Medicaid and the Children’s Health Insurance Program: Optimization to Promote Equity in Child and Young Adult Health

The American Academy of Pediatrics (AAP) envisions a health care system in which all infants, children, adolescents, young adults, and families can access high-quality, comprehensive, family-centered, and equitable care. Such a system would link with other community resources to ensure optimal growth, development, and well-being of all infants, children, adolescents, and young adults (hereafter referred to as “children [0–26 years]”), regardless of where they live, emphasizing prevention and health promotion. This system must have adequate resources and incentives to achieve these goals. This vision builds on much AAP work and policy, including policy statements on the unique value proposition of pediatric health care,¹  principles for child health care financing,²  guiding principles for managed care arrangements,³  continuing on the path to equity,⁴  the medical home,⁵  and community pediatrics.⁶  Approximately 50% of all US children receive care through Medicaid and/or the Children’s Health Insurance Program (CHIP).⁷  However, although children of African American/Black or Hispanic/Latino background represent 38.2% of US children, more than 60% of children from these backgrounds receive services through Medicaid and/or CHIP.^8,9  These 2 programs have historically provided fundamental support for the health care of millions of children who would otherwise have lacked any insurance.¹⁰  Medicaid and CHIP provide an essential base from which to achieve the AAP vision. Much evidence documents the positive effects of Medicaid and CHIP on child health,^11,12  including timely access to care and reductions in neonatal and child mortality, emergency care utilization, and avoidable hospitalizations, as well as positive lifelong impacts such as less chronic disease in adulthood, lower rates of teenage pregnancy, higher rates of high school graduation, increased college enrollment, and higher future wages.¹³  Medicaid specifically has several characteristics that make it a strong program for children, such as no waiting or special enrollment periods and no copays, entitlement to services for all eligible applicants, and coverage of all medically necessary services via the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit.

The creation and evolution of Medicaid and CHIP reflect the key strengths and limitations of the programs. Since 1965, Medicaid has provided coverage to several populations: children from low-income families receiving government assistance; children and adults with disabilities; elderly low-income populations; and people with vision impairment lacking other health insurance. Over time, Medicaid expanded to include more populations, such as low-income pregnant people and children in foster care, and evolved into an essential safety net for children.¹⁴  The Patient Protection and Affordable Care Act provided the most recent large-scale change to Medicaid by expanding eligibility to all children in households with income less than 138% of the federal poverty level (FPL).¹⁵  The programs provide stability during economic downturns, pandemics, and catastrophic events.¹⁶  Medicaid has joint federal-state financing (unlike Medicare, which has full federal funding). States receive a federal payment match, ranging from 50% to 77%, based on several state characteristics (federal medical assistance percentage).¹⁷  This funding arrangement allows states broad discretion over eligibility, benefits, enrollment, and payments while meeting federal minimums and guidelines.

The Medicaid statute requires the broad EPSDT benefit for children insured by Medicaid to 21 years of age.¹⁸  Most states use Bright Futures: Guidelines for Health Supervision of Infants, Children, and Adolescents^19,20  as their standard for pediatric preventive care visits. EPSDT requires states to cover any services identified during preventive screening needed for healthy growth and development, even if the state’s Medicaid program does not normally cover that service (eg, behavioral health services).²¹ 

Medicaid state flexibility was intended to preserve state operational autonomy and programming. Indeed, many states have innovated in Medicaid eligibility, benefit, and payment design, particularly through 1115 waivers, which allow states to try innovations to improve care for beneficiaries. State flexibility, nonetheless, has also fostered wide variability and geographic inequities and further enabled ableism and structural racism.²²  From inception, state uptake and administration of Medicaid varied substantially, with less uptake particularly in states with large populations of African American people.²³  Substantial dependence on state revenues has led to low payment rates and cumbersome enrollment and renewal policies that effectively limit enrollment. These features both undervalue care and disincentivize providing care to the often minoritized populations the program serves. Variations in state implementation of EPSDT and limited federal enforcement of this and other requirements compromises quality of care for insured children, while further exacerbating inequities.^24,25 

