Are We Responding to Their Needs?

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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About the Series

Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site (http://www.urban.org). This paper is one in a series of occasional papers analyzing information from these and other sources.

Executive Summary

Study Background and Purpose

Although the primary goal of the State Children's Health Insurance Program (SCHIP) is to extend health insurance coverage to the estimated 10 million uninsured low-income children in America, SCHIP also presents an opportunity to insure one of our nation's most vulnerable groups: children with special health care needs (CSHCN). Recent research has revealed that children with disabilities and chronic illnesses may make up 17 percent of low-income uninsured children, or roughly one of every six children eligible under SCHIP (Newacheck et al. 1998).

Understanding the implications of this potentially high prevalence of CSHCN is important given the large variety of SCHIP programs implemented in the last three years—roughly two-thirds of the states have used the flexibility in the law to design and implement new child health insurance programs, either separately or in combination with Medicaid expansions (Health Care Financing Administration 2000).

Therefore, even at this early stage of implementation, it is reasonable to ask how, or how well, SCHIP will respond to the needs of children with chronic illnesses and disabilities. This study begins to answer this question, based on a qualitative analysis of the implementation experiences of an 18-state sample.

Key Findings

The findings from this study suggest that most states did not focus particular attention on CSHCN during SCHIP program development. Rather, policymakers grappled with the broader issues of designing the most promising programs for insuring large numbers of children and determining whether this would be better accomplished through Medicaid expansion or separate programs. As a result, states have typically enrolled CSHCN into the same systems of care used by the general SCHIP population and subjected these children and their families to the same rules and policies as all other children. In a small but significant number of separate programs, however, special initiatives have been designed that attempt to address the special needs of children with disabilities and to provide more "Medicaid-like" coverage; these efforts tend to reduce the potential differences between Medicaid and separate programs.

A more specific aim of this study was to discern how, and to what degree, SCHIP programs have responded to the needs of CSHCN by designing special programs and policies. Key findings are summarized below.

• Outreach, Enrollment, and Identification. In none of the study states' SCHIP marketing campaigns did we see any overt efforts to reach out to CSHCN and their families and target them for enrollment. Rather, states focused on much broader campaigns to raise the general public's awareness of SCHIP and on efforts to simplify eligibility rules and processes. Furthermore, the few states that have implemented systematic processes for identifying CSHCN among all the children that enroll in SCHIP have had limited success with these efforts. A number of states did, however, describe efforts within their Title V/CSHCN programs to inform families with uninsured children, and their doctors, of the availability of coverage.
• Benefits. Not surprisingly, benefit packages under separate programs were found to be more limited than those covered by Medicaid. However, coverage in separate programs is quite broad, and was often described as "much better" than typical private coverage. Although policymakers could not identify cases in which children needed benefits that were not covered, many of the services often needed by CSHCN are precisely those that are either omitted or subject to limits under SCHIP, including case management, nonemergency transportation, rehabilitative therapies, and behavioral health services. Of special interest, two of the states we studied—Connecticut and North Carolina—have designed "wrap-around" benefit packages for CSHCN to supplement the basic coverage available to all children and to extend more open-ended Early and Periodic Screening, Diagnosis, and Treatment Program (EPSDT)-equivalent coverage to CSHCN in separate programs.
• Service Delivery. In almost every state, SCHIP programs are relying on managed care and CSHCN are being served through the same systems of care that serve all children. Typically, no special provisions are made to help ensure that appropriate access is extended to CSHCN in these arrangements. Although this may create reason for concern, key informants interviewed during our site visits, including family advocates, could report few or no cases in which delivery systems seemed to be failing to meet the needs of CSHCN. Furthermore, in California, Florida, and Michigan, specialized "carve-out" or managed care systems for SCHIP-enrolled CSHCN have been tailored to include the providers and supports that CSHCN and their families so often need. Early experiences suggest that these systems offer significant potential to provide more comprehensive and coordinated care for CSHCN than mainstream managed care systems.
• Cost Sharing. SCHIP has granted states considerable new flexibility to impose cost sharing—in the form of premiums and copayments—on eligible families. Given the likelihood that they will consume services at rates greater than the norm, CSHCN and their families are particularly vulnerable to high out-of-pocket costs as a result of copayment policies, and only three of the study states reported policies that exempted CSHCN from cost sharing or that somehow protected them from undue expense. However, Title XXI protects any family from spending more than 5 percent of its income for SCHIP coverage, and early impressions are that cost-sharing amounts under SCHIP are nominal and affordable. Indeed, they were often referred to as "much lower" than those found in private insurance policies.
• Crowd-Out Waiting Periods. During its design phase, concern over SCHIP's potential to substitute for private-sector health insurance coverage was widespread among state legislators. As a result, most states now impose "waiting periods" of various lengths, during which families must be uninsured before being permitted to enroll, to discourage them from dropping existing coverage to sign up for SCHIP. SCHIP officials and family advocates reported that these waiting periods might disproportionately affect families of CSHCN—because they are more likely to be "underinsured" for their child's condition (i.e., covered by limited or expensive policies), because SCHIP may offer a broader and more afford-able alternative to their current coverage, and because they cannot risk dropping their current coverage for even a short period because of their children's needs. Six states, however, exempt families from waiting periods if their current coverage is posing a significant financial burden, and one state explicitly exempts families with CSHCN from any waiting periods.
• Prevalence of CSHCN among SCHIP Enrollees. For a variety of reasons, states have experienced difficulty identifying and enrolling large numbers of CSHCN into SCHIP programs, even those with special provisions designed to better serve the population. Only between 1 and 8 percent of SCHIP enrollees have been identified as having special needs among the five states that could report such data, far below national estimates.

