Helping kids, helping families.

While the new Clinton administration hammers out its version of health care reform, states continue to struggle with universal coverage for their own citizens. Among the most vulnerable populations are children with special health care needs.

Two-year-old Justin Smith's body doesn't produce the human growth hormone, a condition that costs $3,000 a month to treat. Although father Brad's employer-based insurance covers a large portion of the treatment, the premiums are escalating rapidly and the family is afraid it will lose its coverage. Justin's parents struggle to pay their share of the costs as it is. "Our whole life is devoted to paying medical bills. We can't afford to do more," says mother Cindy. When she sought state assistance, Cindy found no program for which her family was eligible because they made too much money. State health officials told her she apparently had three choices:

* Buy private insurance for Justin (at $1,000 a month, due to his "pre-existing" condition);

* get divorced and go on welfare; or

* move to Canada.

"This sounds more like an American nightmare than the American dream," exclaims Cindy, who says she cannot pay for a private insurance policy, and she refuses to leave her husband or country. And so the Smiths wonder whether Justin will be able to continue receiving hormone treatments or have to quit and be lucky to reach three feet in height on his own.

John, a healthy full-term baby at birth, got sick when he was 5 months old. It seemed like the flu--but within 12 hours, parents Carol and Curt Terwilliger knew they had serious trouble. The baby had spinal meningitis. He slipped into a coma and sustained damage to every part of his brain. His life, and that of his parents, was irrevocably altered.

Now, at seven, John has multiple problems: spastic quadriplegia, cortical blindness, mental retardation and a convulsive disorder. John also has two parents who love him, two healthy younger siblings and colored beads on the spokes of his wheelchair. But it takes 45 minutes to feed John a small bottle of liquid, and 45 minutes to spoon feed him a single meal. Carol, an MBA, gave up her career as a fiscal operations officer in a Medicare program to become full-time mom and caretaker for a child with special needs.

"Luckily I can stay home," says Carol, "because we can cover our expenses with Curt's salary and his employer's excellent insurance program." Nonetheless, the family is well aware that any change of job or company insurance carrier could put them in jeopardy of discontinuing John's coverage.

Donald Penzenik did have bad luck with employer-based insurance and was forced to "spend down" his family's resources to qualify his "uninsurable" son for Medicaid. Michael, who has cerebral palsy, mental retardation, scoliosis and a seizure disorder, was dropped by the insurance company that had covered him. In the meantime, Donald's new employer would not include Michael in the health coverage for his other family members. Desperate to provide for their son, the Penzeniks turned to Medicaid, but at great cost to the family's security.

"I impoverished my family," says Penzenik. "This was our reward for raising our child with severe disabilities at home. To qualify for Medicaid, all family assets, including our savings, individual retirement accounts and life insurance policies were 'spent down,' leaving my family unprotected and vulnerable to financial disaster." Now Donald and his wife, a nurse, are restricted in the amount they may earn, and they may not save for their other children's college or for retirement in order to keep Michael covered under Medicaid.

Today, serious illness and chronic conditions affect children from all sectors of the American population. Estimates of the numbers of children vary, but several surveys of different conditions (developmental disabilities, diabetes, cystic fibrosis, childhood cancers and other chronic medical needs) suggest that between 10 percent and 15 percent of American children have a chronic health condition; about 5 percent have serious health care needs; and 1 percent to 2 percent, or about 1 million children, have severe chronic impairments.

These children and families have a large stake in the national health care reform debate. The Clinton administration backs "managed competition," and may endorse a "minimum package" of benefits for all Americans. The insurance industry now supports an "essential package" of health benefits for everyone. Whether a "minimum package" or "essential benefits" would meet the extensive needs of children with chronic ailments and serious disabilities is a million-dollar question. Advocates remain hopeful in light of the federal ruling against Oregon's health reform and cost containment initiative. The Bush administration rejected Oregon's proposal, saying it discriminates against people with disabilities and conflicts with the Americans with Disabilities Act. But now there's a new ballgame in town.

In the meantime, families look to states for assistance in the immediate future. Thousands of families who are not poor enough to qualify for Medicaid, but are neither well-insured nor independently wealthy, struggle daily to provide care for their children and to make ends meet. Look at the problems such families face: obtaining and keeping private insurance for children who are considered high-risk by insurance companies; paying for expensive care not covered by insurance policies, such as various therapies, in-home nursing help, high-tech medical equipment and van lifts; staying within the lifetime expenditure caps of insurance policies (virtually impossible for families who have children with severe and chronic health problems); getting the support needed to keep their families intact, such as respite care, parent education, home modifications, cash assistance and special equipment; fighting public policies that will assist them only if they institutionalize their children; and dealing with barriers and public attitudes that make it difficult to get a baby-sitter, or take a child to a restaurant, a movie theater or to school.

