Children With Disabilities: Medicaid Can Offer Important Benefits and
Services (Testimony, 07/12/2000, GAO/T-HEHS-00-152).

Pursuant to a congressional request, GAO discussed the feasibility of
allowing some families with children with disabilities to purchase
Medicaid coverage, focusing on: (1) what role Medicaid plays in
providing health care coverage for children with disabilities; (2) the
extent to which private insurance offers coverage of needed services for
children with disabilities; and (3) the benefits and services available
to children under the Medicaid program.

GAO noted that: (1) Medicaid generally covers children with disabilities
who receive Supplemental Security Income (SSI) program benefits; (2) in
December of 1999, almost 850,000 children were receiving SSI payments;
(3) these children represent 18 percent of the 4.7 million children with
chronic physical or mental conditions of which children with severe
disabilities are a subset; (4) several options exist for states to
expand coverage for children with disabilities or special health care
needs in Medicaid besides the link to SSI eligibility; (5) in
particular, spend down options can result in children being sporadically
eligible for Medicaid, and states' expansions of eligibility for certain
categories of children with disabilities may not be available to all
children, even if they meet the eligibility and income requirements; (6)
private health insurance is often not available and can be a more
limited option for many children with disabilities; (7) in particular,
families with children with special health care needs whose income rises
above the maximum threshold allowed for SSI and Medicaid often have
limited options for obtaining private health insurance that will cover
the services the children need; (8) many of those leaving SSI and
Medicaid work in lower-wage jobs that often do not have access to group
coverage or may find their share of premium costs unaffordable; (9)
while the Health Insurance Portability and Accountability Act of 1996
guarantees that certain children have access to individually-purchased
health insurance without exclusions for pre-existing conditions, this
coverage is also likely to be unaffordable for many; (10) for those
individuals who do obtain private health insurance coverage, the
benefits provided may be limited so that some services that are
important for children with disabilities are not covered; (11) while
private insurance generally covers acute health care services for
children, Medicaid usually offers a more comprehensive package of
benefits that includes the use of services designed for chronic and long
term care needs; (12) Medicaid managed care programs, which a number of
states have or are implementing for children with special needs, may
have the capability to more comprehensively address their extensive and
complex needs than private health insurance plans that serve few persons
with such needs; and (13) in particular, managed care plans may link
beneficiaries to a regular case manager and a care provider, thereby
improving coordination and continuity of care.

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

 REPORTNUM:  T-HEHS-00-152
     TITLE:  Children With Disabilities: Medicaid Can Offer Important
	     Benefits and Services
      DATE:  07/12/2000
   SUBJECT:  Health care programs
	     Health care services
	     Health insurance
	     Eligibility determinations
	     State-administered programs
	     Children with disabilities
	     Managed health care
IDENTIFIER:  Medicaid Program
	     Supplemental Security Income Program
	     Medicaid Katie Beckett State Plan Option
	     Early and Periodic Screening, Diagnosis, and Treatment
	     Program
	     Medicaid Home and Community Based Waiver Program
	     State Children's Health Insurance Program
	     SSI

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GAO/T-HEHS-00-152

For Release on Delivery Expected at 10: 00 a. m. Wednesday, July 12, 2000

GAO/ T- HEHS- 00- 152

CHILDREN WITH DISABILITIES

Medicaid Can Offer Important Benefits and Services

Statement of William J. Scanlon, Director Health Financing and Public Health
Issues Health and Human Services Division Testimony

Before the Committee on the Budget, U. S. Senate

United States General Accounting Office

GAO

Page 1 GAO/ T- HEHS- 00- 152

Mr. Chairman and Members of the Committee: We are pleased to be here today
as you explore the possibility of allowing some families with children with
disabilities the opportunity to purchase Medicaid coverage. Almost 1 million
children with disabilities receive Medicaid coverage because of their
eligibility for the Supplemental Security Income (SSI) program. Additional
children with disabilities also qualify for Medicaid under other criteria,
such as medically needy programs for persons with high medical expenses or
the Katie Beckett option, which allows coverage of children who would be
Medicaid eligible if they resided in an institution.

Concerns have been raised that some children lose Medicaid coverage when
family incomes increase and they cease to be SSI or Medicaid eligible. Other
children with disabilities reside in families with incomes that exceed SSI
and Medicaid requirements and may have limited access to other sources of
health insurance. For children with special health care needs, access to
health insurance is particularly important to assure access to services.
Children with special health needs are three times as likely to be ill,
almost three times as likely to miss school due to illness, and use over
five times as many annual hospital days as other children. They are also
twice as likely to have unmet health needs as children in the general
population. Without access to proper preventive health care and treatment
services, these children are at risk for greater incidence of complicating
illnesses and hospitalization.