Created as part of the Balanced Budget Act of 1997, CHIP was designed to insure children with household incomes above the state’s Medicaid income eligibility threshold but too low to afford private insurance. States can use CHIP funds to create a separate CHIP program, expand their Medicaid program, or adopt a hybrid approach.²⁶  Medicaid and CHIP have similarities and differences in financing and operation. Both are federal-state matching programs, but the CHIP federal match rate is higher than the Medicaid match rate. Medicaid is an entitlement program, requiring states to enroll all eligible individuals who apply, with no limits on Medicaid’s federal matching funds. CHIP, as a block grant, provides each state an annual capped allotment, such that eligible applicants can be denied coverage after the cap has been reached.²⁷  Relative to Medicaid, CHIP has more flexibility in benefit requirements and does not need to include the EPSDT benefit.²⁸  Although states usually cannot impose premiums and cost-sharing in Medicaid, both are permitted under CHIP. CHIP requires periodic congressional reauthorization, with current authorization through September 30, 2029.

Reform of Medicaid and CHIP will lead to a more equitable, higher quality, and more comprehensive family and community-centered health care system as laid out in the AAP vision. This system can better address health-related social needs and integrate mental health, including prevention and promotion, into pediatric care. (The term “mental” or “mental health” throughout this statement is intended to encompass “behavioral,” “psychiatric,” “psychological,” “emotional,” and “substance use” as well as family context and community-related concerns.) Reforms including decreasing major state-by-state variations in access and care, establishing and enforcing national standards of care, providing financing at least consistent with the higher of commercial or Medicare rates, and expanding eligibility will all strengthen public health insurance for children, reduce structural racism and ableism, and improve access to quality care.

This policy statement embraces the belief that greater investment and key reforms in Medicaid and CHIP represent strategic initiatives critical to the future of our nation. Improvement in the physical and mental health of children will achieve an immense long-term return on investment over the life span, including lower rates of disease, greater productivity from a healthier workforce, and reduced adult health care costs. Making investments in Medicaid and CHIP supports a necessary shift from a highly variable, state-by-state system that generates and exacerbates health disparities, to a more uniform program that fosters healthy young people and a productive adult population, allowing individuals to attain well-being, counteracts the effects of poverty, and reduces the likelihood of future incarceration,²⁹  with a multigenerational impact.^12,30 

The AAP calls for several foundational changes to Medicaid and CHIP that advance specific goals in eligibility and enrollment, coverage and care, and financing and payment. The AAP understands well that achievement of many goals will require legislation, regulation, and systems changes. The AAP calls for national standards for eligibility and enrollment, program implementation and benefit standards, and financing and payment. These goals could be achieved through increasing federal and state oversight, federal share of funding, and total investment in the programs. The Centers for Medicare and Medicaid Services (CMS) and state agencies should conduct regular equity impact assessments of the current implementation and proposed policy changes in line with the CMS framework for health equity.³¹  Input from community and family members on program and policy changes that would improve their access and health should help drive change. The following changes will lead to a more equitable program for all children (0–26 years) regardless of state lines, while also allowing state innovation, acknowledging differences in health needs across states.

Goal:All children (0–26 years) in the United States should have access to health insurance coverage.

Proposed Foundational Changes:

1. Universal eligibility for all children up to age 26 years residing in the United States who lack other sources of health insurance, through a single program that combines Medicaid and CHIP.

2. Automatic enrollment in a combined Medicaid and CHIP program at birth of all infants born in the United States, with the option to opt out of coverage for those with other sources of insurance, to guarantee health insurance coverage without reverification of eligibility until age 6 years and no more than every 2 years thereafter.

Goal: Children (0–26 years) insured by Medicaid/CHIP should have meaningful access to a consistent, high-quality set of services and supports that meets their health needs, including mental, dental, and preventive health services, regardless of their state of residence or their socioeconomic status.

Proposed Foundational Changes:

1. Uniform Medicaid or CHIP program and benefit design and implementation that effectively supports the needs of children, youth, and families with uniform access across all states.

2. Implementation of a federal Medicaid/CHIP core drug benefit setting minimum requirements for state formularies.

Goal:Medicaid program financing should facilitate a robust, high-quality network of providers, services, and supports.

Proposed Foundational Changes:

1. Major increases in the federal share of funding of the Medicaid/CHIP programs, especially for all direct patient care, to eliminate state variations that contribute to unequal access to care.

2. A federal minimum rate schedule with an end to undervalued Medicaid payment, with rates at least comparable to prevailing Medicare rates and that support the full range of services needed to provide comprehensive care to children.

