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Myths & Facts |
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Do Medicaid and SCHIP provide a secure foundation for expanded health coverage in California?
What’s Behind It?
Medicaid, called Medi-Cal in California, and the State Children’s Health Insurance Program (SCHIP), called Healthy Families in California, are joint federal-state programs. They are important sources of health care coverage for many children and some adults who would otherwise be uninsured. Both programs rely on joint state and federal funding—federal funds are available to match state dollars spent, at specified ratios—to provide coverage to those who meet specific eligibility rules, including citizenship and income requirements. Medicaid is an entitlement program, meaning it legally requires both the state and federal governments to spend funds to guarantee that the program covers specific health services for eligible individuals. In contrast, SCHIP provides a set of allotments that states use to determine the size and scope of their programs. To leverage federal matching funds, Governor Schwarzenegger and legislative leaders have proposed plans to expand coverage in California that rely partly on covering more Californians through Medi-Cal and Healthy Families. But as the state looks for ways to finance this expanded coverage through these public programs, federal decisions, regulations, and processes limit policymakers in many ways.
The Broader Picture
Federal Medicaid and SCHIP budget, policy, and regulatory changes can have a significant effects on California. -
Because the federal SCHIP allocation is capped, potential Healthy Families enrollment in California is directly linked to federal budget and policy decisions. Congress and President Bush are debating the funding level at which SCHIP should be renewed for the next five years. California alone will need an increase of $6.7 to $8.1 billion over the next five years for its program. -
Federal requirements may also limit California’s ability to maintain and expand coverage via public programs. This past August, the federal government issued eight new requirements for state SCHIP programs that will limit states’ abilities to expand coverage to children whose family incomes exceed 250% of FPL. For example, a new requirement requires states to certify that the number of children (in a specific population) insured with private employer coverage has not decreased more than two percentage points in the past five years. An equally challenging requirement mandates that before expanding eligibility to children in families with higher incomes, states must first ensure that the 95% of lowest-income children (in families earning less than 200% of FPL) are enrolled in these programs. Most experts are skeptical that even aggressive outreach, enrollment, and retention efforts are likely to achieve and sustain such high enrollment levels. California’s probable inability to meet these requirements, and possibly others, would limit its prospects of covering additional children at higher income levels. -
Likewise, federal policy set by the 2005 Deficit Reduction Act (DRA) poses challenges to Medi-Cal expansion. The DRA requires most new applicants for Medi-Cal and current beneficiaries, when re-determining eligibility, to document their citizenship. Low-income Californians—even citizens—without documentation in their possession may find their coverage delayed or denied. The new rule could limit California’s ability to effectively enroll, and therefore cover, more people through Medi-Cal. The process of receiving approval for state-initiated changes under Medicaid programs can be lengthy and unpredictable. Federal law requires a state making a significant change to its Medicaid and SCHIP programs to receive federal approval though a “Section 1115” waiver, a reference to the statutory authority granted to the Department of Health and Human Services under Section 1115 of the Social Security Act. Reform proposals in California, such as expanding coverage to childless adults and to parents earning higher incomes, would require such a waiver. Federal review and approval of these applications can be lengthy and unpredictable. Even if California passes reform that expands public coverage, federal permission to implement the expansion would not be guaranteed. The Bottom Line As an increasing number of states embark on efforts to expand coverage and reform health care, they need to remain aware of the role and influence of the federal government and the challenges that may arise. California and other states that aim to expand health coverage for low to moderate-income individuals have strong fiscal motivation to expand eligibility for Medicaid and SCHIP. But reliance on those programs introduces constraints and uncertainty associated with federal policy, budgeting, and the waiver review processes. Have a question, concern, or idea? Email
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