The proposed Family Opportunity Act of 2000 (S. 2274) would create a new
state option to allow parents who have a child with a severe disability or a
potentially severe disability to purchase health care coverage for the child
through the Medicaid program. Today, my remarks will focus on (1) what role
Medicaid plays currently in providing health care coverage for children with
disabilities, (2) the extent to which private insurance offers coverage of
needed services for children with disabilities, and (3) the benefits and
services available to children under the Medicaid program. My comments are
based on our prior work in Medicaid, SSI and private insurance; a list of
related reports follows the text of my comments.

In summary, Medicaid generally covers children with disabilities who receive
SSI benefits. In December 1999, almost 850,000 children were receiving SSI
payments. These children represent 18 percent of the 4.7 million children
with chronic physical or mental conditions of which children with severe
disabilities are a subset. Despite the extent of Medicaid's coverage,
Children With Disabilities: Medicaid Can

Offer Important Benefits and Services

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 2 GAO/ T- HEHS- 00- 152

–In 1999, over 120,000 children who met the requirements for
disability, were initially denied eligibility when they applied or later had
their benefits suspended because their family's income or resources had
exceeded SSI limits.

–SSI eligibility rules can create a bias towards institutional care
for children with disabilities because the income and resources of parents
of a child with disabilities are excluded in determining eligibility once a
child has been in an institution for more than 30 days.

–Limited mental health coverage in parents' private insurance plans
can create an incentive to use a foster care arrangements as a means of
obtaining or maintaining access to Medicaid eligibility and services. In
many cases, children with psychiatric needs- the basis of eligibility for
over 27 percent of children in 1999– have access to private health
insurance but this insurance may have limited mental health coverage. By
becoming wards of states' child welfare systems, they can obtain or continue
their Medicaid eligibility.

Several options exist for states to expand coverage for children with
disabilities or special health care needs in Medicaid besides the link to
SSI eligibility. In particular, “spend down” options can result
in children being sporadically eligible for Medicaid, and states' expansions
of eligibility for certain categories of children with disabilities may not
be available to all children, even if they meet the eligibility and income
requirements.

Private health insurance is often not available and can be a more limited
option for many children with disabilities. In particular, families with
children with special health care needs whose income rises above the maximum
threshold allowed for SSI and Medicaid often have limited options for
obtaining private health insurance that will cover the services the children
need. Many of those leaving SSI and Medicaid work in lowerwage jobs that
often do not have access to group coverage or may find their share of
premium costs unaffordable. While the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) guarantees that certain children have
access to individually- purchased health insurance without exclusions for
pre- existing conditions, this coverage is also likely to be unaffordable
for many. For those individuals who do obtain private health insurance
coverage, the benefits provided may be limited so that some services that
are important for children with disabilities are not covered.

While private insurance generally covers acute health care services for
children, Medicaid usually offers a more comprehensive package of benefits
that includes the use of services designed for chronic and long term care
needs. Medicaid managed care programs, which a number of

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 3 GAO/ T- HEHS- 00- 152

states have or are implementing for children with special needs, may have
the capability to more comprehensively address their extensive and complex
needs than private health insurance plans that serve few persons with such
needs. In particular, managed care plans may link beneficiaries to a regular
case manager and a care provider, thereby improving coordination and
continuity of care.

Although there is no consensus definition, children with special health care
needs often have a serious physical or mental disability (such as cerebral
palsy or mental retardation), a chronic medical condition (such as diabetes
or asthma), a requirement for significant amounts of medical care or
services (such as around- the- clock nursing care), or a combination of
impairments. For example, a child with autism can experience developmental
delays and behavior problems, and a child with cerebral palsy may also have
quadriplegia. Researchers estimate that there are approximately 4. 7 million
children with special health care needs who experience limitations in
activities such as school or play because of chronic physical or mental
conditions.

The Congress established the SSI program, which is administered by the
Social Security Administration (SSA), in 1972 to provide cash payments to
aged individuals and blind and disabled adults and children with limited
income and resources. Children may qualify for SSI if they meet the
applicable SSI disability, income, and financial asset requirements. To be
eligible, a child must be younger than 18 and must have a medically
determinable physical or mental impairment that results in marked and severe
functional limitations. These impairments (1) can be expected to result in
death or (2) have lasted or can be expected to last for a continuous period
of not less than 12 months. A segment of the 4.7 million children with an
activity limitation have disabilities severe enough to meet their standard.

