On September 7, 2007, the Centers for Medicare and Medicaid Services (CMS) disapproved the State of New York’s proposed amendment to the State’s Children’s Health Insurance Program (CHIP) plan, marking the agency’s first enforcement action based on noncompliance with the controversial new crowd-out policy issued on August 17, 2007.
New York’s State Plan Amendment (SPA) proposed to extend the state’s CHIP eligibility from individuals with effective family incomes at or below 250 percent of the federal poverty level (FPL) to 400 percent of the FPL. The state also proposed to require that children with family incomes above 250 percent of the FPL be uninsured for a 6 month waiting period prior to eligibility.
CMS disapproved the SPA because, in failing to comply with the August 17th guidance, the state "has not demonstrated that its program operates in an effective and efficient manner with respect to the core population of targeted low-income children." Specifically, New York:
- did not provide assurances that it has enrolled at least 95 percent of children with family incomes below 200 percent of the FPL;
- did not include in the SPA a one-year period of uninsurance for populations over 250 percent of the FPL; and,
- did not meet cost sharing requirements (i.e., that the proposed cost sharing not be more favorable than cost sharing of competing private plans by more than 1 percent of the family income, or that the State set its cost sharing at the 5 percent family cap).
New York is permitted to seek reconsideration of this decision within 60 days. New York Governor Eliot Spitzer (D) has announced that the state is prepared to pursue a legal challenge to the requirements of the August 17th letter, specifically that they are contrary to federal CHIP law and the notice and comment requirements of the federal Administrative Procedures Act. Governor Spitzer and Governor Arnold Schwarzenegger of California, whose state is also considering increasing SCHIP eligibility as part of state health reform, had previously requested that CMS withdraw the new guidance in an August 29th letter.
Members of Congress have also expressed concern with CMS’ policy. In addition to the statements of New York’s Congressional delegation, key leaders of the House Committee on Energy and Commerce, Representatives Dingell, Pallone and Stupak, sent a letter to HHS Secretary Michael Leavitt on September 6th requesting that he explain the agency’s shift in policy. Most recently, a bipartisan group of 44 Senators, led by Robert Menendez (D-NJ) and Gordon Smith (R-OR), sent a letter to President Bush on September 10th asking that the administration withdraw the guidance or at the very least pursue these policy changes through formal notice and comment rulemaking.
Secretary Leavitt has affirmed that the agency believes the policy change was appropriately announced in the state health official letter without formal rulemaking. In an August 30th media roundtable, Dennis Smith, Director of CMS' Center for Medicaid and State Operations, described the 95 percent enrollment policy as "aggressive, but doable."
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