FACT SHEET | September 27, 2007

Improving Health Coverage for Children is America's Top Health Priority...But Not the President's

The Children’s Health Insurance Program (CHIP)[1]has played a crucial role in helping to reduce the rate of uninsured low-income children over the past ten years. By every measure, CHIP is cost-effective, and has been shown to work well in meeting the basic health care needs of our nation’s children. The program will expire this Sunday, September 30, if it is not reauthorized. As a result, 6.6 million children stand to lose access to doctors, life-saving prescription drugs, immunizations, preventive screenings and the basic medical care necessary to start life healthy.

President Bush has proposed a meager five billion dollar increase in CHIP funding. He has called on Congress to limit the program’s coverage of children above 200 percent of the federal poverty level – in effect cutting off coverage for 1.4 million children and pregnant women. The President has also strongly criticized legislation to reauthorize CHIP, deriding the program as a step towards “government-run health care” and making misleading and even inaccurate claims in order to support his efforts to limit CHIP. 

A bipartisan majority of Congress has already gone on record to support making CHIP reauthorization a top priority and is committed to investing significant new federal resources into the program. The House and Senate have reached a bipartisan agreement that would cover millions more low-income uninsured children who are eligible for CHIP and Medicaid, but whose families cannot afford private insurance. The House has overwhelmingly approved the bicameral CHIP reauthorization agreement by a vote of 265-169, and the Senate is now poised to do the same. Yet despite the overwhelming support for this legislation and the promise it offers to our nation’s children, President Bush has threatened to veto it.

Because of CHIP, millions of children who would otherwise be uninsured now have coverage. CHIP was created in 1997 to provide health insurance coverage to children who would otherwise be uninsured. The program is targeted to low-income families who do not qualify for Medicaid, but are unable to afford private insurance. Most newly-enrolled children were previously uninsured or recently lost their Medicaid or private health coverage.[2]The program has made great strides in covering uninsured children. While the number of uninsured adults has increased, the percentage of low-income children without health insurance dropped by more than one-third from 1997 to 2005 (from 23 to 4 percent).[3]It is clear that without CHIP, the number of uninsured children would be far greater. 

CHIP has been effective at providing children with better access to quality medical care and improved outcomes. Since its inception, CHIP has been an important health care safety net for children.A recent report published in May by the Kaiser Commission on Medicaid and the Uninsured discusses the benefits to children of having CHIP coverage: Children covered by CHIP and Medicaid have far better access to preventive and primary health care than uninsured children; they are much more likely than uninsured children to have a usual source of care, thereby increasing the quality and continuity of their care. Enrollment in public coverage is associated with improvements in quality of care, and improved health outcomes. Studies have also found an association between enrollment in CHIP and improved school performance, including increased school attendance, greater ability to pay attention in class, and increased ability to participate in school and normal childhood activities. 

CHIP combines the best of public and private approaches to provide health coverage to children. CHIP is not an entitlement program, but rather, a capped block grant program for states. The program also affords states great flexibility to offer coverage as they choose. In fact, the great majority of CHIP programs are modeled after private insurance and use private plans to deliver benefits.[4]CHIP’s structure in most states is similar to the Medicare prescription drug benefit, in which federal benchmarks and funds guide a program administered largely through private insurers. 

The program is helping the lower-income families it is meant to serve. A May 2007 study by the Congressional Budget Office (CBO) found that CHIP has reduced by 25 percent the number of uninsured children in lower-income families (i.e., those with family income between 100 and 200 percent of the federal poverty level),the very population the program is meant to target. A recently released status report of the program prepared for the Centers for Medicare and Medicaid Services (CMS) by Mathemematica Policy Research, Inc. has, again, affirmed that millions of uninsured children have become insured through CHIP, and that by far the greatest gains in insuring children have been made among kids in low-income working families. Approximately 6.6 million children had coverage through CHIP last year.[5]Of those children, ninety-one percent were in families living at or below 200 percent of the federal poverty level, and nearly 70 percent of all CHIP-covered children live in families at or below 150 percent of the federal poverty level.[6]

