Federal Funds Boost Health Coverage For Uninsured Children State Aids, Like Easier Medicaid, Will Be Getting $24 Billion Hand

In the largest expansion of health care for children since Medicaid’s creation in 1965, Uncle Sam is about to hand the states $24 billion to cover up to half of America’s 10 million uninsured kids. But most states are already a step or two ahead of Washington.

Using a variety of approaches, most notably broadening Medicaid eligibility, nearly every state has extended coverage to children of working but low-income families in recent years.

That collective effort is a largely unrecognized, if modest success story: Even as the ranks of uninsured adults continue to swell inexorably, the number of uninsured children has remained stable, with about one in seven lacking coverage.

The impending flow of federal largesse to the states over the next five years - part of the budget bill approved by Congress - means millions of children will enjoy medical insurance, many for the first time. The children’s health-care coverage is to be financed in part by an increase in the federal cigarette tax.

And while a dispute persists over just how many children will actually receive meaningful coverage, the expansion in health care for kids was ailed Tuesday by children’s advocates as well as the nation’s governors, who will be charged with devising ways to reach the uninsured children.

“This historic investment in children’s health is a major victory for America’s children and working families,” said Marian Wright Edelman, president of Children’s Defense Fund.

“This is cause for some serious celebration,” added Dr. Irwin Redlener, a New York physician and longtime children’s advocate.

Nevada Democratic Gov. Bob Miller and Ohio Republican Gov. George V. Voinovich, meeting in Las Vegas last week for the National Governors’ Association conference, praised Congress and President Clinton for “giving states the ability to build on their successes in designing health insurance programs that meet the unique needs of their states.”

The enthusiasm of children’s advocates, however, was tempered by the realization that the few-strings-attached block grants to the states will result in a hodgepodge of programs with different eligibility standards and different benefits packages - depending on which state a child lives in and perhaps even which region within that state.

Children’s advocates also fear the “substitution effect” - the likelihood that at least some employers will stop covering their workers’ dependents after new health-care programs for children are created.

But such “crowding out” is likely to be minimal since most low-paying jobs do not come with health insurance as a fringe benefit in the first place, argued Sen. John D. Rockefeller IV, D-W.Va., another champion of children’s health care.

States face a limited range of options when it comes to extending health care to uninsured children - the foremost being the expansion of Medicaid eligibility, although that seems an unlikely route this time around for most states.

In the 32 years since Medicaid was created, 39 states have expanded eligibility for pregnant women and children beyond federal requirements. Between 1989 and 1993, 5 million children were brought into Medicaid, a joint federal-state health insurance program for certain categories of the indigent.

In all, 34.2 million people, about half of them children, are enrolled in Medicaid.

Most states have extended coverage to uninsured children by expanding Medicaid in part because the program provides comprehensive benefits and relies on existing administrative and reimbursement systems. But this has proven costly for states.

That is why governors have increasingly sought greater leeway in setting their own state’s benefits package - a demand that emerged in bold relief during the recent budget talks.

That desire for greater flexibility is precisely what has prompted many states to extend coverage to children not by expanding Medicaid but by using their own funds to contract with managed care providers to deliver services directly to children who are ineligible for Medicaid, either because of age or family income.

Such arrangements allow states to avoid the array of federal mandates that come with Medicaid - thus allowing states to, for example, offer a limited benefits package and even require co-payments and premiums, based on a sliding scale. Such flexibility allows states to test pilot programs that involve as small an area as a county, health care experts said.

Still another benefit of the non-Medicaid approach is that it is easier to enroll children in a program that does not carry the social stigma some attach to Medicaid. About 3 million uninsured, Medicaid-eligible kids are not enrolled in the program.