Order Code RL30473
CRS Report for Congress
Received through the CRS Web
State Children’s Health Insurance Program
(SCHIP): A Brief Overview
Updated July 20, 2006
Elicia J. Herz and Chris L. Peterson
Specialists in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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State Children’s Health Insurance Program (SCHIP):
A Brief Overview
Summary
The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) established the State
Children’s Health Insurance Program (SCHIP) under a new Title XXI of the Social
Security Act. In general, this program allows states to cover targeted low-income
children with no health insurance in families with income that is above Medicaid
eligibility levels. As of 2004, the upper income eligibility limit under SCHIP had
reached as high as 350% of the federal poverty level, or FPL (in one state).
Under SCHIP, states may enroll targeted low-income children in Medicaid,
create a new separate state program, or devise a combination of both approaches.
States choosing the Medicaid option must provide all mandatory benefits and all
optional services covered under the state plan, and must follow the nominal Medicaid
cost-sharing rules. In general, separate state programs must follow certain coverage
and benefit options outlined in SCHIP law. While some cost-sharing provisions vary
by family income, the total annual aggregate cost-sharing (including premiums,
copayments, and other similar charges) for any family may not exceed 5% of total
income in a year. Preventive services are exempt from cost-sharing.
Nearly $40 billion has been appropriated for SCHIP for FY1998 through
FY2007. Annual allotments among the states are determined by a formula that is
based on a combination of the number of low-income children and low-income
uninsured children in the state, and includes a cost factor that represents the average
health service industry wages in the state compared to the national average. Like
Medicaid, SCHIP is a federal-state matching program. While the Medicaid federal
medical assistance percentage (FMAP) ranged from 50% to 76% in FY2006, the
enhanced SCHIP FMAP ranged from 65% to 83.2% across states.
All 50 states, the District of Columbia, and five territories have SCHIP
programs in operation. As of June 2006, 17 use Medicaid expansions, 18 use separate
state programs, and 21 use a combination approach. Since initial enrollment in
FY1998, many states have amended their original SCHIP plans. For example,
approved amendments and waivers expand eligibility, define new copayment
standards, and/or modify benefit packages.
Approximately 6.2 million children were enrolled in SCHIP during FY2004.
In addition, eight states reported enrolling about 646,000 adults in SCHIP through
program waivers. Spending was slow in the early years of SCHIP due at least in part
to lower than expected enrollment. But that trend changed in more recent years and
has led some states to exhaust their federal SCHIP funds. The Deficit Reduction Act
of 2005 (DRA; P.L. 109-171) provided a new appropriation of $283 million to
address anticipated FY2006 shortfalls in federal SCHIP funding. The Congressional
Research Service (CRS) SCHIP Projection Model projects that four states will still
experience shortfalls in FY2006, totaling $2.75 million. This model projects that 18
states will experience shortfalls in FY2007. SCHIP reauthorization and financing
issues are likely to be addressed by Congress in this fiscal year or in FY2007.

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Contents
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cost-Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Federal Appropriations and Distribution
Among the States and Territories . . . . . . . . . . . . . . . . . . . . . . . . . 5
Reallocation of Unspent Federal Funds . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Factors Affecting Federal Financing . . . . . . . . . . . . . . . . . . . . . . 8
General Program Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trends in Enrollment and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Forthcoming SCHIP Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SCHIP Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1. SCHIP Enrollment Data for the 50 States
and the District of Columbia for FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Table 2. States Qualifying for Redistribution
of Unspent FY1998-FY2003 Original Allotments . . . . . . . . . . . . . . . . . . . 22
Table 3. Status of FY1998-FY2005 Federal SCHIP Funds,
by State and Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 4. Status of FY2006 Federal SCHIP Funds,
by State and Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

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State Children’s Health Insurance Program
(SCHIP): A Brief Overview
The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) established the State
Children’s Health Insurance Program (SCHIP) under a new Title XXI of the Social
Security Act. The program offers federal matching funds to states and territories to
provide health insurance to certain low-income children.
Eligibility
In general, Title XXI defines a targeted low-income child as one who is under
the age of 19 years with no health insurance, and who would not have been eligible
for Medicaid under the rules in effect in the state on March 31, 1997. States can set
the upper income level for targeted low-income children up to 200% of the federal
poverty level (FPL),1 or if the applicable Medicaid income level for children is at or
above 200% FPL prior to SCHIP, the upper income limit may be raised an additional
50 percentage points above that level.
Within these general rules, states may provide medical assistance to qualifying
children in two basic ways. They may cover such children under their Medicaid
programs and/or they may create a separate SCHIP program for this purpose. (More
details on available benefits under each approach are described in the next section.)
When states provide Medicaid coverage to targeted low-income children, Medicaid
rules typically apply. When states provide coverage to targeted low-income children
through separate SCHIP programs, Title XXI rules typically apply. In both cases, the
federal share of program costs comes from federal SCHIP appropriations (also
described in further detail below).
Title XXI does not establish an individual entitlement to benefits. Instead, Title
XXI entitles states with approved state SCHIP plans to pre-determined federal
allotments based on a distribution formula set in the law (explained further below).
However, targeted low-income children covered under Medicaid are entitled to the
benefits offered under that program as dictated by Medicaid law. No such individual
entitlement exists for targeted low-income children covered in separate SCHIP
programs.
States may cover targeted low-income children by expanding their Medicaid
programs in the following ways: (1) by establishing a new optional eligibility group
1 In 2006, the poverty guideline in the 48 contiguous states and the District of Columbia is
$20,000 for a family of four. (“Annual Update of the HHS Poverty Guidelines,” 71 Federal
Register 3848, Jan. 24, 2006.)

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CRS-2
for such children as authorized in Title XXI, and/or (2) by liberalizing the financial
rules2 for any of several existing Medicaid eligibility categories.
Many states have chosen to cover targeted low-income children under existing
Medicaid eligibility pathways, especially Medicaid’s poverty-related child groups,
rather than by establishing the Title XXI optional coverage group.3 Such a strategy
reduces the administrative burden of creating and implementing a new coverage
group.4
States may also provide coverage to targeted low-income children by creating
a separate SCHIP program. States define the group of targeted low-income children
who may enroll in separate SCHIP programs. Title XXI allows states to use the
following factors in determining eligibility: geography (e.g., sub-state areas or
statewide), age (e.g., subgroups under 19), income, resources, residency, disability
status (so long as any standard relating to that status does not restrict eligibility),
access to or coverage under other health insurance (to establish whether such
access/coverage precludes SCHIP eligibility), and duration of SCHIP enrollment.
As of FY2004, the upper income eligibility limit under SCHIP had reached
350% of the FPL (see Table 1).5 Twenty-five states and the District of Columbia had
established upper income limits at 200% FPL. Another 13 states exceeded 200%
FPL. The remaining 12 states set maximum income levels below 200% FPL.6
2 Under Medicaid law, Section 1902(r)(2) authority may be used to liberalize income and
resource methodologies for a number of groups, including, for example, poverty-related
children (i.e., those under age 6 in families with income up to 133% FPL and those between
ages 6 and 18 in families with income up to 100% FPL). That same authority can be used
to liberalize financial rules for SCHIP purposes. Family coverage is provided under Section
1931. This section has its own provisions for liberalizing income and resource standards.
3 Personal communication with Judy Rhoades, Centers for Medicare and Medicaid Services,
June 5, 2003.
4 Because individuals can have other health insurance and still be covered by Medicaid, this
approach also allows states to bring into Medicaid otherwise ineligible higher-income
children regardless of their other health insurance status. Under this strategy, for example,
states can provide Medicaid benefits to additional children whose existing health insurance
is limited (sometimes referred to as under-insured). When states liberalize the financial
rules for existing Medicaid eligibility groups, the federal share of the costs for services
provided to the subset without other health insurance — the targeted low-income children
— is paid for out of SCHIP funds (described in further detail below). The federal share of
the costs for services delivered to the remaining children with other health insurance is paid
for by Medicaid.
5 For determining income eligibility for SCHIP and Medicaid, some states apply “income
disregards.” These are specified dollar amounts subtracted from gross income to compute
net income, which is then compared to the applicable income criterion. Such disregards may
increase the effective income level above the stated standard.
6 States may apply resource, or asset, tests in determining financial eligibility, but are not
required to do so. In states with a resource test, individuals must have resources for which
the dollar value is less than a specified standard amount in order to qualify for coverage.
(continued...)

