Insuring kids in hard times: since it began, SCHIP has been taking care of children's medical needs. The question now, however, is how will it be funded.

• Author: Oliver, Leah

Devastated by losing both his job and family health insurance, Collin Andersen and his wife, Marie, found themselves desperately searching for options for medical care for their children. When they discovered Vermont's Dr. Dynasaur program--the state's health insurance program for families that earn too much to qualify for Medicaid, but too little to afford private insurance--they immediately enrolled the children. Help came just in time: The Andersens' son was admitted to the hospital for complications from a previous surgery.

"I don't know what I would have done without your program!" says Marie.

For the last five years, states have been enrolling eligible children in the State Children's Health Insurance Program (SCHIP). Since it began in 1998, nearly 5 million children have been signed up, and now many of them depend on it for medical care.

The early legwork invested in the program, however, may be at risk due to funding constraints. Five years ago, money went to outreach and education. Now, all 50 states have SCHIP programs actively serving working families with a focus on keeping children in the program and providing health insurance.

The federal share of costs is greater under SCHIP than Medicaid-- between 65 percent and 85 percent of expenses, depending on the state.

While some states still have SCHIP dollars left, others have fully expended their federal allotments. Current state spending patterns do not seem to align with a "one-size-fits-all" approach--states are allowed some flexibility in determining the kind of program and how to provide services. And states that have used their full share of federal funds will feel the sting of the "SCHIP dip"--a significant decrease in federal funding between 2002 and 2004 of the 10-year authorized program--more keenly than those that have not.

Across the nation, SCHIP programs are experiencing the strain of deteriorating state budgets, significant increases in enrollment, decreases in federal funding and the potential loss of funds allocated from earlier years due to requirements in the federal law. Although most states are facing budget constraints, SCHIP program personnel are especially concerned about two major funding issues: the requirement that states forfeit unspent SCHIP money to the federal treasury, and the so-called "SCHIP dip."

THE SCHIP DIP

Originally, the feds set aside approximately $40 billion over 10 years for states to provide health coverage for millions of children, which included the three-year "dip" in funding due to a projected downturn in federal revenues. The first dip--a 26 percent...