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Auditors: Health insurance programs skirting the law

Posted: Wednesday, August 07, 2002

WASHINGTON -- The Department of Health and Human Services has wrongly let states use money allocated for a children's health insurance program to help adults without children, federal auditors say in a new report, prompting a pair of influential senators to suggest the Bush administration is skirting the law.

The General Accounting Office also concluded that HHS is approving state requests to make major changes to programs without adequate opportunity for public input.

Further, the department is failing to ensure that state experiments are budget neutral, the GAO said, meaning certain states will end up spending millions more in federal dollars than they are entitled to.

Under Secretary Tommy Thompson, HHS has been aggressively using its power to change the rules governing Medicaid and the State Children's Health Insurance Program, or CHIP, by granting special permission to change who qualifies, what the benefits are and how the program works. Thompson regularly cites the effort as one of his proudest achievements, saying it has helped reduce the number of uninsured children and adults.

Among other plans, HHS has encouraged states to use CHIP dollars for adults, including adults without children -- as Arizona is now doing with HHS permission.

But in its report, released Tuesday, the GAO found that Congress never intended money in the children's program to help adults without children. And in a letter sent to Thompson Tuesday, leaders of the Finance Committee said they would take legislative action to clarify the law if Thompson did not stop the practice.

''You should not continue to approve waivers that divert funds set aside by Congress for children to insure childless adults,'' wrote Sens. Max Baucus, R-Mont., chair of the Finance Committee, and Chuck Grassley, R-Iowa, the top Republican, who released the GAO report.

HHS responded that it is simply working to get health insurance to more people who need it. The money being spent is leftover after states already have covered all the children who qualify for their programs, said HHS spokesperson Bill Pierce.

''You have states thinking creatively about how to insure more Americans,'' Pierce said. The administration, he said, is working ''to provide Americans with health insurance using all the tools we have.''

Under the CHIP law, the GAO noted, any money not spent by some states is to be reallocated to states that have spent their full allotment on kids.

The GAO examined four waivers granted in the last year and found problems with all of them. It noted that many other states have applications pending and said HHS should change its policies before it considers them.

It found:

Waivers granted to Arizona and California are not cost effective, as HHS claims. The law says that CHIP can cover families only if it does not cost more than simply covering the kids. Both states cover adults with CHIP money.

Waivers granted to Utah and Illinois are not budget neutral, as required.

Utah's waiver reduces benefits for some people in Medicaid in order to extend limited coverage to uninsured adults. This could wind up costing the federal government an extra $59 million over five years.

Illinois' Pharmacy Plus waiver gives low-income seniors prescription drug benefits through Medicaid. The budget rationale is that by reducing drug costs, seniors will be less likely to spend down their savings and therefore less likely to qualify for Medicaid and its expensive nursing home and hospital benefits. GAO said this was dubious reasoning and concluded the program would cost the federal government $275 million over five years.

HHS has failed to make documents about waiver requests available and failed to allow for public comment, and it has failed to follow its own policy for public input.

For instance, it would not make one state's waiver application available to the public until after it was approved.

HHS responded that it allowed for comment on the state level, but GAO said this was not enough. Baucus and Grassley agreed, saying HHS must do more to allow for ''meaningful access'' to information, including posting all documents on the Internet.



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