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CRS-3
Benefits
As noted above, when designing their SCHIP programs, states may cover
targeted low-income children under their Medicaid program, create a new separate
SCHIP program, or devise a combination of both approaches. Under limited
circumstances, states have the option to purchase a health benefits plan that is
provided by a community-based health delivery system (e.g., federally funded
community health centers or hospitals that receive supplemental payments for serving
a disproportionate share of Medicaid or other low-income populations) or to purchase
family coverage under a group health plan.
States that offer Medicaid coverage to targeted low-income children must
provide the full range of mandatory Medicaid benefits, as well as all optional services
specified in their state Medicaid plans. As an alternative to providing all of the
mandatory and selected optional benefits under traditional Medicaid, DRA gives
states the option to enroll state-specified groups in new benchmark and benchmark-
equivalent benefit plans. These plans are nearly identical to the benefit packages
offered through separate SCHIP programs (described below). For any child under
age 19 in one of the major mandatory and optional Medicaid eligibility groups,
including targeted low-income children, the benefits available through the Early and
Periodic Screening, Diagnostic, and Treatment (EPSDT) Program must be provided.
Under EPSDT, children receive well-child care, immunizations, and other screening
services, as well as medical care necessary to correct or ameliorate identified defects,
illnesses, or conditions, including optional services states may not otherwise cover
in their Medicaid programs.
States that choose to create separate SCHIP programs may elect any of three
benefit options: (1) a benchmark benefit package, (2) benchmark equivalent
coverage, or (3) any other health benefits plan that the Secretary of Health and
Human Services determines will provide appropriate coverage to the targeted
population of uninsured children.7
A benchmark benefit package is one of the following three plans: (1) the
standard Blue Cross/Blue Shield preferred provider option plan offered under the
Federal Employees Health Benefits Program (FEHBP), (2) the health coverage that
is offered and generally available to state employees in the state involved, and (3) the
health coverage that is offered by a health maintenance organization (HMO) with the
largest commercial (non-Medicaid) enrollment in the state involved.
Benchmark-equivalent coverage is defined as a package of benefits that has the
same actuarial value as one of the benchmark benefit packages. A state choosing to
6 (...continued)
States determine what items constitute countable resources and the dollar value assigned to
those countable resources. Assets may include, for example, cars, savings accounts, real
estate, trust funds, tax credits, etc.
7 When the law establishing SCHIP was enacted, existing state programs in Florida, New
York, and Pennsylvania were designated as meeting the minimum benefit requirements
under SCHIP (i.e., these programs were grandfathered into SCHIP).

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CRS-4
provide benchmark-equivalent coverage must cover each of the benefits in the “basic
benefits category.” The benefits in the basic benefits category are inpatient and
outpatient hospital services, physicians’ surgical and medical services, lab and x-ray
services, and well-baby and well-child care, including age-appropriate
immunizations. Benchmark-equivalent coverage must also include at least 75% of
the actuarial value of coverage under the benchmark plan for each of the benefits in
the “additional service category.” These additional services include prescription
drugs, mental health services, vision services, and hearing services. States are
encouraged to cover other categories of service not listed above. Abortions may not
be covered, except in the case of a pregnancy resulting from rape or incest, or when
an abortion is necessary to save the mother’s life.
Cost-Sharing
Cost-sharing refers to the out-of-pocket payments made by beneficiaries of a
health insurance plan. Cost-sharing may include, for example, monthly premiums,
enrollment fees, deductibles, copayments, coinsurance and other similar charges.
Federal law permits states to impose cost-sharing for some beneficiaries and
some services under SCHIP. States that cover targeted low-income children under
Medicaid must follow the nominal cost-sharing rules of the Medicaid program.
Under these rules, the majority of such children are exempt. Children who are 18
years of age and enrolled in Medicaid expansions under SCHIP may be subject to
service-related cost-sharing (e.g., copayments) at state option.
DRA provides states with a new option for premiums and service-related cost-
sharing that may be applied to targeted low-income children under SCHIP Medicaid
expansion programs. For children in families with income between 100%-150%
FPL, no premiums may be imposed; however, service-related cost-sharing may be
applied to up to 10% of the cost of the item or service rendered. For children in
families with income above 150% FPL, premiums are allowed (no limit is specified),
and service-related cost-sharing may be applied to up to 20% of the cost of the item
or service rendered. For all individuals, the total aggregate amount of all cost-sharing
cannot exceed 5% of family income (on a quarterly or monthly basis as specified by
the state). Preventive service for children is exempt from DRA cost-sharing. The
nominal Medicaid cost-sharing amounts in regulation will be indexed by medical
care inflation (increased) over time. Special rules apply to cost-sharing for
prescription drugs, and for emergency room copayments for non-emergency care.
DRA also allows states to condition continuing Medicaid eligibility on the payment
of premiums. Providers may also be allowed to deny care for failure to pay service-
related cost-sharing.
If a state implements SCHIP through a separate state program, premiums or
enrollment fees for program participation may be imposed, but the maximum
allowable amount is dependent on family income. For all families with incomes
under 150% FPL and enrolled in separate state programs, premiums may not exceed
the amounts set forth in federal Medicaid regulations. Additionally, these families
may be charged service-related cost-sharing, but such cost-sharing is limited to (1)
nominal amounts defined in federal Medicaid regulations for the subgroup with
income below 100% FPL, and (2) slightly higher amounts defined in SCHIP

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CRS-5
regulations for families with income between 100%-150% FPL. For a family with
income above 150% FPL, cost-sharing may be imposed in any amount, provided that
cost-sharing for higher-income children is not less than cost-sharing for lower-
income children.
Under SCHIP law, the total annual aggregate cost-sharing (including premiums,
deductibles, copayments, and any other charges) for all children in any SCHIP family
may not exceed 5% of total family income for the year. In addition, states are
required to inform families of these limits and provide a mechanism for families to
stop paying once the cost-sharing limits have been reached.
Preventive services are exempt from cost-sharing for all SCHIP families
regardless of income. The Centers for Medicare and Medicaid Services (CMS)
defines preventive services to include the following: all healthy newborn inpatient
physician visits, including routine screening (inpatient and outpatient); routine
physical examinations; laboratory tests; immunizations and related office visits; and
routine preventive and diagnostic dental services (for example, oral examinations,
prophylaxis and topical fluoride applications, sealants, and x-rays).
Financing
Federal financing of SCHIP includes three major components: (1) total federal
appropriations and the distribution of those funds among the states and territories, (2)
reallocation of unspent federal funds, and (3) other factors affecting federal financing
including the federal matching rate and caps on administrative expenses.
Federal Appropriations and Distribution Among the States and
Territories. BBA 97 appropriated a total of $39.7 billion for SCHIP for FY1998-
FY2007.8 The funding level by fiscal year varies across time. The total annual
appropriation for each of FY1998-FY2001 was a little more than $4.2 billion. This
annual total dropped to a little under $3.2 billion in FY2002-FY2004. Then the
appropriation rose to about $4.1 billion for FY2005 and FY2006, with a further
increase to roughly $5.0 billion in FY2007. The drop in funding for FY2002-
FY2004, sometimes referred to as the “SCHIP dip,” was written into SCHIP’s
authorizing legislation due to budgetary constraints applicable at the time the
legislation was drafted.
Allotment of funds among the states is determined by a formula set in law. This
formula is based on a combination of the number of low-income children and
uninsured low-income children in the state, and includes a cost factor that represents
average wages in the states’ health service industry compared to the national average.
8 From the original appropriated amounts specified in BBA 97, the law set aside 0.25% of
SCHIP funds for five territories (Puerto Rico, Guam, Virgin Islands, American Samoa, and
the Northern Mariana Islands). Later, funds were added to the total annual appropriation
and earmarked for the territories for each year beginning in FY1999. For FY1998-FY2002
only, $60 million annually was set aside for special diabetes grants.

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CRS-6
Annual allotments are basically separate, sequential funding accounts. For each
state and territory, the account for a given fiscal year is made available at the
beginning of that year, and remains available for up to three years. For example,
FY2004 allotments are available until the end of FY2006. Typically, SCHIP
payments are taken out of the earliest active account. Once that fiscal year allotment
is fully expended, and the next year’s allotment becomes available (active), states can
begin to access the next fiscal year’s allotment, and so forth.
Reallocation of Unspent Federal Funds. At the end of the applicable
three-year period of availability, unspent allotments are subject to reallocation among
the states. The rules regarding reallocation vary by fiscal year. Generally, the year-
specific rules divide states into two groups for the purpose of reallocation:
! those states that fully exhaust the applicable original allotment by
the three-year deadline, called redistribution states (shown in Table
2 by fiscal year), and
! those states that did not exhaust the applicable original allotment by
the three-year deadline, called retention states.
(Territories are treated differently; see the “Legislative History” section at the end of
this report for more details.)
In the first reallocation legislation for FY1998 and FY1999 (P.L. 106-554),
redistribution states (12 in FY1998 and 13 in FY1999) were given access to unspent
funds from other states equal to their excess spending above their original allotments
during the applicable three-year period. After a set-aside of 1.05% of the total
unspent funds for territories that fully exhausted their original allotments (all five),
the remaining unused funds were divided among the retention states in proportion to
their contribution to the total pool of unspent funds. In contrast, under the second
reallocation legislation for FY2000 and FY2001 (P.L. 108-74), a different rule was
used. A set-aside of 1.05% of the total unspent funds was made for territories that
fully exhausted their original allotments (again, all five). Then, retention states kept
one-half of their unused funds. The remaining unspent funds were then distributed
among redistribution states (14 for FY2000 and 19 for FY2001) in proportion to their
contribution to the total pool of excess spending.9
Because no law was enacted specifying otherwise, the reallocation process
followed BBA 97 requirements for unspent FY2002 funds. Under this law, unspent
allotments are subject to redistribution among only those states that fully expend their
allotments by the applicable three-year deadline, by a method to be determined by the
Secretary of Health and Human Services. States that were projected to exhaust all
of their available federal SCHIP accounts in FY2005, based on their estimated
9 Finally, P.L. 108-74 also permits certain states to spend their available balances from
FY1998-FY2001 (up to a maximum of 20% of those original allotments) for services
delivered to Medicaid beneficiaries under age 19 who are not otherwise eligible for SCHIP
and have family income that exceeds 150% of the FPL. Subsequently, P.L. 108-127
modified the definition of a state that qualifies to make such expenditures. In addition, the
Deficit Reduction Act of 2005 (P.L. 109-171) continued this authority with respect to
FY2004 and FY2005 funds. See the “Legislative History” section below for details.