The next section elaborates on these proposed foundational changes and articulates incremental strategies that could lead to these foundational goals.

Goal:All children (0–26 years) in the United States should have access to health insurance coverage.

The AAP recommends universal eligibility and automatic enrollment for Medicaid/CHIP for all children (0–26 years) lacking other sources of health insurance. Uniform eligibility levels and enrollment and retention policies will help ensure equitable and continuous access to coverage. Currently, states determine Medicaid/CHIP eligibility for children based on age, household income, and other special circumstances (eg, foster care or special health care needs). States now must meet the minimum federal Medicaid income eligibility level for children (currently 138% of FPL), but many states use higher income thresholds, leading to significant state variation in income eligibility.³²  Although current statute allows states to increase the age threshold to 20 years, most states limit eligibility to ages 0 to 18 years. States also can vary the income threshold by age.³² 

Furthermore, after establishing eligibility, each state can impose administrative burdens related to enrollment (eg, required documentation, complex applications, periodic data checks^33,34 ) or alternatively, provide support to facilitate enrollment, such as supporting different language preferences or health literacy levels. Frequent redeterminations often lead eligible recipients to lose coverage because of documentation or other problems. These variations exacerbate inequities, perpetuate systemic racism, and lead to disproportionate underutilization of vital services and programs by the populations Medicaid and CHIP are intended to benefit.³⁵ 

• 1.

  Universal eligibility for all children residing in the United States up to age 26 years through a single program that combines Medicaid and CHIP.

• 2.

  Automatic enrollment of all newborn infants at birth to guarantee health insurance coverage.

Until the above foundational changes are achieved, the AAP recommends interim strategies to augment Medicaid and CHIP eligibility and promote continuity of coverage:

1. Continuous eligibility: Continuous eligibility helps to ensure health care access and limits disenrollment of eligible recipients. The AAP recommends required continuous eligibility of all individuals from the newborn period to age 6 years, and a minimum period of 2-year continuous eligibility without renewal requirement for individuals ages 6 years to up to age 26 years. Medicaid coverage for pregnant individuals should be extended from 60 days to 1 year postpartum^36,37  nationwide, consistent with policy many states have already implemented. Such changes will reduce the number of eligibility redeterminations and temporary losses of Medicaid coverage, while improving infant and maternal health and outcomes.

2. Medicaid and CHIP alignment: Even without combining the programs, Medicaid and CHIP can operate in a more aligned fashion by allowing seamless, continuous coverage for children (0–26 years) as they transition between the 2 programs because of family income fluctuations.

3. Broader eligibility standards: The federal minimum income eligibility for all children (0–26 years) in Medicaid/CHIP should increase to 400% of FPL. This income eligibility level will ensure affordable health insurance coverage for children (0–26 years), regardless of whether they qualify for coverage under an Affordable Care Act marketplace plan or have access to an employer-sponsored plan.

4. Expanded eligibility for children in immigrant families: Children (0–26 years) in immigrant families are at particular risk for uninsurance and access gaps. Given this risk, Medicaid/CHIP eligibility should be extended to all immigrant children irrespective of immigration status to age 26 years. Short of this change, policy should include extending Medicaid/CHIP eligibility to all individuals in the Deferred Action for Childhood Arrivals program and those seeking humanitarian protection and removing the 5-year bar for lawfully present children and/or pregnant individuals at the federal level.

5. Enrollment and retention supports: States and CMS should provide adequate funding to simplify enrollment and retention for children (0–26 years) and families, including outreach and enrollment assistance, especially to populations at high risk of uninsurance. States should have (1) multiple sites for enrollment, including online and paper enrollment and joint applications with other public assistance programs; (2) community-based enrollment navigators; (3) income tax filing prompts for eligibility and enrollment options; and (4) continuous enrollment availability without lockout periods.³⁸ 

6. Presumptive enrollment: Implement presumptive eligibility for re-enrollment for families who had previously submitted evidence of fiscal income eligibility but face challenges in providing timely current income data. This policy helps to minimize coverage disruptions and access gaps.

7. Cross-state coverage support: Limit disruptions in Medicaid/CHIP coverage when children (0–26 years) move across state lines. The previous state should provide seamless coverage until it notifies the new state about termination, and the new state should then grant presumptive eligibility. Additionally, services feasibly accessed only by crossing state lines, such as subspecialist care, should be covered without any interruptions. This should also apply across counties for children enrolled in managed care plans.

