Children are heavy consumers of health care, but they are the cheapest of patients. About a third of all children in America get health services through Medicaid or the State Children's Health Insurance Program (SCHIP), and that cost taxpayers an average of $1,475 for a child enrollee in 2002, compared with $12,764 for one who was elderly. The payoff from that $1,475 investment is large: Immunizations, annual visits to a pediatrician, dental care, and screening for vision, hearing and developmental problems are all long-term money savers for the health care system as a whole.
The same goes for prenatal care for pregnant women. Premature babies cost about $13.1 billion annually, according to the March of Dimes Prenatal Data Center. The average premature baby racked up $75,000 in hospital fees in 2001, compared with $1,300 for a healthy full-term infant.
That's fairly well known. What's less well known is that states made remarkable progress on children's care in the few years just before the most recent budget crunch. Between 1999 and 2002, the number of children without insurance nationwide fell from 9.6 million to 7.8 million. At the upper end of performance, Iowa, Massachusetts, Minnesota, Nebraska, New Hampshire, North Dakota, Rhode Island, South Dakota, Vermont and Wisconsin all had less than 7 percent of total children uninsured.
By 2002, nearly 70 percent of all U.S. children were getting regular doctor's visits, and 83 percent of new mothers were receiving prenatal care in their first trimester--up from 76 percent in 1990. Infant deaths dropped from 9.2 out of 1,000 in 1990 to 6.9 out of 1,000 a decade later.
In recent years, improvements occurred even as the percentage of children covered by private insurance was shrinking. "Medicaid demonstrated its strength as a counter-cyclical safety net program," says Tara Straw, of the March of Dimes. "When children were losing insurance, Medicaid filled the gaps."
Elected officials realize the emotional importance of children's health to millions of Americans. No legislator ever denounces immunization or prenatal care as a waste of tax dollars. And yet--when budgets need to be cut--medical care for children often seems to be sitting in a prominent and vulnerable place on the table.
The most obvious approach, of course, is to tighten eligibility standards for children. But although a few states have taken that route, most
have chosen far more subtle methods to achieve the same outcomes. These maneuvers depend on the fact that Medicaid recipients can be difficult to reach in the first place; many have limited literacy skills, and filling out forms and complying with regulations can be a powerful barrier. Moreover, since recipients are from lower economic strata, they tend not to have easy access to transportation.
As a result, cutting back on outreach to potential recipients is a very effective means of keeping them off the rolls altogether. Reducing the number of administrative workers denies many clients the help they may need in filling out forms or complying with rules. Complicating the application process has the same effect.
CASE HISTORY
As recently as the early 1980s, children were eligible for Medicaid only if their families were on welfare. That meant that only the very poorest were covered. But over the course of the past two decades, Congress steadily expanded eligibility. By October 2002, all children under 19 in families with incomes below the poverty line were eligible for Medicaid coverage.Seven years ago, the federal government gave states a tool to reach children at much higher income levels, as well. SCHIP, the State Children's Health Insurance Program, provides a higher federal matching rate than Medicaid, encouraging states to ease the standards for eligibility. Currently, 39 states cover children in families up to 200 percent of the poverty level, either through SCHIP or expansions of traditional Medicaid.
Some go way beyond this. Minnesota covers infants at 280 percent of poverty and all other age groups at 275 percent. New Jersey, with one of the highest per capita incomes in the country, covers children up to 350 percent of the poverty level. Vermont and Missouri offer coverage to all age groups at 300 percent. "Functionally, we have universal access," says Paul Wallace-Brodeur, director of Vermont's program.
Not only did states expand eligibility in recent years, they worked to make sure that potential recipients actually took advantage of the programs. Most states abolished the requirement for a face-to-face interview and let families simply mail in applications. Forty-four states dispensed with the asset test requirement--allowing families with low annual incomes to apply even if they owned a car or had a small bank account. Georgia and other states also eased up on documentation of income, on the basis that personal information available on databases made it unnecessary for applicants to gather this material themselves.
During the same period, the federal government declared its willingness to cover prenatal care through the SCHIP program, reasoning that the actual patient is the child, not the mother. Most states chose to decline the federal dollars rather than implicitly take a position in the abortion debate favoring the legal rights of the fetus. But six states--Illinois, Massachusetts, Michigan, Minnesota, Rhode Island and Washington--opted to accept the offer and began including pregnant women as part of their SCHIP-eligible population.
The expansion of the system continued until recently in most places. It is over now. "There was an unmistakable march forward," says Cindy Mann, a senior fellow at the Kaiser Family Foundation, "but the march forward has stopped."
