993-
                                          1989    1993    1994      94
--------------------------------------  ------  ------  ------  ------
Poor\a                                    25.0    20.1    22.3   2.2\b
Near-poor\c                               26.5    24.5    24.9     0.4
Above near-poor\d                          7.5     9.1     8.9   (0.2)
----------------------------------------------------------------------
Note:  Figures in each year are percentages of children who were
uninsured for one entire year within each income group.  Only
children who matched to a parent were included in this table. 

\a Poor families have incomes at or below 100 percent of the federal
poverty level. 

\b Statistically significant at the 0.05 level. 

\c Near-poor families have incomes between 101-150 percent of the
federal poverty level. 

\d Above near-poor families have incomes above 150 percent of the
federal poverty level. 


   MEDICAID CONTINUES TO BE A
   SIGNIFICANT SOURCE OF COVERAGE
   FOR CHILDREN, BUT MANY ELIGIBLE
   CHILDREN DO NOT ENROLL
------------------------------------------------------------ Letter :4

In 1994, Medicaid covered 22.9 percent of U.S.  children--16.1
million children.\11 This number was lower than the Bureau of the
Census estimated in 1993.  The difference may be due partially to a
reduction in the number of children on AFDC (who are automatically
eligible for Medicaid) and partially to changes in CPS methodology
that reduced the 1994 estimate, relative to the 1993 estimate.  (See
app.  I.)

   Figure 4:  Estimated Medicaid
   Enrollment for Children
   Expanded Between 1989 and 1993,
   but Was Lower in 1994

   (See figure in printed
   edition.)

Source:  The Bureau of the Census. 

Nevertheless, Medicaid's role as an insurer for children in working
families not depending on welfare has grown.  In 1994, 62 percent of
children on Medicaid had a working parent.  Thirty percent of
children on Medicaid had a parent who worked full-time for the entire
previous year and another 18.8 percent had a parent who worked
full-time but for less than the entire year.  Another 13 percent had
a parent who worked part-time.  Only 38 percent had no working
parent.  In 1994, more than 50 percent of the children on Medicaid
did not receive AFDC or other public assistance. 

   Figure 5:  More Than 60 Percent
   of Medicaid Children Had a
   Working Parent and More Than 50
   Percent Did Not Receive AFDC in
   1994

   (See figure in printed
   edition.)


--------------------
\11 These children are reported as having any Medicaid coverage, even
if they also have employment-based coverage.  Of these children, 3.2
million had private coverage as well as Medicaid coverage at some
point in 1994.  In our previous reports, children who had both
Medicaid and employment-based private coverage were counted as having
employment-based coverage and not counted as having Medicaid
coverage. 


      AT LEAST 30 PERCENT OF
      UNINSURED CHILDREN ELIGIBLE
      FOR MEDICAID BY FEDERAL
      MANDATE
---------------------------------------------------------- Letter :4.1

Many uninsured children who are eligible for Medicaid do not enroll. 
Present law mandates eligibility for children from birth to 5 years
old with income at or below 133 percent of the federal poverty level
and for poor children born after September 30, 1983.  This means that
poor children under 13 years old are now eligible and, year by year,
more poor children will become eligible until all poor children under
19 years old will be eligible in 2002.  States have the option to
expand age and income eligibility beyond this mandate for pregnant
women, infants, or children, and 40 states have done so.  (See table
II.2 for states that have expanded eligibility beyond federal
requirements.)

We estimate that 14.3 million children in 1994 were eligible for
Medicaid by federal mandate because of their age and family
income.\12 Of those children, 11.4 million had private or public
insurance coverage and 2.9 million were uninsured (20.3 percent). 
The 2.9 million uninsured, Medicaid-eligible children accounted for
30 percent of all uninsured children. 

Compared with children on Medicaid, higher percentages of uninsured,
Medicaid-eligible children had a working parent in 1994 (80.4
percent).  Almost three-fourths of these uninsured, Medicaid-eligible
children lived in the South (41 percent) or the West (30.4 percent). 
Over one-half were African-American (21.7 percent) or Hispanic (34.7
percent). 


--------------------
\12 For 1994 these were children from birth to 5 years old with
family income at or below 133 percent of the federal poverty level
and poor children 6 to 11 years old--federal law mandates coverage
for children from birth to 5 years old, and for poor children older
than 5 and born after September 30, 1983.  For 1993, we counted
children as eligible if they were up to 5 years old with family
income at or below 133 percent of the federal poverty level or were
poor children 6 to 10 years old. 


