CHAPTER 8 Shaping the Future: Strategies for Ensuring Ongoing Improvements, Chapter 9 Conclusion/Postscript

CHAPTER 8
Shaping the Future: Strategies for Ensuring Ongoing Improvements

CHAPTER 8 AT A GLANCE
Not all features are available in this version- See PDF version or hard copy report
INTRODUCTION, 8-1
FINDING NEW SOLUTIONS, 8-2
    Using the New Hire Process to Collect Health Care Coverage Information, 8-2
    Learn More About What Works, 8-4
    Developing "Fill the Gap" Coverage, 8-7
BETTER COORDINATION OF POLICIES AND PROGRAMS, 8-9
    Building Better Partnership for Health Policy Oversight, 8-11
        National Policy Coordination Group, 8-11
        Federal Regulatory Coordination Group, 8-12
    Containing Health Care Cost, 8-13
    Consumer Education and Preventive Health Care, 8-13
REVIEW OF TAX POLICY, 8-14
Theme
To give children the opportunity for health care coverage will require the development of new strategies that keep up with the changes in the labor force, health care, family structure, and public programs. Research and demonstration activities can help improve coordination of coverage, fill gaps, and identify new and better ways to get coverage to children. Collaborations within and among Federal and State agencies can help contain costs, identify problems, and make mid-course corrections. Like the old paradigm for Medical Support, the new ideas presented in this Report will become obsolete; knowledge development and coordinated efforts will keep our joint efforts relevant to changing conditions.

Introduction

The Working Group learned many important lessons through its deliberations. Two of the most important were: (1) we do not have all the solutions to improving health care coverage for children, and (2) the IV-D program by itself cannot "fix" the health care coverage problem for children, even for those children receiving services through the IV-D system.

One of the major tasks of this first decade of the twenty-first century will be to build consensus on what we as a society want from our system of health care delivery. To do this the private and public sector must form a partnership that will weigh and balance the health care concerns of all segments of society. Just a few of the issues that need to be considered are: the relative importance of health prevention and medical treatment; the health care needs of the aging baby-boomers relative to those of young adults and their children; the role of employers and the private insurance industry as the primary provider of health care coverage and the role of government in filling gaps in that coverage; the impact of utilization and technological advancements on health care costs; and the appropriate balance between "market" forces and government intervention. All of the choices that we as a society make about our health care system will have consequences for our ability to ensure health care coverage for children.

The development of strategies to improve health care coverage for children must be the on-going responsibility of all the stakeholders-parents, employers, private and public health care plans and providers, courts, State and Federal agencies-and of society as a whole. This chapter considers how we can continue to make long-term improvements in health care coverage for all children.

Finding New Solutions

The Working Group identified a number of important areas where improvements needed to be made but where information was insufficient to ensure that national adoption of a particular policy would have a uniformly positive affect. To further explore or evaluate these ideas through research and demonstration activities seemed to be a reasonable approach. Once tested, the findings of these activities might result in national program or policy modifications or technical assistance and best practice dissemination. An important aspect of the research and demonstration activities is to assess the impact of change on all the relevant stakeholders, and not to focus exclusively on the IV-D perspective.

“...we've got to look forward and not see just what exists today and how health care is delivered today, but also what might be on the horizon for the future, and what changes could we expect for future generations?”

~Cornelia Gamlem, Vice President at Large, Society for Human Resources Management

Using the New Hire Process to Collect Health Care Coverage Information

The need for information about health care coverage whenever the obligated parent started a new job was recognized as critical if the IV-D agency was to keep health care coverage current. The Working Group discussed strategies that might allow for automated or routine collection of this information rather than seeking it on a case-by-case basis. This would maximize the efficient use of the Notice. One option discussed was to include health care coverage information as part of the New Hire Reporting process.

The New Hire Reporting system requires employers to provide the State with the name, address, and social security number of each new employee within 20 days of hiring. This information is then matched with the State's child support enforcement data base to identify noncustodial parents who are being sought for paternity or award establishment or for enforcement of a child support order. If there is a match and a noncustodial parent owes support under an existing order, the State issues a Notice to Withhold Income for Child Support that instructs the employer to withhold child support from the employees wages.¹ This process, especially when fully automated, can significantly reduce the amount of time needed to put a wage-withholding order in place. Adding health care information to this process would make the collection of information routine and give the IV-D agency a head start on putting new coverage in place.

