July 09,2002

Committee to Consider Grassley Bills on Children’s Health, Pension Reform

WASHINGTON – Two pieces of legislation from Sen. Chuck Grassley, ranking member ofthe Committee on Finance, will advance this week when they receive committee consideration.

Grassley’s bills to improve health care for children with disabilities and to reform pension laws tobetter protect employees from corporate malfeasance are the basis for Finance Committee action thisThursday, July 11, at 10 a.m. in 215 Dirksen Senate Office Building.

The committee will mark up a slightly revised version of the Family Opportunity Act, S. 321,which Grassley introduced with Sen. Ted Kennedy in February 2001 and in the previous Congress.The bipartisan legislation would correct an inequity that forces the families of children withdisabilities to impoverish themselves to retain Medicaid for their children. The Family OpportunityAct allows states to create options for such families to buy into Medicaid while continuing to work.Parents would pay for Medicaid coverage on a sliding scale. “Nobody would have to becomeimpoverished or stay impoverished to secure Medicaid for their child,” Grassley said.

Grassley’s inspiration for the legislation came from a mother named Melissa Arnold and heryoung son, Adam, who was born with a short thigh bone. Originally from Red Oak, Iowa, theArnolds moved to the Baltimore-area to obtain medical care for Adam. Melissa Arnold worked hardto obtain promotions but couldn’t accept any more pay raises without jeopardizing Adam’s Medicaidcoverage. Adam’s older brother couldn’t even work part-time for fear of pushing the family’sincome over the Medicaid limit.

Grassley said Medicaid is critical to the well-being of children with multiple medical needs.It covers a lot of services that these children need, such as physical therapy and medical equipment.Private health plans often are much more limited in what they cover. Many parents can’t affordneeded services or multiple co-payments out-of-pocket.

“I’m grateful that Chairman Baucus has scheduled consideration of the Family OpportunityAct,” Grassley said. “Parents of children with disabilities should have the same opportunities asadults with disabilities. Everybody wants to use their talents to the fullest potential, and every parentwants to provide as much as possible for his or her children. We should give states the flexibilityto provide families with options, without the federal government getting in the way.”

Grassley’s second bill that will receive Finance Committee consideration is the NationalEmployee Savings and Trust Equity Guarantee (NESTEG) Act, S. 1971, introduced in February. Thelegislation tightens protections for retirement plan participants in the future in light of the collapseof the Enron Corp., Global Crossing and other similarly situated companies.

“Millions of Americans have hundreds of billions of dollars invested in employer-sponsoredretirement plans,” Grassley said. “My goal with this legislation is to make sure corporate missteps,including fiduciary mismanagement, aren’t allowed to fester, especially when it comes to protectingworkers’ pensions.”

The NESTEG Act includes new diversification rights for company stock in plans; newdisclosure requirements for transaction suspension periods, or blackouts; and new disclosure throughperiodic benefit statements and retirement savings information.

The committee will consider all of NESTEG’s provisions except for a provision barringinsider trading during blackouts, which is part of the accounting standards reform bill that the fullSenate is considering this week.

JCX-74-02, a Description of the Chairman’s Modifications to the “National EmployeeSavings and Trust Equity Guarantee Act,” July 9, 2002, is available athttp://www.house.gov/jct/pubs02.html.

A description of the chairman’s mark of the Family Opportunity Act follows.

“Family Opportunity Act of 2002”

Chairman’s Mark
Section 101. Opportunity for Families of Disabled Children to Purchase Medicaid Coverage forSuch Children

State Option to Allow Families of Disabled Children to Purchase Medicaid Coverage

Current Law
Federal law establishes the categories or groups of individuals that can be covered underMedicaid and, in many cases, defines specific eligibility rules for these categories. Some groupsmust be covered under Medicaid (called mandatory groups), while others may be covered at stateoption. In general, Medicaid is available to low-income persons who are aged, blind or disabled,members of families with dependent children, and certain other pregnant women and children.Applicants’ income and resources must be within certain limits, most of which are determined bystates, again within federal statutory parameters. States have considerable flexibility in definingcountable income and assets for determining eligibility.

For disabled children, there are several potentially applicable Medicaid eligibility groups,some mandatory but most optional. Some of these children could qualify for Medicaid through morethan one pathway in any given state. There are four primary coverage groups for which disabilitystatus or medical need is directly related to eligibility.