In addition, the child's family must have limited income and assets. 1 A
child's family meets the SSI income requirements if his or her parent's
countable income is below the maximum SSI limits (see table 1). Once a child
is on the SSI rolls, eligibility continues until (1) death, (2) the family's
economic resources no longer meet SSI's eligibility requirements, (3) SSA
determines that the child's medical condition has improved to the point that
he or she is no longer considered disabled, or (4) SSA determines that

1 The definition of childhood disability is found in 42 U. S. C. 1382c( a)(
3)( C)( i). SSA considers the parent's income and assets when deciding
whether a child qualifies for SSI. Background

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 4 GAO/ T- HEHS- 00- 152

the child, upon reaching age 18, is not disabled according to adult
disability criteria.

Table 1: Countable Income and Resources, and Principal Income Exclusions for
SSI

Requirement Countable income or resources (after exclusions)

Principal exclusions to countable income or resources

Income a Below $512 a month for oneparent family (excludes allowances for
parent and other children) Below $769 per month for a two- parent family
(excludes allowances for parent and other children)

$20 per month of most income $65 per month of wages and onehalf of wages
over $65 food stamps home energy/ housing assistance

Resources (property and other assets a person owns)

$2,000 for a one- parent family $3,000 for a two- parent family

the home a person lives in a car, depending on need burial plots and funds
up to $1,500 for funeral expenses life insurance with face value of $1,500
total for family member( s) a Most states offer supplements to SSI and a
person's income can be higher and still

qualify. State SSI supplemental recipients are usually eligible for
Medicaid. Source: SSA A Desktop Guide to SSI Eligibility Requirements
(Baltimore, MD.: Social Security Administration, January 2000) http:// www.
ssa. gov/ pubs (cited July 6, 2000).

The Medicaid program, a federal- state entitlement program that finances
health care for certain low- income individuals, also provides assistance to
children with disabilities. 2 The federal government pays a proportion of a
state's Medicaid expenditures that ranges from 50 to 83 percent depending on
each state's per capita income. In 1998, Medicaid spent about $177 billion
to provide health insurance coverage to over 40 million Americans, over half
of whom were children.

Most states' Medicaid programs offer a wide array of therapies and services
that are important for children with special health care needs. Physical,
occupational, and speech therapies, as well as rehabilitative and case
management services, are all common benefits offered to most

2 In addition to Medicaid and SSI, other federal programs provide services
to children with disabilities, including the Special Education and Early
Intervention under the Individuals With Disabilities Education Act (IDEA);
and the Children With Special Health Care Needs program under title V of the
Social Security Act. For more information on these programs, see Medicaid
Managed Care: Challenges in Implementing Safeguards for Children With
Special Needs( GAO/ HEHS- 00- 37, Mar. 3, 2000) and SSI Children: Multiple
Factors Affect Families' Costs for Disability- Related Services( GAO/ HEHS-
99- 99,

June 28, 1999).

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 5 GAO/ T- HEHS- 00- 152

Medicaid eligible individuals. While limitations may be imposed on the
receipt of such services, Medicaid provides children a special entitlement
to health care through the provision of Early and Periodic Screening,
Diagnostic and Treatment (EPSDT) services. Established in 1967, the central
principles behind EPSDT are those of prevention– to locate lowincome
children, assess their health status at key points, and provide care to
identify, control, or correct physical and mental health problems. Among
other requirements, EPSDT mandates that states cover any service or item
that is medically necessary to correct or ameliorate a child's condition,
regardless of whether the service or item is otherwise covered under a state
Medicaid program. 3

The Family Opportunity Act of 2000, S. 2274 introduced by Senators Grassley,
Jeffords, Kennedy, Harkin, Reed, and Moynihan would allow states to permit
families with children that meet the SSI definition of disability but whose
income exceeds a state's Medicaid eligibility standard to “buy-
in” to Medicaid. Families would pay a state- established premium that
could be up to the full cost for the Medicaid buy- in. Premiums could not
exceed 5 percent of income for those at or below 300 percent of poverty and
7.5 percent of income for those between 300 and 600 percent of poverty. The
bill would also

allow states to include children receiving hospital psychiatric services in
the state's home- and community- based services (HCBS) waiver programs, 4

establish a demonstration program to extend Medicaid to children with a
disability that is not yet severe enough to meet SSI's definition but would
be expected to become so without health care, and

establish family- to- family health information centers to provide technical
assistance and information to families about health care programs and
services available for children with special health needs.

3 The statutory requirements of EPSDT are in 42 U. S. C. Section 1396d( r).
4 Under Section 1915( c) of the Social Security Act, the Secretary of Health
and Human Services may waive certain provisions of the Medicaid statute to
provide home and community based services.

