Week 3 Assignment 1

ANF’s research in health care has focused on two major federal–state programs—Medicaid and the State Children’s Health Insurance Program—and on the experience of low-income families in gaining access to health insurance and health care. As with employment and child care, we studied the experi- ences of parents and children, as well as interactions. Not surprisingly, if parents have access to health insurance, the children are more likely to be insured and the entire family will go to the doctor more often. And for health care as for employment and income, we have examined both public programs and private supports, especially employer-provided health insurance.

Medicaid has long been a cornerstone of the financing system that provides health and long-term care to low-income Americans. In 1997, Congress established the State Children’s Health Insurance Program (SCHIP), which gives states the authority and funding to expand health insurance coverage to low-income children by broadening Medicaid eligibility, developing new programs, or both. In both programs, we looked closely at state policy choices within the federal framework and analyzed whether policies achieved their goals for families. Further, in the health care arena, we extended our monitor- ing of state budget and policy choices through the recession and the tight state budget years of 2003 and 2004, allowing us to compare the earlier years of expansion with the later years of financial constraint. Now we are extending our monitoring into 2005.

How did welfare reform influence health insurance coverage?

Just as food stamp participation declined as a result of the dramatic decline in welfare caseloads imme- diately following welfare reform, coverage among children eligible for Medicaid under the welfare-

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related category dropped. Even though most recipient families remained eligible for Medicaid after leaving welfare, many were confused over continued eligibility, faced barriers created by complex state policies, were inadvertently dropped from the rolls, or for some other reason discontinued coverage.

Our analysis of data from the 1997 NSAF showed that a year after leaving welfare, 41 percent of mothers and children were uninsured, 36 percent were on Medicaid, and only 23 percent had private insurance coverage. Children were more likely than their mothers to have public coverage and less likely to be uninsured—with 50 percent on Medicaid and 25 percent uninsured one year after leaving welfare. Looking at mothers only, the uninsured rate increased the longer they spent off welfare. Six months after leaving welfare, 56 percent of the mothers had Medicaid and 34 percent were uninsured. But after 12 months, only 22 percent still had Medicaid, 28 percent had private coverage, and 49 percent were uninsured.

In response, the federal Centers for Medicare and Medicaid Services identified several underlying prob- lems contributing to the loss of Medicaid coverage and urged states to address them. In turn, many states worked to increase former recipients’ knowledge about their Medicaid eligibility and to simplify program enrollment. New results from the National Survey of America’s Families comparing families that left TANF between 2000 and 2002 and families that left between 1997 and 1999 show that Medicaid use has increased—for children, up from 57 percent to 64 percent. Medicaid and SCHIP receipt among adults who left welfare rose from 40 percent to 48 percent.

How effective have state policies and outreach strategies been for uninsured children and their families under SCHIP and Medicaid?

All states expanded coverage for children following SCHIP’s enactment, and all but 13 states now set eligibility thresholds for children at or above 200 percent of the federal poverty level. Higher federal matching funds, flexible program design, state budget surpluses in the late 1990s, and political support for health coverage for low-income children contributed to states’ expanded benefits. With these eligibility expansions, 84 percent of low-income uninsured children and 77 percent of all uninsured children are eligible for either Medicaid or SCHIP.

SCHIP reduced unmet health needs and out-of-pocket spending and increased visits to the dentist and the eye doctor for children who became eligible through the expanded coverage. Our analysis of low- income children’s use of services suggests that publicly and privately insured children have fairly com- parable access to care, but that Medicaid-covered children are more likely to receive dental and well-child care, other things equal.

Medicaid and SCHIP programs vary substantially by state. For children, spending per Medicaid enrollee is twice as high in Massachusetts and New York as in California and 50 percent higher than in Alabama, Mississippi, and Texas. For several measures of access and usage, children in Massa- chusetts and New York fare better than the national average; children in Alabama, California, Mississippi, and Texas fare worse.

Participation among children eligible for Medicaid and SCHIP also varies across states and across subgroups of children. Participation is lower among children with fewer health care needs or with parents who hold negative views about welfare. We found that participation in Medicaid and SCHIP

26 ASSESSING THE NEW FEDERALISM: Eight Years Later

varies substantially across the 13 states closely studied by ANF, with Medicaid participation rates varying from 59 percent to 93 percent of all eligible children in 1999.

