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Assessing the New Federalism Occasional Paper No. 66

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.

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

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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. This paper is one in a series of occasional papers analyzing information from these and other sources.

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Contents

Foreword

Executive Summary

Introduction and Background

Study Methods
Collecting Information on Application Processes
Collecting and Analyzing Application Outcomes Data

SCHIP Enrollment Processes
Administrative Responsibility for Determining Eligibility
SCHIP Application Processes and Efforts to Simplify

SCHIP Application Outcomes
Rates of Approval, Denial, and Referral to Medicaid at Initial Application
Reasons for Denial at Application

Conclusions and Implications for Future Policy

Notes

References

Appendix A: Limitations of State Data and Data Systems

About the Authors

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Foreword

This is one of a series of reports exploring policy issues that have emerged during states' early implementation of the State Children's Health Insurance Program, or SCHIP. These reports seek to identify important challenges states have faced, explore the availability of data to analyze these issues, provide initial analysis of the effects of alternative policies and implementation strategies, and raise questions for further study. Because of the limited scope of these analyses, it is important to exercise restraint in drawing conclusions from study results; these reports are intended to provide preliminary analyses of complex issues, and early insights into their nature and possible resolution.

The authors would like to extend sincere thanks to the many people who assisted with the completion of this project. Caroline Taplin, our project officer at the Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, provided strong leadership, guidance, and support through the paper's development. The federal interagency workgroup, put in place to guide the work of the task order contract, also played an integral role in setting the objectives for the study and providing feedback on all data collection instruments and drafts. Specifically, we want to extend our gratitude to Tanya Alteras, Steven Finan, Julia Paradise, Barbara Richards, Adelle Simmons, and Jennifer Tolbert at ASPE, Wendy Wolf, formerly of the Health Resources and Services Administration (HRSA), Karen Raykovich at HRSA, Cindy Shirk, formerly at the Centers for Medicare and Medicaid Services (CMS), and Christina Moylan, Angela Corbin, and Johanna Barraza-Cannon of CMS.

At the Urban Institute, we would like to thank John Holahan, Genevieve Kenney, and Lisa Dubay, for their helpful comments and feedback on our drafts, and in particular for helping us navigate and analyze state enrollment data.

Finally, and most importantly, we would like to thank the many state officials who gave generously of their time, freely shared state data, and provided us with critical assistance in interpreting and analyzing the implications of these data. These officials included Gayle Sandlin and Cathy Caldwell of Alabama; Sandra Shewry of California; Dorothy Sweringen of Colorado; Rose Naff and Bridgett Singleton of Florida; Denise Holmes and Bob Stampfly of Michigan; Greg Vadner, Charles Bentley, and Pamela Victor of Missouri; Judy Arnold of New York; and June Milby, Barbara Brooks, and Patsy Slaughter of North Carolina.

Executive Summary

The Balanced Budget Act of 1997 established Title XXI of the Social Security Act, creating the State Children's Health Insurance Program (SCHIP). Title XXI provided states the authority and funding to expand health insurance coverage to low-income children by expanding Medicaid, developing new "separate" child health programs, or a combination of both approaches. During the first three years of SCHIP, considerable policy attention was directed at state efforts to enroll eligible children. Yet the program was often criticized for getting off to a slow start and enrolling a small percentage of the target population. Over time, states have designed and implemented numerous strategies to streamline the application process with the goal of achieving higher enrollment. As SCHIP programs have matured, national enrollment has increased steadily—between the second quarters of federal fiscal years (FFY) 1999 and 2000, enrollment grew by 90 percent (Rosenbach et al. 2001). Furthermore, the Centers for Medicare and Medicaid Services reported that in FFY 2001, 4.6 million children participated in SCHIP (CMS 2002). Nevertheless, with more than three-quarters of all uninsured children now eligible for public coverage, more needs to be learned about why these children are not enrolling in Medicaid or SCHIP (Dubay, Haley, and Kenney 2000).

Given policymakers' continued interest in enrolling eligible children into SCHIP and a more recent focus on improving retention rates in the program, the U.S. Department of Health and Human Services' Office of the Assistant Secretary for Planning and Evaluation (ASPE) asked the Urban Institute to conduct a study of state efforts to enroll and retain children in SCHIP. Specifically, the Institute was asked to collect and analyze information about states' application and eligibility redetermination processes under SCHIP, as well as data on the outcomes of these processes. This report focuses on our findings related to enrollment; findings from our study of retention are examined in a companion report (Hill and Lutzky 2003).

Information and data were collected from eight states, selected based on a variety of demographic and programmatic variables, during the spring and summer of 2000. The states were queried on such issues as

• administrative responsibility for SCHIP eligibility determination;
• the process for accepting initial applications for SCHIP and how it differs from that of Medicaid;
• the "screen and enroll" process for SCHIP and Medicaid;
• strategies used to facilitate enrollment into SCHIP and Medicaid; and
• the processes by which applications are denied eligibility and families are notified of this denial.

We also discussed the lessons state officials had learned through the operation of these systems about the barriers that persist for families applying for SCHIP coverage, and strategies for overcoming these barriers.

The second component of the study involved the collection and analysis of application outcomes data. Specifically, we collected data on

• the number of SCHIP applications submitted, and of these, the number approved for SCHIP coverage, denied SCHIP coverage, and referred to Medicaid;
• the number of referrals to Medicaid that were approved, denied, or withdrawn;
• the number of eligibility denials that were due to "failure to meet eligibility criteria;" and
• the number of eligibility denials that were due to "failure to comply with procedures."

