The legislation that authorized SCHIP gives States considerable flexibility in designing their SCHIP programs. Broadly speaking, States can offer coverage to children through their existing Medicaid programs, through separate programs, or through a combination of the two. The method of coverage, in turn, influences the benefits package offered to children, and the delivery systems providing these services. These issues, along with research examining States' decisions in these areas, are presented below.

Benefits Design

By statute, if States offer SCHIP through a Medicaid expansion program, they must offer the full Medicaid benefits package. States that implement non-Medicaid programs must provide benefits packages comparable to one of three private benchmark insurance plans:

• The Federal Employees Health Benefits Program Blue Cross standard option plan.
• The State's employee health benefits plan.
• The health maintenance organization (HMO) with the largest number of commercially insured members in the State.

In addition, these programs must also include mental health and prescription medication services equal to at least 75 percent of the actuarial value of the benchmark plan.

States have further flexibility to shape benefits packages within these broad statutory requirements. States establishing non-Medicaid programs may modify the amount, duration, and scope of covered services within any benchmark class of services.1 For example, States may choose to limit the SCHIP benefits package to major medical coverage, as is consistent with the benchmark plan, or they may opt to include coverage for long-term or chronic conditions.2

A number of studies have examined States' decisionmaking with respect to benefits package design, often comparing and contrasting the benefits available under Medicaid expansion and non-Medicaid SCHIP program components. The findings from several such studies are summarized below.

• Case studies conducted by the Urban Institute3 found that States typically adopt rich benefits packages in their separate SCHIP programs that, although not equal to Medicaid, are broad and are considered better than most private plans. Most of the 18 States studied provided services beyond the minimum established in Federal law and had incorporated the guidelines for well-child visits established by the American Academy of Pediatrics. The primary areas where separate programs appear to differ from Medicaid are:

  • Non-emergency transportation.
  • Substance abuse services.
  • Rehabilitative therapies.

  However, the study noted that while the lack of these services may have implications for certain subgroups of children, many States have augmented their benefits packages with wraparound services for special populations.

• Fox and colleagues4 examined the different types of benefits packages offered under SCHIP and analyzed their implications for certain target populations. The researchers suggested that Medicaid expansion program benefits appear to be better suited for:

  • Disabled children, who are likely to require coverage for long-term ancillary therapies, case-management services, and assistive therapies.
  • Adolescents, who may need a wide range of traditional and nontraditional mental health services.

• Heffron and Davis5 flagged concerns about coverage of specific benefits under non-Medicaid expansion programs. The researchers at the National Mental Health Association suggest that separate SCHIP programs have compromised long-term health by placing restrictions on mental health and substance abuse benefits. For example:

  • Florida allows only a maximum of 15 days per year for inpatient mental health services.
  • Kansas limits both inpatient and outpatient mental health services to those that are "biologically based."
  § Alabama's combination plan limits inpatient mental health services to 72 hours per episode.
  • Montana and Nevada place annual and lifetime dollar limits on substance abuse services.
• The American Academy of Pediatric Dentistry (AADP)6 contends in a recent resource packet that Medicaid expansion programs provide more comprehensive dental benefits than separate SCHIP plans. Under separate SCHIP programs, States can elect to provide or exclude dental benefits, based on their benchmark plans. While the Federal employee and State employee benchmark plans usually include limited dental benefits, the larger statewide HMOs generally provide none. The AADP argues that this lack of comprehensive dental coverage further endangers low-income children, who are at greater risk for dental caries than any other group.

Several studies have looked at how State design decisions influence the choice of delivery systems and health care providers for SCHIP-covered children.

• An Urban Institute report3 notes that some States use separate SCHIP programs to provide access to a broader range of providers than was traditionally available in the Medicaid program. The study looked at the States of Alabama, Michigan, Mississippi, and Pennsylvania, where SCHIP program officials developed new contractual arrangements with Blue Cross/Blue Shield organizations in their States, thereby giving enrollees access to the largest networks of providers in the States. Findings for the States include:

  • In Alabama, Blue Cross insures 80 percent of covered lives in the State. The ALLKids contract with Blue Cross affords these children the potential of truly mainstream access to care.
  • In Mississippi, the Blue Cross network includes 90 percent of all physicians in the State and all acute care hospitals. Enrollees in SCHIP carry the same insurance card as all other Blue Cross enrollees, and seem to enjoy markedly better access to care than their Medicaid counterparts.
  • Michigan has applied this approach to dental care, an area in which most Medicaid programs have been plagued by poor access. Michigan has developed arrangements with capitated dental organizations whereby dentists participating in capitated plans must also accept MIChild patients. Through these contracts, MIChild has gained access to roughly 90 percent of dentists in the State and, to date, this access appears to be translating into robust utilization. An estimated 75 percent of enrollees in the two largest MIChild dental plans have received at least one preventive dental exam.7

• The Urban Institute study found that some SCHIP expansion programs work with managed care networks that are comparable to or the same as those used by Medicaid. According to the study, managed care organizations (MCOs) and providers in these States often prefer participating in SCHIP over participating in Medicaid for a variety of reasons, including:

  • Improved payment rates.
  • Simpler administrative rules.
  • Less onerous contracting requirements.

• A study by Schwalberg and colleagues8 examined the delivery of services to children with special health care needs and concluded that, for SCHIP programs to effectively serve this population, they must:

  • Clearly delineate the roles and responsibilities of different providers and delivery systems.
  • Offer comprehensive care coordination to manage the range of services used by this population.

• A survey of 26 separate SCHIP programs conducted by the National Conference of State Legislatures9 examined policies concerning the participation of safety net providers and found that:

  • Seventeen States encourage or require plans to include federally qualified health centers.
  • Thirteen States encourage or require the participation of rural health clinics.
  • Twelve States encourage or require the inclusion of public hospitals.
  • Seven States encourage or require the participation of school-based health centers.

As a result, researchers offered the following suggestions to policymakers for ensuring the effective delivery of services to children in separate State programs:

• Address the problem of providing basic services to rural and inner-city children.
• Develop a comprehensive strategy for improving provider participation in SCHIP, including paying reasonable and attractive fees and ensuring that MCOs' credentialing and selection practices do not exclude safety net and minority providers.
• Consider how children with special needs will fare under managed care.
• Develop a plan to ensure that adolescents' needs are met.