      MORE UNINSURED TEENS WILL
      BECOME ELIGIBLE FOR MEDICAID
      COVERAGE IN THE NEXT 6 YEARS
---------------------------------------------------------- Letter :4.2

Poor teens under 19 years old will be phased into Medicaid
eligibility in the next 6 years if current federal Medicaid
eligibility mandates for children are maintained.  In 1994, an
estimated 4.1 million children 13 to 18 years old were poor.  In
1994, 32 percent of poor teens 13 to 18 years old--1.3 million
teens--were uninsured. 


      PARENTS MAY NOT ENROLL
      ELIGIBLE UNINSURED CHILDREN
      IN MEDICAID FOR VARIOUS
      REASONS
---------------------------------------------------------- Letter :4.3

As we have previously reported, there are several possible reasons
why families may not enroll their children in Medicaid.  First,
low-income families may not know that their children could be
eligible for Medicaid even if a parent works full-time or if the
family has two parents.  A study that interviewed current AFDC
recipients and former recipients who had begun working found that 41
percent of AFDC recipients and 23 percent of former recipients did
not understand that a parent could work full-time and receive AFDC
for his or her children and an even larger percentage did not
understand that children in two-parent families could be eligible for
Medicaid.\13

Families participating in other programs for low-income persons also
have low rates of Medicaid enrollment.  In 1992, only 48 percent of
the women, infants, and children enrolled in the Special Supplemental
Program for Women, Infants, and Children (WIC) were enrolled in
Medicaid, even though over 72 percent were in families with incomes
below 130 percent of the federal poverty level.  In 1993, only 68
percent of children in Head Start, an early childhood education
program for low-income children, were enrolled in Medicaid. 

Second, getting enrolled in Medicaid is difficult for low-income
families.  In a previous report, we found that many Medicaid
applicants never complete the eligibility determination process and
about one-half are denied for procedural reasons; that is, applicants
did not or could not provide the basic documentation needed to verify
their eligibility or did not appear for eligibility interviews.\14
Finally, some families may not seek Medicaid until they face a
medical crisis or may not want to enroll in Medicaid because they
consider it a welfare program and therefore stigmatizing. 

States can obtain federal matching funds to conduct outreach programs
about the Medicaid program.  States determine their own outreach
programs--both the amount and the focus.  According to one Health
Care Financing Administration (HCFA) official, Medicaid outreach to
children's families has focused more on encouraging the use of
preventive care by enrolled children than on informing nonenrolled
families that their children might be eligible.  Some states do try
to inform low-income families that they can get health insurance for
their children through Medicaid--either by using informational
billboards, 800 telephone referral numbers, or other means.  In
addition, HCFA and the Agency for Children and Families have
developed a cooperative agreement to work together and with states
and localities to improve outreach to families of potentially
eligible low-income children, particularly those enrolled in
federally funded child care and Head Start programs. 

Fiscal pressures may have made some states less interested in
expanding the number of children receiving Medicaid than they were
several years ago.  Even though children represent a relatively small
percentage of Medicaid expenditures (about 16 percent of expenditures
are for nondisabled children under 21 years old), growth in the
number of children on Medicaid has contributed to program expenditure
increases.  Medicaid spending increases have become one of the
largest budget problems for states--representing 19.4 percent of
state expenditures in 1994. 


--------------------
\13 Sarah C.  Shuptrine, Vicki C.  Grant, and Genny G.  McKenzie, A
Study of the Relationship of Health Insurance Coverage to Welfare
Dependency (Columbia, S.C.:  Southern Institute on Children and
Families, 1994), pp.  21-25. 

\14 Health Care Reform:  Potential Difficulties in Determining
Eligibility for Low-Income People (GAO/HEHS-94-176, July 11, 1994). 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

Private health insurance is overwhelmingly employment-based in the
United States, but many children do not get this benefit even if
their parents work.  Health insurance is less likely to be offered in
the firms that employ low-income workers.  If health insurance is
available through work but is costly for workers, it is less likely
to be affordable for low-income workers. 

Part of the reason that families with children may have difficulty
affording health insurance is that many children live in low-income
families.  Twenty-four percent of children lived in poor families in
1994, and another 21 percent lived in families with income between
101 and 200 percent of the federal poverty level.  Moreover, families
with employer-sponsored health insurance have faced sharply rising
costs over the last decade to purchase family coverage through their
employer.  These rising costs may prove to be much more of a burden
for lower-income families. 

