Hillary-Care for Kids Through the Backdoor
by Erica Olsen
illary Health Care is coming to Nevada by way of a new federal program smilingly called KidCare bringing America one step closer to national health insurance.
KidCare was slyly added to the Balanced Budget Act of 1997 and is being implemented deceptively in Nevada with little legislative scrutiny. Nevadas version of KidCare, called Nevada Check-Up, simply extends state funded medical coverage to the lower middle class. The money carrot is dangling on a stick and it seems impossible for bureaucrats not to go after it, even if it means hastily throwing together a program which may or may not serve the people it is intended to serve. Such is the case with the Nevada Division of Health Care Financing and Policy and its attempt to insure uninsured children.
Roughly 1.3 million children in the U.S. do not have access to the normal range of health care services because their parents lack the financial means to provide adequate insurance, according to a survey conducted by the U.S. Department of Health and Human Services. Eager to take up this "parental slack" is, of course, the federal government. This years budget agreement included a five-year, $24 billion solution to the problem of uninsured children. Although providing those 1.3 million children with insurance would actually only cost $6 billion, the program is costing another $18 billion. Why? Because it is designed to reach another 3.7 million children who already have insurance. The Congressional Budget Office estimates that half of all new enrollees will be from families who drop private coverage in favor of federally subsidized insurance. So Nevadans will be paying the insurance premiums for families who can afford insurance and the state is offering to pay it for them.
Officially called the State Childrens Health Insurance Program (S-CHIP), the program provides states with partial funding to extend health insurance to children in families with incomes below 200 percent of the poverty level, who are not eligible for Medicaid and are not enrolled in a health plan or covered by health insurance. Translation: Another burdensome entitlement. Or as Minority Leader Tom Daschle (D-SD) prefers to call it, "(It is) the single biggest health achievement since we passed Medicaid in 1965." Medicaid has also "succeeded" in becoming the fastest growing expenditure in state budgets. About $284 million of Nevadas budget goes to Medicaid. Nevada needs to come up with $16.4 million more, which is 70 percent of its Medicaid matching rate, in order to receive federal funding for KidCare.
KidCare is in place, supposedly to be funded by the 10 cent tobacco tax increase, and the money will be spent, but it is up to Nevada bureaucrats to find the best way to insure the greatest number of the 69,000 targeted children in this state. Disconcertingly, this new entitlement program and government expansionbound to continue to gobble up more and more of the state budgetwill apparently be in place and operating by May, without full legislative approval, another demonstration of how it has become possible to expand government without asking taxpayers.
The First Step: The Governors "Vision"
It started with Governor Millers State of the State address in 1996. He drew up a comprehensive plan to care for children called "Nevada Check-Up: A Childrens Health Initiative." Nevada Check-Up follows the protocols of the federal KidCare legislation, even though the federal plan was not approved until spring 1997. Clearly, Governor Miller was working hand-in-glove with the Clinton Administration before the blueprints were even off the press.
The Second Step: Create a New Division
A new state program needs an administrative structure in which to operate, naturally. Rather than utilizing existing agencies or divisions, last session the Legislature approved a Miller proposal for creation of the Divi
sion of Health Care Financing and Policy to deal with Nevada Check-Up and Medicare. Previously, Medicare was being administered through the Welfare Division. It was also created before the federal KidCare legislation was passed. If the federal funding for KidCare had fallen through, Nevada would have created a new governmental arm for no reason.
The Third Step: Approve Matching Funds
Also needed to start Nevada Check-Up was approval to transfer funds. Senate Bill 470 in the 1997 session, sponsored by Senator Dina Titus, authorized $7.5 million from the Intergovernmental Transfer Account to fund Nevada Check-Up if KidCare passed. But in order to receive the full federal funding, Nevada will need a total of $16.4 million from the State General Fundanother $9.4 million not yet authorized. With partial funding, the state Division of Health Care Financing and Policy can submit a detailed program application to the U.S. Department of Health and Human Services to receive some of the federal dollars.
Nevada Check-Up and its implementation does not need to be approved by the full Legislature, according to Marla McDade, LCB Research Analyst for the Legislative Committee on Health Care. Currently that Legislative Committee is reviewing the administrations plan but can only make recommendations, not mandate a change in the programs structure. The Interim Finance Committee has some input because it holds the purse strings to approve or reject the final transfer of funds as authorized in SB 470.