Goal: Children (0–26 years) should have access to a consistent, high-quality set of services and supports that address their clinical needs regardless of their state of residence or their socioeconomic status.

Federal guidelines mandate a core set of benefits and covered services in Medicaid/CHIP, although states have wide discretion and minimal oversight regarding which optional services to cover as well as the design of their benefits. For example, states must provide inpatient care but can limit the number of allowable days per year or provide similar limits on specialized therapies. States can also limit providers eligible to offer various services, such as restricting payment for provision of mental health and developmental preventive and treatment services to professionals licensed in those fields or can deny payment for both medical and mental health services provided to the same patient on the same day. Especially given the high rates of mental health conditions among children, these limits hinder opportunities for primary care pediatricians to assess and manage common behavioral conditions, such as emotional dysregulation, anxiety, depression, and attention-deficit/hyperactive disorder. The Medicaid statute provides a clear standard of care for children through the “equal access” provision and through EPSDT; however, federal monitoring and enforcement of enrollees’ access to care and of state EPSDT implementation has been limited, leading to inequities across states in the services enrollees can access in a timely way, as well as what medically necessary services are covered.

• 1.

  Uniform Medicaid/CHIP program design and implementation that effectively supports the complex needs of children, youth, and their families.

• 2.

  Implementation of federal core Medicaid/CHIP drug set.

Until the above foundational changes are achieved, the AAP recommends interim strategies to ensure high-quality coverage for all children:

1. Full implementation and monitoring of the EPSDT benefit in Medicaid and CHIP: At minimum, states should cover all benefits and services outlined in the AAP statement on scope of health care benefits.¹⁸  The EPSDT benefit should also be mandated as standard within CHIP.

2. Standard medical necessity definition: Ensuring a national standard of care through EPSDT makes clear the need to formalize the definition and coverage of medically necessary services, including preventive care or periodicity^19,20  and immunization schedules consistent with national guidelines.³⁹  See the AAP statement on medical necessity.⁴⁰ 

3. Standard measure set: States and the federal government must ensure quality and accountability in the Medicaid/CHIP programs, using measures appropriate for children (0–26 years) and young families with goals of enhancing care and outcomes. Quality measurement should identify racial disparities and other areas of potential health inequities. Measures included in the Medicaid Child Core Set should be frequently reviewed and updated to align with AAP recommendations and advances in measurement science.⁴¹  States should provide incentives to encourage practices⁴²  to achieve predefined quality and performance metrics that reflect pediatric clinical priorities.

4. Incorporate racial and health equity analysis into the development and evaluation of Medicaid and CHIP Policies: Optimizing Medicaid/CHIP for equity will benefit from systems of accountability that help avoid introducing new harms and barriers, as well as perpetuating existing damage. Existing analysis tools, including community input, should be incorporated early in Medicaid and CHIP policy and budget development, as well as implementation and evaluation.

5. Medicaid Claims Database: CMS should enhance national Medicaid claims data resources and require state Medicaid plans and Medicaid managed care organizations (MCOs) to participate fully in reporting encounter data, with a standardized approach to collecting and reporting race and ethnicity and language data.^43–45  This database will allow health policy analysts and researchers in government, academia, and the private sector to examine regional patterns of utilization, denials, access to care, and quality of care to provide accountability and inform efforts to construct “best practice” models of care.^46,47 

Goal: Medicaid program financing should facilitate a robust, high-quality network of providers, services, and supports.

Medicaid and CHIP are based on a complex federal-state financing partnership that promotes wide state variation in all program aspects, including financing and payments. State variations in payment help to perpetuate racial and geographic inequities. Most states contract with MCOs to implement their Medicaid/CHIP programs, and MCOs now cover the large majority of children⁴⁸ ; differences across MCOs create further heterogeneity within states. In addition, persistently undervalued payment rates by Medicaid and CHIP have disincentivized physician and other provider participation in these programs, limiting the number of accessible health care options.

• 1.

  Federal assumption of most funding for Medicaid/CHIP beneficiaries up to age 26 years, especially all direct patient care, to eliminate state variations that contribute to unequal access to care.

• 2.