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FY2005 expenditures, received access to FY2002 redistribution money equal to that
estimated shortfall. The six “shortfall states” were Arizona, Minnesota, Mississippi,
Nebraska, New Jersey, and Rhode Island. The remaining balance of unspent FY2002
funds was then divided among a total of 28 redistribution states, including the six
shortfall states, based on each such state’s percentage of the total excess spending
above the FY2002 allotments during the three-year period of availability of these
funds.10 Also according to BBA 97, reallocation pots expire at the end of one year.
In the case of reallocated FY2002 funds, the expiration date was the end of FY2005.
For FY2006, the Secretary was required to distribute both unspent FY2003
original allotments and the new appropriation of $283 million to cover shortfalls
provided by the Deficit Reduction Act of 2005 (DRA; P.L. 109-171).11 First, the
Secretary of HHS distributed the DRA funds to the eight states that covered only
children and were expected to experience shortfalls in FY2006. (DRA prohibits the
use of these funds for non-pregnant adults; coverage for pregnant women is
considered to be coverage of children). These eight states are Iowa, Maryland,
Massachusetts, Mississippi, Missouri, Nebraska, North Carolina, and South Dakota.
These DRA funds entirely eliminated the expected FY2006 shortfall among these
eight states. The remaining DRA funds were then distributed to the four additional
shortfall states that also cover adults in their SCHIP programs — Illinois, Minnesota,
New Jersey, and Rhode Island — ensuring that the amount of DRA funds to these
states did not exceed projected spending on children. These four shortfall states also
received all of the unspent FY2003 funds, which were not limited to covering the
costs of SCHIP benefits for children only. After these reallocations, the four shortfall
states that cover adults are still projected to have a shortfall of about $2.75 million
in FY2006. This deficit is due to the 1.05% set-aside from the $283 million in DRA
funds earmarked for the territories that was not accounted for in determining the
total appropriation necessary to fully cover all anticipated shortfalls in FY2006. Both
the reallocated unspent FY2003 funds and the DRA funds are available only during
FY2006.
Access to reallocated funds (i.e., redistributed and retained funds from prior
years) has added another layer of complexity to SCHIP financing. During FY2006,
all states have access to original allotments from FY2004, FY2005, and FY2006.
Selected states also have access to reallocated FY2003 funds and newly appropriated
DRA funds (described above). Generally, when multiple accounts are available
simultaneously, expenditures are applied against reallocated and original allotments
in chronological order from earliest to most recent. However, in regulations, CMS
has allowed redistribution states only (i.e., states with excess spending that qualified
them for redistribution of unspent funds from other states) the option of defining the
10 All five territories also exceeded their FY2002 original allotments by the three-year
deadline. As with prior redistributions (see the “Legislative History” section below for more
details), 1.05% of all unspent FY2002 funds was set aside for the territories. Each received
an amount equal to its original allotment for FY2002 divided by the sum of FY2002
allotments among the territories.
11 For a more detailed description of the distribution of unspent FY2003 original allotments
and the DRA funds, see by CRS Report RL32807, SCHIP Financing: Funding Projections
and State Redistribution Issues, by C. Peterson.

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order for applying expenditures against available redistribution accounts. That is, to
optimize the use of funds, such states were given the flexibility to decide whether to
use redistributed funds before or after other available funds/accounts. Once a
specific order is chosen for a given set of open accounts, such states are not allowed
to change that order (until a new redistribution account is added to the set).
Other Factors Affecting Federal Financing. Like Medicaid, SCHIP is
a federal-state matching program. For each dollar of state spending, the federal
government makes a matching payment drawn from SCHIP accounts. A state’s share
of program spending for Medicaid is equal to 100% minus the federal medical
assistance percentage (FMAP). The enhanced SCHIP FMAP is equal to a state’s
Medicaid FMAP increased by the number of percentage points that is equal to 30%
multiplied by the number of percentage points by which the FMAP is less than
100%.12 For example, in states with a Medicaid FMAP of 60%, the enhanced FMAP
equals the Medicaid FMAP increased by 12 percentage points (60% + [30%
multiplied by 40 percentage points] = 72%.) In this example, the state share is 100%
- 72% = 28%.
Compared with the Medicaid FMAP, which ranges from 50% to 76% in
FY2006, the enhanced FMAP for SCHIP ranges from 65% to 83.2%. All SCHIP
assistance for targeted low-income children, including coverage provided under
Medicaid, is eligible for the enhanced FMAP. The Medicaid FMAP and the
enhanced SCHIP FMAP are subject to a ceiling of 83% and 85%, respectively.
There is a limit on federal spending for SCHIP administrative expenses, which
include activities such as data collection and reporting, as well as outreach and
education. For federal matching purposes, a 10% cap applies to state administrative
expenses. This cap is tied to the dollar amount that a state draws down from its
annual allotment to cover benefits under SCHIP, as opposed to 10% of a state’s total
annual allotment. In other words, no more than 10% of the federal funds that a state
draws down for SCHIP benefit expenditures can be used for administrative expenses.
General Program Characteristics
All 50 states, the District of Columbia, and five territories have SCHIP
programs in operation. As of June 2006, 17 use Medicaid expansions, 18 use
separate state programs, and 21 use a combination approach. Three states received
authority under the Balanced Budget Act of 1997 to operate previously existing
comprehensive state-based plans as their separate SCHIP program. Among other
types of separate SCHIP programs, data from June 2003 indicate that most of the
benchmark and benchmark-equivalent plans are based on the state employees’ health
plan, and most secretary-approved plans are modeled after Medicaid.
12 The federal medical assistance percentage (FMAP) and the enhanced federal medical
assistance percentage (enhanced FMAP) are calculated and published annually by the
Secretary of DHHS. FMAP is a measure of the per capita income in each state, squared,
compared to that of the nation as a whole. This formula is designed to provide a higher
FMAP to states with lower per capita income.

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SCHIP programs across states are evolving rapidly, as evidenced by the
numerous changes states have made to their original state plans over time. As of
June 2006, 263 amendments to original state plans had been approved and 13 more
were in review.13 Most states have multiple amendments. The content of the plan
amendments varies among states. For example, some states use amendments to
extend coverage beyond income levels defined in their original state plans. Others
define new copayment standards for program participants. Still others modify benefit
packages.
In addition to the amendment process, states that want to make changes to their
SCHIP programs that go beyond what the law will allow may do so through what is
called a Section 1115 waiver (named for the section of the Social Security Act that
defines the circumstances under which such waivers may be granted). The Secretary
of Health and Human Services may waive certain statutory requirements for
conducting research and demonstration projects under SCHIP that allow states to
adapt their programs to specific needs. On August 4, 2001, the Bush Administration
announced the Health Insurance Flexibility and Accountability (HIFA)
Demonstration Initiative. Using Section 1115 waiver authority, this initiative is
designed to encourage states to extend Medicaid and SCHIP to the uninsured, with
a particular emphasis on statewide approaches that maximize private health insurance
coverage options and target populations with income below 200% FPL.
As of March 2006, 15 states had approved SCHIP Section 1115 waivers.14 Four
additional Section 1115 waiver proposals (three for new waivers and one for an
amendment to an existing waiver) were under review at that time. Eleven states
(Arizona, Arkansas, California, Colorado, Idaho, Illinois, Michigan, New Jersey,
New Mexico, Oregon, and Virginia) have approved HIFA demonstrations. In 12
states with approved waivers (Arizona, California,15 Colorado, Idaho, Illinois,
Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Virginia, and
Wisconsin), SCHIP coverage is expanded to include one or more categories of
adults16 with children, typically parents of Medicaid/SCHIP children, caretaker
relatives, legal guardians, and/or pregnant women. Four states (Arizona, Michigan,
New Mexico, and Oregon) also cover childless adults under their waivers. The
13 The source for this information can be found at [http://www.cms.hhs.gov/
LowCostHealthInsFamChild/downloads/SCHIPStatePlanActivityMap.pdf].
14 The 15 states are Alaska, Arizona, Arkansas, California, Colorado, Idaho, Illinois,
Michigan, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Virginia, and
Wisconsin. This information is taken from the following source: [http://www.cms.hhs.gov/
LowCostHealthInsFamChild/downloads/Section1115ReportApprovedUnderReview.pdf].
There may be other combined Medicaid/SCHIP waivers that also implement policies similar
to those described in this section. Such waivers are not represented in this discussion.
15 California has not yet implemented its parental expansion.
16 States have the option to purchase family coverage under a group health plan or health
insurance coverage that may cover adults as long as it is cost-effective to do so (relative to
the amount paid for comparable coverage for the children only), and it must not substitute
for health insurance that would otherwise be provided to the children. For states seeking
greater flexibility both in selecting which adults to cover and in the benefit package offered
to those adults, a waiver is required.