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 6 GAO/ T- HEHS- 00- 152

Most children counted by Medicaid as disabled- approximately 1 million in
1997- qualify for Medicaid coverage because they are receiving SSI benefits.
5 States may link eligibility for Medicaid with SSI in one of three ways.
First, the law allows automatic Medicaid eligibility when a person becomes
entitled to SSI. Thirty- two states and the District of Columbia have
elected this option. Second, in 7 states, SSI recipients are eligible for
Medicaid, but they must file a separate application with the state agency
that administers Medicaid. Third, the remaining 11 states do not use SSI
eligibility, but have chosen their own Medicaid eligibility criteria for
individuals with disabilities. 6

In December 1999, the SSI program covered close to 850,000 children with
disabilities, a number that represents 18 percent of the over 4. 7 million
children estimated to have special health care needs and experience
limitations in activities such as school or play because of chronic physical
or mental conditions. Only some of these 4.7 million children have
limitations or disabilities severe enough to meet SSI's definition of
disability. Thus, SSI may cover more than 18 percent of children with severe
disabilities, 7 but the proportion it actually covers is not currently
known.

Many children with disabilities are ineligible- or lose SSI eligibility-
because of family income. In 1999, 14,900 children with disabilities applied
for SSI and were deemed disabled; however, they did not receive benefits
because their families' income or resources were too great. Of these 14,900
children, 72 percent were denied because their families had excess income,
while 28 percent had excess resources. During the same year, 113,400
children who had been receiving SSI were suspended from the program because
their families' income or other resources grew to exceed

5 Many eligibility categories for Medicaid do not identify whether
individuals have disabilities; thus other children with disabilities
receiving Medicaid may not be included in this count of 1 million. 6 Under
Section 1902( f) of the Social Security Act, states are allowed to use their
1972 assistance eligibility rules in determining Medicaid eligibility for
individuals with disabilities, rather than SSI eligibility. The 11 states
that have chosen this option are known as “section 209( b)”
states, after the Section of the Social Security Amendments of 1972 that
established it. SSI recipients not eligible for Medicaid in Section 209( b)
states must be allowed to “spend down” and become eligible after
their income is lowered to the Medicaid eligibility level.

7 Nearly 70 percent of children receiving SSI lived in households where the
average monthly income was less than $1,000. The most common type of
unearned income was public income- maintenance payments, which includes
Temporary Assistance for Needy Families (TANF), Department of Veterans
Affairs payments based on need, and other governmental programs. No income
information is available for the 114, 970 children with no parents. Appendix
I has selected characteristics of children receiving SSI. Children With

Disabilities Most Frequently Qualify for Medicaid Because of Eligibility for
SSI

Retaining Medicaid Eligibility Through SSI Can Be Problematic

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 7 GAO/ T- HEHS- 00- 152

program limits. 8 Most of those children, 94 percent, had family incomes
that were too high, while 6 percent were in families with excess resources.
Some of these children may still qualify for Medicaid because of federal or
state eligibility expansions discussed below.

SSI eligibility rules can create a bias towards institutional care for
children with disabilities as a means of obtaining Medicaid coverage. SSI
eligibility rules do not count the income and resources of parents of a
child with disabilities once the child has been in an institution for 30
days. Parents who are not poor, but who cannot afford to meet the financial
and medical needs of a child with disabilities, may place the child in an
institution to be eligible for Medicaid coverage. Approximately 8,200
children with disabilities receiving SSI (less than 1 percent) resided in
institutions during the period October 1997 to September 1998.

Limited mental health coverage in parents' insurance plans can result in
some children being placed in foster care arrangements as a means of
obtaining or maintaining access to Medicaid eligibility and services. 9
Among the children that qualified for SSI, over 27 percent were identified
as having psychiatric disorders. A recent study reported that in 27 states,
custody relinquishment has occurred as a means of ensuring that children
receive Medicaid mental health services. 10 In many cases, these children
have access to health insurance, but have limited mental health coverage in
private insurance plans; however, by becoming wards of states' child welfare
systems, they can obtain or continue their Medicaid eligibility.

8 SSI cash benefits stop upon suspension; however, a child can reapply at
any time if family income or resources again decrease below the SSI
requirements. For data on SSI suspensions, see SSI Annual Statistical Report
1999( Baltimore, MD: Office of Research, Evaluation, & Statistics, June
2000), pp. 5758.

9 Children in federally funded foster care or children with special needs in
federally funded adoption assistance programs are eligible for Medicaid.
Additionally, children in state funded foster care or adoption assistance
programs can, at the state's option, also be eligible for Medicaid benefits.

10 See Relinquishing Custody: The Tragic Result of Failure to Meet
Children's Mental Health Needs Bazelon Center for Mental Health Law,
Washington, DC: March 2000.