These days, with budgets impossibly tight, states are looking for cuts wherever they can find them. A few have affected children and prenatal programs directly. Last June, Alaska cut eligibility for its SCHIP program from 200 percent of poverty level to 175 percent. Other states have taken less obvious but equally effective paths toward reducing the number of children who receive coverage. "States are rolling back on the simplification processes they put in place," says Donna Cohen Ross, co-author of a July 2003 Kaiser study on Medicaid and SCHIP eligibility and enrollment practices. "It's a way of curbing enrollment and implementing a cut in your program."
One way to discourage participation is simply to ask people to renew their coverage more frequently. A study by the Urban Institute found that when it comes time to renew coverage, less than 50 percent of children covered through SCHIP stay eligible. Some are dropped from the rolls for good reasons, such as a change in family income. But a close look at eight states suggested that between 10 and 40 percent of children were "lost." One reason was that parents didn't answer renewal notices or re-submit applications.
States might conclude from this research that they should do more to educate and retain potential clients. And in the 1990s, many states did just that. But cutting back on SCHIP outreach saves substantial amounts of money, because it keeps the size of the rolls down. In both fiscal 2003 and 2004, California eliminated more than $13 million in funding to community-based organizations for outreach and application assistance as well as another $6 million a year for school-based outreach, such as media advertising and aides to help families fill out applications. Mississippi, Nebraska and Washington have recently added more rigorous documentation requirements for reporting income, while Connecticut, Indiana, Nebraska and Washington did away with the guarantee of 12 months of uninterrupted coverage.
All told, about half a million children will have lost coverage in fiscal years 2003 and 2004.
A More Direct Approach
If tightening up on eligibility sounds like a form of budget-cutting by stealth, many states are taking the more direct approach of actually freezing enrollment in their SCHIP programs. Alabama, Colorado, Florida, Maryland, Montana and Utah all have taken this path. The levels of income used to determine eligibility have not changed, but no new children are being admitted. In Florida, some 63,000 children who are eligible for SCHIP are now on waiting lists for coverage. Utah doesn't have a waiting list; it just sends people home and tells them to watch for a time when enrollment is open again.
The impact of such actions is immediate and dramatic, as was pointed out in a study of an enrollment freeze in the North Carolina SCHIP program, which took place between January and October 2001. About 34,000 children went on a waiting list. In interviews with University of North Carolina researchers, families who were wait-listed complained that they had been forced to delay medical or dental care, were unable to afford prescriptions, and in some cases had put off paying rent or utility bills.
Texas has made the most drastic cutbacks of all. Historically, the Lone Star State has been one of the weakest in children's health; an analysis of census data by the American Academy of Pediatrics puts the uninsured rate for children in Texas at 23 percent, compared with a U.S. average of 11.9 percent. This is in part a function of the state's percentage of low-income Hispanic families and a business sector with no strong tradition of employee benefits.
For a while, however, there was a serious effort to overcome these obstacles. After waiting until 2000 to implement its SCHIP program, Texas received deserved accolades for a massive expansion in which 500,000 children received new coverage through SCHIP and another 335,000 were added to the Medicaid program by 2002. Enrollment was simplified, Spanish-language outreach was initiated, and documentation requirements were eased. Medicaid officials reported a significant decline in the use of emergency rooms and county indigent care programs--settings where the uninsured often access their medical care.
But with its budget in trouble, and with a statewide aversion to new taxes, Texas has retreated. It reduced eligibility levels for pregnant women on Medicaid from 185 percent of poverty to 158 percent. It imposed asset limits and added a requirement that families on SCHIP re-enroll every six months, rather than once a year. One of the changes with the most impact is a new 90-day delay in starting coverage for children after they're determined to be eligible. This delay includes newborns as well. "It is unconscionable that crucial health care be delayed for an eligible newborn as a cost-saving measure," says Straw, of the March of Dimes. In all, the package of restrictions enacted by the legislature reduced SCHIP enrollment in Texas by about 54,000 children in the last six months of 2003.
Texas also increased both premiums and co-payments for SCHIP families--an action taken by many other states as well. By April 2003, 31 states were charging premiums to SCHIP families, and 22 states were requiring co-payments. This is significant, because studies have shown a steep fall-off in the use of medical services when low-income families are charged co-payments or fees. So far, this tactic has not been applied to Medicaid, which has traditionally been protected from significant cost-sharing requirements under federal law. But this may change. Washington State has asked for permission from the federal Centers for Medicare and Medicaid Services to charge premiums to families on Medicaid as well as those on SCHIP.
