A letter from the Centers for Medicare and Medicaid Services that outlines new guidelines for states seeking to expand eligibility of their SCHIP programs has ignited a battle between the states and the Bush Administration.

In New York, where expansion of the states Child Health Plus program is crucial to Governor Eliot Spitzers health care goals, the war of words has escalated to threats of legal action, countless public statements, and competing letters calling for action from CMS.

At issue for New York is Spitzers plan, filed with CMS in April, to expand the income eligibility for New Yorks Child Health Plus program from the current maximum of 250 percent of the federal poverty level (FPL), about $43,000 for a family of three, to 400 percent of the FPL, about $68,000 for the same family. The change would extend eligibility to an additional 60,000 uninsured children, with the cost of the monthly premium increasing based on a familys income level.

Other states have similarly used expansion of their SCHIP programs to bring coverage to uninsured children.

On August 17, CMS sent a letter to the states informing them of eligibility guidelines for states that intend to extend SCHIP to children in families with income levels above 250 percent of the FPL. CMS cited concerns that eligibility for children in higher-income families may interfere with the programs intended purpose of targeting low-income children. Additionally, CMS stated that it was concerned that expanding the program may lead people who are eligible for coverage by group health plans to substitute the public SCHIP coverage instead, a procedure CMS called crowding out.

The CMS letter explains, As CMS has developed more experience and information from the operation of SCHIP programs, it has become clear that the potential for crowd-out is greater for higher-income beneficiaries.

To safeguard against crowding out, CMS said that states intending to expand the program above the 250 percent threshold must implement the following five crowd-out strategies:

Imposing a waiting period of a minimum of one year between dropping private coverage and enrollment in SCHIP;

Imposing cost sharing in approximation to the cost of private coverage;

Monitoring health insurance status at the time of application, which must include information regarding coverage provided by a non-custodial parent;

Verifying family insurance status through insurance databases;

Preventing employers from changing dependent coverage policies that would favor a shift to public coverage.

Additionally, CMS said the states must make the following assurances before expanding the program:

Assurance that the state has enrolled at least 95 percent of the children in the state below 200 percent of the FPL who are eligible for either SCHIP or Medicaid (including a description of the steps the state takes to enroll these eligible children);

Assurance that the number of children in the target population insured through private employers has not decreased by more than two percentage points over the prior five year period;

Assurance that the state is current with all reporting requirements in SCHIP and Medicaid and reports on a monthly basis data relating to the crowd-out requirements.

Opposition to N.Y. Plan

Following the CMS letter, U.S. Senators Charles Grassley (R-Iowa) and Pat Roberts (R-Kan.) wrote a letter to U.S. Department of Health and Human Services Secretary Michael Leavitt asking for CMS to deny New Yorks application to expand Child Health Plus because the states proposal is inconsistent with the intent of SCHIP to provide health insurance to children from low-income families.

The senators request would prevent states from offering SCHIP benefits to any family that exceeds the FPL by 200 percent.

Spitzer responded by stating, Pursuant to the law, CMS has already approved New Yorks expansion to 250 percent and has consistently approved the expansion by other states to levels higher than 200 percent. Thus, the senators seem to be advocating for a coverage roll-back that would force states to drop children from health insurance coverage.

Possible Legal Action

About a week later, on August 27, Spitzer appeared with Congressman Charles Rangel (D-N.Y.), Chairman of the House Ways and Means Committee, to announce that he will consider fighting the federal government in court to block its efforts to impede the expansion of Child Health Plus in the state.

CMS administrative rules, Spitzer contended, contradict the provisions of the federal SCHIP law, and have been imposed without notice or the required comment period as required by the federal Administrative Procedures Act.

Flexibility has been the cornerstone of SCHIPs past success, allowing states to design their own programs based on local needs, values, and economics, said Rangel. So if we allow local adjustments in federal subsidies like housing or Medicare, why wouldnt we do so in safeguarding the health of our youngest generation?

Spitzer, Schwarzenegger Reach Out to President

Days after the threat of legal action, Spitzer and California Governor Arnold Schwarzenegger sent a letter to President George W. Bush urging him to call on the Centers for Medicare and Medicaid Services (CMS) to reverse the requirements stated in its letter.

Ensuring that all children in this country have access to quality health care is a foremost national priority and an issue that rises above party lines, said Spitzer. States are showing great leadership on this issue, and New York was proud to achieve a bipartisan agreement this year to provide health care to the states 400,000 uninsured children. Governor Schwarzenegger and I are joining together to call on President Bush to do the right thing and roll back these troubling federal roadblocks. These federal rules represent the wrong prescription for our children and will deny thousands of children access to the health insurance they need and deserve.

Christine Anderson, a spokesperson for Spitzer, said that Spitzer and Schwarzenegger share the presidents goal of ensuring that the program does not become a substitute for employer-sponsored insurance, but they believe the new rules fail to recognize that declining health insurance trends are related to other issues besides public coverage, such as reductions in benefit packages for low-income workers.

In the wake of Spitzers public comments, all 13 of New Yorks Planned Parenthood CEOs signed a letter asking CMS to rescind its August 17 letter concerning SCHIP expansion provisions.

Philosophical Differences Threaten Extension

On the federal level, SCHIP is set to expire on September 30. The White House, Senate, and House of Representatives all favor extending the program, however there is disagreement on what that extension should look like. An August 13 online article in National Underwriter, Life and Health notes that the White House favors a $5 billion increase over five years, or $1 billion per-year over the existing $5 billion per year that the program currently receives. The House and Senate have proposed larger increases, with the Senate proposing a $35 billion increase over five years and the House a $50 billion increase over five years.

Some Republicans have questioned the intent of Democrats who favor the larger increases. An August 1 National Underwriter story quotes Rep. James McCrery (R-La.), the most senior Republican on the House Ways and Means Committee, as saying, This is not just about helping low-income children. [The House bill] seems to be spending government funds to lure middle class, upper middle class, even wealthy, perhaps, families, to opt out of private health coverage and go to government health coverage.

The White House struck a similar tone, with officials stating that the bill clearly favors government-run health care over private health insurance, and spends far too much money. Bush has threatened to veto both the House and Senate bills should either come across his desk.