In addition to high costs and insurance problems, families face extreme emotional stress. For example, Carol Bennet, whose twins were 10 weeks premature, says her marriage suffered and eventually broke up from the strains created by the boys' need for constant care and attention. She struggled as a waitress to care for Trevor and Travis, both of whom have special health care needs. Travis has cerebral palsy, cannot walk and takes seizure medication. Trevor, who also cannot walk and just began talking at age 6, is mentally retarded. After wearing herself out trying to be a breadwinner and caretaker, Carol reluctantly placed Trevor in a group home for children with multiple disabilities.

"I couldn't afford to keep both of them at home without help, but I'm not poor enough to qualify for Medicaid to help me at home. But Medicaid would pay for institutional care," Carol explains. "Both boys had savings accounts, and I had to give the money back to our families so I could meet the eligibility requirements."

Rhonda delaParra faced pressure to institutionalize her son Conrad after he suffered severe brain damage at age 2. As a happy, seemingly healthy infant, Conrad walked, talked and laughed. Then something happened and he went into a coma. The family is still not sure what caused it, maybe an asthma attack.

"'If you take him home, you're on your own' they told me," reports Rhonda. Ironically, the state would have paid for the expensive institutional care. Now, at age 11, Conrad is mentally retarded, his vision is poor, he can't walk or talk. Conrad's new step-dad, Joe, would like to adopt him, but adoption might jeopardize Conrad's eligibility for Supplemental Security Income, a federal cash assistance program. Joe works seven days a week as it is to support them, and the family doesn't think it could make it without the assistance.

"There's a gap between the needs and the distribution of services," says Rhonda. "They don't offer services that people really need, like counseling, and they don't offer anything for the middle class. With a little assistance, families could cope with keeping their child at home--nobody wants their child to live with strangers, and we don't want to be indigent before we can get some help."

The bias toward institutional care in most states stems from Medicaid reimbursement policies. Many of the extensive services needed by children with severe health problems or disabilities are reimbursable under Medicaid only if the child is in a facility such as a state institution or a licensed group home. Exceptions are possible, most notably under the federal "Home- and Community-Based Services" waiver. This waiver allows Medicaid payment for certain nonmedical services, such as respite care or habilitation services, for eligible children who otherwise would be served in an institutional setting at an equal or higher cost. But children who are not certified as needing institutional care, in most cases, do not qualify for such community services.

In addition, many children at home do not qualify for Medicaid because their family's income is too high. But if they move to an out-of-home setting, their income as children may be considered separately, thereby qualifying them for assistance. Again, exceptions exist, such as a state's option to serve a small number of children dependent on a ventilator. But the relative numbers are small. These public policies exclude thousands of families who would benefit from community services.

State legislators, asked to help fill the gaps for these families, face their own problems. State coffers are empty, revenues continue to shrink and new federal mandates require more services for more people. Advocates pressure lawmakers to fund community services to assist families in need, arguing that community care is cheaper than institutional care. In many cases it is. But budget watchdogs fear the "woodwork" effect: Those people not currently eligible for state assistance would "come out of the woodwork" if states expand eligibility criteria for community services.

For example, when Arizona recently expanded its services for people with developmental disabilities, the number of consumers more than doubled, from 5,000 to 11,500. Caseloads suddenly jumped from 47 to as high as 80 families per case manager, although federal guidelines advise a caseload of no more than 30.

Deborah Meintel, a case supervisor in the Arizona Division of Developmental Disabilities, says that the size of such caseloads detracts from the time and attention given to each family. "I'm not trying to get away from being accountable, but I feel we're meeting the needs of the system, and we need to get back to meeting the needs of the family."

Patti, an Arizona school teacher whose 1-year-old son Ben has Down syndrome, recalls that it took six weeks to be assigned a caseworker, becoming number 60 in her caseload. Patti received the paperwork to apply for services, but was told of an indefinite state freeze on funds and services due to budget constraints. Ben was put on a waiting list, and was ineligible for federal services until he had state services first. "It's a Catch-22," Patti declares.

Advocates insist that home care is better for the child than out-of-home placement, and is preferred by most families. The key, they say, is to provide adequate financial support and a comprehensive array of services to meet the individual family's needs.

Most states provide at least some support for families caring for children with disabilities at home. Services most commonly offered include case management, respite care, parent education, home adaptations, special equipment and transportation, Other services may include information and referral, parent and family counseling, peer support groups, homemaker services, attendant care, in-home nursing, future planning and cash assistance.

In addition to family support, many states provide other forms of assistance, but often a gap exists between the intention and the reality.

"There's a theoretical system," says Carol Terwilliger, of California, "but it is so badly funded and understaffed that the only way it will work is if the parent is able to pour time into it. You're a coordinator, researcher, therapist. It's up to the families to keep on top of things, to get services and see that the service providers work together."

Although children with special health care needs are relatively few, their expenses can be enormous. These children consume an estimated 25 percent to 50 percent of all child health care expenses.