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 8 GAO/ T- HEHS- 00- 152

While Medicaid eligibility expansions have increased the potential for
children living in poverty or near poverty to receive Medicaid benefits,
problems remain, particularly for children in families with incomes slightly
higher than those allowed by Medicaid. In addition to federal mandates
expanding Medicaid eligibility for children, 11 many states have implemented
optional medically needy and home and community based services programs that
also expand eligibility and are important to children with special health
care needs. While significant, these expansions can result in episodic
Medicaid coverage or have limited availability for children with special
health care needs.

Under the medically needy option, states can extend Medicaid coverage to
children who are disabled but would not qualify because their family's
countable incomes are too high. However, when medical expenses are deducted
from their incomes, the remainder falls below state established thresholds
for being medically needy. 12 As of 1998, 35 states and the District of
Columbia had elected to offer coverage to medically needy individuals. While
providing care during times of financial stress, families with incomes just
over the Medicaid income requirements can bounce in and out of Medicaid
eligibility, depending on the medical needs of the child. Episodic
conditions- such as acute asthma- can be especially problematic as expenses
can vary greatly, thus affecting a child's eligibility for Medicaid.

Under Section 1915( c) of the Social Security Act, the Secretary of Health
and Human Services may waive certain provisions of the Medicaid statute to
provide home and community based services. Children receiving Medicaid
coverage under an HCBS waiver must, absent home and community based
services, require the level of care furnished in a hospital, a nursing
facility, or an intermediate care facility for individuals with mental
retardation. Income and resource eligibility criteria can, at the states'
option, be higher for HCBS services. As of June 2000, at least 31 states
operate 49 HCBS waiver programs that provide services to children with
disabilities, most commonly serving children with developmental

11 Federal law mandates that all children born after September 30, 1983, in
families up to 100 percent of the federal poverty level are eligible for
Medicaid. Additionally, infants and children up to age six are eligible if
residing in families up to 133 percent of the federal poverty level.

12 Under this option, a state establishes an income and resource standard
and deducts the medical expenses an individual has incurred over a budget
period (not more than 6 months) from the individual's countable income. If
the recalculated income is less than the state's medically needy income
standard- and if countable resources are within the state's medically needy
resource standard- then the child is eligible for Medicaid for the remainder
of the budget period. At the end of the budget period, the individual's
medically needy status must be redetermined for a new budget period. Other
Avenues to Medicaid

Eligibility for Children With Special Health Care Needs Can Also Be
Problematic

Medically Needy Eligibility Can Result in Episodic Coverage

Home and Community Based Services (HCBS) Waivers Have Limits on Eligibility
and Services

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 9 GAO/ T- HEHS- 00- 152

disabilities. While HCBS waivers allow states more flexibility in program
design, they can also limit states' expenditures by targeting services to
specific populations, geographic areas, or both. In addition, they may have
a cap on the number that can be served. As a result, not all children may be
able to access waiver services.

The Katie Beckett option allows states to offer Medicaid eligibility for
children who live at home and (1) meet the SSI standard for disability and
(2) need a level of care provided by an institution. As of 1996, 20 states
and the District of Columbia used this eligibility category. For the
remaining states that have not employed this option, parents with incomes
higher than the Medicaid threshold that have children with disabilities
could face the choice of placing their child in an institution as a means of
obtaining Medicaid coverage.

Private health insurance is often not available and can be a more limited
option for many children with disabilities. Families with children with
special health care needs whose incomes rise above the maximum allowed for
Medicaid have limited options for obtaining other health coverage that will
cover necessary services. Many families with children with disabilities who
are eligible (or near eligible) for Medicaid work in lower- wage jobs that
may not provide access to group health insurance or may require premiums and
cost- sharing that families find unaffordable. Federal and state laws
guarantee that certain individuals losing group coverage, including children
with special health care needs who lose Medicaid, can access individually-
purchased private health insurance, but this insurance may be prohibitively
expensive for many families. Moreover, even those who can obtain private
health insurance may find that the coverage for some services relied on by
children with disabilities are more limited than under Medicaid.

Data on the health insurance status of children with disabilities indicates
that group health insurance has been unavailable or unaffordable to many
low- income families. In 1994 and 1995, children with a disability in
families with incomes below the federal poverty level relied predominantly
on Medicaid and other public programs for coverage, whereas only half of
children with disabilities in families with incomes between 100 and 200
percent of the federal poverty level had private health insurance. Almost a
fifth of these children were uninsured. (See table 2.) The State Children's
Health Insurance Program (SCHIP) enacted as part of the Balanced Budget Act
of 1997 may be providing some of these uninsured children Most States Do Not
Use the

Katie Beckett Option to Expand Eligibility for Children With Disabilities

Private Health Insurance is Often Not Available and Can Be a More Limited
Alternative for Many Children With Disabilities

Group Health Coverage Is Unavailable to Many LowIncome Families

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 10 GAO/ T- HEHS- 00- 152

with coverage. Data on how much of a difference SCHIP has made for children
with disabilities are not available.

