Bush Blamed on Child Health Funds

WASHINGTON —  A government report released Wednesday faulted the Bush administration for allowing federal funds to be diverted from programs serving poor children.

The administration exceeded its legislative authority in granting California and three other states special permission to use child health funds for other purposes, according to the General Accounting Office. The administration’s actions, it said, could deprive some children of health insurance even in states other than the four cited in the report.

The report prompted two senior senators to contend that the waivers approved for the states violate federal law and pit poor children against adults in the struggle for limited health-care funds.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Charles E. Grassley of Iowa, the committee’s top-ranking Republican, said they would take legislative action if necessary to prevent the administration from continuing to let funds intended for the State Children’s Health Insurance Program (SCHIP) be diverted.

The GAO report was issued just days after a separate study found that nearly 5 million poor children who qualify for the SCHIP program remain unenrolled and uninsured.

“These children should never have to compete with childless adults for the use of remaining SCHIP funds,” Baucus and Grassley wrote in a letter to Health and Human Services Secretary Tommy G. Thompson.

The report by the GAO, the nonpartisan, investigative arm of Congress, also chastised the Health and Human Services Department for making “inappropriate and impermissible” budget calculations and for failing to adequately inform the public about the proposed changes.

The charges leveled by the GAO and other critics of the waiver policy echoed what has become a common criticism of the Bush administration: that its policymaking process sometimes leaves Congress and the public out of the picture.

“The real issue is what’s at stake and who is looking after the interests of low-income beneficiaries” of the Medicaid and SCHIP programs, said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

The waiver process, in which state and federal officials negotiate behind closed doors, allows states to radically restructure their programs without the input or oversight of Congress, state legislatures or the public, she said.

HHS officials, who had already responded in writing to the GAO and the Finance Committee leaders, renewed their defense of the waiver process.

“No one is not getting health insurance as a result of this program,” said HHS spokesman Bill Pierce. Thompson “wanted to allow states to be as creative and have as much flexibility as possible,” he said.

About 40 million low-income families and children received health coverage last year under Medicaid--the program for low-income families and senior citizens and the disabled--and under SCHIP, which provides health care to children whose families are not poor enough to qualify for Medicaid. Expenditures for the programs were $232 billion last year.

The federal government provides more than half the funds for the two programs--the states pay the rest--and the states have to follow certain guidelines to qualify for the federal money.

Beyond the basics, however, states may offer as many benefits to as many people as they choose. Some two-thirds of Medicaid spending goes for “optional” services, mostly nursing home care for the elderly and disabled.

The SCHIP program contains yet another administrative wrinkle: Congress appropriated a fixed amount of money, $10 billion over 10 years, and specified that money left unspent by one state could be reallocated to others. The Congressional Research Service said last year that 19 states had spent less than 25% of their SCHIP funds.

The Bush administration, which supports a shift of government power to the states, has encouraged state governments to tailor their Medicaid and SCHIP programs more closely to their own needs, as long as such changes still meet the program’s basic obligations and do not require increases in federal funding. As virtually all the states have suffered revenue shortfalls in the last year, more and more have looked to Medicaid and SCHIP for spending cuts.

Thirteen states have applied to HHS for Medicaid or SCHIP waivers. So far, the administration has approved four of them:

* California, hoping to increase the number of children enrolled in the Healthy Families program, was allowed to use unspent SCHIP funds to cover uninsured low-income parents and guardians of eligible children. Gov. Gray Davis, citing the state’s budget woes, has delayed the expansion.

* Arizona was told it could use SCHIP funds to cover adults who have no children.

* Utah expanded its Medicaid program to enroll more adults but reduced the number of health services covered under the program and increased patient co-payments.

* Illinois won a waiver to use Medicaid funds to expand prescription drug coverage to low-income seniors.

Despite the administration’s requirement that waivers entail no new costs, the Utah and Illinois waivers will cost the federal government millions of dollars.

Baucus and Grassley objected most strenuously to the Arizona waiver.

“You should not continue to approve waivers that divert funds set aside by Congress for children to insure childless adults,” they wrote to Thompson.