SCHIP: Differences Between H.R. 3963 and H.R. 976

SCHIP: Differences Between H.R. 3963 and H.R. 976

Order Code RS22746
Updated January 9, 2008
SCHIP: Differences Between H.R. 3963
and H.R. 976
Evelyne P. Baumrucker, April Grady,
Elicia J. Herz, and Chris L. Peterson
Domestic Social Policy Division
Summary
The Balanced Budget Act of 1997 (P.L. 105-33) established the State Children’s
Health Insurance Program (SCHIP) under a new Title XXI of the Social Security Act.
SCHIP builds on Medicaid by providing health insurance to low-income, uninsured
children in families with incomes above applicable Medicaid income standards. In BBA
97, Congress authorized and appropriated funds for FY1998-FY2007. No federal
appropriations were slated for FY2008 and beyond. However, on December 29, 2007,
the President enacted the Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L.
110-173), which contains appropriations for SCHIP allotments through March 31,
2009.1
The 110th Congress has considered reauthorization legislation that would make
important changes to Medicaid and SCHIP, including the Senate-passed Children’s
Health Insurance Program Reauthorization Act of 2007 (S. 1893/H.R. 976) and the
House-passed Children’s Health and Medicare Protection Act of 2007 (H.R. 3162). A
bicameral agreement on SCHIP reauthorization passed the House on September 25 and
the Senate on September 27 as an amendment to H.R. 976. President Bush vetoed H.R.
976 on October 3. The House sustained the President’s veto with a vote on October 18.
The House passed H.R. 3963, a modified version of the vetoed H.R. 976, on
October 25, 2007, with a vote of 265 to 142. The Senate passed H.R. 3963 on
November 1, 2007, with a vote of 64 to 30. The President vetoed H.R. 3963 on
December 12, 2007. On January 23, 2008, the House again failed to override the
President’s veto, with a vote of 250 to 152. This report summarizes the differences
between the two bills across key provisions, and will not be updated.2
1 For additional information on the impact of the continuing resolution on SCHIP financing, see
CRS Report RS22739, FY2008 Federal SCHIP Financing, by Chris L. Peterson.
2 For a brief description of current law and a side-by-side comparison of the changes that would
be made to Medicaid and SCHIP under H.R. 3162, S. 1893/H.R. 976, and the bicameral
agreement, see CRS Report RL34129, Medicaid and SCHIP Provisions in H.R. 3162, S.
1893/H.R. 976, and Agreement, by Evelyne P. Baumrucker et al.

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Overview of the Vetoed H.R. 3963 and H.R. 976
Although this report focuses on differences between the bills, H.R. 976 and H.R.
3963 share many common elements, including:
! national allotment appropriations totaling $61.4 billion over five years
(an increase of $36.2 billion over the current law baseline of $25.2
billion), distributed to states and territories using a new formula that
builds on provisions in the House and Senate reauthorization bills;
! a new contingency fund (for making payments to states for certain
shortfalls of federal SCHIP funds), which would receive deposits through
a separate appropriation each year through FY2012 and make payments
of up to 20% of the available national allotment for SCHIP;
! new performance bonus payments (for states exceeding certain
enrollment levels), which are funded with an FY2008 appropriation of $3
billion and deposits of certain unspent SCHIP funds through FY2012;
! additional grants for outreach and enrollment totaling $100 million each
year through FY2012;
! provisions to remove barriers to enrollment;
! provisions related to benefits (e.g., dental, mental health and Early and
Periodic, Screening, Diagnosis and Treatment [EPSDT]);
! provisions to eliminate barriers to providing premium assistance;
! provisions to strengthen quality of care and health outcomes of children;
! program integrity and miscellaneous provisions, including some that
affect the Medicaid program; and
! tobacco tax changes.
A cost estimate from the Congressional Budget Office (CBO) indicates that H.R. 976
would increase outlays by $34.9 billion over 5 years and by $71.5 billion over 10 years.3
A cost estimate for H.R. 3963 indicates that it would increase outlays by $35.4 billion
over 5 years and by $71.5 billion over 10 years.4 Costs in both bills would be offset by
an increase in the federal tobacco tax and other changes, which the Joint Committee on
Taxation (JCT) estimates would increase net revenue by $36.3 billion over 5 years and
by $72.8 billion over 10 years.
3 CBO, letter to the Honorable John Dingell (September 25, 2007), available at
[http://www.cbo.gov/ftpdocs/86xx/doc8655/hr976.pdf].
4 CBO, CBO’s Estimate of the Effects on Direct Spending and Revenues of the Children’s Health
Insurance Program (October 24, 2007), available at [http://www.cbo.gov/ftpdocs/87xx/doc8741/
hr976DingellLtr10-24-2007.pdf].