Table 2: Health Insurance Status of Children With Disabilities, 1994- 1995 a
Population (thousands) Private

coverage only (percent)

Public coverage

only b (percent)

Private and public coverage (percent)

Uninsured (percent)

Less than 100% of federal poverty level

2,984 10.2 68.5 4. 5 16.7 100% to 199% of federal poverty level

2,946 49.7 28.3 3. 9 18.1 200% or more of federal poverty level

5,329 87.6 5. 8 2.6 4. 1 Total 12,455 c 56.2 29.1 3. 5 11.2 a Data on health
insurance status did not stratify children by severity of disability.

b Includes Medicaid, Medicare, military, Civilian Health and Medical Program
of the Uniformed Services, and other public assistance programs. c Columns
do not add to total because the total includes children in families with
unknown income.

Source: Based on an analysis of the 1994- 1995 National Health Interview
Survey on Disability. See Paul W. Newacheck et al, “Access to Health
Care for Children with Special Health Care Needs,” Pediatrics, Vol.
105, No. 4 (April 2000), pp. 760 to 766.

Many families with children with disabilities whose incomes are– or
rise to– a level above states' Medicaid income eligibility thresholds
have lowwage jobs that often do not offer health insurance benefits. Only 55
percent of low- wage employees paid $7 per hour or less have access to
employer- sponsored health coverage compared to 96 percent of employees paid
$15 per hour or more. Further, even those low- wage employees who are
offered health insurance may not elect to accept the coverage. Nearly one-
fourth (24 percent) of low- wage workers who were offered health insurance
by their employer declined coverage, primarily due to the cost of having to
pay a share of the premiums. 13

13 Philip F. Cooper and Barbara Steinberg Schone, “More Offers, Fewer
Takers for Employment- Based Health Insurance: 1987 and 1996,” Health
Affairs, Vol. 16, No. 6 (1997), pp. 142 to 149.

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 11 GAO/ T- HEHS- 00- 152

For those families of children with disabilities who lose Medicaid coverage
but are not eligible for group health coverage offered by an employer, the
individual insurance market may offer a very expensive alternative. HIPAA
guarantees that individuals losing Medicaid after at least 18 months of
continuous coverage must be offered individually purchased health insurance
without exclusions for preexisting conditions. 14 However, HIPAA does not
address the affordability of coverage, and carriers in the individual
insurance market typically deny coverage or charge higher premiums for
individuals with medical conditions, known as medical underwriting. As a
result, the premiums may be prohibitively expensive.

For example, in a prior review of children's health insurance products, we
found that some carriers deny coverage for children with conditions such as
autism, cerebral palsy, Downs syndrome, emotional disorders, and epilepsy.
15 If required by HIPAA to offer coverage to children with these conditions
and prior Medicaid coverage, the carrier would likely charge the highest
premium allowed by state regulations. For example, in 14 states using the
federal rather than state rules guaranteeing access, we found that HIPAA-
eligible individuals with severe diabetes as a preexisting condition are
typically charged at least 300 percent of standard premiums charged healthy
individuals, and as much as 464 percent more. 16 Children with chronic
disabilities may have even greater health care needs and could therefore
face premiums that are at least as high as those charged to adults with
diabetes.

More than half of the states have high- risk pools that provide private
health insurance coverage to individuals who are denied individual health
insurance coverage and (in 22 states) HIPAA- eligible individuals. However,
nationwide these pools served fewer than 100,000 people in 1997 and some
have waiting lists for non- HIPAA eligible participants that exceed their
limits on enrollment. A family of a child with disabilities participating in
a high- risk pool would pay for this coverage, but states typically cap the
cost at 150 percent or less of the standard insurance rate for a healthy
individual.

14 To be eligible for guaranteed individual insurance coverage through
HIPAA, the individual must have 18 months of continuous prior coverage
through Medicaid or other group health plans, a gap in coverage not
exceeding 63 days, and not be eligible for other group health coverage.