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CRS-10
Deficit Reduction Act of 2005 (DRA) prohibits new waivers that would use SCHIP
funds to provide coverage to non-pregnant, childless adults (see the “Legislative
History” section below for more details).
In addition to expanding coverage to new populations under waivers, some
states have used this authority for other purposes. For example, two states (Alaska
and New Mexico) require periods of no insurance prior to enrollment under their
waivers.17 New Mexico also modified its cost-sharing rules for targeted low-income
children under its Medicaid program. Seven states (Arkansas, Colorado, Idaho,
Illinois, New Mexico, Oregon, and Virginia) offer premium assistance programs for
employer-sponsored insurance under waiver authority. New York’s demonstration
provided temporary disaster relief in New York City due to the events of September
11, 2001. Finally, Ohio received approval to implement an annual enrollment fee
and to give 12 months of continuous eligibility for certain targeted low-income
children in its Medicaid program.18
Trends in Enrollment and Expenditures
Early enrollment estimates indicated that nearly 1 million children (982,000)
were enrolled in SCHIP under 43 operational state programs as of December 1998.19
Nearly two million children (1,979,450) were enrolled in SCHIP during FY1999
under 53 operational state programs.20 The latest official numbers show that SCHIP
enrollment reached a total of nearly 6.2 million children in FY2004 (see Table 1).
Of this total, almost 4.4 million were covered in separate state programs, and 1.8
million were targeted low-income children under Medicaid.
Although total SCHIP enrollment has steadily increased over time at the
national level, some states have occasionally experienced year-to-year declines in the
number of children covered. For example, between FY2003 and FY2004,21 annual
SCHIP enrollment in 12 states fell. Seven of these states22 had single-digit
17 SCHIP separate state programs have the authority of impose waiting periods without
seeking special approval, and many do so. In general, for Medicaid expansions under
SCHIP, all Medicaid rules apply. Thus, when states with SCHIP Medicaid expansions such
as Alaska and New Mexico want to implement other rules (e.g., establish waiting periods
before enrollment, implement enrollment fees, etc.), a waiver is required.
18 Due to a variety of budget and resource constraints, in May 2002, Ohio decided not to
implement its waiver.
19 U.S. Health Care Financing Administration, A Preliminary Estimate of the Children’s
Health Insurance Program Aggregate Enrollment Numbers Through Dec. 31, 1998
(background only), Apr. 20, 1999.
20 U.S. Health Care Financing Administration, The State Children’s Health Insurance
Program, Annual Enrollment Report, Oct. 1, 1998-Sept. 30, 1999 (no date).
21 For detailed state-by-state FY2003 and FY2004 SCHIP enrollment data for children and
adults, see [http://www.cms.hhs.gov/NationalSCHIPPolicy/SCHIPER/list.asp].
22 Maine -1.0%; Wisconsin -1.1%, Kansas -2.9%; Arizona -3.1%; Alaska -4.2%; Florida -
5.3%; and New York -7.8%.

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CRS-11
percentage declines, while five states23 had double-digit percentage reductions in
enrollment.
Eight states also reported enrollment of about 646,000 adults in SCHIP in
FY2004 (see Table 1), up from nearly 484,000 in FY2003. Six of these states had
increases in adult enrollment between these two fiscal years, while two (Minnesota
and New Jersey) had a decline.24 Finally, in FY2004, adult enrollment exceeded
child enrollment in four states (Arizona, Michigan, Minnesota, and Wisconsin).
Expenditures under SCHIP have been the subject of much debate and
controversy almost since the program’s inception. Despite the fact that most states
began enrolling children in SCHIP in late 1997 or 1998 (see Table 1), new programs
always take time to get off the ground and participation rates in the early years of
SCHIP rose more slowly than expected. As a consequence, spending was slow to
ramp up too, as evidenced by the fact that a minority of states (12 to 19, depending
on the year) fully expended their original FY1998-FY2001 allotments by the
applicable three-year deadlines (see Table 2). It was not until FY2005, when the
redistribution of unspent FY2002 funds took place, that more than half of the states
(28) succeeded in qualifying for a portion of these unused funds because they spent
all their own FY2002 allotments within the three-year period of availability. Even
more states, a total of 40, exhausted their FY2003 allotments by the end of FY2006.
But only selected shortfall states actually received the unspent FY2003 funds, as
described above.
Table 3 provides a historical snapshot of SCHIP funding and expenditures for
FY1998-FY2005. A total of $30.5 billion of the total federal SCHIP appropriation
of nearly $40 billion was made available to states and territories during this period.
By the end of FY2005, nearly 77% ($23.4 billion) of these funds was spent.
However, an additional $1.4 billion available to 11 states actually expired by the
close of FY2005; these expired funds were comprised of unspent FY1998 to FY2002
reallocated monies. The column displaying net funds gained or lost through the
reallocation process indicates that 31 states forfeited more funds to redistribution
than they received. California (-$1.5 billion) and Texas (-$808 million) had the
largest absolute net losses, while New York ($1.8 billion)25 and New Jersey ($531
million) had the largest absolute net gains.
Table 4 displays available SCHIP funds and estimated expenditures for the
current fiscal year, FY2006. During FY2006, several SCHIP accounts are active,
including the following:
23 Texas -10.4%; Maryland -14.3%; South Carolina -16.7%; Nevada -18.4%; and Nebraska
-26.8%.
24 In one additional state, Colorado covered 1,423 adults under SCHIP in FY2003, but did
not report adult enrollment data to CMS for FY2004.
25 Even though New York gained access to a lot of additional federal dollars through
reallocations during this period, $951 million in SCHIP funds for this state still expired by
the end of FY2005.

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CRS-12
! reallocated FY2003 funds and the new DRA appropriation of $283
million to cover shortfalls, available only in FY2006, and
! original allotments for FY2004, FY2005, and FY2006, each
available for a three-year period.
Only 11 states forfeited unspent FY2003 funds. As noted previously, only 12
of the 40 redistribution states (plus the five territories) received additional funds
through the reallocation of unspent FY2003 funds and/or the DRA appropriation.
After these distributions, four shortfall states (specifically those covering adults under
SCHIP) are still projected to have a continuing shortfall of about $2.75 million in
FY2006. This deficit is due to the 1.05% set-aside for the territories that was not
accounted for in determining the total appropriation necessary to fully cover all
anticipated shortfalls in FY2006. Of the $10.1 billion available this fiscal year, states
estimate they will spend nearly $6 billion during FY2006.
Forthcoming SCHIP Issues
As with previous Congresses, the main SCHIP policy issue facing the 109th
Congress is federal financing — specifically, dealing with insufficient unspent funds
to prevent state shortfalls as well as identifying the best method for allocating
original allotments among states. In the early years of SCHIP, the majority of states
had not used available SCHIP allotments within applicable time frames, and these
unspent funds were on the verge of expiring (to be returned to the Treasury). These
states wanted continued access to their unspent funds, perhaps to support program
expansions, but the law established in the Balanced Budget Act of 1997 (BBA 97)
required that such funds be redistributed among only those states that fully exhausted
their own allotments (12 to 19 states, depending on the fiscal year). In response,
Congress passed reallocation legislation that tried to strike a balance between
rewarding fast-spending states with additional funds, while giving slow-spending
states continued access to a portion of their unused funds.
The BBA 97 rule applies to the redistribution of unspent SCHIP funds for
FY2002 allotments forward. The Administration reallocated roughly $643 million
in unspent FY2002 funds among 28 states that had exhausted their own FY2002
allotments, six of which had projected shortfalls in FY2005. For FY2006, unspent
FY2003 allotments and a new appropriation under DRA were distributed among 12
shortfall states only. While this distribution was intended to cover the shortfalls
among these states, a shortfall of $2.75 million remained due to a set-aside in the
DRA appropriation for the territories.
The 109th Congress continues to face a shrinking pool of unspent funds to be
reallocated among the states. With each passing year, more states have been able to
spend their full allotments, leaving less and less funds to meet growing state
financing needs. States’ projected need for federal SCHIP funds for FY2007 points
to a likely shortfall in 18 states.26 In response, states may choose to cut back their
26 CRS has developed a model for projecting states’ need for federal SCHIP funds based on
current law assumptions. Results from this analysis are discussed in CRS Report RL32807,
(continued...)