All this has been occurring at a time when federal dollars available for child health are declining as well. Between 1998 and 2001, states were allotted $4.3 billion in federal dollars for SCHIP coverage annually. As a number of states got a slow start in ramping up, there was more than enough money to go around in the early years of the program. But that won't be the case from now on. In 2002, 2003 and 2004, total federal dollars were reduced to $3.1 billion annually. New Jersey and Rhode Island have reported that they may run out of federal funds this year, with Alaska, Arizona, Maryland, Minnesota, Mississippi, Nebraska and South Dakota likely to have similar problems in 2005.
COMPLICATIONS
Finding the money to insure children for health care is only half the battle. The other half is ensuring that there are physicians available who are willing to take the cash that's been offered. Even in good economic times, compensation to physicians hasn't kept pace with inflation. In tough economic times, things get worse, with states actually freezing or cutting back on payments to doctors and managed care plans. Many states, including Alabama, Georgia, Mississippi and Texas, have taken this path.In general, the move to managed care has improved access for poor children and their families, but managed care organizations are in trouble in many states and failing outright in some. In states that rely on traditional fee-for-service compensation, reimbursement rates are sometimes so low that doctors decline to take on Medicaid patients.
When the American Academy of Pediatrics surveyed 13,000 pediatricians about their participation in the Medicaid program in 2000, they found that low reimbursement was one of the dominant reasons for limiting participation in Medicaid. Even before the economy faltered, more than half the pediatricians surveyed said Medicaid payments did not cover overhead. Since then, the situation has gotten worse. According to Steve Berman, director of Children's Outcomes at the University of Colorado School of Medicine, only 19.1 percent of pediatricians in private practice are now accepting all Medicaid patients in Colorado-- down from 41.4 percent in 2000.
Adjusted for inflation, physician reimbursement rates in California's Medi-Cal program declined 54 percent between 1985 and 2001. After more recent efforts to cut reimbursement, the state was hit by a lawsuit that was launched against California by a coalition of professional medical organizations whose members serve children.
Cutbacks in reimbursement have a significant impact on access to care. A study in 2001, published in the journal Pediatrics, looked at the difficulty in obtaining treatment for a child covered through Medi-Cal, compared with one covered by private insurance. Researchers called the offices of 50 orthopedic surgeons, asking for a follow-up appointment for a 10-year-old boy with a broken arm. When researchers described the boy as having private insurance, all the offices gave him an appointment within seven days. When offices were told that he was on Medi-Cal, only one of the 50 offices offered an appointment within seven days, and 47 refused him entirely. Only 13 percent of the offices that turned him away were able to recommend another office that would accept Medi-Cal.
Children's access to private pediatricians under Medicaid varies wildly from one state to another. In Massachusetts, North Dakota, South Dakota, Vermont and Wyoming, more than 90 percent of primary care pediatricians in private offices took all Medicaid patients, according to the American Academy of Pediatrics survey. But in California and Oklahoma, this was true of only 34.5 percent and 31.8 percent, respectively, and in Tennessee, the number was 18.8 percent.
Meanwhile, there are multiple problems throughout the states with Medicaid administrative systems. Doctors complain that it is difficult to get through via online systems to confirm that children are eligible and are not clients of someone else. Referrals require heavy paperwork and in some states, including Alabama and Tennessee, unpredictable or delayed payments are a problem as well. In the American Academy of Pediatrics survey, 39.4 percent of pediatricians regarded "paperwork" as a very important reason for limiting participation in Medicaid. But this criticism also varied a good deal among the states. In Florida, Mississippi, Nevada, New Jersey and Pennsylvania, more than half the pediatricians who responded complained about a paperwork problem. In Montana, Rhode Island, Vermont and Wyoming, fewer than 20 percent did.
REMEDIES
Targeting AcccessCutting back on access--either by freezing enrollments or cutting reimbursement rates--is not a choice states have taken happily. But it's a choice they were willing to make as a means of bringing budgets closer to balance. Children's health is universally seen as a worthy cause, but the fact remains that SCHIP and Medicaid families are not a very strong political constituency anywhere in the country.
Still, some states are doing better than others. Despite severe budget problems, Virginia simplified its application forms in 2002, instituted a joint form for SCHIP and Medicaid, and started new outreach efforts, with Governor Mark Warner going on what he called "a road show" to community fairs and churches to encourage families to sign up their children. The result by mid-summer 2003 was an additional 50,000 children enrolled.
Illinois last year increased coverage in its SCHIP program from 150 to 185 percent of poverty, adding an additional 20,000 children. Louisiana increased eligibility levels for pregnant women to 200 percent of the poverty level, and now covers a total of 600,000 children through either Medicaid or SCHIP, nearly twice as many as it covered five years ago. "We don't have uncoordinated care anymore," says Louisiana Health Secretary David Hood. "We have a program that I hope is going to change both recipient and provider behavior."