15 Health Insurance for Children: Private Individual Coverage Available, but
Choices Can Be Limited and Costs Vary( GAO/ HEHS- 98- 201, Aug. 5, 1998). 16
Private Health Insurance: Progress and Challenges in Implementing 1996
Federal Standards (GAO/ HEHS- 99- 100, May 12, 1999). Individually-
Purchased

Insurance Can Be an Expensive Alternative

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 12 GAO/ T- HEHS- 00- 152

For those individuals who do obtain private health insurance coverage–
whether through a group plan, individually purchased plan, or a high- risk
pool– the benefits provided might be limited in some areas that are
important for children with disabilities. While private health insurance
plans typically cover some services important to children with disabilities,
such as physical, occupational, and speech therapy; mental health; and home
health care, these benefits are typically limited and require the patient to
share the costs of services through a deductible, copayment, or coinsurance.
For example, typical mental health coverage in an employersponsored group
health plan limits mental health services to 30 hospital days and 20-
outpatient office visit per year and requires the patient to pay 50 percent
coinsurance. Further, the benefits for these services are typically intended
for short- term rather than chronic care. For example, private health plans
may only cover care for a short- term period, such as 30 rehabilitative
visits within a 60- day period, and require that significant improvement in
the condition be expected. Similarly, health plans typically make coverage
conditional on a determination of medical necessity, and this may depend on
an expectation of improved medical condition. In contrast, many children
with disabilities may require health services to maintain a given level of
ability rather than expecting improvement.

While private insurance generally covers acute health care services for
children, Medicaid can offer a more comprehensive package of benefits that
includes the use of services designed for chronic and long term care needs.
For example, most states offer case management services, which are designed
to assist beneficiaries in getting medical, social, educational, and other
services. Medicaid also offers personal care services, which provides
assistance with basic daily activities such as bathing and dressing, and
intermediate care facilities for individuals with mental retardation/
developmental disabilities. HCBS waivers further expand Medicaid's benefit
package to include services such as respite care, which provides relief to
the primary caregiver of a chronically ill or disabled beneficiary.

In contrast to the limits private health plans typically place on many
services valued by children with special health care needs, Medicaid
provides comprehensive services with no or nominal cost sharing by
participants. Moreover, to the extent that states have limitations on
benefits and services under their Medicaid programs, EPSDT provides an
avenue for ensuring that children receive any medically necessary Private
Coverage for

Services Important to Children With Disabilities Is Frequently Limited

Medicaid Can Offer a Comprehensive Benefits Package for Children With
Disabilities

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 13 GAO/ T- HEHS- 00- 152

service. 17 While evidence exists that certain elements of EPSDT are poorly
implemented, 18 the legislation establishing EPSDT does provide an avenue
for providing coverage to children with disabilities for necessary health
screens and services. Moreover, the standard of care for EPSDT includes
relief of pain and maintenance of a level of health- a contrast to private
insurance policies, which can be structured to deny care if improvement in
conditions do not occur.

Medicaid may also have the capability to more comprehensively address the
care needs of these children than private health plans. Individual private
plans may include very few children with severe disabilities and thus
developing special programs and arrangements for them may not be
economically justified. Medicaid programs, as the major insurer of these
children, may find it advantageous to design specially tailored programs
that both better serve the children and are more efficient. In particular,
since the mid- 1990s, states have been increasing enrollment of children
with disabilities in capitated Medicaid managed care programs. While some
concerns exist about the appropriateness of capitated managed care for these
children, well designed and well implemented managed care programs may have
the potential of better serving these children. Employing sufficient
safeguards to assure adequate and appropriate services can ameliorate these
concerns. 19 Managed care can potentially provide benefits for children with
disabilities, including linking beneficiaries to a case manager and a
regular care provider and thus improving coordination and continuity of
care.

For families with a child with severe disabilities, particularly those with
incomes and resources that are just above Medicaid thresholds, the ability
to purchase Medicaid coverage could be an important means of obtaining
health care for their children. Precisely because it is the single largest
source of health care financing- public or private- for low- income
individuals with disabilities, Medicaid offers a unique set of benefits and
capabilities. While problems in Medicaid certainly exist – for
example,

17 Social Security Act sect. 1905( r), 42 U. S. C. sect.1396d( r). 18 See Lead
Poisoning: Federal Health Care Programs Are Not Effectively Reaching At-
Risk Children, (GAO/ HEHS- 99- 18, Jan. 15, 1999) and Medicaid: Elevated
Blood Lead Levels in Children( GAO/ HEHS98- 78, Feb. 20, 1998).

19 The Health Care Financing Administration (HCFA) has published interim
safeguard requirements for states mandating enrollment of children with
special needs into capitated managed care. HCFA plans to revise these
requirements after conducting studies regarding appropriate safeguards for
children with special needs in managed care. See Medicaid Managed Care:
Challenges in Implementing Safeguards for Children With Special Needs, (GAO/
HEHS- 00- 37, Mar. 3, 2000). Concluding

Observations

Children With Disabilities: Medicaid Can Offer Important Benefits and
Services

Page 14 GAO/ T- HEHS- 00- 152

complex eligibility rules and variation across states – it
nevertheless can provide the basis for comprehensive coverage and case
management for children with disabilities.