We typically found that states had a difficult time producing outcomes data, varied considerably in their data collection and reporting practices, and that no state could produce all of the measures of interest.

Findings and Implications for Future Policy

By collecting and analyzing information on the application processes states use for SCHIP and Medicaid, as well as administrative data on the outcomes of these processes, we had hoped to make informed observations regarding how various policy strategies affect rates of approval and denial of coverage. Because of limitations of state data systems and similarities in policies among our small sample of states, we were in most cases unable to draw such clear links. However, we did learn a great deal about the procedures states follow in accepting and reviewing SCHIP/Medicaid applications; the strengths and weaknesses of state eligibility data systems; the rates at which children are approved and denied coverage under SCHIP, and referred to Medicaid; and the various reasons why children are denied eligibility. The major findings of this study and their implications for future policy include the following:

• States have implemented many similar strategies for simplifying the SCHIP enrollment process, but simplifications to Medicaid policies and procedures are less extensive. In line with the national trend, the states we studied all made simplifying SCHIP enrollment a high priority. For example, all of our study states use a joint SCHIP/Medicaid application, permit these applications to be submitted by mail, and have dropped assets testing from eligibility criteria. Five of our eight study states had adopted 12 months of continuous eligibility for children enrolled in SCHIP. Two states have gone so far as to allow families to self-declare their incomes.

It appears, however, that these states have not simplified their Medicaid enrollment processes to the same extent as their SCHIP processes. Among our eight study states, two still required face-to-face interviews for children enrolling in Medicaid (whereas SCHIP enrollment can be completed entirely by mail), two retained assets tests as part of their eligibility criteria, only four had adopted 12 months of continuous eligibility for Medicaid, and only one permitted families to self-declare income.

• Inconsistencies between SCHIP and Medicaid eligibility rules and requirements make the enrollment process more difficult and confusing for families. Inconsistencies between SCHIP and Medicaid eligibility rules and procedures may pose barriers to families wishing to enroll their children in coverage. State officials believed that these inconsistencies make the federally required "screen and enroll" process difficult and confusing, while also making children's transitions between SCHIP and Medicaid coverage more challenging.
• In most states, less than 50 percent of applicants were approved for SCHIP eligibility. However, a large proportion of applicants appeared to be Medicaid-eligible and were referred to that program. SCHIP approval rates of joint applications were less than 50 percent in four out of the five states submitting comparable data. In these same four states, roughly 40 percent of SCHIP applications were referred to Medicaid because applicant children appeared to be income-eligible for Medicaid coverage. This finding speaks to the critical importance of SCHIP's "screen and enroll" requirements, which aim to ensure that children are enrolled into the program for which they are eligible, and that enhanced federal matching dollars are targeted to the intended population. In addition, this finding reinforces anecdotal reports that SCHIP outreach and enrollment efforts may be fueling increased Medicaid case finding. Unfortunately, most states could not report on the outcomes of their referrals to Medicaid (i.e., regarding which children were granted Title XIX coverage and which were not) because of the limitations of their data systems.
• Large proportions of SCHIP applications are denied for procedural reasons; this may be the unexpected down side of a simplified application process. As states have increasingly implemented mail-in application procedures, they have also experienced higher rates of application denials for "failure to comply with procedures," and "incomplete" applications. In the three study states submitting comparable data, we found that between one-half and three-quarters of all eligibility denials were among families that failed to successfully complete the SCHIP application process. Nearly all of these denials were because families submitted incomplete applications, or applications that omitted required documentation and verification. Most often, it appears that missing income verification was the leading culprit in these denials.

State officials speculated that these high rates of incompletes were likely a direct side effect of a mail-based application process, which, by its nature, introduces the potential for confusion and/or mistakes by families. Ironically, these officials noted that one advantage of the previous face-to-face intake process was that eligibility workers could directly discuss with parents the various items that needed to be submitted along with the application. Yet state officials generally agreed this trade-off was worth it, for it made application processes more acceptable to families and has led to a higher volume of applications.

• SCHIP programs are asking families about existing health insurance coverage as part of the application process, and are denying coverage to those who possess it. However, it appears that only a small proportion of applicants already have insurance. The Title XXI statute prohibits states from enrolling children in SCHIP who already possess other forms of creditable insurance. Each state in our study, therefore, includes questions on its applications about whether applying children have existing coverage. We found that small proportions of children appear to already have insurance at the time of application—in four of the six states that could report on this indicator, less than 5 percent of applicants reported existing coverage.
• State SCHIP and Medicaid data systems are highly variable in their capacity to report eligibility outcome data. One of the most important conclusions of this study is that state administrative data systems cannot precisely report on the outcomes of the eligibility process. Even among states that could provide data we requested, the codes, definitions, and classifications of various data elements were inconsistent across states, making aggregation and cross-state comparisons difficult, if not impossible.

If states are to make informed improvements in their eligibility policies and application systems, then they will need to make investments to improve their administrative data systems. At the national level, policymakers should consider whether developing standardized approaches for collecting, compiling, and reporting SCHIP and Medicaid application outcomes data would be beneficial.

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

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Acknowledgments

This report is part of the Urban Institute's Assessing the New Federalism project, a multiyear effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.

This study was primarily funded through a contract with the Office of the Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services. Additional support was provided by the Robert Wood Johnson Foundation under the Urban Institute's Assessing the New Federalism project.

The Assessing the New Federalism project is currently supported by The Annie E. Casey Foundation, The Robert Wood Johnson Foundation, the W. K. Kellogg Foundation, The John D. and Catherine T. MacArthur Foundation, and The Ford Foundation.

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