First, subject to one important exception, states are required to cover all children receivingSupplemental Security Income (SSI). Because SSI is a federal program, income and resourcestandards do not vary by state. In determining financial eligibility, parents’ income is deemedavailable to noninstitutionalized children (but the need of household members is taken into account).If family income is higher than the SSI threshold, the child will not qualify for SSI or Medicaid.

The major exception to the required coverage under Medicaid of SSI recipients occurs in socalled “209(b)” states. Such states can apply more restrictive income and resources standards and/ormethodologies in determining Medicaid eligibility than the standards applicable under SSI. Statesthat offer State Supplemental Payments (SSP) may also offer Medicaid coverage to SSP recipientswho would be eligible for SSI, except that their income is too high.

Second, states may offer medically needy coverage under Medicaid. The medically needyare persons who fall into one of the other categories of eligibility (e.g., is a dependent child) butwhose income exceeds applicable financial standards. Income standards for the medically needy canbe no higher than 133a percent of the state’s former Aid to Families with Dependent Children(AFDC) payment standard in effect on July 16, 1996. Individuals can meet these financial criteriaby having income that falls below the medically needy standard, or by incurring medical expensesthat when subtracted from income, result in an amount that is lower than the medically needy incomestandard. Resource standards correspond to those applicable under SSI. Older children or those withvery large medical expenses may qualify for medically needy coverage. (Other eligibility pathwaysfor younger children are described below.)

Third, states may extend Medicaid to certain disabled children under 18 who are living athome and who would be eligible for Medicaid via the SSI pathway if they were in a hospital, nursingfacility, or intermediate care facility for the mentally retarded, as long as the cost of care at home isno more than institutional care. (This group is also called the Katie Beckett category.) The lawallows states to consider only the child’s income and resources when determining eligibility for thisgroup. That is, states may ignore parents’ income.

Fourth, states have an option to cover persons needing home and community based services,if these persons would otherwise require institutional care covered by Medicaid. These services areprovided under waiver programs authorized by Section 1915(c) of Title XIX of the Social SecurityAct. Unlike the Katie Beckett option, which requires all disabled children within a state to becovered, such programs may be limited to specific geographic areas, and/or may target specificdisabled groups and/or specific individuals within a group. States may apply institutional deemingrules which allow them to ignore parents’ income in determining a child’s eligibility for waiverservices.

Disabled children can also qualify for Medicaid via other eligibility pathways for whichdisability status and medical need are irrelevant. These additional pathways cover children at higherincome levels than those applicable to most of the disability-related eligibility categories describedabove. For example, states are required to provide Medicaid coverage to children under age 6 (andpregnant women) in families with incomes below 133 percent of the federal poverty level (FPL), andin FY2002, for children between ages 6 and 18 in families with income below 100 percent of FPL.States may cover infants under age one (and pregnant women) in families with income between 133and 185 percent of FPL. Similarly, under the State Children’s Health Insurance Program (SCHIP),states may extend Medicaid (or provide other health insurance) to certain children under age 19 whoare not otherwise eligible for Medicaid in families with income that is above the applicable Medicaidstandard but less than 200 percent of FPL, or in states that already exceed the 200 percent of FPLlevel for Medicaid children, within 50 percentage points over that existing level.

Chairman’s Mark
Effective October 1, 2004, the Chairman’s mark would add a new optional eligibility groupfor disabled children to Medicaid. The new group includes children under 18 years of age who meetthe disability definition for children under the Supplemental Security Income (SSI) program andwhose family income is above the financial standards for SSI but not more than 250 percent of FPL.States may exceed 250 percent of FPL, but federal financial participation is not available forcoverage of disabled children in families with income above that level.

Interaction with Employer-Sponsored Family Coverage
Current Law
States may require Medicaid eligibles to apply for coverage in certain employer-sponsoredgroup health plans (for which such persons are eligible) when it is cost-effective to do so. Thisrequirement may be imposed as a condition of continuing Medicaid eligibility, except that failureof a parent to enroll a child must not affect the child’s continuing eligibility for Medicaid.If all members of the family are not eligible for Medicaid, and the group health plan requiresenrollment of the entire family, Medicaid will pay associated premiums for full family coverage ifdoing so is cost-effective. However, Medicaid will not pay deductibles, coinsurance or other costsharingfor family members ineligible for Medicaid. Third party liability rules apply to coverage ina group health plan. That is, such plans, not Medicaid, must pay for all covered services under theplan.