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Differences Between the Bills
Funding/Financing
Allotments. H.R. 976 appropriated a total of $61.4 billion for SCHIP allotments
between FY2008 and FY2012. H.R. 3963 does not alter these amounts or the formulas
for calculating states’ SCHIP allotments.5
Bonus Payments. H.R. 976 called for bonus payments to states that (1) increase
their enrollment of children in Medicaid or SCHIP above certain levels and (2) implement
four out of seven specific activities to encourage enrollment and retention among
Medicaid and SCHIP-eligible children. Qualifying states would receive cash payments
as a percentage of the state share of their Medicaid/SCHIP expenditures, though setting
a higher bar and paying a lower percentage in SCHIP as compared to Medicaid.
Unlike H.R. 976, H.R. 3963 would not make bonus payments available for increases
in SCHIP enrollment — only for increases in enrollment among children in Medicaid.
To be eligible for bonus payments under H.R. 3963, a state would have to implement five,
rather than four, of eight, rather than seven, specific activities to encourage enrollment
and retention.6 In addition, the second tier percentage for bonus payments would be
slightly higher — 62.5% of the state share, rather than the 60% in H.R. 976 for increases
in child enrollment in Medicaid. Unlike H.R. 976, H.R. 3963 also specifies that bonus
payments “may only be used to reduce the number of low-income children who do not
have health insurance coverage in the State.”
Redistribution of Unspent FY2005 Allotments. H.R. 3963 would allow the
redistribution of unspent FY2005 allotments to occur as specified in the continuing
resolution (H.J.Res. 52, P.L. 110-92), which would go to states in the order in which they
face shortfalls (with unused FY2005 funds not available for redistribution after FY2008).
Limitations on SCHIP Matching Rate and Availability of Federal Funds.
Under current law, states can set their upper income eligibility threshold for SCHIP at the
higher of 200% of the federal poverty line (FPL) or 50 percentage points above their
income eligibility level for Medicaid children prior to SCHIP’s enactment. However, by
using existing flexibility to define what counts as income, any state can raise its effective
income eligibility threshold for SCHIP through the use of income disregards, which must
be approved by the federal government. There are two types of income disregards that
5 The only change in the legislation in these sections would reduce the amount of the FY2012
semiannual appropriations for SCHIP allotments to $1.15 billion, from $1.75 billion, with the
one-time appropriation for SCHIP allotments in FY2012 (Section 108 of the bill) increased to
$13.7 billion, from $12.5 billion. Although the total appropriation for FY2012 allotments is $16
billion in both versions, the substantive impact is that the “baseline” of funding for SCHIP
allotments from FY2013 onward will reflect the $1.35 billion in semiannual installments, rather
than $1.75 billion. This change affects the baseline between FY2013 and FY2017 for the
purposes of the score by the CBO (even though the legislation itself provides appropriations
directly for SCHIP allotments only through FY2012).
6 The new, eighth activity is “implementing the option of providing premium assistance
subsidies....”