Eleven States currently ask employers to provide health care coverage information as part of their New Hire process. The Working Group members contacted the States and ascertained that reporting is mandatory in Iowa and Rhode Island and voluntary in the other nine States-the District of Columbia, Georgia, Kentucky, Maine, Maryland, Montana, New Mexico, Oklahoma, and Tennessee. Preliminary information from those States was considered inconclusive. States with voluntary reporting provisions indicated that the number of employers who reported the information was limited. No State had conducted an analysis of whether the information collected at the time of hire was still accurate at the time the employee became eligible to enroll for health benefits.

In addition, representatives of the employer community were concerned that increased reporting requirements for employers may have unintended consequences. The Federally mandated elements of the New Hire system are synonymous with other Federal reporting requirements, making compliance by employers very quick and easy. To the extent that employers have to spend more resources to comply with new Federal requirements, they have less money to spend on benefits for employees. This is especially true of small employers.

The Working Group recognizes that a quick, routine, and universal reporting system for health care coverage data could facilitate a more automated approach to issuing the Notice and, therefore, increase the number of months that child support-eligible children are enrolled in private health care coverage. However, in the absence of firm evidence that the benefits of using the New Hire Reporting system to obtain this data would outweigh costs, the Working Group recommends that HHS quickly undertake a study of states where employers currently report such information. This study should examine both mandatory and voluntary reporting.

Recommendation 69 (Research and Demonstration)
The Federal OCSE should conduct a study of the 11 States that ask employers to submit health care coverage information as part of their New Hire Reporting process. The study should analyze the costs and benefits of these efforts from the point of view of employers and States, consider the privacy issues raised by such an information exchange, and identify any precautions taken to protect the privacy of case participants. The results shall be communicated to the States and to the Congress.

If HHS does not have sufficient resources available to fund these studies and/or demonstration projects, the agency should seek an additional appropriation from Congress.

Learn More About What Works

The Working Group understands that its recommendations have profound implications for the IV-D, Medicaid, and SCHIP programs. Envisioning a more seamless interface between these agencies and between private and public coverage than currently exists, the next several recommendations highlight the need for research, demonstrations, and studies that will help the public and private sector build a more effective and efficient system of coverage.

Better coordination and communication is needed if children are to be enrolled in the most appropriate private or public coverage each time a support order is entered. Such coordination is even more important to ensure continuity of coverage as children move between public and private coverage or to a different private provider. Information is also needed in order to document funding needs for IV-D medical support services and to determine the amount of public medical cost savings attributable to child support agencies' efficient handling of medical support. Such issues take on further importance and become more complex in interstate cases.

Current Federal law requires the Secretary of HHS to issue regulations that will facilitate the exchange of information on available family health coverage between IV-D and Medicaid agencies.² Furthermore, current Federal policy requires SCHIP plans to include procedures to ensure coordination with other public and private programs that provide health coverage for low-income children.³ Factors such as high case loads and manual procedures, as well as other systemic factors, may impede required coverage coordination and data exchanges between these programs. There is presently no set of known best practices that, if adopted, would facilitate coordination and communication between these programs. Consequently, children who are eligible often go without public health care coverage, while others receive coverage from Federally-funded sources, although appropriate private coverage is available. Documenting and sharing best practices would increase the potential for getting children into the right coverage option.

Most children enrolled in Medicaid are allowed to maintain both Medicaid and private coverage concurrently. Whenever this occurs, the private coverage is intended to be the primary source of coverage, leaving Medicaid to pick up where the private coverage leaves off. HCFA refers to this as "wraparound" coverage. This also provides continuous coverage for children who lose Medicaid coverage.

Conversely, with respect to SCHIP, children are not allowed to be enrolled in a separate SCHIP plan and private coverage concurrently. This makes it an ineffective source of "back up" coverage for low-income children who do not qualify for Medicaid. Parents who have access to family health care coverage at little or no cost may choose not to enroll their children in the plan because SCHIP provides needed services that are not covered under the parent's private group health plan.