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CRS-13
programs through reducing the number of beneficiaries, limiting benefits, lowering
provider reimbursement rates, etc. However, it is important to note that when SCHIP
was created under BBA 97, Congress intended for this program to be a capped
federal grant to states, not an individual, open-ended entitlement; and SCHIP remains
so today.
In addition, Congress will also be faced with reauthorizing SCHIP either this
fiscal year or in FY2007, when the current period of authorization ends. Such
reauthorization may further define the core populations to be served under SCHIP
(i.e., children versus parents/caretaker relatives versus other adults), which may be
incorporated in new criteria for distributing federal funds — both reallocation of
unspent funds and new original allotments — among states into the future.
SCHIP Legislative History
Below is a summary of major SCHIP changes enacted in public laws beginning with
the legislation authorizing the program in 1997:
Balanced Budget Act of 1997 (BBA 97), P.L. 105-33:
1. Creation of SCHIP. — Under BBA 97, the State Children’s Health Insurance
Program was established, effective August 5, 1997. A number of provisions
specified eligibility criteria; coverage requirements for health insurance; federal
allotments and the state allocation formula; payments to states and the enhanced
FMAP formula; the process for submission, approval and amendment of state SCHIP
plans; strategic objectives and performance goals, and plan administration; annual
reports and evaluations; options for expanding coverage of children under Medicaid;
and diabetes grant programs.
District of Columbia Appropriations Act of 1998, P.L. 105-100:
1. Increased Appropriation. This law increased the FY1998 SCHIP appropriation
from $4.275 billion to $4.295 billion.
Omnibus Consolidated and Emergency Supplemental Appropriation Act, FY1999,
P.L. 105-277:
1. Increased Appropriation for Territories. For FY1999, an additional appropriation
of $32 million for the territories was provided, bringing the FY1999 total
appropriation to $4.307 billion.
2. Change in Allotment Formula Affecting Some Native American Children. For
FY1998 and FY1999, the law changed the annual state allotment formula by
stipulating that children with access to health care funded by the Indian Health
26 (...continued)
SCHIP Financing: Funding Projections and State Redistribution Issues, by Chris L.
Peterson.

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CRS-14
Service and no other health insurance would be counted as uninsured (rather than as
insured as required under the previously existing law).
The Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999
(BBRA 99), incorporated by reference in the Consolidated Appropriations Act for
Fiscal Year 2000, P.L. 106-113:
1. Stabilizing the SCHIP Allotment Formula. Annual federal allotments to each state
are determined in part by states’ success in covering previously uninsured low-
income children under SCHIP. Under prior law, the more successful a state was in
enrolling children in SCHIP, especially early in the program, the greater the potential
reduction in subsequent annual allotments. To limit the amount a state’s allocation
can fluctuate from one year to the next, BBRA 99 modified the allotment distribution
formula and established new floors and ceilings.
2. Targeted, Increased Allotments. Additional allotments for the commonwealths
and territories were provided for FY2000-FY2007.
3. Improved Data Collection. The law provided new funding for the collection of
data to produce reliable, annual state-level estimates of the number of uninsured
children. These data changes will improve research and evaluation efforts. They will
also affect state-specific counts of the number of low-income children and the
number of such children who are uninsured that feed into the formula that determines
annual state-specific allotments from federal SCHIP appropriations.
4. Federal Evaluation. New funding was also provided for a federal evaluation27 to
identify effective outreach and enrollment practices for both SCHIP and Medicaid,
barriers to enrollment, and factors influencing beneficiary drop-out.
5. Additional Reports and a Clearinghouse. The law also required (a) an inspector
general audit28 and GAO report on enrollment of Medicaid-eligible children in
SCHIP,29 (b) states to report annually the number of deliveries to pregnant women
and the number of infants who receive services under the Maternal and Child Health
Services Block Grant or who are entitled to SCHIP benefits, and (c) the Secretary of
Health and Human Services to establish a clearinghouse for the consolidation and
coordination of all federal databases and reports regarding children’s health.
27 Implementation of the State Children’s Health Insurance Program: Momentum is
Increasing After a Modest Start, First Annual Report, Cambridge, MA: Mathematica Policy
Research, Inc., Jan. 2001. For additional reports describing results from other components
of the national evaluation of SCHIP, go to [http://aspe.os.dhhs.gov/health/schip/background.
htm].
28 The OIG has issued two audit reports: Department of Health and Human Services, Office
of Inspector General, State Children’s Health Insurance Program: Assessment of State
Evaluations Reports, OEI-05-00-00240, Feb. 2001, and Department of Health and Human
Services, Office of Inspector General, State Children’s Health Insurance Program:
Ensuring Medicaid Eligibles are not Enrolled in SCHIP, OEI-05-00-00241, Feb. 2001.
29 U.S. General Accounting Office, Children’s Health Insurance: Inspector General
Reviews Should Be Expanded to Further Inform the Congress, GAO-02-512, Mar. 2002.

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CRS-15
Agriculture Risk Protection Act of 2000, P.L. 106-224:
1. Information Sharing. This law allows schools operating federally subsidized
school meal programs to take a more active role in identifying children eligible for,
and enrolling such children in, the Medicaid and SCHIP programs. It permits schools
to share income and other relevant information collected when determining eligibility
for free and reduced-price school meals with state Medicaid and SCHIP agencies, as
long as there is a written agreement that limits use of the information and parents are
notified and given a chance to “opt out.”
2. Demonstration Project. The law also establishes a demonstration project in one
state in which administrative funds under the Special Supplemental Nutrition
Program for Women, Infants and Children (WIC) may be used to help identify
children eligible for, and enroll such children in, the Medicaid and SCHIP programs.
Children’s Health Act of 2000, P.L. 106-310:
1. Rights of Institutionalized Children. The law requires that general hospitals,
nursing facilities, intermediate care facility and other health care facilities receiving
federal funds, including SCHIP, protect the rights of each resident, including the right
to be free from physical or mental abuse, corporal punishment, and any restraints or
involuntary seclusions imposed for the purposes of discipline or convenience.
Restraints and seclusion may be imposed in such facilities only to ensure the physical
safety of the resident, a staff member or others. Additional requirements govern
reporting of resident deaths, promulgation of regulations regarding staff training, and
enforcement.
2. Children’s Rights in Community-Based Settings. The law also includes
requirements for protecting the rights of residents of certain non-medical,
community-based facilities for children and adolescents, when that facility receives
funding under this act or under Medicaid. (Existing regulations do not clarify if and
how these rights apply to such facilities funded by SCHIP.) For such individuals and
facilities, restraints and seclusion may only be imposed in emergency circumstances
and only to ensure the physical safety of the resident, a staff member or others, and
less restrictive interventions have been determined to be ineffective. Additional
requirements govern reporting of resident deaths, promulgation of regulations
regarding staff training, and enforcement.
Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA), incorporated by reference into the Consolidated Appropriations Act 2001,
P.L. 106-554:
1. Special Redistribution Rules for Unspent FY1998 and FY1999 Allotments. For
each of these years separately, a pool of unspent funds is created from the unused
allotment amounts of those states that did not fully expend their original allotments
within the applicable three-year time frame. From this pool, 1.05% is set aside for
the territories that fully exhaust their original allotments. Each such territory receives
a percentage of the available 1.05% pool equal to that territory’s original allotment
divided by the sum of original allotments for such territories. Then the states that did
fully expend their original allotments within the three-year deadline receive access

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CRS-16
to redistributed funds from the remaining pool equal to the amount by which their
three-year spending exceeds their original allotments.30 The remaining states that did
not use all their original allotments for the year retain access to a portion of the
remaining funds in the pool, equal to the ratio of such a state’s unspent original
allotment to the total amount of unspent funds for that fiscal year. These latter states
are permitted to use up to 10% of their retained FY1998 funds for outreach activities.
This allowance is over and above spending for such activities under the general
administrative cap described above. The deadline for spending all redistributed and
retained funds from FY1998 and FY1999 is September 30, 2002, although this date
was extended by P.L. 108-74 as described below. (See the text for additional
information on redistribution of unspent SCHIP funds.)
2. Presumptive Eligibility. Under Medicaid presumptive eligibility rules, states are
allowed to temporarily enroll children whose family income appears to be below
Medicaid income standards, until a final formal determination of eligibility is made.
BIPA clarified states’ authority to conduct presumptive eligibility determinations, as
defined in Medicaid law, under separate (non-Medicaid) SCHIP programs.
3. Authority to Pay SCHIP Medicaid Expansion Costs from Title XXI Appropriation.
Under prior law, states’ allotments under SCHIP paid only the federal share of costs
associated with separate (non-Medicaid) SCHIP programs. The federal share of costs
associated with covering targeted low-income children under Medicaid was paid for
by Medicaid. State SCHIP allotments were reduced by the amounts paid by
Medicaid for such costs. BIPA authorized the payment of the costs of targeted low-
income children under Medicaid, and the costs of benefits provided during periods
of presumptive eligibility, from the SCHIP appropriation rather than the Medicaid
appropriation, and as a conforming amendment, eliminated the requirement that state
SCHIP allotments be reduced by these (former) Medicaid payments. Also, for
FY1998-FY2000 only, BIPA authorized the transfer of unexpended SCHIP
appropriations to the Medicaid appropriation account for the purpose of reimbursing
payments made on behalf of targeted low-income children under Medicaid.
Public Health Security and Bioterrorism Preparedness and Response Act of 2002,
P.L. 107-188:
1. Waiver of Provider Requirements and Medicare+Choice Payment Limits. The
law authorizes the Secretary to temporarily waive conditions of participation and
other certification requirements for any entity that furnishes health care items or
services to Medicare, Medicaid, or SCHIP beneficiaries in an emergency area during
a declared disaster or public health emergency. During such an emergency, the
Secretary may waive: (a) participation, state licensing (as long as an equivalent
license from another state is held and there is no exclusion from practicing in that
state or any state in the emergency area), and pre-approval requirements for
physicians and other practitioners; (b) sanctions for failing to meet requirements for
emergency transfers between hospitals; (c) sanctions for physician self-referral; and
(d) limitations on payments for health care and services furnished to individuals
30 For example, if a state’s FY1998 allotment was $10 million, and the state’s FY1998,
FY1999 and FY2000 spending totaled $12 million, the state would receive access to a
redistribution of $2 million.