Private health insurance coverage has continued to decrease for
children.  As private coverage has decreased, Medicaid has become a
more important source of health insurance coverage, especially for
children in working families.  Nevertheless, despite the expansion in
public insurance funding, 10 million children were uninsured in the
United States in 1994.  Even more notable, the largest percentage of
uninsured children were in families with a working parent or parents. 
In addition, at least 30 percent of uninsured children were eligible
for Medicaid, which means that many uninsured children are not
getting the advantage of publicly funded insurance. 

As long as private coverage continues to decrease for children, the
number of children uninsured or on Medicaid will continue to grow. 
This strains public resources--either to pay for Medicaid coverage or
to provide direct care or subsidies to hospitals to care for the
uninsured.  In the past, providers have had various sources of funds
to recoup some of the cost of caring for the uninsured patient.  In
the era of managed care and cost-cutting, it is becoming more
difficult for hospitals and physicians to care for patients without
insurance.  As these trends continue, it will likely become even more
difficult to get care without insurance. 

Medicaid cost increases are pressuring states and the federal
government toward different types of program changes.  Changes to the
Medicaid program that remove guaranteed eligibility or alter the
financing and responsibilities of the federal and state governments
may strongly affect health insurance coverage for children in the
future.  Other types of changes that strengthen the private insurance
market may also have significant effects on children's coverage in
the future. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We did not seek agency comments because this report does not focus on
agency activities.  We did, however, discuss relevant sections of
this report with responsible officials in the Department of Health
and Human Services, HCFA, and the Department of Commerce, Bureau of
the Census.  They offered technical suggestions that we included
where appropriate in the report. 


---------------------------------------------------------- Letter :6.1

As agreed with your office, we plan no further distribution of this
report for 30 days.  At that time, we will make copies available on
request.  Please contact me at (202) 512-7114 or Michael Gutowski at
(202) 512-7128 if you or your staff have any further questions.  This
report was prepared by Michael Gutowski, Sheila Avruch, and Paula
Bonin. 

Sincerely yours,

William J.  Scanlon
Director, Health Systems Issues


CHANGES IN THE CPS AND THEIR
EFFECT ON ESTIMATED INSURANCE
COVERAGE AND OTHER METHODOLOGICAL
CONSIDERATIONS
=========================================================== Appendix I

The Bureau of the Census has made recent efforts to improve the
accuracy and ease of administering the CPS.  These changes should
improve estimates of coverage, particularly for children.  However,
these changes can affect the estimates reported.  As a result,
estimates for 1994 and subsequent years may not be entirely
equivalent to those for previous years.  Several changes completely
or partially implemented this year appear to have affected specific
estimates of health insurance coverage. 


   CPS IMPROVED, BUT ESTIMATES
   BEFORE 1994 MAY NOT BE
   COMPARABLE
--------------------------------------------------------- Appendix I:1

Census reworded and reordered existing questions about health
insurance and added new ones for the March 1995 CPS, which reports
1994 data.  This was done as part of changing to a computer-assisted
telephone interviewing methodology.  Census also changed the sample
frame--or types of families sampled to get a statistically
representative estimate--from one based on the 1980 census to one
based on the 1990 census.  These changes appear to have affected the
1994 estimates of the percentage of people (particularly children)
whose private insurance coverage is employer-based versus privately
purchased and the percentage of children on Medicaid compared with
previous years' estimates. 

Most people in the United States who have private insurance get their
insurance through their employer or union.  The previous CPS
questionnaire asked first whether a person had any private insurance,
then if that person was the policyholder.  Only after that did the
questionnaire ask whether the insurance was obtained through an
employer or union.  The new questionnaire first asks directly whether
a person has private insurance through an employer or union.  The
questionnaire then asks about private, individually purchased
coverage. 


   PRIVATE INSURANCE COMPARABLE,
   BUT TYPE OF PRIVATE INSURANCE
   MAY NOT BE
--------------------------------------------------------- Appendix I:2

Officials at Census believe that the 1994 estimate of overall private
insurance agrees well with previous years' estimates, and the
estimates for individually purchased insurance and employment-based
insurance are superior to previous years' estimates.  However, the
number of people who report that their private insurance came from an
employer or union has increased, while the number who report that
their private insurance was individually purchased has decreased. 
Therefore, because these apparent differences may be due to the
questionnaire change rather than actual changes in the composition of
private insurance coverage, comparisons of employment-based or
private individual coverage in 1994 to previous years may not be
appropriate to understand trends in coverage.  This is why we
compared private coverage rather than employment-based coverage of
children over time in this report. 