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have been used by states. The first type excludes a particular dollar amount based on a
type of income (e.g., earnings) or expense (e.g., child care). The second type of income
disregard excludes an entire block of income.
Although H.R. 976 would not affect states’ ability to use income disregards, it would
reduce the federal reimbursement rate for costs associated with SCHIP enrollees whose
income would exceed 300% FPL without the use of a block of income disregard. An
exception would be provided for states that, on the date of enactment, have federal
approval or have enacted a state law to cover SCHIP enrollees above 300% FPL. In
contrast, H.R. 3963 would deny federal funding for costs associated with SCHIP enrollees
whose income would exceed 300% FPL without the use of a block of income disregard.
An exception would only be provided for states that have federal approval to cover
SCHIP enrollees above 300% FPL on the date of enactment (New Jersey is the only state
that currently meets this requirement).
Illegal Aliens and Unauthorized Expenditures. H.R. 976 would specify that
nothing in the bill allows federal payment for individuals who are not legal residents.
H.R. 3963 would add an additional statement that Titles XI, XIX, and XXI provide for
the disallowance of federal financial participation for erroneous expenditures under
Medicaid and SCHIP.
Eligibility
H.R. 976 allowed broader coverage of pregnant women under SCHIP, in terms of
eligibility and benefits, when certain conditions were met. It largely followed the Senate-
passed SCHIP bill with modifications based on the House bill. Pregnancy-related
assistance included all services covered under SCHIP for children in a state as well as
prenatal, delivery and postpartum care, and also included Medicaid benefits provided to
pregnant women in the state. H.R. 3963 would delete coverage of Medicaid services for
the new group of pregnant women under SCHIP.
With respect to SCHIP coverage of adult populations (e.g., nonpregnant childless
adults and parents of Medicaid and SCHIP-eligible children), H.R. 976 would phase out
SCHIP coverage of nonpregnant childless adults after two years, and in FY2009, federal
reimbursement for such coverage would be reduced to the Medicaid federal medical
assistance percentage (FMAP) rate. Under H.R. 3963, SCHIP coverage of nonpregnant
childless adults would end on December 31, 2008, and federal reimbursement for such
coverage would be maintained at the SCHIP enhanced federal medical assistance
percentage rate. Under both bills, such states would be permitted to apply for Medicaid
waivers to continue coverage for such populations, but such waivers would be subject to
a specified budget neutrality standard (i.e., tied to the 2008 state spending on this
population increased by a specified growth factor).
The treatment of parents is identical under H.R. 976 and H.R. 3963. Coverage of
parents would still be allowed, but beginning in FY2010, allowable spending under the
waivers would be subject to a set aside amount from a separate allotment and would be
matched at the state’s regular Medicaid FMAP rate unless the state is able to prove that
it met certain coverage benchmarks (related to performance in providing coverage to
children). Finally, in FY2011 and FY2012, the federal matching rate for costs associated
with such parent coverage would be reduced to a rate between the Medicaid and SCHIP