Permitting children who are covered by other health care plans to enroll in SCHIP would eliminate the problem of crowd-out, and provide children with continuous coverage if they become ineligible for SCHIP or lose coverage under their parent's health plan. This also would ensure a smooth transition from Medicaid plus private coverage, to SCHIP plus private coverage, to only private coverage as the parents' incomes rise. The Working Group recommends that HCFA use its authority to authorize demonstrations allowing States to permit SCHIP enrollees to have other coverage.

The movement towards managed care plans also complicates dual coverage coordination. While some managed care plans have interlocking agreements to pay for or provide treatment for each others enrollees, it was reported by Working Group members that some managed care plans do not seek reimbursement from another managed care plan (and for routine care, may not seek reimbursement even from a fee-for-service plan). In the context of child support-eligible-children enrolled in Medicaid managed care plans, this may mean that the noncustodial parent is paying premiums for health care coverage that is never used by her children.

Some states have developed policies and procedures to avoid unreimbursed or underutilized coverage. For example, Massachusetts has developed procedures where children with private fee-for-service coverage are not enrolled in the Medicaid managed care plan, but are placed in its alternative fee-for-service Medicaid program. This allows the Medicaid program to only pay for Medicaid services not covered by the private plan. Alabama has developed system edits to ensure that managed care providers do seek appropriate third-party reimbursement when private coverage for children is obtained. The Working Group believes that such practices should be encouraged and that additional innovative ways of coordinating coverage should be developed so that the utilization of managed care does not have the unintended consequence of increasing Medicaid costs or reducing children's enrollment in private health care coverage.

Recommendation 70 (Research and Demonstration)
HHS should undertake projects that will examine various aspects of the intersections of child and medical support enforcement. These projects will encourage States to implement the Working Group's recommendations and promote further innovations to expand health care coverage for children. The projects may be, but should not be limited to, §1115 demonstrations and Child Support Enforcement State program improvement grants projects. These grants might examine issues such as:

States' efforts to coordinate health care coverage availability between the Child Support, Medicaid, TANF, and SCHIPs programs

Best practices in establishing and enforcing private family health coverage

How automation/technologies can be used to improve medical child support enforcement and save tax dollars

States' creative use of cross-program funding to promote medical support enforcement including, but not limited to, SCHIP block grant funds, PRWORA-related Medicaid matching funds, Federal TANF or States' maintenance of effort funds (MOE), and other block grant funds

The availability of private family health coverage to IV-D families with an emphasis on access, cost, and comprehensiveness of family health coverage

State-specific demographic and economic variables that impact performance and States' ability to improve medical support enforcement performance

If HHS does not have sufficient resources available to fund these studies and/or demonstration projects, the agency should seek an additional appropriation from Congress.

Sacramento IV-D Kids Medical Insurance Project
In 1995, when California's child support enforcement responsibility was still vested in each of its 58 counties individually, Sacramento County instituted a unique public-private partnership approach to providing affordable health care coverage for children by contracting with several providers for a child-only pool of reasonably priced "group rate" insurance that met medical support requirements. All children in the IV-D system are eligible for this coverage.

The IV-D Kids Program targets a significant health coverage gap-children whose parents do not meet income eligibility criteria for Medicaid or SCHIP and yet cannot afford the cost of private coverage. Like the SCHIP program, IV-D Kids insurance is offered by private-sector insurance companies. Unlike SCHIP, IV-D Kids insurance is available regardless of income level, and the premiums are directly paid by parents, rather than from public funds. Non-resident parents whose income exceeds SCHIP guidelines pay the full unsubsidized cost of this health coverage.

Some of the unique features responsible for the success of this program include the fact that there is no separate application process for the parents. Instead, the court adds the modest cost of the premium to the basic child support order at the hearing when ordering health coverage for an otherwise uninsured child. Employers of non-resident parents are directed, via a wage assignment, to forward insurance premium payments from the employees' wages to a third party administrator. Self-employed non-resident parents send premiums directly to the administrator. The administrator signs up the child with the provider, pays the premiums and alerts the custodial parent and the IV-D Agency when the payment is not received. In order to prevent the policy from lapsing for nonpayment, the custodial parent could meet the obligation while the child support agency is investigating the delinquency. In the future, California plans to implement an "insurance buffer zone" that will allow IV-D Kids insurance benefits to continue if the non-resident parent is briefly unemployed or experiences a short-term drop in income (to below guideline amounts).