Despite CHIP’s success, the gains in coverage achieved under the program have been offset in recent years by a decline in employer-sponsored health insurance. With the increasing decline in employer-based health care coverage, the number of uninsured children is increasing. More than half of all workers in poor families and over one third of those in near-poor families have no offer of job-based coverage in the family.[7]Moreover, working parents have been experiencing a decline in employer-sponsored health insurance. Fewer than half of parents in families earning less than $40,000 a year are offered health insurance through their employer – a nine percent drop since 1997.[8]As employer-sponsored health insurance coverage has eroded, the number of uninsured children has increased since 2005. Last year, the number of uninsured children grew by 710,000 to reach 9.4 million.[9]These numbers underscore the need for Congress to provide sufficient funding for CHIP to ensure that uninsured children whose parents work hard can obtain the health coverage and care they need. 

When employer-sponsored coverage is offered, it is becoming increasingly unaffordable for many families. Since 2001, premiums for family coverage have increased 78 percent, compared to a 19 percent increase in wages and a 17 percent increase in overall inflation.[10]When premium growth outpaces increases in wages and inflation, workers typically have to spend a greater portion of their income each year in order to maintain coverage.[11]The average premium for a family of four topped $12,000 in 2007, with the average family contribution of over $3,200. Over the past six years, the amount families pay out of pocked for their share of premiums has increased by approximately $1,500 dollars.[12]Again, there is a very real need to invest more resources in CHIP, as more and more families are unable to afford coverage on their own. 

That is why CHIP reauthorization legislation would invest $35 billion in new funding for CHIP, ensuring coverage for more than 10 million American children. The bipartisan agreement reached between the House and the Senate would invest $35 billion over five years to strengthen CHIP’s financing, increase health insurance coverage for low-income children, and improve the quality of health care children receive. According to CBO estimates, the agreement would ensure that the 6.6 million children who are currently covered under CHIP retain their coverage, and would extend coverage to 3.8 million children who would otherwise be uninsured. Attached to this Fact Sheet is a chart detailing the number of children in each state who would gain access to health insurance coverage under the CHIP reauthorization agreement. The agreement would also achieve the following objectives: 

  • Improving CHIP benefits, providing dental coverage and ensuring mental health parity. Under the agreement, quality dental coverage would be provided to all children enrolled in CHIP. The agreement would also ensure that states will offer mental health services on par with medical and surgical benefits covered under CHIP, and protect medically necessary benefits (EPSDT) for low-income children. 
  • Improving outreach tools to streamline enrollment of eligible children. The agreement would provide $100 million in grants for new outreach activities to states, local governments, schools, community-based organizations, safety-net providers and others. 
  • Raising the Quality of Health Care for Low-Income Children. The agreement would establish a new quality child health initiative to develop and implement quality measures and improve state reporting of quality data. 
  • Providing sates with incentives to lower the rate of uninsured low income children. The legislation is designed to target low-income uninsured children for outreach and enrollment, providing incentives for states to lower the rate of uninsured low-income children by enrolling eligible children in CHIP or Medicaid.
  • Replacing the flawed approach in CMS’s August letter to the states. On August 17, CMS sent a letter to the states, mandating new restrictions on CHIP which would, in effect, foreclose states’ ability to cover children above 250 percent of the federal poverty. If implemented, this drastic change in federal policy would halt current state efforts to cover more uninsured children and potentially eliminate existing coverage for hundreds of thousands of children.[13]While Congress agrees with the Administration on the importance of taking steps to address crowd-out and prioritize coverage of lower income children, the bipartisan CHIP agreement would replace the flawed CMS August 17 letter with a more thoughtful and appropriate approach. The CHIP reauthorization agreement would give states time and assistance in developing and implementing best practices to address crowd out. The agreement would also put the lowest income children first in line by phasing in a new requirement for coverage of low-income children as a condition of receiving CHIP funding for coverage of children above 300 percent of the federal poverty level. 
  • Improving Access to Private Coverage Options. The agreement would expand on current premium assistance options for states, allowing them to offer a premium assistance subsidy for qualified, cost-effective employer-sponsored coverage to children eligible for CHIP and who have access to such coverage. It would also change the federal rules governing employer-sponsored insurance to make it easier for states and employers to offer premium assistance programs. 
  • Prioritizing children’s coverage. The Agreement also prioritizes children’s coverage by transitioning childless adults off of CHIP and prohibiting any new federal waivers to cover non-pregnant parents under CHIP. States that have received waivers to cover parents would be allowed to transition them into a separate block grant with a reduced federal matching rate. At the same time, the Agreement would provide for coverage of pregnant women as a new state option, while preserving the existing options to cover pregnant women through a state waiver or through regulation.