In addition, we are using a different definition of children on
Medicaid for this report than our previous report and
correspondences.  For this report, our group of children on Medicaid
are children with any Medicaid coverage, even if they also have
employment-based coverage.  Previously, we had excluded children with
Medicaid coverage who also had employment-based insurance in the same
year from the Medicaid group.  We considered employment-based
insurance their primary source of coverage and included them in that
group.  But defining insurance coverage this way led to a lower
overall number and percentage of children with Medicaid coverage. 
Therefore, for this report, we are including children with both
private and Medicaid coverage reported in both categories.  Figure 1
shows the overlap.\15


--------------------
\15 In our previous report and correspondences, we assigned a single
source of coverage to children if they had multiple insurance sources
reported for a single year.  We based the assignment for insured
children on a hierarchy--if they had any employment-based insurance,
they were assigned to that category; if they had no employment-based
insurance, but had Medicaid or Medicare, they were assigned to the
Medicaid category; if they had neither employment-based insurance,
Medicaid or Medicare, but had CHAMPUS, they were assigned to CHAMPUS;
if they had private, individually purchased insurance, but none of
the above categories, they were assigned to the individual privately
purchased coverage category. 


   MEDICAID ESTIMATES FOR CHILDREN
   MAY BE AFFECTED BY DECREASES IN
   AFDC ENROLLMENT RATES AND
   CHANGE IN SAMPLING FRAME
--------------------------------------------------------- Appendix I:3

In the past, researchers have been concerned that the CPS
underreports Medicaid coverage, because CPS estimates of Medicaid
enrollment have historically been lower than HCFA numbers on Medicaid
program enrollment.  Even if the CPS underreported Medicaid
enrollment, consistent estimates can be useful to follow overall
insurance trends over time.  However, the calendar year 1994 CPS
estimates of Medicaid coverage for children are lower than the
calendar year 1993 estimates.  This is puzzling to some researchers
who have used the CPS in the past because HCFA data on Medicaid
program enrollment showed an increase in coverage between fiscal year
1993 and fiscal year 1994.  The apparent drop may be partially due to
a reported drop in the number of children enrolled in AFDC and it may
also be due to the change in the CPS sampling frame. 

Between 1993 and 1994 the percentage of children who were reported to
be receiving AFDC or other assistance dropped from 10.6 percent to
9.6 percent--about 600,000 fewer children.  Because children on AFDC
are entitled to Medicaid coverage, Census assigns Medicaid coverage
to AFDC children even if their parents do not report them as
receiving Medicaid.  This partially explains why Medicaid coverage
may have appeared to decrease.  Department of Health and Human
Services' data also show a small drop in the average monthly
enrollment of children in AFDC between calendar years 1993 and 1994,
although because of the differences between months included in
calendar years and fiscal years, the drop does not show up in fiscal
year data until fiscal year 1995.  In fiscal year 1995, average
monthly enrollment of children continued to drop. 

Medicaid coverage also may have appeared to decrease because Census
changed the sample frame--or types of families that Census
interviews--from one based on the 1980 census to one based on the
1990 census.  Because the March 1995 CPS was a transitional one for
the sample frame, half the families were chosen based on the 1980
frame and half were chosen based on the 1990 frame.  The percentage
of children on Medicaid was lower in the half chosen from the 1990
frame (22.3 percent) than the half chosen from the 1980 frame (23.4
percent).  While the sample chosen from the 1990 frame should be a
more accurate report of Medicaid coverage, the differences between
the two parts of the sample indicate that reported differences
between 1993 and 1994 Medicaid coverage levels may be due in part to
sampling frame changes rather than actual changes in coverage. 

Other types of health insurance coverage did not appear to be
affected much by sampling frame differences.  Health insurance
coverage estimates for workers with private insurance or with CHAMPUS
were almost the same in the two halves of the sample frame. 

Another issue with the 1993 estimate of children with Medicaid
coverage--which Census informed us has been resolved--concerns
miscoding.  Last year, Census officials discovered some children
appeared to be miscoded as receiving Medicaid.  Census officials
attempted to fix this through editing the CPS data tape, but the
edited 1993 data tape may still contain inadvertently included data
that show some children in the group with Medicaid who should not be
in that group.  According to Census, the coding issue was resolved
for the 1994 estimates. 