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CRS-17
enrolled in Medicare+Choice (M+C) plans when services are provided outside the
plan. To the extent possible, the Secretary must ensure that M+C enrollees do not
pay more than would have been required had they received care within their plan
network.
2. Notification to Congress. The law also requires the Secretary to provide Congress
with certification and written notice at least two days prior to exercising this waiver
authority. It also provides for this waiver authority to continue for 60 days, and
permits the Secretary to extend the waiver period.
3. Evaluation. The Secretary is further required, within one year after the end of the
emergency, to provide Congress with an evaluation of this approach and
recommendations for improvements under this waiver authority.
Health Care Safety Net Amendments of 2002, P.L. 107-251:
1. Study of Migrant Farm Workers. This law requires the Secretary to conduct a
study of the problems experienced by farm workers and their families under
Medicaid and SCHIP, specifically, barriers to enrollment, and lack of portability of
Medicaid and SCHIP coverage for farm workers eligible in one state who move to
other states on a periodic basis. The Secretary must also identify possible strategies
to increase enrollment and access to benefits for these families. Strategies to be
examined must include (a) use of interstate compacts to establish portability and
reciprocity, (b) multi-state demonstration projects, (c) use of current law flexibility
for coverage of residents and out-of-state coverage, (d) development of programs of
national migrant family coverage, (e) use of incentives to private coverage
alternatives, and (f) other solutions as deemed appropriate. In conducting the study,
the Secretary must consult with several groups. The Secretary must submit a report
on this study to the President and Congress in October 2003. This report shall
address findings and conclusions and provide recommendations for appropriate
legislative and administrative action.
State Children’s Health Insurance Program Allotments Extension Act, P.L. 108-74:
1. Extension of Available SCHIP Reallocated Funds from FY1998 and FY1999.
This law extends the availability of FY1998 and FY1999 reallocated funds through
the end of FY2004 (rather than the end of FY2002).

2. Revision of Methods for Reallocation of Unspent FY2000 and FY2001, and
Extension of the Availability of Such Funds. The law also establishes a new method
for reallocating unspent funds from FY2000 and FY2001 allotments. For each of
these years separately, a pool of unspent funds is created from the unused allotment
amounts of those states that did not fully expend their original allotments within the
applicable three-year time frame. From this pool, 1.05% is set aside for the territories
that fully exhaust their original allotments. Each such territory receives a percentage
of the available 1.05% pool equal to that territory’s original allotment divided by the
sum of original allotments for such territories. For each year separately, each state
that does not spend its full original allotment by the three-year deadline retains 50%
of its unspent funds. Then the remaining pool is allocated to each state that fully
expends (exceeds) its original allotment by the three-year deadline. The
redistribution amount for each such state is based on the proportion of its excess

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CRS-18
spending relative to the total amount of excess spending for all such states.
Reallocated funds for FY2000 and FY2001 are available until the end of FY2004 and
FY2005, respectively.
3. Authority for Qualifying States to Use Certain Funds for Medicaid Expenditures.
For specific expenditures occurring after August 15, 2003, the law permits certain
states to apply federal SCHIP funds toward the coverage of certain children enrolled
in regular Medicaid (not a SCHIP Medicaid expansion). Specifically, qualifying
states may spend their available balances from FY1998-FY2001 (up to a maximum
of 20% of those original allotments) for services delivered to Medicaid beneficiaries
under age 19 who are not otherwise eligible for SCHIP and have family income that
exceeds 150% of the FPL. For such services, these federal SCHIP funds can be used
to pay the difference between the SCHIP enhanced federal matching rate and the
regular Medicaid federal matching rate the state receives for these children.
Qualifying states include those that on or after April 15, 1997 had an income
eligibility standard of at least 185% of the FPL for at least one category of children,
other than infants. (Other qualifications apply to states with statewide waivers under
Section 1115 of the Social Security Act.) Under this law, the qualifying states
included Connecticut, Minnesota, New Hampshire, Tennessee, Vermont,
Washington, and Wisconsin. (See below for changes to this section of this law.)
Technical Corrections with Respect to the Definition of Qualifying State, P.L. 108-
127:
1. Change in the Income Standard and Applicable Dates. This law modified P.L.
108-74 by changing the income eligibility standard affecting some qualifying states
from 185% to 184% of the FPL. It also modified applicable dates with respect to
certain states with Section 1115 waivers that covered children in families with
income of at least 185% of the FPL. The effect of these changes was to add four
states (i.e., Hawaii, Maryland, New Mexico, and Rhode Island) to the set of
qualifying states, thus allowing them to also use certain funds for Medicaid
expenditures (see above description for P.L. 108-74).
Deficit Reduction Act of 2005, P.L. 109-171:
1. Additional allotments to eliminate FY2006 funding shortfalls. This law
appropriated $283 million for shortfall states and territories in FY2006. A shortfall
state was defined as a state that the Secretary estimated would have expenditures in
FY2006 that exceed the sum of all available SCHIP funds in that year (i.e.,
reallocated unspent FY2003 funds, balances remaining from FY2004 and FY2005
original allotments, and FY2006 original allotments), based on the most recent
SCHIP data as of December 31, 2005. From the new FY2006 appropriation, after a
1.05% set-aside for the territories, each FY2006 shortfall state received an allotment
intended to cover its projected shortfall. On October 1, 2006, any remaining unspent
additional allotments revert to the Treasury. The additional FY2006 appropriation
is restricted to payments for benefits provided to targeted low-income children only.
2. Prohibition against covering non-pregnant, childless adults with SCHIP funds.
The Secretary of HHS is prohibited from approving new 1115 waivers, on or after
October 1, 2005, that would use SCHIP funds to provide coverage to non-pregnant,
childless adults. The Secretary may continue to approve projects that expand SCHIP

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CRS-19
to caretaker relatives of Medicaid- or SCHIP-eligible children, and to pregnant
adults. Existing waivers that use SCHIP funds to cover non-pregnant, childless
adults (including extensions, amendments, and renewals of such waivers) that were
approved before enactment of DRA are allowed to continue.
3. Continued authority for qualifying states to use SCHIP funds for certain Medicaid
expenditures. The law allows qualifying states to use any available FY2001,
FY2004, and FY2005 SCHIP funds (i.e., original allotments and/or reallocated funds,
as applicable) for coverage of certain children enrolled in regular Medicaid (not an
SCHIP Medicaid expansion) for such Medicaid payments made on or after October
1, 2005, up to the 20% allowance. See the discussion of P.L. 108-74 and P.L. 108-
127 for more details.

