On May 7, the Centers for Medicare and Medicaid Services (CMS) released a letter to state health officials clarifying CMS’s August 17, 2007 directive on SCHIP. This August 17th directive stated that before expanding SCHIP eligibility to children in families with incomes greater than 250% of the federal poverty level, states must demonstrate that they have enrolled at least 95% of children in the State below 200% of the poverty level who are eligible for Medicaid or SCHIP. Since the August 17th CMS directive, many states have expressed concerns that it greatly limits their flexibility to administer and expand their SCHIP programs.

The May 7th CMS letter details the following:

• Any changes made to a State’s crowd-out procedures in response to the August 17th directive does not need to be applied to prior enrollees (even if they are above 250% of FPL). They may be grandfathered in, as long as they remain continuously enrolled in the program.

• States are only required to apply the 12-month uninsurance period and cost-sharing requirements identified in the CMS directive to beneficiaries with incomes above 250% of FPL. States may choose to apply these requirements to children at or below 250% of FPL. 

• The crowd-out procedures do not apply to pregnant women (“unborn children”).

• The requirement in the CMS directive that 95% of children in a State with family incomes below 200% of FPL have coverage can be supported by data demonstrating Medicaid, SCHIP, or private coverage. CMS believes that this 95% threshold is an achievable goal and that some states have already reached this benchmark.

• Although the purpose of the crowd-out procedures is to ensure compliance with existing regulatory requirements, CMS acknowledges that State programs vary widely and states that they will continue to review requests for alternative approaches on a case-by-case basis.

For further information on this issue, please see a GAO Legal Opinion on the August 17th CMS directive and a New York Times article. The National Council will continue to update you on the latest developments on this directive.