Experience has shown that by increasing the number of children in the insurance pool, the IV-D Kids program could expand benefits (in particular, to include dental and vision benefits). It is anticipated that California's newly centralized Department of Child Support Services will achieve this goal by expanding the scope of this program to create an avenue though which all 29 of the State's CHIP providers will be accessible through the IV-D Kids program.

Additional modification to ensure coverage regardless of parents' income level will be developed as California gains more experience with this program.

Developing "Fill the Gap" Coverage

One barrier to achieving health care coverage for all child support-eligible children is that not all parents (even when both parents' health care coverage is considered) have access to affordable employer-based dependent health coverage.⁴ While many children may be eligible for Medicaid or SCHIP, some are not. About one half million children who live in child support-eligible families with incomes over 200 percent of poverty have no private or public health care coverage during a year.⁵ In addition, many other children do not have continuous coverage, and these children also need better health care coverage. The IV-D agencies are ideally situated to identify, rapidly and easily, these children who lack medical insurance coverage.

Certain public-private arrangements, such as the Sacramento IV-D Kids program have had modest success in providing affordable coverage for children not otherwise eligible for Medicaid or SCHIP. The Working Group recommends that demonstration projects combining public and private resources be funded to determine if innovative programs to fill the coverage gap can be successful on a large scale and replicated in other areas.

“[T]here are so many people who are not eligible now for medical coverage, who are not eligible for SCHIP, that there's got to be a large segment of the population that need a pool, and maybe a kids' pool would … allow children to be covered.”

~R. Ann Fallon, Attorney at Law, Whiting, Fallon & Ross

One replication problem the Working Group noted was that while a significant number of middle-income children need coverage, the number of children available for the insurance risk pool in any given area varies greatly across State and local jurisdictions. Because a large risk pool of children is needed to absorb the risk of a seriously-ill child, small numbers of children place insurers at greater risk of not covering costs. This increased risk results in higher premiums for parents and reduced benefits for children, as is the case with the Sacramento IV-D Kids program. Therefore, the Working Group includes as part of this recommendation that the demonstration projects include a strong element of cooperation with SCHIP as a means to expand the scope of dependent health coverage provided, geographic areas of coverage, numbers of children insured, and portability of health insurance coverage. A program that could combine the private-payer features of Sacramento's IV-D Kids pilot program with SCHIP's larger group of providers, comprehensive benefits, and low premiums could provide comprehensive medical coverage that seamlessly covers children, regardless of parents' income levels (Medicaid, SCHIP, or non-aided).

Another feature that the Working Group would like considered in these demonstrations is the placement of a medical support facilitator within the court or administrative unit handing the child support actions. The facilitator would communicate with the administrators of the various coverage options. One aspect of the demonstration would explore the different ways to structure the multi-layered communication to ensure that each child gets into the right coverage option and to determine the best procedures for communicating with the custodial and noncustodial parent.

Payment of premiums would most likely be made through wage assignment. But the demonstrations should explore whether the cost of premiums should vary depending on parent income. For example, if the noncustodial parent met income qualifications for the SCHIP coverage, the current requirement that the IV-D agency pursue the noncustodial parent for the full, unsubsidized cost of the insurance premium could be waived: that is, qualifying under SCHIP's income test would itself be prima facie evidence of a noncustodial parent's inability to pay a full premium. If the noncustodial parent did not qualify for fully-subsidized coverage under the SCHIP means test, a wage assignment for the full premium would be issued. However, because the overall pool of children would now include all children-those covered by SCHIP, Medicaid, and IV-D Kids-the "full premium" could be substantially less than the group rate secured by an independent "gap" program alone. If the noncustodial parent did not qualify under the SCHIP-based means test, then the noncustodial parent would be responsible for the unsubsidized portion of the premium.