Mr. Chairman, this concludes my prepared statement. We would be happy to
answer any questions that you or Members of the Committee may have.

For more information regarding this testimony, please contact William J.
Scanlon at (202) 512- 7114 or Carolyn Yocom at (202) 512- 4931. John Dicken
and Karen Doran also made key contributions to this statement. GAO Contacts
and

Staff Acknowledgments

Page 15 GAO/ T- HEHS- 00- 152

Table 3: Selected Demographic Characteristics of the 843, 470 Children
Receiving SSI, December 1999

Characteristic Number of children Percentage Monthly household income not
including SSI a

None 223,720 30.7 Under $200 119,040 16.3 $200- 399 33,790 4. 6 $400- 599
41,480 5. 7 $600- 999 83,310 11.4 $1000 or more 227,160 31.2

Age

0- 5 166,750 19.8 6- 9 206,780 24.5 10- 13 241,400 28.6 14- 17 228,540 27.1

Sex

Female 306,890 36.4 Male 536,580 63.6 a Includes monthly income of
households headed by single adults and couples. No parental

income information exists for the 114, 970 children with no parents. Source:
SSA, Children Receiving SSI (Baltimore, MD.: Office of Research, Evaluation,
and Statistics, Dec. 1999), http:// www. ssa. gov/ statistics/ children_
receiving_ ssi/ 121999/ chreport. pdf (cited July 6, 2000). SSA projected
these numbers from a 10 percent sample of children receiving SSI benefits
drawn from its supplemental security record file, Dec. 1999.

Appendix I Selected Demographic and Diagnostic Characteristics of Children
Receiving SSI, December 1999

Appendix I Selected Demographic and Diagnostic Characteristics of Children
Receiving SSI, December 1999

Page 16 GAO/ T- HEHS- 00- 152

Table 4: Selected Conditions of Children Receiving SSI, December 1999
Diagnostic Group a Number of children Percentage Mental impairments

Mental retardation 291,770 36.9 Other psychiatric 213,060 27.0 Schizophrenia
4, 150 0.5

Physical impairments

Diseases of the nervous system and sense organs 96,750 12.3 Congenital
anomalies 41,900 5. 3 Diseases of the respiratory system 25,060 3. 2
Neoplasms 9,520 1.2 Diseases of the musculoskeletal system and connective
tissues 7,680 1.0 Endocrine, nutritional, and metabolic 6, 360 0.8 Injury
and poisoning 4,360 0.6 Diseases of the circulatory system 4,070 0.5
Infectious and parasitic diseases 3,010 0.4 Diseases of the digestive system
2,990 0.4 Diseases of the genito- urinary system 2, 320 0.3 Other b 76,790
9. 7 Total 789,790 100.0

a Numbers are based on the children for whom a diagnostic code is available
in SSA's Supplemental Security Record file. b Includes conditions for which
a diagnosis has been established but is not included in SSA's medical
listing of impairments.

Source: SSA, Children Receiving SSI (Baltimore, MD.: Office of Research,
Evaluation, and Statistics, Dec. 1999), http:// www. ssa. gov/ statistics/
children_ receiving_ ssi/ 121999/ chreport. pdf (cited July 6, 2000). SSA
projected these numbers from a 10 percent sample of children receiving SSI
benefits drawn from its supplemental security record file, Dec. 1999.

Page 17 GAO/ T- HEHS- 00- 152

Medicaid and SCHIP: Comparisons of Outreach, Enrollment Practices, and
Benefits (GAO/ HEHS- 00- 86, Apr. 14, 2000).

Medicaid Managed Care: Challenges in Implementing Safeguards for Children
With Special Needs (GAO/ HEHS- 00- 37, Mar. 3, 2000).

Medicaid and Special Education: Coordination of Services for Children With
Disabilities Is Evolving (GAO/ HEHS- 00- 20, Dec. 10, 1999).

SSI Children: Multiple Factors Affect Families' Costs for Disability-
Related Services (GAO/ HEHS- 99- 99, June 28, 1999).

Private Health Insurance: Progress and Challenges in Implementing 1996
Federal Standards (GAO/ HEHS- 99- 100, May 12, 1999).

Lead Poisoning: Federal Health Care Programs Are Not Effectively Reaching
At- Risk Children, (GAO/ HEHS- 99- 18, Jan. 15, 1999).

Health Insurance for Children: Private Individual Coverage Available, but
Choices Can be Limited and Costs Vary (GAO/ HEHS- 98- 201, Aug. 5, 1998).

Medicaid: Elevated Blood Lead Levels in Children (GAO/ HEHS- 98- 78, Feb.
20, 1998). Related GAO Products

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