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CRS-20
Table 1. SCHIP Enrollment Data for the 50 States and the
District of Columbia for FY2004
Adults
SCHIP
FY2004 enrollment (number of
ever
upper
Date
children ever enrolled during year)
enrolled in
income
State
enrollment
SCHIP
eligibility
began
Separate
demonstrations
standard
Medicaid child health
Total
during
(% FPL)
expansion
program
FY2004
Alabama (S)
2/1/98
200%
79,407
79,407
Alaska (M)
3/1/99
175%
21,966
21,966
Arizona (S)
11/1/98
200%
87,681
87,681
113,490
Arkansas a (M)
10/1/98
200%
799
799
California (C)
3/1/98
250%
152,041
883,711
1,035,752
Coloradob (S)
4/22/98
185%
57,244
57,244
NR
Connecticut (S)
7/1/98
300%
21,438
21,438
Delaware (C)
2/1/99
200%
181
10,069
10,250
District of Columbia
(M)
10/1/98
200%
6,093
6,093
Florida (C)
4/1/98
200%
2,031
417,676
419,707
Georgia (S)
11/1/98
235%
280,083
280,083
Hawaii (M)
7/1/00
200%
19,237
19,237
Idaho (M)
10/1/97
185%
17,879
1,175
19,054
Illinois (C)
1/5/98
200%
95,522
138,505
234,027
120,152
Indiana (C)
10/1/97
200%
55,187
25,511
80,698
Iowa (C)
7/1/98
200%
14,996
26,640
41,636
Kansas (S)
1/1/99
200%
44,350
44,350
Kentucky (C)
7/1/98
200%
60,496
34,004
94,500
Louisiana (M)
11/1/98
200%
105,580
105,580
Maine (C)
7/1/98
200%
20,204
8,967
29,171
Maryland (C)
7/1/98
300%
101,664
9,824
111,488
Massachusetts (C)
10/1/97
200%
119,377
47,131
166,508
Michigan (C)
5/1/98
200%
31,427
56,136
87,563
132,590
Minnesota (C)
10/1/98
280%
110
4674
4784
39,571
Mississippi (S)
7/1/98
200%
82,900
82,900
Missouri (M)
9/1/98
300%
176,014
176,014
Montana (S)
1/1/99
150%
15,281
15,281
Nebraska (M)
5/1/98
185%
33,314
33,314
Nevada (S)
10/1/98
200%
38,519
38,519
New Hampshire (C)
5/1/98
300%
598
10,371
10,969
New Jersey (C)
3/1/98
350%
39,870
87,374
127,244
88,826
New Mexico (M)
3/31/99
235%
20,804
20,804
New York (C)
4/15/98
250%
136476
690,135
826,611
North Carolina (S)
10/1/98
200%
174,434
174,434
North Dakota (C)
10/1/98
140%
1,845
3,292
5,137
Ohio (M)
1/1/98
200%
220,190
220,190
Oklahoma (M)
12/1/97
185%
100,761
100,761
Oregon (S)
7/1/98
185%
46,720
46,720
4,294
Pennsylvania (S)
5/28/98
200%
177,415
177,415

---

CRS-21
Adults
SCHIP
FY2004 enrollment (number of
ever
upper
Date
children ever enrolled during year)
enrolled in
income
State
enrollment
SCHIP
eligibility
began
Separate
demonstrations
standard
Medicaid child health
Total
during
(% FPL)
expansion
program
FY2004
Rhode Island (C)
10/1/97
250%
24,089
1,484
25,573
23,327
South Carolina (M)
10/1/97
185%
75,597
75,597
South Dakota (C)
7/1/98
200%
10,338
3,059
13,397
Tennessee c (M)
10/1/97
Texas (S)
7/1/98
200%
650,856
650,856
Utah (S)
8/3/98
200%
38,693
38,693
Vermont (S)
10/1/98
300%
6,693
6,693
Virginia (C)
10/22/98
200%
41,651
57,918
99,569
Washington (S)
2/1/00
250%
17,002
17,002
West Virginia (S)
7/1/98
200%
36,906
36,906
Wisconsin (M)
4/1/99
185%
67,893
67,893
123,999
Wyoming (S)
12/1/99
185%
5,525
5,525
Total
—
—
1,773,431
4,379,602
6,153,033
646,159
Source: Data on date enrollment began is from the Centers for Medicare and Medicaid Services, The
State Children’s Health Insurance Program, Annual Enrollment Report Federal Fiscal Year 2001:
October 1, 2000-September 30, 2001, Feb. 6, 2002. The SCHIP upper income eligibility standards
are taken from Table 1 in Beneath the Surface: Barriers Threaten to Slow Progress on Expanding
Health Coverage of Families and Children, by Donna Ross and Laura Cox, The Kaiser Commission
on Medicaid and the Uninsured, Oct. 2004. The state-reported SCHIP enrollment figures are taken
from Centers for Medicare and Medicaid Services, Revised FY2004 Number of Children Ever
Enrolled in SCHIP by Program Type, May 23, 2005. For states with combination programs, the
“total” column shows the sum of the unduplicated number of children ever enrolled in the SCHIP
Medicaid expansion program during the year and the unduplicated number of children ever enrolled
in the separate SCHIP program during the year. Because a child may be enrolled in both programs
during the year, there may be some double counting of children enrolled in these states. SCHIP
enrollment figures for the territories are not available.
Notes: S — Separate child health programs; M — Medicaid expansion programs; C — Combination
programs. NR — Indicates that state has not reported data via the SCHIP Statistical Enrollment Data
System (SEDS). FPL = poverty level.
a. Arkansas did not report enrollment data for its SCHIP Medicaid expansion in the SEDS database
for FY2004. Under its comprehensive Medicaid Section 1115 waiver, this state uses a
combination of Medicaid and SCHIP funds to cover uninsured children through age 18 in
families with income up to 200% FPL. Waiver documents indicate that 77,246 children were
enrolled in this demonstration as of January 2004.
b. Colorado reported in a letter that due to a new system they were only able to provide accurate data
for 10.5 months for FY2004.
c. Tennessee used SCHIP funds to expand its existing comprehensive Medicaid Section 1115 waiver
program. Under the state’s SCHIP Medicaid expansion, Tennessee began enrolling children in
October 1997 through FY2002. In that year, enrollment reached 10,216. Eligibility for this
Medicaid expansion program was limited to older children in families with income up to 100%
FPL. As of October 1, 2002, all such children had to be covered under regular Medicaid, that
is, they were no longer eligible for SCHIP coverage. Thus, Tennessee has no SCHIP enrollment
subsequent to FY2002.

---

CRS-22
Table 2. States Qualifying for Redistribution of Unspent
FY1998-FY2003 Original Allotments
Exhausted
Exhausted
Exhausted
Exhausted
Exhausted
Exhausted
FY1998
FY1999
FY2000
FY2001
FY2002
FY2003
State
allotment
allotment
allotment
allotment
allotment
allotment
by FY2001 by FY2002 by FY2003 by FY2004 by FY2005 by FY2006
Alabama
Yes
Yes
Alaska
Yes
Yes
Yes
Yes
Yes
Yes
Arizona
Yes
Yes
Yes
Arkansas
Yes
California
Yes
Colorado
Yes
DC
Yes
Florida
Yes
Yes
Yes
Georgia
Yes
Yes
Yes
Hawaii
Yes
Illinois
Yes
Yes
Indiana
Yes
Yes
Yes
Iowa
Yes
Yes
Kansas
Yes
Yes
Yes
Yes
Kentucky
Yes
Yes
Yes
Yes
Yes
Yes
Louisiana
Yes
Yes
Maine
Yes
Yes
Yes
Yes
Yes
Yes
Maryland
Yes
Yes
Yes
Yes
Yes
Yes
Massachusetts
Yes
Yes
Yes
Yes
Yes
Yes
Michigan
Yes
Yes
Minnesota
Yes
Yes
Yes
Yes
Mississippi
Yes
Yes
Yes
Yes
Missouri
Yes
Yes
Yes
Yes
Montana
Yes
Yes
Nebraska
Yes
Yes
Yes
New Jersey
Yes
Yes
Yes
Yes
Yes
New York
Yes
Yes
Yes
Yes
Yes
Yes
North Carolina
Yes
Yes
Yes
Yes
Yes
North Dakota
Yes
Ohio
Yes
Yes
Oklahoma
Yes
Pennsylvania
Yes
Yes
Yes
Rhode Island
Yes
Yes
Yes
Yes
Yes
Yes
South Carolina
Yes
Yes
Yes
Yes
South Dakota
Yes
Yes
Yes
Utah
Yes
Virginia
Yes
West Virginia
Yes
Yes
Yes
Yes
Wisconsin
Yes
Yes
Yes
Yes
Yes
Wyoming
Yes
US
12
13
14
19
28
40
Source: Congressional Research Service (CRS) analysis of data from the Centers for Medicare and
Medicaid Services.
Note: All reallocated (redistributed and retained) funds for FY1998-FY2000 were available through
FY2004. All reallocated funds for FY2001 and FY2002 were available through FY2005. Although
40 states qualified for the redistribution of other states’ unspent FY2003 original allotments, only four
states (those that are facing shortfalls of federal SCHIP funds in FY2006 and that cover adults in their
SCHIP programs — Illinois, Minnesota, New Jersey and Rhode Island) received these funds.