Under current law, cost-effectiveness means that the reduction in Medicaid expenditures forMedicaid beneficiaries enrolled in a group health plan is likely to be greater than the additional costsfor premiums and cost-sharing required under the group health plan. Group health plan means a planof (or contributed to by) an employer or employee organization to provide health care (directly orotherwise) for employees and their families.

In sum, when it is cost-effective, Medicaid pays the premiums and other cost-sharing undercertain group health plans for Medicaid eligibles, as well as for Medicaid services not covered underthe group health plan. This includes payment of any premium and cost sharing amounts that exceedlimits placed on such payments in Medicaid law.

Chairman’s Mark
The Chairman’s mark would allow states to require parents of disabled children who areeligible for the newly defined coverage group to enroll in employer-sponsored family coverage undercertain circumstances. Specifically, when the employer of a parent of a disabled child offers familycoverage under a group health plan, the parent is eligible for such coverage, and the employercontributes at least 50 percent of the annual premium costs, states may require participation in suchemployer-sponsored family coverage plan as a condition of continuing Medicaid eligibility for thetargeted child under the proposed optional eligibility category. In addition, if such coverage isobtained, states may elect to have families pay an amount that reasonably reflects the premiumcontribution made by the parent for this coverage on behalf of the disabled child. States may payany portion of a required premium for family coverage under an employer-sponsored plan; forfamilies with income that does not exceed 250 percent of FPL, the federal government will sharein the cost of these payments.

In addition, states that use employer-sponsored family coverage for the new optionaleligibility group must insure that these plans, not Medicaid, pay for all covered services under theplan, as is the case with all other third party liability situations.

State Option to Impose Income-Related Premiums
Current Law
Generally, for certain eligibility categories, states may not impose enrollment fees, premiumsor similar charges. Further, states are specifically prohibited from requiring payment of deductions,cost-sharing or similar charges for services furnished to persons under 18 years of age (up to age 21,or any reasonable subcategory of such persons between 18 and 21 years of age, at state option).In certain circumstances, states may impose monthly premiums for enrollment in Medicaid.For example, states may require certain qualified severely impaired persons ages 16 and above whobut for earnings would be eligible for SSI to pay premiums and other cost-sharing charges set on asliding scale based on income. Further, states may require such persons with income between 250to 450 percent of FPL to pay the full premium. However, the sum of such payments may not exceed7.5 percent of income.

For other groups, states may not require prepayment of premiums and may not terminateeligibility due to failure to pay premiums, unless such failure continues for at least 60 days. Statescan also waive premiums when such payments would cause undue hardship.

Chairman’s Mark
The Chairman’s mark adds a new section to Medicaid law governing premiums applicableto the new optional eligibility group. It would allow states to require families with disabled childreneligible for Medicaid under the new optional eligibility group to pay monthly premiums forenrollment in Medicaid on a sliding scale based on family income. Aggregate payments forpremiums paid by families for employer-sponsored family coverage may not exceed 5 percent ofincome.

States may not require prepayment of premiums, nor are states allowed to terminate eligibilityof a targeted child for failure to pay premiums unless lack of payment continues for a minimum of60 days beyond the payment due date. States may waive payment of premiums when such paymentwould cause undue hardship.

The mark does not change current law with respect to other cost-sharing by beneficiaries(e.g., deductibles, co-insurance, co-payments), which is not permitted for children under 18 yearsof age. Thus, Medicaid would pay such cost sharing obligations rather than the families ofqualifying children under the new optional group.

Section 102. Treatment of Inpatient Psychiatric Hospital Services for Individuals Under 21 in Homeor Community-Based Services Waivers Current Law
Medicaid home and community-based service (HCBS) waivers authorized by Section1915(c) of Title XIX of the Social Security Act give states the flexibility to develop and implementalternatives to placing Medicaid beneficiaries in hospitals, nursing facilities, or intermediate carefacilities for the mentally retarded (ICF-MRs). These waivers allow such individuals to be cared forin their homes and communities as long as the cost is no higher than that of institutional care.

Federal regulations permit HCBS programs to serve the elderly, persons with physicaldisabilities, developmental disabilities, mental retardation or mental illness. States may also targetwaiver programs to persons with specific illnesses or conditions, such as technology-dependentchildren or individuals with AIDS.