A few states have revamped their organizational and management systems to ensure better access to medical care while keeping costs under control. Rhode Island stands out in this respect. Currently, about 5 percent of Rhode Island children are uninsured. The state's "Rite Care" Program covers those below 250 percent of the poverty level and guarantees benefits to their mothers for two years after delivery. The state's immunization rates and infant mortality rates are significantly better than the national average. One of the state's major achievements has been to narrow the gap in infant mortality between high-income and low-income families. In the 1990s in Rhode Island, the infant mortality rate for children receiving public health coverage dropped 36 percent.
One of the keys to Rhode Island's success has been an organizational structure in which a "Children's Cabinet" crosses departmental boundaries. "The nature of government is to be insular and not look across many sections of government," says John Young, the state's Medicaid director. "But that's been our effort."
Rhode Island relies heavily on a managed care approach for meeting children's health care needs. Early on, it established a consumer advisory committee to deal with concerns voiced by patient advocates about managed care, and this committee has helped to establish safeguards. The state has buttressed quality in its managed care health plans through the use of performance contracting--setting up clear expectations for what the programs are expected to accomplish and rewarding those that meet the goals.
To encourage lead screening, for example, Rhode Island offers bonuses to managed care plans in which most physicians test for lead. The most recent figures show that 79 percent of Rhode Island physicians perform this test--four times higher than the rate reported nationally in a 1999 study. The state Medicaid office has received an unusual waiver from the federal government to establish "lead centers" that will not only help treat poisoning cases but prevent new cases by making modifications to housing units.
Alternative Treatments
Massachusetts, Minnesota and Wisconsin are also making effective use of performance measurement in children's health. Wisconsin has been at it longer than anyone else, and its establishment of clear expectations for health plan performance has had obvious results. Four Wisconsin health plans that offer Medicaid service are among the top 15 performers nationwide, according to the National Committee for Quality Assurance, which rates both commercial and Medicaid plans.
"This is all consistent with the tenets of value-based purchasing," says Michael Bailit, a private health care consultant. "You reward them if they do better and penalize them if they don't do well." New York State rewards plans that have higher percentages of doctors who screen young patients for vision, dental, hearing or developmental problems by sending more patients their way. It publishes statistics on the Web that compare individual plans on a variety of measures. Utah and Wisconsin withhold some portion of a health plan's compensation if it does not meet screening standards for lead exposure, developmental problems or vision difficulties.
Arkansas, Maine and Florida also make good use of information in their primary care case management, each in different ways. Arkansas produces a "physician report card" so doctors can compare referrals, hospitalizations and emergency room use in their own practices to those of other primary care physicians. Maine has a primary care physician incentive program that measures such topics as well-child visits and immunizations and provides bonuses to doctors who can demonstrate high performance. Florida has established training programs to keep providers informed about their screening responsibilities, and has attacked the problem from the client side as well by sending letters to parents to remind them when their children are due for tests.
Why don't all the states rely more heavily on this model? Primarily for one reason: Many of them lack the ability to turn the numbers generated by managed care plans into useful data from which standards can be derived. "The Achilles heel is having the information support technology and staff to mine and use the information," says Kip Piper, a consultant and former Medicaid director in Wisconsin.
PROGNOSIS
The states are now at a crossroads in children's health coverage. If their revenues revive, and efforts are renewed to make sure needy children and pregnant women receive care, it's likely that the recent difficulties will be remembered as an unfortunate and painful episode- -but not a calamitous one. If, however, the trend toward short-term cost cutting continues, the inefficiencies of this approach will become crystal clear. Those states that continue to diminish the number of children receiving quality health care will not only wind up with sicker kids, they'll wind up with chronically diseased budgets in the future.Plenty of data backs up this point of view. A study published in November in Pediatrics noted that some $17 billion is spent in the U.S. annually on unnecessary hospitalizations. The study, which surveyed parents and doctors of children admitted to Boston Medical Center over a 14-month period, found that between 13 and 46 percent of the admissions could have been avoided with better care at home or by primary care physicians.
Many states have reported a decline in emergency room use when children are provided with their own doctors. The year after the Rite Care program started in Rhode Island, both hospital days and emergency room use decreased by one third--a result that has been found in a number of other states and studies as well.
"If you introduce a child at a young age to a primary care physician and not the emergency room, it has a long-term effect on the behavior of your population," says Newell Augur, director of legislative and public affairs for the Maine Department of Human Services. "It sets a framework for your future medical costs and savings."
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