Overall, children’s participation in both Medicaid and SCHIP increased between 1999 and 2002 as states streamlined the application process and invested heavily in publicizing SCHIP. Between 1999 and 2002, participation by eligible children in SCHIP increased from 43 percent to 66 percent, and the share of low-income uninsured children whose parents had heard of their state’s SCHIP program increased from 47 percent to 71 percent. Typically, states used a two-pronged approach—using the mass media to build recognition and community-based efforts to directly help families enroll their chil- dren. States also vastly simplified their enrollment rules and procedures for SCHIP, typically shortening application forms, reducing documentation requirements, introducing 12-month continuous eligibil- ity, reducing verification requirements, and allowing families to submit applications by mail. Many states also simplified enrollment in Medicaid and jointly promoted both programs.

Despite this progress, however, many families remain confused about the relationship between welfare and Medicaid/SCHIP, a finding consistent with other recent data showing that many low-income parents do not know their uninsured children could qualify for public coverage. Among families familiar with these public health insurance programs, 83 percent of low-income uninsured children had parents who said they would enroll their child if told the child was eligible.

Over the years studied by ANF, states took advantage of the flexibility given them to design their SCHIP programs, tailoring eligibility thresholds, program types, outreach efforts, cost sharing, and enrollment processes to their own unique needs. Under budget pressures in more recent years, some states have cut back or eliminated outreach, reduced eligibility or imposed waiting lists, raised cost shar- ing requirements, and frozen or reduced provider reimbursement. Other states whose SCHIP programs seemed more immune to budget pressures continued to simplify their enrollment processes and enhance benefits.

Turning to eligibility and participation rates among adults, we found that Medicaid coverage among adults also varies significantly across states. The proportion of adults with incomes below 100 percent of the federal poverty level eligible for Medicaid varied from 84 percent in Washington to 15 percent in Colorado. In the 13 states studied by ANF, participation rates among those eligible varied from 81 percent in Massachusetts to 36 percent in Mississippi. Analysis of ANF state surveys also showed that states paid health plans at very different rates for similar beneficiaries and services.

What role have state policies played in reducing overall uninsurance?

As explained above, health insurance coverage improved for children following the coverage expansions under SCHIP and efforts by states to streamline enrollment processes and publicize the availability of public coverage. The share of children with insurance coverage grew by 2.6 percentage points between 1999 and 2002. Coverage gains were driven by public coverage increases and were concentrated among children in low-income families targeted by Medicaid and SCHIP.

In contrast, states have not taken the lead in innovations to reduce uninsurance for adults. ANF’s researchers examined overall rates of uninsurance among all adults, in addition to looking at low- income children and parents. While Medicaid provides many mechanisms for states to expand cover-

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age, only 11 states covered all adults to at least 100 percent of the federal poverty level and another 10 states covered primarily parents at that poverty level. The remaining states hovered at the mini- mum required coverage.

In some states, though, expansions of public programs have reduced uninsurance rates for adults. Using data from 1997 to 1999, we showed that Massachusetts’s coverage expansion significantly reduced the rates of uninsured low-income adults. Adding 2002 data, we also found that significant expansions in California, New Jersey, and Wisconsin reduced the rates of uninsured. However, in New Jersey much of the expansion was apparently the result of a shift from private coverage.

Most of the uninsurance problem is chronic, with disproportionate effects on certain subgroups. We found that chronic uninsurance varied with income, health status, race and ethnicity, and state. By comparison, little variation exists in rates of short-term uninsurance. The chronically uninsured are much more likely to be low-income, noncitizens, in fair or poor health, and Hispanic or Native American. So, state variation in uninsurance rates is largely explained by state variation in chronic uninsurance rates.

What is the role of employer-paid coverage?

A major finding of ANF is that the wide variation in employer-sponsored coverage across states mirrors a corresponding variation in uninsurance rates. In other words, the size of a state’s health coverage prob- lems depends on the structure of the state’s employer-based insurance system. For example, rates of employer-sponsored insurance coverage among low-income adults vary across the 13 ANF states from 40 percent in California to 63 percent in Wisconsin. Correspondingly, the 1999 NSAF showed us that uninsurance rates in California are among the highest for low-income workers, with over 35 percent of California’s service workers, one of the lowest-paid occupations, lacking coverage. In Wisconsin, only about 22 percent of service workers lacked coverage in 1999.

Differences in income distribution also figure into differences in the size of states’ health coverage prob- lems. Despite lower eligibility levels, much higher percentages of all children and adults were covered in public programs in Mississippi and Texas than in Minnesota and Massachusetts because of differences in family income. Because Mississippi and Texas have so many low-income families, these states covered a much higher proportion of their total population even with less generous eligibility thresholds for public health coverage.

