In a letter issued Friday to state officials, the Centers for Medicare & Medicaid Services (CMS) issued new restrictions to limit "crowd-out" in the face of state SCHIP expansion. 

For states looking to extend SCHIP in families earning above 250% of the federal poverty level (FPL) -- $51,625 for a family of four -- existing regulations require the adoption of several strategies to prevent crowd-out, including:

• Imposing waiting periods between dropping private coverage and enrollment;
• Imposing cost-sharing that looks like private coverage;
• Ensuring that SCHIP expansion populations do not already have private coverage; and
• Preventing employers from dropping dependent coverage in favor of SCHIP.

In the letter, CMS rightly points out that SCHIP crowd-out is more likely when the program is extended to higher-income beneficiaries.  To help stop this from happening, CMS has renewed its efforts to enforce the above criteria, including the imposition of a minimum one-year waiting period before beneficiaries can access SCHIP.  CMS is now also requiring SCHIP expansion states to:

• Cover at least 95% of existing children under 200% FPL that are already eligible for SCHIP or Medicaid;
• Ensure that the number of privately-enrolled children has not dropped more than 2% in five years; and
• Report monthly to CMS on efforts to reduce SCHIP crowd-out.

The Bush Administration deserves kudos for issuing this preemptive strike to a Congress hell-bent on putting all kids on a government-run medical program.