Cost Sharing for Children and Families
Strategies
Some strategies for developing cost sharing and premium policies consistent with the goals of SCHIP and Medicaid in providing coverage and necessary services to children and parents in low-income families include:
1. Ensure that premium and cost sharing charges are affordable. In making cost sharing decisions, it is critical to match premiums and other cost sharing charges to the amount that families can afford to pay. With the wide variation in the cost of living across states, state-specific studies on the amount of income available to low-income families to finance health care expenses after paying for other essentials, such as food and housing, should be taken into account when establishing cost sharing policies.
2. Eliminate or minimize cost sharing for the lowest-income families. The evidence is overwhelming that low-income families are more sensitive to cost sharing charges than their more moderate-income counterparts. In light of this, it is critical not to impose any cost sharing charges on the lowest-income families or, at a minimum, ensure that they are very modest. Most states already do this; for example, only ten states with separate state SCHIP programs charge any premiums for children below 150 percent of the federal poverty level.
3. Protect children and parents with extensive medical needs from excessive cost sharing charges. For children and parents with extensive medical needs, even modest-sounding cost sharing charges can add up quickly. For example, a $5 charge for an office visit may be affordable for the low-income family with a child who sees the pediatrician once or twice a year, but an enormous problem for a family with a child with a disability who requires multiple medical appointments each week. In response, some states have established monthly caps on the dollar amount that families can be required to pay in cost sharing charges, effectively preventing cost sharing charges from accumulating and imposing an excessive burden on those with particularly extensive medical need. For example, Minnesota imposes a small charge ($3 per prescription) on parents filling prescriptions, but only for the first four prescriptions that they fill in a given month, and some mental health drugs are exempt from the copayment.
4. Monitor the impact of cost sharing and make changes as needed. Given that there is no “correct” answer as to what level of premiums and service-related cost sharing charges are appropriate for low-income families and children, it is important to consider establishing a mechanism to monitor the impact of a state’s cost sharing policies and to modify them if appropriate. Virginia, for example, discontinued SCHIP premiums and Florida rescinded a premium increase after seeing the potential effects on enrollment. Specifically, Virginia imposed a $15 per child per month premium for children between 150-200 percent of the federal poverty level; the state spent $1.39 in administrative costs to collect every $1 in premiums and some 6,000 children were at risk of losing coverage for failure to pay the premium.1 In the face of this significant cost and potential loss of coverage, the state permanently eliminated the premiums in April 2002 and cancelled the coverage terminations. Florida increased its KidCare premium by $5 in July 2003 but rescinded the increase for children with income below 150 percent of the federal poverty level in October 2004 after enrollment length decreased by 63 percent for children with income 101-150 percent of the federal poverty level.2 A number of other states have sponsored studies to evaluate the impact of premium changes, which can be used to document if the impact of cost sharing changes are greater than expected and pave the way for modifications.
5. Exempt critical services from cost sharing charges for cost-effectiveness reasons. Federal rules already prohibit states from imposing cost sharing charges on certain services, such as preventive care for children. States, however, may want to follow the growing trend among some employers of exempting a wider array of services from the usual cost sharing charges when it is cost-effective to do so. For example, in order to link cost sharing to value,3 SCHIP and Medicaid programs could exempt copayments for physician visits and medications needed to control asthma, diabetes, mental illness, and other conditions that lead to higher costs and complications if not managed well. The emerging evidence is that doing so can help people to better manage chronic conditions, potentially reducing long-term costs associated with complications. For example, one recent study found that a large employer’s decision to reduce copayments for five chronic medication classes (e.g., diabetes) in the context of a disease management program lead to markedly better compliance with medication regimes.4
6. Create easy, family-friendly ways to make cost sharing payments. Most states accept premium payments through the mail, but a number of states are providing families with other options to make premium payments, such as on-line, at drug or grocery stores, or through automatic deductions from checking accounts.5 These options are likely to gain in popularity and make it administratively easier for families to keep up with premium payments. Some states, such as Alabama and North Carolina, allow families to pay a single, relatively modest annual enrollment fee, eliminating the need for monthly payments. (Note, however, that an annual enrollment fee likely needs to be set well below the annualized cost of monthly premiums because many low-income families will find it difficult to come up with a single, large payment). It also is important to give families that miss premium payments an easy way to “cure” the non-payment and to re-enroll their children in the program. Georgia’s experience with a three-month “lock out” policy for families that failed to make a monthly SCHIP premium payment highlights the risks of failing to do so. Within eight months of adopting its lock out policy, 80,000 children were locked out of PeachCare, almost 60 percent of whom had family incomes below 150 percent of the federal poverty level.6
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Conclusion
Footnotes
1. Virginia Department of Medical Assistance Services memo, (May 15, 2002); see also, L. Summer & C. Mann, “Instability of Public Health Insurance Coverage for Children and Their Families: Causes, Consequences, and Remedies,” The Commonwealth Fund (June 2006). Back
2. B. Shenkman, “Healthy
Kids Program Changes in State Fiscal Year 2003-2004: Associations with
Enrollee Case-Mix, Health Care Expenditures, and Disenrollment; Tab O,
Impact on Cost Sharing,” A Report to the Healthy Kids Corporation (November 2004); and J. Boylston Herndon, et al., “The Effect of Premium Changes on SCHIP Enrollment Duration,” Health Services Research, 43: 458-477 (September 2007). Back
3. For example, see R. Braithwaite & A. Rosen, “Linking Cost Sharing to Value: An Unrivaled Yet Urealized Public Health Opportunity,” Annals of Internal Medicine, 146: 602-605 (April 2007). Back
4. M. Chernew, et al., “Impact of Decreasing Copayments on Medication Adherence Within a Disease Management Environment,” Health Affairs, 27: 103-112 (2008). Back
5. See N. Kaye, C. Pernice, & A. Cullen, “Charting SCHIP III: An Analysis of the Third Comprehensive Survey of State Children’s Health Insurance Programs,” National Academy for State Health Policy, (September 2006). Back
6. A. Essig & T. Sweeney, “PeachCare Lockout: Who Suffers?,” Georgia Budget and Policy Institute (May 2005). Back
