Out Of Touch: A Status Report on CMS’s August 17th Directive

Resource: An excerpt from Out Of Touch: A Status Report on CMS’s August 17th Directive
by the Center for Children & Families, Georgetown University (May 2008).

Available at: http://ccf.georgetown.edu/index/cms-filesystem-action?file=ccf%20publications/federal%20schip%20policy/outoftouchfinal-1.pdf

On August 17, 2007, the Centers for Medicare and Medicaid Services (CMS) sent a letter to state health officials sharply restricting the ability of states to cover uninsured children through the State Children’s Health Insurance Program (SCHIP). The policy, known as the “August 17th directive,” affects states’ ability to cover children with family income above 250 percent of the federal poverty level (FPL), the equivalent of $44,000 annually for a family of three. In short order, the policy was criticized by 30 Governors and numerous members of Congress and was the subject of lawsuits brought by affected states and families. It was issued just as a number of states had enacted expansions in SCHIP coverage over 250 percent of the FPL, using the flexibility that states always have had to decide the income level of children who need help securing affordable coverage through SCHIP.

The directive already has forced several states to delay, scale back, or state fund their efforts to cover uninsured children, even as the weakening economy has created more strain and hardship for moderate-income families seeking affordable coverage for their children. In the months ahead, children in even more states will be affected by the policy at a time when there is a growing recognition that the economic downturn will be adding to the numbers of children who lack private employer-based coverage and whose families will need affordable coverage alternatives through SCHIP and Medicaid.

In earlier issue briefs on the August 17th directive, the Center for Children and Families (CCF) provided an in-depth analysis of the requirements of the directive and a status report on its impact as of December 2007.1 More recently, new data and analyses regarding the directive (see below) have been released by state officials, research organizations, and policy experts. These new data, reports, affidavits, and analyses raise significant questions about the policy basis for and the potential adverse effects of the August 17th directive, as well as the process by which CMS issued the policy. This issue brief provides an update on the impact of the directive as of April 2008 drawing on these new resources.

Key Elements of the August 17th Directive

Under the directive issued by CMS on August 17, 2007, states cannot receive federal SCHIP funds to enroll children with gross family income above 250 percent of the FPL unless:

  • 95 percent of all children eligible for Medicaid and SCHIP with income below 200 percent of the of the FPL are already enrolled; and
  • Employer-sponsored insurance (ESI) for children below 200 percent of the FPL has not dropped by more than two percentage points over the prior five years.
  • If a state can meet these new requirements, the directive would further require the state to:

    • Impose a 12-month waiting period (children who had ESI in the past but now qualify for SCHIP would have to remain uninsured for 12 months from the time their coverage ended); and
    • Charge families the maximum cost sharing permitted by federal law (five percent of family income) unless the state can show that the premiums it would charge are not more favorable than those charged by comparable private plans by more than one percent of family income.
    • The former Director of CMS has stated that the directive applies to Medicaid as well as to SCHIP.