The SCHIP provider pool should not be adversely affected by adding more children into the coverage pool. The children reached by the new coverage are not insured elsewhere, so crowd-out is not an issue under this plan. That is, an increase of children insured under a combined SCHIP-Medicaid-Gap Coverage Program will not result in a corresponding market reduction in another plan. Instead, children (and their parents) will be first-time and potentially long-term customers of the insurers who provide them with health care coverage. Also, the inclusion of additional children, accompanied by inexpensive consumer education about preventive care, could increase insurance company profitability while it improves children's health.

Recommendation 71 (Research and Demonstration)
The HHS should seek Congressional appropriation to fund demonstration projects for a minimum of three to five years to encourage states to adopt public-private partnership health care models for children who are eligible for IV-D services. The HHS should provide information to the States regarding how to establish a public-private model (such as Sacramento IV-D Kids) that is combined with SCHIP/Medicaid program to make private insurance available for individual children at a group rate. Model programs will have features such as the following:

State IV-D Agencies will gain access to the SCHIP provider pool, making the SCHIP's benefits, including dental and vision, accessible to a pool of children eligible for child support services at the reduced rate created by the increased population pool.

The target group will be children served by State child support enforcement agencies, regardless of income level, who do not have reasonable access to employer-provided insurance due to cost, access, continuity of coverage or other reasons.

Facilitators for the Model program will be stationed in family law courts, who will enroll children for coverage at the time the order for support is entered. The facilitator will communicate with the third-party administrator, who will facilitate all subsequent transactions between the third-party SCHIP and the children.

The efficacy of the court facilitator's role in the Model program will be evaluated separately and as part of the whole Model. The separate evaluation will focus on the facilitator's effectiveness in making families aware of various available health care programs and enrolling children in the most appropriate and cost-effective programs.

If the noncustodial parent's income is higher than the SCHIP-based eligibility cut-off, a wage assignment for the full insurance premium will be issued. However, since the overall pool of children would include children covered by SCHIP, Medicaid, and the Model program, the "full premium" could be substantially less than the group rate secured by the IV-D Kids Program alone. If the noncustodial parent's income and assets make the children ineligible for SCHIP, then the noncustodial parent will be able to buy into the equivalent of the SCHIP program by paying the premium required under the Model program.

Since the medical premium will be part of the child support order, a separate health care application process will not be needed.

Coordinating the third-party administrators of the Model program and the SCHIP program will create a system that provides children with seamless health care coverage throughout the life of the order, regardless of changes in the parents' income levels.
undertaken so that IV-D medical support efforts are not hampered by a lack of coordination and cooperation in the broader health care environment.

Better Coordination of Policies and Programs

The mandate of the Working Group focuses the health care coverage spotlight on IV-D medical child support enforcement. This topic, however does not exist in isolation and it is subject to meaningful examination only if cast against the backdrop of the national health care landscape. It is extremely important that broad efforts to improve health policy continue to be

Building Better Partnership for Health Policy Oversight

The majority of the nation's health care coverage for children is provided through the employer community. Impediments to employer-sponsored coverage directly impact the extent to which children receive health coverage. The lack of coordination at the national level creates anomalies and confusion, contributes to unwillingness or inability to participate in or provide group health coverage, and promotes a litigious environment. This ultimately discourages provision of health coverage and increases health care costs, further exacerbating the uninsured problem.

The Working Group recommends that action be taken to convene two related working groups-a national policy and coordination group and a Federal legislative and regulatory group-to provide oversight on health care programs that affect children.

National Policy Coordination Group

The Working Group has been successful in exchanging ideas and developing solutions that reflect a partnership of diverse communities-government, business, parents, and advocates. We are recommending that this process be institutionalized to benefit future generations of children and families through the creation of a national health care policy coordination group.

Such a group would be able to help establish objectives for improved health care and to guide initiatives in furtherance of those objectives. The policy group could lead the effort to help establish national health care policies and objectives and to help establish priorities for health care needs. It would be comprised of various sectors involved in the health care field, such as government representatives at the State and Federal level, as well as industry groups representing the insurance industry, employers, and business community. The charter of the policy group would include researching legislation and regulatory directives to determine if they present any conflicts to existing legislation (both at the State and Federal level), and to determine whether these directives would negatively impact health care costs. This group would evaluate whether a proposal will enhance the goal of any national health care policy that may be developed or will be counterproductive (that is, result in higher costs or hinder the effects of existing legislation.) This group would study the effects to assure that there are no resulting unintended consequences.