Out of the Loop
The reason no direct legislative approval is needed is because the federal government made money available to the statesprovided it is used to insure childrenvia a grant application process. The application, which is a detailed explanation of how Nevada intends to administer the entitlement, is filled out by the appropriate administrative agency, in this case the Division of Health Care Financing and Policy. The 1997 Legislature approved a seemingly unimportant funding allocation bill which allowed the Division to submit the application and meet the matching funds requirement. In order to receive federal dollars this year, the states application must be submitted by April 1, 1998.
The ranks of the uninsured are growing and there are distinct patterns.
However there is a three-year-roll over period, meaning Nevada wont lose the money if the program is not started this year. The money will simply be "rolled over" to next year. Ignoring the three-year grace period, the Division wants to have the program up and running by May. So Nevada Check-Up will be in place for a year before the Legislature has the authority to do more than make recommendations.
"Why be so gung-ho to start a project that we may be stuck with even if legislators dont want it?" asked Senator Maurice Washington. "You cant end an entitlement program."
Division Administrator Chris Thompson says Nevada Check-Up is not an entitlement program because the state can cap enrollment if funding is not available.
"If we went into an entitlement program, we would have to set the eligibility requirements lower to stay within budget," he said.
The Eligibility Requirements
A 1992 study showed that in Nevada 19 percent of all Nevada children are uninsured. To be effective and reach as many children as possible, the Senate Health Care Committee suggested commissioning a new study to get updated numbers. The plan was written to provide comprehensive health care coverage for at least 20,000 children who meet the eligibility requirements. Eligibility includes children under 18 who are not currently covered by insurance, not on Medicaid and members of families with incomes less than $30,000. These eligibility guidelines are set forth by federal legislation. The administration has decided to insure children through pre-approved HMOs that provide a coverage package that meets the federal benchmark.
The administration estimates the program will cost about $1,000 per year per child. Expert witness Elizabeth Gilbertson told the Senate Committee that her organization provides comprehensive insurance, including dental and pharmaceutical coverage which is what Nevada Check-up requires, costing between $700 and $900 per year. A study by the Council for Affordable Health Insurance showed the average cost for three insurance carriers was $62 per month per child or $744 per year. If the administration takes the time to look at all possible options instead of using an HMO just because Medicaid is set up this way, it is possible that more children can be insured.
The KidCare legislation actually allows for some flexibility in how it is implemented. "(This) is a chance for states to prove that they can perform better than (using) a centralized federal program," said Eric Berger, a professional staff member of the U. S House Commerce Committee who helped draft the legislation.
The legislation allows for the following:
Expand the existing state Medicaid program, thereby utilizing an established administrative structure; and
Offer coverage under group or individual health plans with a benefits package that meets the federal requirements (e.g. a standard Blue Cross/Blue Shield policy or the Federal Employees Health Benefits Program).
Both options allow for several approaches, some of which are more cost effective and would cover more children than others. According to some analysts and information gathered by the National Center for Policy Analysis (NCPA), it is more cost effective to move uninsured children into private health insurance than to put them in Medicaid due to the way the matching funds process works under present legislation. Therefore, state officials and legislators should carefully consider their available options before acting and in Nevada this inquiry has been underway for several months.
Both options are divided into four possible programs and each one is evaluated by NCPA in its publication, "The Best and Worst Ideas for Insuring Children."
The Worst Idea: Expanding Medicaid
Beginning in 1986, Congress began a series of Medicaid expansions which will end in 2002, resulting in all children under 18 living below poverty level being covered under Medicaid. The federal government requires these steps to be taken in each state, but has allowed for some flexibility. For example, 29 states choose to expand Medicaid beyond the federal guidelines. As a result, Medicaid now covers a larger part of the population. According to the Employee Benefit Research Institute (EBRI), 73.2 percent of children in 1987 received their health insurance through their parents private insurance, while 15.5 percent were covered under Medicaid. By 1995, only 66.1 percent had private health care and 23.2 percent were covered under Medicaid. Those without insurance increased from 13.1 to 13.8 percent.