President Bush’s approach would do nothing to combat the rising number of uninsured children and would cause over a million children to lose their existing coverage. The President’s budget would have Congress ratchet back CHIP coverage, limiting it to children in families earning no more than twice the federal poverty level. The President has also called for a reduction in the federal matching rate for children in families with incomes above 200 percent of the federal poverty line. If adopted, not only would the President’s proposals fail to make any headway towards covering the nation’s nine million uninsured children, but his approach would also effectively cut off health coverage for 1.4 million children and pregnant women during the course of a year.[14]

The President’s claims about the CHIP reauthorization agreement are inaccurate. President Bush’s main criticisms of the CHIP reauthorization agreement are that it would turn CHIP into a program that covers children in households with incomes of up to $83,000 a year, and move millions of Americans that now have private health insurance into government coverage. These allegations are simply false. 

  • The CHIP reauthorization agreement keeps the program focused on low income children. No state currently covers children at $83,000, and the CHIP reauthorization agreement does not raise the eligibility level for CHIP or encourage states to cover families up to $83,000. As described above, the legislation targets funding to low-income children and actually reduces federal support for future coverage of children at higher income levels. Under the agreement, as under current law, interpretation and approval of appropriate income levels for eligibility above 200 percent of the federal poverty level (or 50 percent above a state’s Medicaid income cap) remains a CMS decision, just as in the original CHIP law written by a Republican-led Congress. 
  • The great majority of the uninsured children covered under the CHIP reauthorization agreement would have family incomes below the current eligibility limits that states have set. According to CBO, about 3.2 of the 3.8 million uninsured children (approximately 84 percent) who stand to gain coverage under the CHIP reauthorization agreement would have family incomes below the current eligibility limits that states have set. 
  • The CHIP reauthorization agreement’s approach is the most cost-effective and efficient mechanism to reduce the number of uninsured children.CBO director Peter Orszag and leading health policy experts have explained that virtually any effort to cover more of the uninsured would result in some “crowd out” (that is, the substitution of one type of health insurance for another). In testimony before the Senate Finance Committee on July 19, 2007 regarding the Senate’s CHIP bill (the same approach adopted by the bicameral agreement), Dr. Orszag remarked: 

“In the absence of a mandate, a mandatory system on employers, individuals, or states -- so in a voluntary system where you are trying to provide an incentive to reduce the number of uninsured children, I think this approach is pretty much as efficient as you can possibly get per new dollars spent to get a reduction of roughly 4 million uninsured children.”

  • Under approaches promoted by the Bush Administration, the large majority of benefits would generally go to people who already have insurance.A recent analysis by Professor Jonathan Gruber of MIT of the health insurance tax proposals included in the Bush Administration’s budget last year found that 77 percent of the benefits would go to people who were already insured.[15]That is more than double CBO’s estimates of the crowd out percentage under the bipartisan CHIP reauthorization agreement.[16]In a February 28, 2007 letter to Representative Dingell, Professor Gruber further noted: 

“I have undertaken a number of analyses to compare the public sector costs of public sector expansions such as SCHIP to alternatives such as tax credits. I find that the public sector provides much more insurance coverage at a much lower cost under SCHIP than these alternatives. Tax subsidies mostly operate to “buy out the base” of insured without providing much new coverage.”

