Report Calls Bush SCHIP Rules Illegal

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By Mike Lillis

Non-partisan agency blasts restrictions on access for kids health program.


The Bush administration has no immediate plans to rescind controversial guidelines restricting enrollment in a popular children's health-care program, despite a recent legal finding that they were administered illegally.

The administration's position could leave the issue to the courts, where several states have already sued the White House over their right to expand coverage under the State Children's Health Insurance Program, or SCHIP. It could also lead to a showdown with Congress, though legislative efforts to expand SCHIP were twice vetoed by President George W. Bush last year. Perhaps with that in mind, congressional critics of the enrollment guidelines are clinging to the unlikely hope that the new legal opinion will inspire the administration to scrap the rules voluntarily.

The long-running debate over SCHIP highlights the sharp differences between the White House and a Democratic Congress over Washington's role in providing health care. With medical costs skyrocketing and employers dropping more and more coverage benefits, many lawmakers are pushing to expand that role into higher income brackets. The Bush administration has fought that push, claiming such expansions nibble away at private insurance markets.

In limbo are tens-of-thousands of kids whose health coverage hinges on their eligibility for the state-federal program.

At issue are controversial eligibility guidelines - issued directly to state health officials in an Aug. 17 letter - that prohibit states from using federal SCHIP funds to cover children in families earning more than 250 percent of the federal poverty level, or $53,000 for a family of four, until they have covered 95 percent of kids living under 200 percent of poverty, or $42,400. Supporters in and outside of the White House say the rules ensure that SCHIP dollars go to the lowest income kids.

But on Thursday, the Government Accountability Office challenged the guidelines, charging that the administration broke the law when it bypassed Congress in issuing them. Under a 12-year-old law, the GAO says, the changes have to be reviewed by both Congress and the GAO before they could take effect.

The legal opinion is being cheered by children's health-care advocates and state health officials. But they might not want to hold their breath waiting for change: The GAO opinion has no teeth, and the Bush administration has already issued a statement saying it will ignore it.

"GAO's opinion does not change the department's conclusion that the 8/17 letter is still in effect," Jeff Nelligan, spokesman for the Centers for Medicare and Medicaid Services, said in an Apr. 18 statement.

The issue boils down to a difference in legal interpretations. The Bush administration claims the Aug. 17 letter is just a non-binding statement of general policy - a clarification of existing law. The GAO, on the other hand, argues that the letter constitutes a policy change significant enough to require congressional and GAO perusal under the Congressional Review Act.

"The August 17 letter from CMS to state health officials is a statement of general applicability and future effect designed to implement, interpret or prescribe law or policy with regard to [SCHIP]," GAO writes. "Accordingly, it is a rule under the Congressional Review Act. Therefore, before it can take effect, it must be submitted to Congress and the Comptroller General."

The Congressional Research Service, another nonpartisan investigative research body, reached a similar conclusion in a January report.

Meanwhile, a number of states have already felt the effects of the allegedly non-binding policy. State officials in both Wisconsin and Louisiana, for example, passed SCHIP expansions last year taking eligibility up to 300 percent of poverty, or $63,600 for a family of four. In both cases, the administration knocked that ceiling down to 250 percent. Researchers at Louisiana State University estimated the change prevented 6,000 kids from joining the program in Louisiana alone.

In New York, state officials passed an expansion pushing eligibility to 400 percent of poverty, or $84,800, but the administration rejected it, citing the Aug. 17 waiver. State officials say the change would allow for coverage of 70,000 more kids under the program.

New York has sued the administration, charging it did not have the authority to install the guidelines without congressional review. The GAO report bolsters that argument, though there's no indication that the court will reach its verdict in the near future.

Timeliness could pose a problem for states that currently cover kids living above 250 percent of poverty. The Bush administration has given states a year to comply with the conditions in the Aug. 17 directive. Afterward, states would have to drop those kids or pick up 100 percent of their health-care costs. With many state budgets already pinched due to the ailing economy, officials contend the latter option is virtually impossible.

That would force the issue to Congress, where critics of the Aug. 17 directive remain strangely hopeful that the administration will heed the GAO criticisms. "CMS now has a critical choice to make: rescind the rule or continue to spend taxpayer money defending a growing list of lawsuits it is unlikely to win," Sen. Jay Rockefeller (D-W.V.), who requested the GAO report, said in a statement.

"It would be in the best interest of all parties involved, but particularly children, if CMS voluntarily withdrew the August 17 letter," Rockefeller concluded.

That, however, could reopen the floodgates for state SCHIP expansions - an unlikely scenario at the hands of an administration that threatened to veto any legislation confronting the expansion restrictions.