Making Medicaid bigger does not make it better. As already noted, Medicaid is one of the fastest growing parts of most state budgets, mostly because the program is riddled with fraud and abuse. Many state legislators nationwide recognize the problems inherent in the Medicaid system and have decided to operate KidCare primarily through Health Maintenance Organizations.
Mediocre Idea: Enrolling Children in an HMO
Many states have submitted waivers to the Department of Health and Human Services to allow Medicaid recipients to enroll in an HMO. Although waivers allow for a range of options, HMOs are the option of choice and was encouraged by the 1997 budget agreement. Currently about 40 percent of Medicaid enrollees nationwide are in HMOs, and observers are predicting an increase to 75 percent by 2000.
This approach, which would be the same system used for KidCare, provides access to more extensive primary and preventive services. Most low-income families have no choices in health care coverage. Each family is simply assigned to an HMO. Ironically, many state legislatures, including Nevadas, are simultaneously passing anti-HMO legislation in an effort to prevent HMOs from harming patients or reducing the quality of care.
Good Idea: Purchasing Private Health Insurance
Several states and private organizations are trying to expand health insurance for children outside the Medicaid program. In most cases private programs provide children with private health insurance at subsidized rates and the subsidy usually comes from the state or local government. KidCare funds could be used to pay such subsidies.
For example, Floridas "Health Kids" program provides subsidized private health coverage through public schools for children from low-income families. The average cost of each child covered is $51 per month, excluding administrative costs, slightly less than traditional health insurance, but because premiums are subsidized on a sliding scale, most families pay much less. The program covers 40,000 children and the total cost in 1997 was $35 million.
Although Florida and several other states are also reaching uninsured children through school based clinics, this option is less desirable. School based clinics do not provide comprehensive health insurance which is what KidCare is designed to provide.
Best Idea: Empowering People to Choose Their Own Coverage
Instead of expanding Medicaid or forcing people into HMOs, families could use the money allotted for them to enroll in the private health plans of their choice. Choices would include HMOs, Preferred Provider Organizations (PPOs), Provider Service Networks (PSNs), traditional fee-for-service policies and Medical Savings Accounts.
Several funding approaches are available, all of which would be subject to the Department of Health and Human Services approval. Direct transfer of funds. The "Medicare+Choice" program permits seniors to opt out of traditional Medicare and choose private health coverage instead. If this option is chosen, Medicare transfers the seniors allotment of funds directly to the insurer. Low-income families could do the same by choosing a plan best suited to their childrens needs and the state would transfer the annual premium to the insurer.
Refundable tax credit. Low-income families could be offered a dollar-for-dollar refundable tax credit for use toward the purchase of their childrens health coverage. The credit would cover most or all of the cost of health insurance; parents would pay the difference, if any. The credit would be refundable, which means that families would receive the full benefit of the credit regardless of how small their income tax obligation happened to be.
Vouchers. Parents could receive vouchers for the amount of each childs health insurance subsidy and apply that voucher toward the purchase of the childs health insurance policy.
The key to a successful expansion of health insurance for poor children is providing low and middle income families with choices. With very limited fundingand $9.4 million shortfallthe Division on Health Care Financing and Policy needs to carefully look at how its going to implement Nevada Check-Up instead of jumping in with both feet and hoping to land on a solid program. Although the federal government created a nightmare entitlement, states were given the flexibility to do the best they can with the funding provided. With that flexibility comes hard work and the responsibility to look at all the options available and to utilize the one that makes the most financial sense.
If history teaches us anything, we should know that entitlements inevitably mushroom into costly, unwieldy programs reaching far beyond their intended scope. Medicaid is supposed to provide health care for the needya small segment of society living below 133 percent of poverty or an income of $21,000 per year for a family of four. Medicaid has grown so much that it will be 10 percent of the federal budget by 2000. In real numbers it grew from $770 million in 1966 to $89.2 billion in 1995.
KidCare now expands coverage to a segment of the population that is not needy. It is foolish to think Nevada Check-Up would not expand proportionally as Medicaid has. Entitlements are not free no matter how much federal money is provided and Nevada taxpayers will end up footing the bill when the federal money is gone. u
Erica Olsen is Managing Editor of Nevada Journal.
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