  A federal minimum rate schedule with an end to undervalued Medicaid payment, with rates at least comparable to prevailing Medicare rates and that support the full range of services needed to provide comprehensive care to children.^49,50 

Until the above foundational changes are achieved, the AAP recommends interim strategies to improve adequate Medicaid/CHIP program financing:

1. Expand federal oversight: Change the statutory relationships between CMS and the states so that CMS has expanded authority to ensure national standards for eligibility, enrollment, benefits, quality, and payment.

2. Restructure CHIP as an entitlement program: Transform CHIP to an entitlement program similar to Medicaid to eliminate the impact of potential lapses in funding resulting from congressional inaction. Prohibit states from freezing or capping enrollments.

3. Augment resources and adjust payments for health-related social needs: Payment rates should recognize the costs of supporting families and their complex social, developmental, and economic needs, including the extra resources needed to promote healthy mental and emotional development and screening for and addressing social influencers of health. Payment models should account for elevated costs associated with caring for children with varied special needs, such as chronic and complex medical conditions, mental health concerns, and health-related social needs. Risk adjustment models that rely on previous utilization may not fully account for needs, in part because children, especially in less-resourced households or neighborhoods or who face systemic racism, may underutilize care.⁵¹  Further, payments should be adjusted for the health and/or mental health of family caregivers, whose health and well-being greatly influence needs and health care use by children.⁵² 

4. Enable access to integrated mental health supports regardless of diagnosis: Payment must be adequate to allow for access to needed mental health preventive and treatment services, including therapy in addition to medication management, even without a specific diagnosis. All Medicaid and CHIP programs should enable children (0–26 years) to access mental health supports without a formal diagnosis.⁵³  The growing mental health needs among children (0–26 years) create an urgent need to support mental health integration in pediatric care, including incentives for primary care pediatricians to provide needed services.

Medicaid and CHIP currently provide essential health coverage for over half of all US children, who reflect the racial and ethnic diversity of the United States. These critical programs provide substantial pediatric-specific benefits and care that have had major positive impacts for children, youth, and families. Transformational reform and enhancements of Medicaid and CHIP have the potential to build a national system of care that fully addresses the clinical, developmental, social, and mental health needs of diverse, low-income children, youth, and their families. This AAP statement outlines goals and strategies to ensure health equity, quality of care, and access to vital health care services while dismantling the longstanding impacts of systemic racism within public insurance programs for children. The statement clarifies ways to expand on current program strengths, but the AAP recognizes the need for more foundational and lasting reform to meet the needs of children, advance health equity, and ensure healthy and productive adults in the future. Regular health equity assessments will check that changes made improve equitable access, with modifications made if health equity goals are not met. Changes outlined in this statement will improve health care and access for all children. The technical report will describe how Medicaid supports the needs of several special populations in more detail. Proposed reforms in Medicaid/CHIP include a federal standard that expands eligibility and improves enrollment and retention and promotes innovative payment structures; makes EPSDT the standard for both Medicaid/CHIP with enforcement by CMS⁵⁴ ; regulates standards and decreases state-by-state variation; and ensures adequate payment while still allowing, encouraging, and supporting continued state innovation.

Jennifer D. Kusma, MD, MS, FAAP

Jean L. Raphael, MD, MPH, FAAP

James M. Perrin, MD, FAAP

Mark L. Hudak, MD, FAAP

James M. Perrin, MD, FAAP, Chairperson

Lisa Chamberlain, MD, MPH, FAAP

Jennifer D. Kusma, MD, MS, FAAP

William Bernard Moskowitz, MD, FAAP

Alison Amidei Galbraith, MD, FAAP

Jean L. Raphael, MD, MPH, FAAP

Renee M. Turchi, MD, MPH, FAAP

Angelo P. Giardino, MD, FAAP – Medicaid and CHIP Payment and Access Commission

Mike Chen, MD, FAAP – Section on Surgery

Todd Wolynn, MD, MMM, FAAP – Section on Administration and Practice Management

Hope Glassberg

Elizabeth Patchias

Sunnah Kim

Stephanie Glier

Dan Walter

Todd Fraley

Nicholas Wallace

AAP

American Academy of Pediatrics

CHIP

Children’s Health Insurance Program

CMS

Centers for Medicare and Medicaid Services

EPSDT

Early and Periodic Screening, Diagnostic, and Treatment

FPL

federal poverty level

MCO

managed care organization