A Study Finds Children's Aid Goes to Adults

By ROBERT PEAR

ASHINGTON, Aug. 7 — Congressional investigators said today that the Bush administration had improperly allowed some states to spend federal money intended for the Children's Health Insurance Program on childless adults instead.

Senators said the practice violated the intent of Congress, and they vowed to stop it if the administration did not.

Health care experts said states were stretching the children's health program beyond its original purpose because they were short of money and had large numbers of uninsured people.

The investigators, from the General Accounting Office, said states like New York, which use their full allotments of federal money for children, could suffer as a result of the misuse of federal money in other states. "Allowing the expenditure of unspent funds on childless adults could prevent the reallocation of these funds to states that have already exhausted their allocations," the report said.

Congress created the program in 1997, with the explicit purpose of providing health insurance to uninsured children in low-income families. The accounting office said using the money to insure adults without children was "inconsistent with the statutory objectives" of the program.

The Department of Health and Human Services and three states named by the accounting office — Arizona, Illinois and Utah — disagreed with the findings.

Senators Max Baucus, Democrat of Montana, and Charles E. Grassley, Republican of Iowa, said states using CHIP money for childless adults were violating the clear intent of Congress. Mr. Baucus is chairman of the Finance Committee, which has authority over the program, and Mr. Grassley is the senior Republican on the panel.

The accounting office said the "impermissible expenditures" reduce the amount of money available to cover children. If money remains unspent in a state, it is redistributed to other states with unmet needs.

Tommy G. Thompson, the secretary of health and human services, has encouraged states to cover more people through innovative use of federal money. In 14 years as governor of Wisconsin, Mr. Thompson often expressed frustration with federal officials who delayed or withheld approval for his novel ideas, and as secretary he has given states much more flexibility.

Mr. Thompson has waived many requirements of federal law so states can use money from Medicaid and the children's health program to cover people who would not otherwise be eligible.

But the accounting office said Mr. Thompson was making these decisions without giving the public an adequate opportunity to comment on the changes, as required by the policies and procedures of his department.

In addition, the accounting office said the waivers were likely to increase federal costs, by allowing tens of millions of dollars in benefits for people who would not otherwise qualify for assistance. The waivers are not supposed to generate any new costs.

The accounting office, an investigative arm of Congress, expressed "legal and policy concerns" about waivers granted to Arizona, Utah and Illinois, among other states. It did not say how extensive the problems might be elsewhere. Many states are working on waivers like those already approved. Four states have received waivers like the one granted to Illinois.

"The report does not provide a balanced view of the progress we have made" in trying to reduce the number of uninsured, Mr. Thompson said. "In the debate over the technicalities of the law, we must not lose our focus" on the goal of providing health care benefits to low-income people.

But Senators Baucus and Grassley sided with the General Accounting Office.

"The focus on children is not a technicality of the law, but rather the explicit purpose" of the Children's Health Insurance Program, Mr. Baucus and Mr. Grassley said in a letter to Mr. Thompson. "We agree that covering uninsured adults is an important public policy objective, but that does not justify the defiance of Congressional intent."

The senators told Mr. Thompson, "You should not continue to approve waivers that divert funds set aside by Congress for children to insure childless adults."

If the Bush administration continues approving coverage of childless adults with CHIP money, the senators said, "we intend to take legislative action to end this violation of Congressional intent."

Leighton Ku, a health policy analyst at the Center on Budget and Policy Priorities, a liberal research and advocacy group, said that at least a dozen states had spent their 2000 allotments of CHIP money on children, as Congress intended, and would be shortchanged if other states chose to spend money on childless adults. Besides New York, he said, the states that stand to lose federal money include Alaska, Idaho, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Missouri and West Virginia.

Researchers from the Robert Wood Johnson Foundation, a health care philanthropy, and the Urban Institute said last week that nearly five million uninsured children were eligible for CHIP or Medicaid, but not enrolled.

In their letter, Senators Baucus and Grassley said, "These children should never have to compete with childless adults" for use of the remaining CHIP money.

The administration has urged states to follow the example of Illinois, which was allowed to provide prescription drug coverage under Medicaid to low-income elderly people who would not otherwise qualify.

Illinois contends that a prescription drug benefit for low-income elderly people will keep them healthy so they do not become eligible for Medicaid by incurring high costs for nursing homes and hospitals.

The accounting office expressed grave doubt that the drug benefit would "pay for itself" in this way. It said the Bush administration was using "risky assumptions" about the savings.

Illinois agreed to an overall limit on federal payments to the state for services to the elderly, including the drug benefit. If the state cannot achieve the promised savings, it might have to cut spending on elderly Medicaid recipients, cut benefits or reduce payments to health care providers, the accounting office said.

To secure waivers, states are supposed to show that their new programs would not result in more cost to the federal government than existing programs. The accounting office said that Illinois and Utah provided "inadequate justification" to support that conclusion.

"Consequently," it said, "these waivers have put the federal government at increased financial risk." The accounting office estimated that the waivers could increase costs by $59 million, or 10 percent, over five years in Utah, and by at least $275 million, or 2 percent, in Illinois.

To promote public comment, the accounting office said that federal officials should publish notice of pending waiver requests in the Federal Register. The Bush administration rejected this recommendation, saying that the "opportunity for public comment is more than adequate."