A key finding is that the rate of employer-sponsored insurance is declining over time. Employer cover- age of low-income adults fell from 41.6 percent in 1999 to 37.0 percent in 2002. Two-thirds of the decline stemmed from employees’ decision not to take the insurance, perhaps because of rising premiums and co-payments. The share of low-income workers with access to employer coverage who enrolled fell from 73 percent to 67 percent over that period; for all workers the decline was from 90 percent to 88 percent. We also found that about half of the workers no longer covered by employer- sponsored insurance are likely to be uninsured. Medicaid or SCHIP would cover most of the other half.

How does health insurance coverage affect access and use of care?

The National Survey of America’s Families showed us that expanding insurance coverage would provide much more substantial gains than expanding the so-called health care safety net—the web of commu-

28 ASSESSING THE NEW FEDERALISM: Eight Years Later

nity health centers, private physicians, and other providers that offer care to the uninsured at little or no cost based on need. The availability of survey respondents’ zip code data allowed researchers to calcu- late the distance to the nearest safety net provider. While proximity proved important, the impact was small compared with the impact of insurance coverage.

The ANF case studies show that communities structure their health care safety nets very differently. Most of these safety nets have been able to provide care in difficult times despite financial pressures. The demand for their services is related to the numbers of uninsured. Assorted market forces and efforts by managed care plans to lower provider payments created financial pressures on these safety nets that differed from place to place. Few safety net providers closed, because they relied on a wide range of strategies to obtain necessary revenues, including creating managed care plans, entering into favorable contracts with public and/or private managed care plans, and seeking additional federal, state, and local revenues.

States’ health care safety nets differ in both capacity to serve the uninsured and in degree of financial pressure faced. Our analysis of the 13 NSAF states shows that the uninsured are worse off in some states than in others. For example, the uninsured in states with stretched safety nets (California, Florida, and Texas) on average are less likely to have a usual source of care than the uninsured in the other 10 states. In general and in each state, the uninsured were considerably worse off than the insured, which underscores our major conclusion that even a strong safety net is not as effective as insurance. Low-income populations do better in states with more secure safety nets, partly because the safety net is under less financial pressure and partly because these families are less likely to be uninsured.

How do access and use of health care vary by race and ethnicity?

Our health care analysis shows that Hispanics are considerably worse off with respect to insurance coverage than non-Hispanic whites, but the black–white differential varies by state. Blacks were worse off than non-Hispanic whites only in three southern states: Alabama, Mississippi, and Texas. No signif- icant differences in access for white and black low-income adults exist in the other states.

Among Hispanics, Spanish-speaking noncitizens had by far the greatest problems with health care access and insurance. Even for English-speaking citizens, Hispanic adults are worse off than non-Hispanic white adults. But those differences are more pronounced for noncitizens, particularly those interviewed in Spanish. Hispanic children in noncitizen families fare worse than other children, while Hispanic children in English-speaking citizen families fare nearly as well as non-Hispanic white children.

Native Americans had less insurance coverage, less access, and lower usage rates than whites. Among the low-income population, those with access to the Indian Health Service fared better than their unin- sured counterparts and insured whites on key measures but received less preventive care. However, over half of low-income uninsured Native Americans do not have access to the Indian Health Service. Important gaps remain for this population.

How have tight state budgets affected states’ policy choices related to health care?

ANF’s health care researchers followed state budget and policy choices beyond the prosperous years of the late 1990s through the tight budget years of 2003 and 2004. The first conclusion was that

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states’ ability to finance health care programs for low-income populations deteriorated dramatically between the late 1990s and the early years of the new century. In the late 1990s, states experienced strong economic growth, gained new revenues from tobacco settlements and Medicaid-maximization strategies, and implemented the new SCHIP program. After 2001, just as state economies slowed, Medicaid enrollment increased because of reduced employment, health care costs rose, and states began to contemplate Medicaid cuts. By 2003, states faced even greater problems. Employer coverage con- tinued to decline, Medicaid managed care was no longer yielding the same savings, hospital costs and prescription drug expenditures continued to jump, and long-term care costs were increasing.

ANF analyses of state fiscal years 2003 and 2004 also found that states were under serious budget pressure and faced difficult choices among spending reductions, tax increases, and other methods. In 2003, they sought to solve funding problems using reserves, trust fund transfers, tobacco funds, and other one-time measures. Medicaid cuts were generally limited to reimbursement rate reductions and the elimination of some optional benefits; enrollment was generally protected. In 2004, while states continued to use one-time measures, they also increased their use of cigarette and alcohol taxes. Some states raised taxes, and some enacted broader spending cuts including deeper cuts in health care.