The Bush Administration has previously supported the very efforts it now strives to undermine.The Bush Administration has previously supported investing in CHIP and increasing enrollment of children into the program:

  • During the 2004 presidential campaign, the President promised a major outreach campaign to enroll children in CHIP and Medicaid – exactly what the bill he is now threatening to veto seeks to accomplish:

“America’s children must have a healthy start in life…. In a new term, we will lead an aggressive effort to enroll millions of poor children who are eligible, but not signed up for the government’s health insurance programs. We will not allow a lack of attention or information to stand between these children and the health care they need.”

·Touting the benefits of state flexibility to set eligibility standards, the Bush Administration has also supported states’ efforts to cover additional children above 200 percent of the federal poverty level – continuing even this year to approve waivers of CHIP rules to allow states to expand coverage up to 300 percent of the federal poverty level.[17]In July 25, 2006 written testimony before the Senate Finance Committee, then CMS Administrator, Mark McClellan explained: 

“The program provides each state with the flexibility to design its program within broad federal guidelines in order to best meet the unique needs of the children and families it serves, and the circumstances of health insurance in the State. This flexibility has helped make SCHIP a clear success…. SCHIP gives states the ability to adjust the program’s coverage to reflect the particular needs and economic circumstances of the populations served, and to use new and creative approaches to provide health insurance coverage effectively.” 

By changing its position at this critical juncture when Congress is poised to reauthorize CHIP, the Bush Administration is putting ideology over children’s health care – irresponsibly placing the well-being of millions of children at risk. The 69 senators, 43 governors, hundreds of organizations, and the vast majority of the American people who support the bipartisan CHIP reauthorization agreement will continue to oppose President Bush’s misguided approach – and strive to give our nation’s uninsured children the promise of a healthy start in life.


Uninsured Children Who Would Gain Health Coverage Under the CHIP Renewal Bill


Number of Uninsured Children Covered



























































New Hampshire


New Jersey


New Mexico


New York


North Carolina


North Dakota










Rhode Island


South Carolina


South Dakota














West Virginia






United States



SOURCE: Families USA, September 25, 2007


[1] NOTE that the Children’s Health Insurance Program is also referred to as “SCHIP” in several quotations in this fact sheet.

[2]Congressionally Mandated Evaluation of the State Children’s Health Insurance Program, Final Report to Congress, Wooldridge and Kenney et al, October 2005

[3]Kaiser Commission on Medicaid and the Uninsured, January 2007

[4] NationalAcademyfor State Health Policy, September 2006

[5]National Evaluation of the State Children’s Health Insurance Program, Mathematica Policy Research, Inc., September 2007

[6]Congressional Research Service, March 2007

[7]Kaiser Commission on Medicaid and the Uninsured, April 2007

[8]State Health AccessData AssistanceCenter (SHADAC) at the University of Minnesota on behalf of the Robert Wood Johnson Foundation, March 2007

[9]Kaiser Commission on Medicaid and the Uninsured, September 2007

[10]The Henry J. Kaiser Family Foundation and Health Research Education Trust, September 2007

[11]The Henry J. Kaiser Family Foundation, August 2007

[12]The Henry J. Kaiser Family Foundation and Health Research Education Trust, September 2007

[13]Center for Children and Families, Georgetown University Health Policy Institute, August 2007

[14]Center on Budget and Policy Priorities analysis of CBO data, March 2007

[15]Center on Budget and Policy Priorities, February 15, 2006.

[16]Center on Budget and Policy Priorities, September 25, 2007

[17]In February of this year, CMS approved an expansion of Pennsylvania’s“Cover All Kids” program to provide health coverage to children of parents with annual incomes up to 300 percent of the federal poverty level.




  • Elizabeth Engel (224-3232)


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