   EFFECT ON COMPARING 1994 WITH
   OUR PREVIOUS ESTIMATES
--------------------------------------------------------- Appendix I:4

These changes in reported coverage make some comparisons with our
previous reports and others' reports based on the CPS problematic. 
While the estimate of the uninsured should not be affected to any
great extent by changes in the questionnaire, estimates of
employment-based insurance and private, individually purchased
insurance are not comparable from 1994 to previous years.  However,
estimates of private insurance (the combination of both) appear more
comparable.  Therefore, for this letter we are reporting on
comparisons of private coverage.  Similarly, whether private coverage
came from employment or individual purchase can affect other
estimates when using a hierarchy to assign one source of coverage. 
In addition, we are reporting children on Medicaid if they had any
Medicaid coverage (including those who also had employment-based
coverage) because this definition of Medicaid coverage should not be
as affected by the questionnaire change and is more comparable to
previous years' data and better captures the full extent of U.S. 
children enrolled in Medicaid. 


   METHODOLOGY FOR MATCHING
   CHILDREN AND DETERMINING
   PARENTAL WORK STATUS
--------------------------------------------------------- Appendix I:5

To determine characteristics of children's parents, we followed a
methodology discussed in our previous report (see app.  II of Health
Insurance for Children:  Many Remain Uninsured Despite Medicaid
Expansion (GAO/HEHS-95-175)).  We matched children to a parent (18 to
64 years old) in their household (or a related adult who served as a
parent, such as a grandparent or sister) and then linked that parent
to a spouse, if any.  We matched about 98 percent of children, but
fewer Medicaid and uninsured children matched (about 96 percent) than
did children with employment-based insurance.  We determined parental
work status by searching for a parent with the highest work
status--full-time all year, less than full-time all year, or not
working.  Figures 1 through 4 and table II.1 are based on the total
number of children--that is, unmatched children.  Any discussions of
employment status of parents are based on matched children, as are
figure 5 and table 1. 


INSURANCE STATUS OF CHILDREN,
1987-94, AND MEDICAID ELIGIBILITY,
BY STATE, 1996
========================================================== Appendix II



                               Table II.1
                
                  Health Insurance Status of Children
                Under 18 Years Old (1987-94--All Sources
                         of Insurance Reported)

                                                Privat
                                                     e
                                                insura  Medica  Uninsu
Year                                               nce      id     red
----------------------------------------------  ------  ------  ------
1994\a                                            65.6    22.9    14.2
1993\b                                            67.4    23.9    13.7
1992\c                                            68.7    22.0    12.7
1992                                              69.3    21.6    12.4
1991                                              69.7    20.4    12.7
1990                                              71.1    18.5    13.0
1989                                              73.6    15.7    13.3
1988                                              73.5    15.6    13.1
1987                                              73.6    15.2    12.9
----------------------------------------------------------------------
Source:  The Bureau of the Census. 

Note:  Rows may add to more than 100 percent because children with
both private insurance and Medicaid will be counted in both
categories.  In any year, under 5 percent of children have other
coverage, such as CHAMPUS.  Children with coverage other than private
insurance or Medicaid and who are not uninsured are not counted in
this table. 

\a Data collection method changed to entirely computer-assisted
telephone interviewing and sample frame partially changed. 

\b Data collection method partially changed to computer-assisted
telephone interviewing. 

\c Implementation of 1990 census population weights, which affected
the estimates--see other estimate for 1992. 



                               Table II.2
                
                Medicaid Eligibility Levels for Pregnant
                Women and Children, as of February 1996