Recommendation 72 (Federal Legislation)
The Administration should convene a national policy and coordination group that will act through the Federal agencies to provide oversight on health care programs that affect children. The policy group should establish a mechanism or process to encourage dialogue and ensure coordination on health care program issues, especially those impacting children. This process will ensure that interested groups, such as Child Support Enforcement, providers, and payers, help in developing and implementing national objectives concerning health care coverage for children. The group will help ensure that policies, objectives, guidelines, and regulations are consistent, and that these initiatives are designed with consideration for their impacts on all affected parties.

Federal Regulatory Coordination Group

Piecemeal Federal legislation and/or regulatory agencies' requirements are not inherently ineffective, but often do create unintended consequences. The work of the broad interagency health care policy coordination group, discussed above, would be strengthened by the establishment of a Federal legislative and regulatory oversight group with specific responsibility to guide development and implementation of specific proposals within the context of the broad health policy environment. This oversight group would consist of representatives of HHS to represent medical and social issues, DOL to represent employment interests, and the Department of Treasury to represent interests related to tax implications and incentives and others as appropriate.

States should also be encouraged to develop such oversight groups. Numerous State programs and mandates have been established to promote health care coverage of children. In many States there are multiple programs that overlap, including those that focus almost exclusively on children. Some form of family health coverage exclusively for children is available in all 50 States, but options for coverage are limited and prices vary widely between markets. States may develop their own tax incentives for health care coverage by employers and/or individuals but not understand how the incentives and State programs interact. Reviews of programs and other provisions at both the State and Federal level could be used to correct individual problems, clarify confusion and misunderstandings, and identify gaps in coverage or services. These findings should feed back into the deliberations of the broader policy coordination efforts.

Recommendation 73 (Administrative Action)
All Federal and State regulatory agencies should develop mechanisms for reviewing proposed health care programs and mandates and incorporating programs and mandates for subsequent periodic review.
Review mechanisms should focus on:

Research designed to obtain information about how proposed programs or mandates may conflict with existing programs or mandates, especially those that will impact children.

Establish standards and goals for initiatives and mandates. For example, the number of uninsured children has been reduced by 20 percent (+/-).

Periodically review established programs, in accordance with standards and goals, such as the goal of cost-effectiveness, and determine whether and to what extent programs are achieving their intended purposes. For example, child support enforcement agencies should determine whether the numbers of uninsured parents and children have been reduced or whether parents' obligations to provide health care coverage are being met.

Containing Health Care Cost

Private family health coverage is a very cost-sensitive benefit, both for employers and employees. If efforts to expand private coverage for children and to enroll children in public health care programs when private coverage is not an option are to be successful, then all stakeholders, including the general public as taxpayers, need to be concerned about containing health care costs. The Working Group makes two recommendations, which it believes could have a long term positive impact on ensuring health care coverage for children; the first is on consumer education and preventive health care and the second is on the need for review of certain tax policies.

A Preventive Health Program in the Private Sector
Communication is key to promoting healthier lives, according to Linda Barnes, Director for Learning Services for Magic Valley (Idaho) Regional Medical Center, a regional county hospital serving an eight-county area. The hospital has implemented or participated in programs, such as the following: (1) safety education focused on children; (2) education on helping diabetics follow a healthy diet, which helps prevent costly hospitalization; (3) cardiac risk programs; (4) implementation of a diagnostic cardiac laboratory and cardiac rehabilitation (case management) program; and (5) free mammograms.

Consumer Education and Preventive Health Care

One cost containment strategy is to encourage consumer education and preventive health measures. Some programs already have been implemented successfully by civic groups and health care providers. For example, former Surgeon General C. Everett Koop, with Senator Robert Graham and HHS/HCFA, began promoting preventive health measures-from smoking cessation to dieting and exercise-as important health care initiatives.

