States at risk of losing children’s health care funds

WASHINGTON – A government program that provides health insurance for poor children could run into money problems in several states over the next two years unless Congress acts.

Six to 14 states will use up their share of federal money for the State Children’s Health Insurance Program during the 2006 budget year, according to a report by the nonpartisan Congressional Research Service. By the next year, that number will range from 12 to 20 states.

Once states spend their federal share, they either have to use more of their own money to provide insurance coverage or find ways to reduce expenses by cutting services.

Sen. Ted Kennedy, D-Mass., said on Friday that he planned legislation that would seek to add $1 billion to the program, known as SCHIP. The money had been allocated, he said, but was not spent by a deadline, so it reverted to the treasury on Sept. 30.

“It is unconscionable that children will go without health care because funds meant for the SCHIP program were not kept in the program,” Kennedy said.

The program, created in 1997, now serves about 6.1 million people who would not otherwise have health insurance. Enrollment has increased steadily, though the pace has begun to slow in the past year.

Congress could address the problem in a few ways.

Lawmakers could give the program more money, as Kennedy wants. They also could change the formula used to distribute the money; this would help some states but hurt others.

Some lawmakers, such as the chairman of the Senate Finance Committee, appear to favor the latter option.

“Part of the solution might be to make sure the money that’s already in the system is directed to where it’s needed and will be used,” said Sen. Charles Grassley, R-Iowa.

Congress could let the states that are spending more than their federal share face the consequences of that spending on their own, the research service noted.

The children in the health insurance program typically come from families whose income is too much to qualify for Medicaid but who cannot afford private health insurance.

When lawmakers created the program, they set aside $40 billion over 10 years. Most states have been unable to spend their share.

After three years, states must return any unspent federal dollars so the money can go to states that have used up their federal share.

So far, the redistribution has prevented any widespread shortfalls. Only Rhode Island has exhausted all of its federal money coming through the program.

Soon the redistribution will not be enough to cover the shortfalls in some states. That is because the pool of unspent money is shrinking as the program takes hold and enrollment expands, according to the report.

In 2006, Congress will appropriate about $4.1 billion to the program. But the projected demand for federal money will range from $5 billion to $6 billion.