                                                                   Age
                                        Pregna  Childr  Childr   under
                                            nt      en    en 6   which
                                         women   under   years  childr
                                           and       6     old  en are
                                        infant   years     and  eligib
State                                      s\b     old   older      le
--------------------------------------  ------  ------  ------  ------
Alabama                                    133     133     133    13\c
Alaska                                     133     133     100    13\c
Arizona                                    140     133     100      14
Arkansas                                   133     133     100    13\c
California                                 200     133     100      19
Colorado                                   133     133     100    13\c
Connecticut                                185     185     185    13\c
Delaware                                   185     133     100      19
Florida                                    185     133     100      20
Georgia                                    185     133     100    13\c
Hawaii                                     300     300     300      19
Idaho                                      133     133     100    13\c
Illinois                                   133     133     100    13\c
Indiana                                    150     133     100    13\c
Iowa                                       185     133     100    13\a
Kansas                                     150     133     100      16
Kentucky                                   185     133     100      19
Louisiana                                  133     133     100    13\c
Maine                                      185     133     125      19
Maryland                                   185     185     185    13\c
Massachusetts                              185     133     100    13\c
Michigan                                   185     150     150    15\d
Minnesota                                275\e     133     100    13\c
Mississippi                                185     133     100    13\c
Missouri                                    85     133     100      19
Montana                                    133     133     100    13\c
Nebraska                                   150     133     100    13\c
Nevada                                     133     133     100    13\c
New Hampshire                              185     185     185      19
New Jersey                                 185     133     100    13\c
New Mexico                                 185     185     185      19
New York                                   185     133     100    13\c
North Carolina                             185     133     100    13\c
North Dakota                               133     133     100      18
Ohio                                       133     133     100    13\c
Oklahoma                                   150     133     100    13\c
Oregon                                     133     133     100      19
Pennsylvania                               185     133     100    13\c
Rhode Island                               250     250     100    13\c
South Carolina                             185     133     100    13\c
South Dakota                               133     133     100      19
Tennessee                                  185     133     100    13\c
Texas                                      185     133     100    13\c
Utah                                       133     133     100      18
Vermont                                    225     225     225      18
Virginia                                   133     133     100      19
Washington                               200\f     200     200      19
West Virginia                              150     133     100      19
Wisconsin                                  185     185     100    13\c
Wyoming                                    133     133     100    13\c
----------------------------------------------------------------------
Source:  National Governors' Association, State Medicaid Coverage of
Pregnant Women and Children:  Winter 1996, MCH Update (Washington,
D.C.:  National Governors' Association, 1996.)

Note:  Percentages and ages in bold type show expansions beyond
federal minimum requirements, either for age, family income, or both. 

\a The federal poverty level is the income level below which a family
is poor, according to the federal poverty income guidelines published
every year by the Department of Health and Human Services.  The
guidelines are for income by family size.  For 1996, a family of
three was poor if its family income was below $12,980. 

\b Infants are children less than 1 year old. 

\c Born after September 30, 1983. 

\d Born after June 30, 1979. 

\e Minnesota defines infants as up to 2 years old. 

\f Pregnant women are eligible if they have family income at or below
185 percent of the federal poverty level.  Infants receive automatic
coverage if their mother was on Medicaid when the child was born.  In
addition, infants are eligible if they are living in families with
income up to 200 percent of the federal poverty level. 





RELATED GAO PRODUCTS
=========================================================== Appendix 0

Medicaid:  Spending Pressures Spur States Toward Program
Restructuring (Testimony, GAO/T-HEHS-96-75, Jan.  18, 1996). 

Health Insurance for Children:  State and Private Programs Create New
Strategies to Insure Children (GAO/HEHS-96-35, Jan.  18, 1996). 

Medicaid and Children's Insurance (GAO/HEHS-96-50R, Oct.  20, 1995). 

Health Insurance for Children:  Many Remain Uninsured Despite
Medicaid Expansion (GAO/HEHS-95-175, July 19, 1995.)

Medicaid:  Spending Pressures Drive States Toward Program Reinvention
(GAO/HEHS-95-122, Apr.  4, 1995). 

Medicaid:  Restructuring Approaches Leave Many Questions
(GAO/HEHS-95-103, Apr.  4, 1995). 

Medicaid:  Experience With State Waivers to Promote Cost Control and
Access Care (GAO/HEHS-95-115, Mar.  23, 1995). 

Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb.  14, 1995). 

Block Grants:  Characteristics, Experience, and Lessons Learned
(GAO/HEHS-95-74, Feb.  9, 1995.)

Health Care Reform:  Potential Difficulties in Determining
Eligibility for Low-Income People (GAO/HEHS-94-176, July 11, 1994). 

Medicaid Prenatal Care:  States Improve Access and Enhance Services,
but Face New Challenges (GAO/HEHS-94-152BR, May 10, 1994). 

Employer-Based Health Insurance:  High Costs, Wide Variation Threaten
System (GAO/HRD-92-125, Sept.  22, 1992). 

Access to Health Insurance:  State Efforts to Assist Small Businesses
(GAO/HRD-92-90, May 14, 1992). 


*** End of document. ***