Community education programs could be established to help inform individuals of such matters as how the health care system works, how individuals and their demand for services affects delivery and costs, how to shop for health care, and how to assess appropriate levels of care. Fee schedules that allow "comparison shopping" could be published with respect to fees charged by physicians, clinics, hospitals, and other health care providers. Quality measures, such as health care outcomes or other factors that can be used to assess care and efficiencies accurately, could be made available to the public. Employees, employers, and other health plan sponsors can use such data for comparison shopping for the most cost-effective health care coverage. These types of efforts could help lower overall health cost, thus ensuring affordability for both employers and employees.

Recommendation 74 (Technical Assistance)
The HHS should collaborate with the DOL, Department of Education, and other Federal agencies involved in health care, health care benefits, child support, and tax policies, to develop consumer education programs in order to help contain health care costs.

These consumer education programs could be promoted through tax incentives, grants, private foundation awards, and advocacy groups. The programs would focus on:

The availability and types of health care programs available to children (and would target the parents of uninsured children)

Consumer education that will allow the market to help control health care costs, such as developing literature on efficacy and cost of generic and brand-name drugs

Civic health education, screening and preventive programs, civic risk education programs, and healthful life-styles programs.

Review of Tax Policy

Favorable tax treatment can help reduce health care costs. Tax policy does not always seem consonant with health care policy. The Working Group recognized technical analysis of the tax laws would be beyond its scope, but believed such an objective analysis and a broad dissemination of funding to trade and bar associations, civic organizations, employer groups and other outlets, including the courts and IV-D agencies, would be important to the overall success of expanding health care coverage for children. Additionally, the Working Group identified specific examples of tax policies that seemed inconsistent with containing cost and promoting expansion of private family health coverage that should be addressed.

Noncustodial parents are not the only adults who assume responsibility for providing dependent health care coverage. Sometimes stepparents, grandparents, or other family members step forward to fill the health care coverage gap for children. The current Internal Revenue Code, however, may not recognize the covered children as "dependents." It is the understanding of members of the Working Group that if an individual includes a child (who does not meet the Code definition of dependent) under coverage provided by the individual's employer, that individual may have to include the value of that child's coverage in gross income as reported for tax purposes.⁶ This requirement may disadvantage a person who voluntarily enrolls a child in employer-provided coverage. A review such as the one contemplated by the Working Group could help clear up confusion regarding this and similar issues and make sure that families are not penalized for doing the "right thing" for children.

Recommendation 75 (Legislative Action)
Amend Tax Code to Extend Exclusion: The exclusion from income for health care costs under §105 and §106 should be extended to step-parents, grandparents, and other individuals who accept responsibility for obtaining or providing health care coverage for children, regardless of whether the child qualifies as a dependent of that individual under other provisions of the tax code.

Federal Tax Policy & Family Health Coverage
A parallel consideration in the mission to secure health care coverage for children residing in single-parent households is Federal tax policy. The size and availability of tax incentives for employers who provide dependent care benefits may drive their decision to offer family health coverage or to increase their contributions to premiums for such coverage. In addition, the Internal Revenue Code does not equitably account for expenditures on a child's health care needs by someone other than the custodial parent. As with employers, tax incentives may foster cooperation, particularly by the noncustodial parent.

The tax laws currently provide favorable treatment for costs incurred in medical treatment, but do not similarly treat costs incurred in activities that promote general health and well-being. The Working Group considered the example of smoking-cessation programs, which in the past were viewed as merely promoting general well-being, but which recently have been recognized as relating more directly to a medical condition. Such smoking cessation programs generally reduce health-risk factors. It is the Working Group's understanding that individuals generally may not deduct the cost of participating in such programs, and that an employee being reimbursed by an employer for such participation must include these amounts in gross income. A review, such as the one recommended by the Working Group, could help change tax policy to encourage health promotion as well as medical treatment.

An examination of the Internal Revenue Code is essential to fully assess these and other health care issues that can be addressed more clearly in the Code. Furthermore, the manner in which the Department of Treasury and the Internal Revenue Service address health care issues within their purview, such as COBRA conversion and HIPAA coverage, should also be evaluated to ensure they comport with over-arching health policy goals.

