An Obamacare setback for poor children


Uninsured patient Yulisa Mateo, 9, has an eye test at Venice Family Clinic in Venice, California, June 25, 2009.

Article Highlights

  • Kids enrolled in CHIP will be moved out of their health plans and into state-run Medicaid Plans b/c of Obamacare.

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  • The impact on the CHIP kids will take effect regardless of what the states choose to do with the rest of the program.

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  • The kids previously on CHIP will be on a long list of folks who have their current health coverage taken by Obamacare.

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  • Obamacare will hurt many folks. Was it necessary to burn down some people’s coverage to offer insurance to others?

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Come January, many children currently enrolled in the State Children’s Health Insurance Program (CHIP) will be compulsorily moved out of their current health plans and into state-run Medicaid plans – as a result of Obamacare.

In today’s New York Post Op Ed Page, I describe how this came to pass. To expand on the issue, here’s some additional detail of how it’s going to work:

CHIP gives matching funds to states for providing health insurance to children. The program was designed to cover uninsured kids in families with incomes that are modest but too high to qualify for Medicaid. It was expanded by President Obama in 2009 as part of its re-authorization and now covers more than 8 million kids.

CHIP has plenty of flaws. It has increased the cost of coverage by limiting competition in the insurance market. But it can give kids a choice of private health plan models that are a lot better than traditional Medicaid. Right now, many states benchmark the benefits that CHIP must offer to the same standard Blue Cross/Blue Shield plan that’s available to Members of Congress in the Federal Employees Health Benefits Plan (FEHBP), or to the benefits offered to state workers, or to the most popular private health plan that’s already operating in a particular state.

Under Obamacare, any kid whose parents earn between 100% and 133% of the Federal Poverty Level (FPL) will be forcibly moved off of CHIP and into Medicaid. That comes out to families of four earning $23,000 to $31,000 in annual income. It ropes in thousands of children. And it will unfold regardless of whether a particular state plans to expand its Medicaid program for adults to meet the 133% threshold.

It’s all part of the President’s vaunted Medicaid expansion and an obscure provision buried in Obamacare. When the feds coaxed states to expand their Medicaid programs up to 133% of FPL, they wanted to make sure that kids followed their parents into the program (presumably so that families would be covered under the same insurance schemes, making managed care easier). So section 2001(a)(5)(B) of Obamacare made the children whose parents earned between 100% and 133% of FPL (based on their parents’ modified adjusted gross income) a “mandatory” Medicaid population. (Of note: states will retain their ability to claim the enhanced CHIP matching rate out of their CHIP allotments for this population).

But this provision is separate from the language that offers states enhanced matching funds to expand their overall Medicaid programs up to 133% of FPL. That means that the impact on the CHIP kids will take effect regardless of what the states choose to do with the rest of their program. It’s also not affected by the Supreme Court decision that gave states some flexibility to refuse the Federal Medicaid expansion.

According to the SCOTUS decision, if a state declines to expand its Medicaid program to cover the new expansion group, the state forgoes only the federal funds that would have been used to offset medical costs of the “newly eligible” beneficiaries. But all other provisions of the Medicaid statute, including those in Obamacare, are “severed” from this remedy. They remain “fully operative,” and will “function in a way consistent with Congress’ basic objectives in enacting the statute.”

This means that provisions such as section 2001(a)(5)(B), which were not the focus of the SCOTUS decision because they are not part of the Medicaid expansion described in section 2001(a)(3), are not affected by the Supreme Court’s ruling.

So the kids previously on CHIP will find themselves among a growing list of folks who have their current health coverage degraded by Obamacare. I’ve detailed some of the other groups that will have their current health coverage hit in my NY Post Op Ed. In fact, it’s likely that for every one uninsured person who receives coverage as a result of Obamacare, they’ll be many more people who have their present health coverage degraded by the law’s other provisions.

And so a new part of the overarching vision of Obamacare is starting to take shape. It goes like this: The way to improve access to health insurance is by sanding down everyone’s coverage to the same lower standard. Think of Obamacare this way – it was designed to take the existing pie of health coverage dollars, and spread them more thinly, to extend coverage to some new folks. This is how the President proposes to make our healthcare system more “just”. This doesn’t mean the overall pie doesn’t grow – it does — largely because the new law does little to create the kinds of competitive pressures that would hold down costs.

Obamacare will hurt many folks, even as some are helped by the law’s coverage. Was it necessary to burn down some people’s coverage to offer insurance to others?

Ironically, these provisions will also wound the industry groups that cynically helped push Obamacare into law. This may be the measure’s only real “justice.”

When the health insurers and drug makers helped push Obamacare’s passage, they envisioned a bigger pool of newly insured patients. These new customers, they reasoned, would have more (federal) money to purchase their products.

That new pool of insured customers that industry gets? It could be largely offset by the skimpier coverage that their old customers will now be carrying. The healthcare industry may have to revisit their original estimates of Obamacare’s largesse.


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About the Author


  • Scott Gottlieb, M.D., a practicing physician, has served in various capacities at the Food and Drug Administration, including senior adviser for medical technology; director of medical policy development; and, most recently, deputy commissioner for medical and scientific affairs. Dr. Gottlieb has also served as a senior policy adviser at the Centers for Medicare & Medicaid Services. 

    Click here to read Scott’s Medical Innovation blog.

    Follow Scott Gottlieb on Twitter.

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