WASHINGTON -- Health officials in Maryland and other states are scrambling to respond to new Bush administration rules that could effectively end subsidized medical insurance for thousands of children.
State officials plotted strategy in a conference call yesterday and are reaching out to governors and congressional allies for help. They hope to block new regulations that limit eligibility for the State Children's Health Insurance Program, a Clinton administration-era partnership between state and federal governments that, supporters say, provides a critical safety net for hundreds of thousands of families.
In Maryland, about 3,700 children could be removed from the program under guidelines issued by the Bush administration late last week, roughly one out of every 30 who now get coverage.
"That's pretty serious," said John Folkemer, Medicaid director in the Maryland Department of Health and Mental Hygiene.
The health program has been the subject of intense debate in Washington, with a bipartisan group in Congress seeking to expand the initiative to cover more uninsured children, paid for in part with an increase in the federal excise tax on cigarettes of up to 61 cents a pack.
The House and Senate adopted competing measures this month and are expected to reach a compromise after Labor Day. But President Bush has threatened a veto and wants to refocus the program more narrowly on the working poor.
Bush has criticized the congressional effort as an attempt to impose more government control of health care that would lead, over time, to lower-quality medical care and rationing of medical services.
In an apparent effort to pre-empt congressional action, the Bush administration issued new rules that, local officials say, would make it nearly impossible for many families receiving benefits under the program to remain eligible.
White House spokesman Tony Fratto said state officials need to do a better job boosting enrollment at lower income levels before they worry about coverage for what he called middle-class families.
"That should be their goal," he said.
In Maryland, a family of four with an income of up to $61,950 is now eligible for the program. But the Bush administration wants to limit the benefit to those families that have incomes between $20,650 and $41,300, or between one and two times the federal poverty level.
"It really is a strategy to do through regulations what they were unsuccessful in doing through legislation," said Lisa Dubay, an associate professor at the Johns Hopkins Bloomberg School of Public Health.
The health program, known in Washington as SCHIP, was originally designed to help families that can't afford private insurance but earn too much to qualify for Medicaid, the federal health care program for the poor. States have flexibility in setting income limits, and a growing number of states are raising the ceiling on family income as a way to increase the number of previously uninsured families who can qualify.
The new regulations took congressional leaders and state officials by surprise when they were issued Friday evening.
"They are trying to send a signal that they don't want any expansion of the SCHIP program," said Rep. Frank Pallone Jr., a New Jersey Democrat who chairs a health subcommittee. "The sad thing about that is it is totally contrary to what the president has said in the past."
Health officials in Maryland and elsewhere are "quite anxious" over the new rules, said Martha Roherty, director of the National Association of State Medicaid Directors, which coordinated the conference call in which members agreed to ask the administration to rescind the new requirements.
"It appears they are opening the door to changing the whole program," Roherty said. "Now states are saying, 'How are we going to do health care reform at all if we have this huge scaling back of the SCHIP program?'"
In setting out the new regulations, Dennis G. Smith, director of the Center for Medicaid and State Operations, told state officials that governments needed to do a better job in making sure families weren't simply replacing their private insurance with the government plan, a choice that policymakers call "crowd-out."
"It has become clear that the potential for crowd-out is greater for higher income beneficiaries," Smith wrote to state officials.
He told the officials that a state would have to prove that 95 percent of eligible children from working-poor families - those earning up to twice the federal poverty limit - were enrolled in the program before the state could provide coverage to children from households earning more.
In reality, health experts say, no state would meet that requirement, given aggressive marketing efforts that have left millions of eligible youngsters unenrolled. In Maryland, for example, just 74 percent of eligible children in that income group are enrolled, said Cindy Mann, director of the Georgetown University Center for Children and Families.
Another requirement receiving heavy criticism: States would be prohibited from enrolling children from higher-income families until they have been without health insurance for a year. Maryland requires a six-month uninsured period.
"That would automatically mean that a tremendous amount of kids don't get coverage," Pallone said. "It doesn't make any sense."
The states that cover families at higher income levels are generally places where medical care costs more, such as Maryland, New Jersey, New York and California, health experts said. The measures recently approved by Congress address the risks of private insurance replacement, or crowd-out, by targeting new money at the estimated 5 million children who are eligible for the program but not enrolled, Mann said.
The administration's new restrictions add a fresh element to negotiations between Congress and the White House over the future of the children's health program. At their core, the discussions involve an ideological dispute over the scope of the government's role in providing health care.
SCHIP will expire at the end of September if Congress doesn't extend the law. Bush has proposed spending $5 billion more on the program over the next five years - an amount the Congressional Budget Office said would not meet the rising cost of health care for those already enrolled. The Senate version would spend $35 billion more and the House would authorize $47 billion in additional funds.
Congress should concentrate first on renewing the program, and worry about expansion later, said Grace-Marie Turner, president of the Galen Institute, a think tank that supports market solutions to health issues.
"When you mix it all together, you get bad public policy," she said.