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rates for states that meet certain coverage benchmarks, and to the state’s regular Medicaid
FMAP for all other states.
Enrollment and Access
H.R. 976 and H.R. 3963 include identical provisions to facilitate access and
enrollment in Medicaid and SCHIP. Among the major provisions, the bills would create
a state option to rely on a finding from specified agencies to determine whether a child
under age 19 (or an age specified by the state not to exceed 21 years of age) has met one
or more of the eligibility requirements (e.g., income, assets or resources, citizenship, or
other criteria) necessary to determine an individual’s initial eligibility, eligibility
redetermination, or renewal of eligibility for medical assistance under Medicaid or
SCHIP. The bills would not relieve states of their obligation to determine eligibility for
Medicaid, and would require the state to inform families that they may qualify for lower
premium payments or more comprehensive health coverage under Medicaid if the
family’s income were directly evaluated by the state Medicaid agency. Both bills would
drop the requirement for signatures on a Medicaid application form under penalty of
perjury.
Current law and regulations require that SCHIP plans include procedures to ensure
that SCHIP coverage does not substitute for coverage provided in group health plans, also
known as crowd-out. On August 17, 2007, the Administration issued a guidance letter
explaining how CMS would apply existing requirements in reviewing state requests to
extend SCHIP eligibility to children with income levels exceeding 250% FPL, including
specified crowd-out strategies states would be required to implement within one year.
H.R. 976 included a crowd-out provision. It would have required states already
covering children with income exceeding 300% FPL (and beginning in 2010, new states
that propose to do so) to describe how they will address crowd-out and implement “best
practices” to avoid crowd-out (to be developed by the Secretary in consultation with the
states). H.R. 3963 would amend this provision to require all states to submit a state plan
amendment describing how they will address crowd-out and incorporate such best
practices in their SCHIP programs.
Under H.R. 976, beginning in 2010, higher income states (those covering children
with income exceeding 300% FPL) cannot have a combined rate of public and private
coverage for low-income children that is less than the “target rate of coverage for low-
income children.” This target rate would be calculated by the Secretary to represent the
average rate of private and public coverage combined among the 10 states and DC with
the highest percentage of such coverage. States failing to meet this requirement in a given
fiscal year would not receive any federal SCHIP payments for higher income children
until they come into compliance with this rule. States would develop corrective action
plans and the Secretary would not be permitted to deny payments if there is a reasonable
likelihood that such plans would bring affected states into compliance.
H.R. 3963 would also add language to require that, in the case of state plan
amendments denied on or after August 16, 2007 on the basis of policy or interpretation
in effect prior to the date of enactment of this Act, if such a state submits a modification
of such a state plan amendment that complies with the crowd-out provisions in this bill,
the original date of submission for the state plan amendment must be applied to the

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modified state plan amendment. However, such a modified state plan amendment must
not be effective before the date of enactment of this Act. Also, payments for services to
children with income exceeding 300% FPL (if applicable) would not be permitted for
such a modified state plan amendment.
The crowd-out provisions in both H.R. 976 and H.R. 3963 would supersede the
August guidance letter.
Citizenship Documentation. Under current law, U.S. citizens and nationals
must present documentation that proves citizenship and documents personal identity in
order for states to receive federal Medicaid reimbursement for services provided to them.
H.R. 976 would modify existing Medicaid citizenship documentation rules (e.g., by
requiring additional documentation options for federally recognized Indian tribes and
specifying the reasonable opportunity period for individuals who are required to present
documentation). It would also provide a new option for states to meet Medicaid
citizenship documentation requirements through name and Social Security number (SSN)
validation, make citizenship documentation a requirement for SCHIP, and provide an
enhanced match for certain administrative costs. H.R. 3963 would include the same
changes, except that (1) the name and SSN option for citizenship documentation would
determine whether an individual’s name or SSN, or declaration of citizenship or
nationality, is inconsistent with information in the records maintained by the
Commissioner of Social Security; and (2) $5 million would be appropriated to carry out
the Commissioner’s citizenship documentation responsibilities. (H.R. 976 would require
name and SSN validation only. SSNs by themselves do not denote citizenship, because
certain noncitizens are eligible for them.)
Premium Assistance
Both bills would allow states to offer a premium assistance subsidy for qualified
employer sponsored coverage to all targeted low-income children who are eligible for
child health assistance and have access to such coverage, or to parents of targeted low-
income children. The bills would also allow states to offer a premium assistance subsidy
for qualified employer sponsored coverage (ESI) to Medicaid-eligible children and/or
parents of Medicaid-eligible children where the family has access to ESI coverage (H.R.
3963 includes language to ensure that Medicaid premium assistance programs coordinate
with premium assistance programs offered under this provision). In addition, both bills
specify that family participation in premium assistance programs would be optional.
Payments
In mid-August and early September, the Administration issued proposed rules to
restrict Medicaid coverage or payments for rehabilitation services and certain school-
based services. H.R. 976 would prohibit the Secretary of HHS from taking any actions
(including through regulation) to restrict Medicaid coverage or payment for rehabilitation
and school-based services if such actions are more restrictive in any aspect than those
applied to such coverage or payments as of July 1, 2007. Under H.R. 976 this prohibition
would have been in effect until May 28, 2008. H.R. 3963 would change this moratorium
date from May 28, 2008 to January 1, 2010.