The budget choices states made in 2004 will have long-term consequences for their fiscal stability. General revenues will be needed to replenish reserves and trust funds when state economies improve. States may also be faced with higher numbers of uninsured because of restrictions on Medicaid and SCHIP enrollment and outreach. Reimbursement rate cuts will probably reduce provider participation, which may trigger rate increases. States may also face the reality that Medicaid spending is projected to increase faster than state revenue growth.

What are the lessons learned about the new federal–state relationship in health care?

The ANF book Federalism and Health Policy, released by the Urban Institute Press in 2003, reviews evidence on the topics summarized above and more. The authors conclude that Medicaid and SCHIP are facing considerable stress and would benefit from a broad restructuring, including higher levels of mandated coverage and greater federal financial contributions. While noting the system’s many strengths (including coverage and access for many low-income children and their parents), the authors identify major reasons to restructure:

■ Fiscal stress on state budgets. The pressures on state budgets, documented above, make it difficult for states to fund rising health care costs. In tight economic times such as the early 2000s, constrained state budgets are on a collision course with increased enrollment as families lose jobs and coverage.

■ Access and equity. Although Medicaid has improved access to health services for large numbers of low- income Americans, beneficiaries in many states face persistent access problems. As this report summa- rizes, coverage varies considerably across states, particularly for adults. States also face formidable barriers to improving equity because the situations they face are so disparate. Jobs in some states are far more likely to come with employer-sponsored coverage than jobs in others, for example.

■ Lack of innovation. An argument for a decentralized system and against restructuring is state inno- vation. However, Federalism and Health Policy reviews the evidence and finds that there has not been a great deal of innovation, particularly in health coverage and access for adults.

30 ASSESSING THE NEW FEDERALISM: Eight Years Later

■ Threats to trust and integrity from Medicaid maximization strategies. The book describes and assesses state practices that aim to bring more federal money to states with little or no state contribution, often called “Medicaid maximization.” These practices, common when states are facing budget shortfalls, are the subject of heated disputes between the federal government and the states. Even when legal, these practices threaten federal–state trust and the integrity of the program. Some forms of maximization include disproportionate share hospital payments, which help defray the costs of caring for the uninsured, and upper payment limits. These programs now represent about $15 billion of federal funds with uncertain state matching payments. The book argues that it would be better to eliminate these controversial practices and to offset the loss by increasing the basic federal contribution.

Forthcoming Urban Institute research will provide additional, updated information on Medicaid restructuring. We will be assessing the new Medicaid waiver proposals that several states have developed and the alternative block grant proposals that are under debate. In other work, we will assess state responses to cutbacks in federal upper payment limits to states.

Selected bibliography

Coughlin, Teresa A., and Stephen Zuckerman. 2002. “States’ Use of Medicaid Maximization Strategies to Tap Federal Revenues: Program Implications and Consequences.” Assessing the New Federalism Discussion Paper 02-09. Washington, DC: The Urban Institute.

Davidoff, Amy, Genevieve Kenney, and Lisa Dubay. Forthcoming. “Effects of the State Children’s Health Insur- ance Program Expansion on Children with Chronic Health Conditions.” Pediatrics.

Davidoff, Amy, Alshadye Yemane, and Emerald Adams. 2005. “Health Coverage for Low-Income Adults: Eligi- bility and Enrollment in Medicaid and State Programs, 2002.” Policy Brief. Washington, DC: Kaiser Commission on Medicaid and the Uninsured.

Davidoff, Amy, Lisa Dubay, Genevieve Kenney, and Alshadye Yemane. 2003. “The Effects of Parents’ Insur- ance Coverage on Access to Care for Low-Income Children.” Inquiry 40(3): 254–68.

Dubay, Lisa, and Genevieve Kenney. 2001. “Health Care Access and Use among Low-Income Children: Who Fares Best?” Health Affairs 20(1): 112–21.

———. 2003. “Expanding Public Health Insurance Coverage to Parents: Effects on Children’s Coverage under Medicaid.” Health Services Research 38(5): 1283–1302.

———. 2004. “Addressing Coverage Gaps for Low-Income Parents.” Health Affairs 23(2): 225–34.

———. 2004. “Gains in Children’s Health Insurance Coverage but Additional Progress Needed.” Pediatrics 114(5): 1338–40.