---

CRS-23
Table 3. Status of FY1998-FY2005 Federal SCHIP Funds,
by State and Territory
(millions of dollars)
Amount of
FY1998-
Net funds gained
expired FY1998-
Federal SCHIP
FY2005
(forfeited) through
FY2002
States and
expenditures
original
reallocation of
reallocated
territories
through the end
SCHIP
FY1998-FY2002
SCHIP funds
of FY2005
allotments
original allotmentsa
through the end
of FY2005
Alabama
$541.1
($72.9)
$378.3
Alaska
$61.0
$97.5 $134.3
$8.6
Arizona
$856.1
$25.0 $856.6
Arkansas
$357.5
($134.0)
$130.5
$11.2
California
$5,454.4
($1,454.9)
$3,009.3
Colorado
$349.9
($54.9)
$193.0
Connecticut
$263.3
($82.9)
$109.5
Delaware
$69.7
($25.0)
$23.5
DC
$78.5
($24.3)
$37.7
Florida
$1,780.4
$49.6 $1,426.5
Georgia
$952.9
($36.9)
$835.4
Hawaii
$80.7
($23.9)
$38.1
Idaho
$141.5
($20.3)
$83.3
Illinois
$1,087.1
($228.0)
$818.2
Indiana
$492.1
$66.6 $439.0
Iowa
$221.8
($10.8)
$190.8
Kansas
$219.3
$31.6 $201.7
Kentucky
$381.4
$239.9 $429.4
$98.5
Louisiana
$637.1
($127.3)
$423.2
Maine
$94.0
$49.7 $115.8
$5.9
Maryland
$383.3
$389.9 $684.9
$8.1
Massachusetts
$386.5
$216.5 $501.9
$31.3
Michigan
$798.0
($152.6)
$521.3
Minnesota
$255.5
$39.4 $273.9
Mississippi
$386.4
$80.8 $450.9
Missouri
$411.8
$41.2 $415.9
Montana
$96.5
($5.2)
$70.0
Nebraska
$125.9
$0.1 $125.4
Nevada
$252.1
($59.2)
$117.5
New
$80.3
($30.0)
$28.6
Hampshire
New Jersey
$660.0
$530.6 $1,140.9
New Mexico
$374.1
($144.3)
$88.9
$33.1
New York
$2,067.0
$1,788.2 $2,417.5
$951.1

---

CRS-24
Amount of
FY1998-
Net funds gained
expired FY1998-
Federal SCHIP
FY2005
(forfeited) through
FY2002
States and
expenditures
original
reallocation of
reallocated
territories
through the end
SCHIP
FY1998-FY2002
SCHIP funds
of FY2005
allotments
original allotmentsa
through the end
of FY2005
North Carolina
$710.5
$165.1 $765.2
North Dakota
$44.9
($7.5)
$28.4
Ohio
$955.4
($14.2)
$804.7
Oklahoma
$509.0
($170.7)
$255.3
Oregon
$335.7
($112.0)
$134.9
Pennsylvania
$934.4
($33.1)
$705.5
Rhode Island
$71.7
$114.3 $185.9
South Carolina
$451.1
$144.0 $359.1
$152.2
South Dakota
$58.9
($1.0)
$50.4
Tennessee
$549.7
($189.1)
$68.0
$97.3
Texas
$3,469.5
($808.1)
$1,856.8
Utah
$209.3
($11.4)
$146.1
Vermont
$31.9
($6.2)
$16.8
Virginia
$525.4
($133.6)
$286.2
Washington
$414.1
($142.3)
$109.8
$11.5
West Virginia
$167.8
$24.7 $150.9
Wisconsin
$354.8
$141.5 $437.2
Wyoming
$51.7
($18.7)
$22.0
Puerto Rico
$261.0
$90.9 $299.3
Guam
$10.0
$3.5 $13.5
Virgin Islands
$7.4
$2.6 $8.6
American
$3.4
$1.2 $6.2
Samoa
N. Mariana
$3.1
$1.1 $8.3
Islands
Total
$30,528
$0
$23,431
$1,409
Source: Congressional Research Service (CRS) analysis of data from the Centers for Medicare and
Medicaid Services.
Note: Data are not additive across columns. For example, original allotments for FY2004 and
FY2005 remain available to states beyond FY2005, while other accounts have closed or expired.
a. These reallocations were first active in FY2001-FY2005, respectively.

---

CRS-25
Table 4. Status of FY2006 Federal SCHIP Funds,
by State and Territory
(millions of dollars)
Net funds
gained
Available
(forfeited)
balances
through
Original
Total
States’
from
reallocation of
FY2006
amount
FY2006
State
original
unspent
SCHIP
available in
spending
FY2004 and
FY2003
allotments
FY2006 b
estimate c
FY2005
original
allotments
allotments plus
DRA
appropriation a
Alabama
$64.2
$90.0
$154.1
$95.0
Alaska
$9.1
$15.6
$24.7
$23.8
Arizona
$107.4
$24.5
$131.9
$110.5
Arkansas
$43.8
$81.8
$125.6
$47.2
California
$646.7
$990.2
$1,636.9
$1,147.0
Colorado
$58.0
$102.1
$160.0
$51.4
Connecticut
$34.5
$64.5
($6.4)
$99.1
$18.7
Delaware
$9.0
$16.9
($4.3)
$25.9
$7.1
DC
$9.6
$16.6
$26.1
$8.2
Florida
$249.3
$403.5
$652.9
$374.9
Georgia
$129.5
$80.6
$210.1
$201.6
Hawaii
$12.4
$18.7
$31.1
$13.6
Idaho
$20.6
$37.7
($0.2)
$58.3
$26.7
Illinois
$169.2
$40.9
$117.5
$327.6
$328.5
Indiana
$73.0
$119.7
$192.7
$81.4
Iowa
$27.0
$20.2
$6.1
$53.3
$53.3
Kansas
$27.5
$49.1
$76.6
$50.4
Kentucky
$57.8
$93.3
$151.1
$78.1
Louisiana
$77.1
$86.6
$163.8
$135.2
Maine
$11.9
$21.9
$33.9
$24.0
Maryland
$48.7
$80.3
$13.7
$142.7
$142.7
Massachusetts
$59.4
$69.8
$21.9
$151.1
$151.1
Michigan
$117.2
$124.2
$241.4
$176.7
Minnesota
$39.4
$21.0
$20.1
$80.4
$80.6
Mississippi
$49.9
$16.3
$73.6
$139.8
$139.8
Missouri
$56.3
$37.1
$8.0
$101.3
$101.3
Montana
$12.6
$21.3
$33.8
$15.9
Nebraska
$16.8
$0.6
$15.7
$33.2
$33.2
Nevada
$41.9
$71.6
($3.9)
$113.4
$28.2
New Hampshire
$9.2
$17.3
($4.5)
$26.5
$8.6
New Jersey
$89.5
$49.8
$105.6
$244.8
$245.7

---

CRS-26
Net funds
gained
Available
(forfeited)
balances
through
Original
Total
States’
from
reallocation of
FY2006
amount
FY2006
State
original
unspent
SCHIP
available in
spending
FY2004 and
FY2003
allotments
FY2006 b
estimate c
FY2005
original
allotments
allotments plus
DRA
appropriation a
New Mexico
$42.2
$74.9
($32.8)
$117.1
$34.2
New York
$272.5
$486.6
$759.1
$395.0
North Carolina
$110.3
$110.3
$2.8
$223.4
$223.4
North Dakota
$6.3
$9.0
$15.4
$14.3
Ohio
$124.6
$136.5
$261.1
$179.1
Oklahoma
$57.4
$83.1
$140.4
$69.8
Oregon
$46.9
$85.3
($3.5)
$132.2
$21.9
Pennsylvania
$134.1
$195.9
$330.0
$151.7
Rhode Island
$9.8
$0.2
$66.1
$76.1
$76.8
South Carolina
$55.5
$83.7
$139.3
$59.1
South Dakota
$7.8
$7.5
$0.5
$15.9
$15.9
Tennessee
$80.4
$136.9
($58.4)
$217.3
$3.6
Texas
$454.7
$780.8
($23.8)
$1,235.6
$365.5
Utah
$32.2
$51.8
$84.0
$38.2
Vermont
$4.8
$8.7
($0.1)
$13.5
$2.8
Virginia
$72.3
$105.6
$177.9
$96.4
Washington
$64.7
$115.0
($35.5)
$179.7
$38.5
West Virginia
$23.3
$41.6
$64.9
$37.3
Wisconsin
$55.8
$59.1
$114.9
$96.3
Wyoming
$5.9
$11.1
$16.9
$6.7
Puerto Rico
$39.0
$52.6
$4.4
$95.9
$41.9
Guam
$1.5
$0.0
$0.2
$1.7
$2.0
Virgin Islands
$1.1
$1.4
$0.1
$2.6
$1.5
American Samoa
$0.5
$0.0
$0.1
$0.6
$0.7
N. Mariana Islands
$0.5
$0.0
$0.1
$0.5
$1.4
National total
$4,082.4
$5,521.1
$283.0
$10,059.9
$5,974.4
Source: Congressional Research Service (CRS) analysis of data from the Centers for Medicare and
Medicaid Services.
a. Redistributed FY2003 funds and the Deficit Reduction Act of 2005 (DRA) appropriation of $283
million for SCHIP are active only during FY2006. States with blank cells in this column
exhausted their FY2003 allotments by the three-year deadline and did not face shortfalls in
FY2006. In prior reallocations, all such states received a portion of unspent funds available for
redistribution. The unspent FY2003 funds went only to states expected to have shortfalls in
FY2006.
b. This column shows the sum of only the positive numbers in the previous three columns. In the
third column, the negative numbers in parentheses refer to amounts unspent and forfeited at the

---

CRS-27
end of FY2005, and thus were no longer available to these states at the beginning of FY2006.
For states with negative values in the third column, this column is equal to the sum of the first
and second columns.
c. Data reported by states to CMS as of December 2005.

---