Services that may be provided under HCBS waiver programs include: case management,homemaker/home health aide services, personal care services, adult day health, habilitation, andrespite care. Other services needed by waiver participants to avoid institutionalization, such as nonmedicaltransportation, in-home support services, special communication services, minor homemodifications, and adult day care may also be provided, subject to approval by Centers for Medicareand Medicaid Services (CMS). The law further permits day treatment or other partial hospitalizationservices, psychosocial rehabilitation, and clinic services for persons with chronic mental illness.Room and board are excluded from coverage except under limited circumstances.

Under HCBS wavier programs, states may select the mix of services that best meets the needsof the targeted population to be served. Programs may be statewide or limited to a specificgeographic area.

Chairman’s Mark
The mark adds to the list of persons eligible for HCBS waiver programs individuals under21 years of age requiring inpatient psychiatric hospital services, effective for medical assistanceprovided on or after January 1, 2003.

Section 103. Development and Support of Family-to-Family Health Information Centers.Current Law

Title V of the Social Security Act authorizes the Maternal and Child Services Block Grantprogram, which provides grants to states for improving the health of mothers and children. Theprogram has three components: (1) formula block grants to 59 states and territories; (2) SpecialProjects of Regional and National Significance (SPRANS); and (3) Community Integrated ServiceSystems (CISS) grants.

Activities supported under SPRANS include Maternal and Child Health (MCH) research,training, genetic services, hemophilia diagnostic and treatment centers and maternal and child healthimprovement projects that support a broad range of innovative strategies.

By law, 15 percent of the amount appropriated for the Maternal and Child Health BlockGrant Program up to $600 million, is awarded to public and private not-for-profit organizations forSPRANS. SPRANS also receive 15 percent of funds remaining above $600 million after CISS fundsare set aside. The CISS programs are initiated when the MCH appropriation exceeds $600 million.Of any amount appropriated over $600 million, 12.75 percent must be for CISS. The remainingamounts are allocated to the block grant program and to SPRANS.

Chairman’s Mark
The Chairman’s mark would increase funding for SPRANS for the development and supportof new family-to-family health information centers. The mark would appropriate to the Secretaryout of any money in the Treasury not otherwise appropriated, for this new purpose an additional $3million for FY2003; $4 million for FY2004; and $5 million for FY2005. For each of fiscal years2006 and 2007, the bill authorizes to be appropriated to the Secretary $5 million for this purpose.Funds would remain available until expended.

The family-to-family health information centers would: (1) assist families of children withdisabilities or special health care needs to make informed choices about health care so as to promotegood treatment decisions, cost-effectiveness, and improved health outcomes for such children; (2)provide information regarding the health care needs of, and resources available for children withdisabilities or special health care needs; (3) identify successful health delivery models; (4) developa model for collaboration between such children and health professionals; (5) provide training andguidance with regard to the care of such children; and (6) conduct outreach activities to the familiesof such children, health professionals, schools, and other appropriate entities and individuals. Thefamily-to-family health information centers would be staffed by families of children with disabilitiesor special health care needs who have expertise in federal and state public and private health caresystems, and health professionals.

The Chairman’s mark would require the Secretary to develop such centers in: (1) not lessthan 25 states in FY2003; (2) not less than 40 states in FY2004; and (3) not less than 50 states inFY2005. States would be defined as the 50 states and the District of Columbia.

Section 104. Restoration of Medicaid Eligibility for Certain SSI Beneficiaries.

Current Law
Except in the case of “209(b)”states, states are required to provide Medicaid benefits to allindividuals who are receiving Supplemental Security Income (SSI). Persons eligible for SSI are lowincomeaged, blind, and disabled individuals. (Under the 209(b) provision, states may apply morerestrictive income and resources standards and/or methodologies for determining Medicaid eligibilitythan the standards under SSI.) For disability purposes, two groups of disabled children exist: thoseunder the age of 18 and those age 18 through 21 (if a full time student). Eligibility for SSI iseffective on the later of: (1) the first day of the month following the date the application was filed,or (2) the first day of the month following the date that the individual was determined eligible.

Chairman’s Mark
The Chairman’s mark confers Medicaid eligibility to persons who are under age 21 and whoare eligible for SSI, effective on the later of: (1) the date the application was filed, or (2) the dateSSI eligibility was granted.

The Committee’s provision would apply to medical assistance for items and servicesfurnished on or after the first day of the first calendar quarter that begins after the date of enactmentof this Act.