Several possible explanations were offered for this last finding, including the lack of outreach targeted to CSHCN, ineffective identification systems, and the fact that SCHIP programs are still quite new and, perhaps, unknown among this group. It was also suggested, however, that rates of uninsurance among CSHCN may be lower than those presented in the research literature. Furthermore, for those families whose CSHCN are insured, coverage that is expensive or limited in terms of a child's special needs condition may be creating a problem of underinsurance. For these families, waiting-period policies designed to discourage or prevent crowd out may be posing a particular barrier, which raises a critical question, and challenge, for the Title XXI program: Although primarily designed to extend health insurance to uninsured children, can SCHIP also be amended to address the needs of underinsured children?

In the interest of equity, policymakers might consider two changes in current policy that would allow the program to address the needs of the underinsured:

1. Permit SCHIP coverage to "wrap around" existing private health insurance for selected priority populations, such as children with special health care needs. The Medicaid program has always been permitted to wrap around private coverage. Federal policy states that Medicaid is to serve as the "payor of last resort" for dually insured persons, and much effort is made by state Medicaid administrators to coordinate benefits for such persons and ensure the integrity of the Medicaid system. Federal rules could be modified to allow Title XXI to play this same role by covering services above and beyond those covered by current private policies and, perhaps, by helping families to pay cost-sharing expenses. Such wraparound coverage, if not extended to all privately insured children, might be targeted only to those with chronic illnesses and disabilities who are at risk for underinsurance. Such a change would not, in fact, represent an easing of federal and state crowd-out policies; in fact, it would reinforce that SCHIP coverage should not substitute for private coverage, but would permit the program to fill in gaps that might be present in that private coverage.
2. Encourage or require states to broaden their waiting period exceptions policies to allow children with special health care needs to drop private coverage if that coverage is deemed significantly limited or expensive. This policy change would expand what is already occurring in a handful of states, where exceptions to waiting periods acknowledge that some families' private coverage, while creditable, may be very expensive or limited and, therefore, that children with such coverage should be permitted to switch to SCHIP.

This study provides preliminary evidence that SCHIP programs appear to be providing relatively broad and affordable coverage to low-income children, including children with special health care needs. It has also revealed that an encouraging number of states have implemented special provisions—in the areas of benefits coverage, service delivery design, and crowd-out prevention—to make SCHIP more responsive to the needs of CSHCN and their families. As programs mature, it is reasonable for policymakers to consider possible amendments to Title XXI, such as those suggested above, that might improve the program's ability to serve the various subgroups of children who are particularly vulnerable.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.