Dubay, Lisa, Jennifer Haley, and Genevieve Kenney. 2002. “Children’s Eligibility for Medicaid and SCHIP: A View from 2000.” Assessing the New Federalism Policy Brief B-41. Washington, DC: The Urban Institute.

Dubay, Lisa, Ian Hill, and Genevieve Kenney. 2002. “Five Things Everyone Should Know about SCHIP.” Assessing the New Federalism Policy Brief A-55. Washington, DC: The Urban Institute.

Garrett, Bowen, and John Holahan. 2000. “Health Insurance Coverage and Health Status of Former Welfare Recipients.” Health Affairs 19(1): 175–84.

Haley, Jennifer, and Stephen Zuckerman. 2003. Is Lack of Coverage a Short- or Long-Term Condition? Washington, DC: Kaiser Commission on Medicaid and the Uninsured.

Hill, Ian, Holly Stockdale, and Brigette Courtot. 2004. “Squeezing SCHIP: States Use Flexibility to Respond to the Ongoing Budget Crisis.” Assessing the New Federalism Policy Brief A-65. Washington, DC: The Urban Institute.

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Holahan, John, and Brenda Spillman. 2002. “Health Care Access for Uninsured Adults: A Strong Safety Net Is Not the Same as Insurance.” Assessing the New Federalism Policy Brief B-42. Washington, DC: The Urban Institute.

Holahan, John, Alan Weil, and Joshua Wiener, eds. 2003. Federalism and Health Policy. Washington, DC: Urban Institute Press.

Holahan, John, Joshua Weiner, and Amy Westpfahl Lutzky. 2002. “Health Policy for Low-Income People: States’ Responses to New Challenges.” Health Affairs Web Exclusive, May 22, W187–W218.

Holahan, John, Teresa A. Coughlin, Randall R. Bovbjerg, Ian Hill, Barbara A. Ormond, and Stephen Zuckerman. 2004. State Responses to 2004 Budget Crises: A Look at Ten States. Washington, DC: The Urban Institute.

Howell, Embry, Ian Hill, and Heidi Kapustka. 2002. “SCHIP Dodges the First Budget Ax.” Assessing the New Federalism Policy Brief A-56. Washington, DC: The Urban Institute.

Kenney, Genevieve, and Debbie Chang. 2004. “The State Children’s Health Insurance Program: Successes, Short- comings, and Challenges.” Health Affairs 23(5): 51–62.

Kenney, Genevieve, Jennifer Haley, and Alexandra Tebay. 2003. “Familiarity with Medicaid and SCHIP Programs Grows and Interest in Enrolling Children Is High.” Snapshots of America’s Families III, No. 2. Washington, DC: The Urban Institute.

Ku, Leighton, and Brian Bruen. 1999. “The Continuing Decline in Medicaid Coverage.” Assessing the New Federalism Policy Brief A-37. Washington, DC: The Urban Institute.

Ku, Leighton, and Timothy Waidmann. 2003. How Race/Ethnicity, Immigration Status and Language Affect Health Insurance Coverage, Access to Care and Quality of Care among the Low-Income Population. Washington, DC: Kaiser Commission on Medicaid and the Uninsured.

Long, Sharon, and Teresa Coughlin. 2001/2002. “Access and Use by Children on Medicaid: Does State Matter?” Inquiry 38(4): 409–22.

Long, Sharon, and Stephen Zuckerman. 2004. “MassHealth Succeeds in Expanding Coverage for Adults.” Inquiry 41(3): 268–79.

Long, Sharon, Brenda Spillman, and Jennifer King. 2004. “Casting a Narrow Net: Does Proximity to the Safety Net Improve Access and Use?” Working Paper. Washington, DC: The Urban Institute.

Norton, Stephen A., and Debra J. Lipson. 1998. Portraits of the Safety Net: The Market, Policy Environment, and Safety Net Response. Washington, DC: The Urban Institute. Assessing the New Federalism Occasional Paper No. 19.

Ross, Donna Cohen, and Ian Hill. 2003. “Enrolling Eligible Children and Keeping them Enrolled.” The Future of Children 13(1): 81–97.

Waidmann, Timothy, and Shruti Rajan. 2000. “Race and Ethnic Disparities in Health Care Access and Utiliza- tion.” Medical Care Research and Review 57(Supplement 1): 55–84.

Zuckerman, Stephen, Jennifer Haley, Yvette Roubideaux, and Marsha Lillie-Blanton. 2004. “Access, Use and Insurance Coverage Among American Indians/Alaska Natives and Whites: What Role Does the Indian Health Service Play?” American Journal of Public Health 94(1): 53–59.

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