Recommendation 76 (Administrative Action)
The Administration should establish an interagency group to evaluate the impact of tax and health care policy on the provision of children's health care coverage. This group, drawn from the Federal Departments of Treasury, Health and Human Services, and Labor should recommend and help develop tax laws that support the goal of securing health care coverage for all children.

The interagency group should consider the impact of tax and health care policies upon health care costs, medical insurance costs, and children's access to health care services, with special emphasis on those children who live with a single parent.

In order to reduce heath care costs and make medical insurance more affordable, the interagency group should consider granting tax incentives to preventive programs, such as health and safety programs.

The interagency group also should evaluate tax and health care policies, with an aim to proposing legislation and developing regulations that promote individual awareness and responsibility for improving health and reducing health risks. The group might recommend Federal tax incentives for programs that promote proper diet, self-administered care, and exercise programs for diabetic children.

Continued improvement in health care coverage for children will not happen unless there are ongoing efforts to develop new strategies and new approaches that are responsive to the trends and changes in society-at-large. How to develop seamless coverage, so that child support-eligible children do not fall through the health care system's cracks, as they move between different private coverage plans, between public and private coverage, and between types of public coverage is an important task. Undertaken jointly by the child support and public health communities and their private sector partners-employers, plan administrators, and the health insurance industry-research and demonstrations will help us identify and implement these new approaches. But just as important is the need for society to work together to develop new strategies and new approaches for containing health care costs. The overall growth in health care costs remains a constraint on efforts to increase health care coverage for the uninsured. Both the private and public sectors need to take leadership in promoting preventive health measures as important health care initiatives, enhancing employers' and employees' ability to provide health care coverage for children, and developing coordinated and consistent health care policy. Our children deserve no less, for they are our shared responsibility.

“Ask any insurer which kid he wants to insure when they become an adult: the one who's had access to health care all the way through or the one who hasn't… [T]he kids win, you win, and the insurers win… [T]he nation wins because we've reduced future health care costs.”

~Theodore R. Earl, Jr., Registered Representative, John Hancock, Inc.

Endnotes

[1] The Employer’s Desk Guide to Child Support, U.S. Department of Health and Human Services, Government Printing Office, Washington DC, (August 1999).

[2] 42 U.S.C. §452(f).

[3] 42 U.S.C. §1397bb(b)(3)E).

[4] O’Brien, Ellen and Judith Feder, How Well Does the Employment-Based Health Insurance System Work for Low-Income Families? Kaiser Commission on Medicaid and the Uninsured (September 1998); GAO, 1998; and Wheaton, Laura, “Noncustodial Fathers: To What Extent Do they Have Access to Employment Based Health Care Coverage?” The Urban Institute (forthcoming, June 2000).

[5] 1996 March-April Match File Current Population Survey. See data tabulations in APPENDIX D: Health Care Coverage for Child Support-Eligible Children , page A-32 .

[6] Sections 105 and 106 of the Internal Revenue Code relate to the taxability of employer contributions to, and employee benefits received from, group health plans, and incorporate by reference the term “dependent” as defined in §152 of the Internal Revenue Code of 1986.

CHAPTER 9
Conclusion/Postscript

The current medical support enforcement system is ineffective. Modeled on outdated assumptions, it does not reflect present realities that limit the availability, affordability, and stability of dependent health coverage. The recommendations contained in this report will greatly reduce impediments to medical support enforcement and establish a new paradigm, ensuring that all 21 million IV-D eligible children have accessible, comprehensive, and seamless health care coverage.

The Working Group recognizes that all proposed solutions cannot be implemented immediately. Nor can they be accomplished at all without the coordinated commitment of the public and private sectors-a partnership forged on our shared responsibility to America's children. Reforms will cost money. To some degree our recommendations require financial contributions from parents, employers, and the private insurance industry, in addition to government. They also require time, dedication, innovation, and flexibility, as these solutions are tested and even better ideas evolve from the research. Mostly, just as the Working Group developed consensus from disparate interests and legitimate competing concerns, so too must society forge a consensus to ensure that health care is a reality for all America's children.