Carol Terwilliger explains. "Anything that's 'special needs' is extremely expensive because the market is so small. And the price for anything that goes through the medical market immediately gets kicked up. A standing frame costs $700; plastic foot braces are $1,400 a pair; a therapeutic foam wedge for sleeping runs $100. And these are all for a growing child, so they have to be replaced every two years or so. Just the growth adjustment to John's wheelchair cost $900 this year."

When the cost of their care is high, insurance companies drop families or raise premiums to prohibitive levels. Massachusetts addresses this problem through its CommonHealth plan. "The plan allows parents to make sure that their children's needs are met without going bankrupt, and it keeps families together," explains Representative John McDonough. "It's a humane, cost-effective, sensible way to address the needs of a vulnerable population. I wish we could do it for everyone."

Cheryl Gresek, the mother of a Massachusetts boy with a rare and costly heart condition, is a firm advocate of the CommonHealth program. It was a life-saver for the Greseks after they were priced out of their employer-based health plan. The Greseks had paid premiums for four years without making a claim, but when they suddenly faced serious and expensive health care needs for their son Daniel, their premiums skyrocketed, first to $766 a month. They sold their condo, and paid. The next year, their premium jumped to $1,371 a month. They couldn't pay and had to drop out. After much expense, anguish and searching, the Greseks were referred to the new CommonHealth program, which insured Daniel for $58 a month, a premium determined by the family's income.

Even families whose employers offer excellent insurance benefits fear loss of coverage if they change jobs, get laid off, or if their employer changes health insurance coverage. They also face the possibility of exceeding their plan's total dollar limit, and most plans also limit the types of services covered. Insurance policies usually have pre-existing conditions clauses, which deny or restrict coverage for new enrollees of conditions that will be expensive to treat. A recent proposal by the Health Insurance Association of America (HIAA) recognizes problems in the current insurance system. HIAA's new position supports agreement among private insurers to provide unspecified essential benefits for everyone, regardless of medical history.

In the meantime, both the Massachusetts CommonHealth program and the Minnesota Children's Health Plan (CHP), to some extent, address these insurance issues for children.

"The idea is to get health care to kids who need it," says Minnesota Representative Lee Greenfield of the Children's Health Plan, which covers primary and outpatient health care. "We don't screen kids, we don't have any prior conditions clause--everyone's welcome." Nonetheless, Minnesota's program doesn't cover many of the services needed by children with special health care needs. CHP proponents had hoped to expand the program to cover acute care needs and inpatient hospital services, but policymakers found the costs prohibitive. The state's new MinnesotaCare plan, which builds on the success of the Children's Health Plan to cover uninsured adults, will eventually replace CHP and cover inpatient and acute care. Funding will come from a new tax on hospitals and other health care providers and a 5-cent increase in the state's cigarette tax.

In response to the growing outcry for help, the federal government assists states and families of children with special health care needs through changes and additions to Medicaid, the Maternal and Child Health Block Grant and the Individuals with Disabilities Education Act. But much of the financial burden under new federal mandates falls on states. Caught between added demands and limited resources, the states are in an increasingly awkward, and unsupportable, position.

A class action lawsuit under way in Pennsylvania (Scott, et al. vs. Snider, et al.) is a case in point. The lawsuit charges Pennsylvania with negligence for slow response to the federal mandate to actively seek out eligible children and enroll them in Medicaid's Early and Periodic Screening, Diagnostic and Treatment (EPSDT) program. Under EPSDT, states must provide extensive treatment services to Medicaid-eligible children who need them. The lawsuit also requests Pennsylvania to set Medicaid payments for providers high enough to ensure children on Medicaid access to providers. A victory for the plaintiff on this provider payment issue would open the door to additional cost increases for states. As of mid-December, the plaintiffs and the state continued to work toward a settlement.

Pennsylvania Representative Ronald Cowell views the lawsuit as a potentially unifying force. "All in all, I think the outcome of this lawsuit will be very positive. It has prodded the state to re-examine the way it handles Medicaid, and by doing some reorganizing, we can probably improve the situation. We may even be able to draw down some additional federal money as well."

Senate colleague James Greenwood sees the additional federal support as critical. "Children who need health care should have health care, and we recognize that Medicaid's EPSDT program is a cost-effective way to provide services to children. However, it's unfortunate that we have been given a federal mandate without the time or the resources to implement it effectively. This is a well-intentioned policy, but it creates an impossible burden on the states."

A recent U.S. Supreme Court ruling, in Sullivan vs. Zebley, also has a major impact on Medicaid spending in most states for children with special health care needs. The court found that Supplemental Security Income (SSI) requirements for children were more restrictive than for adults and ordered the states to rectify the situation. As a result, many more children with disabilities will be eligible for SSI, and therefore Medicaid, in most states. This is good news for families of children with special health care needs, but expensive for states.

But for many parents, it's a question of paying now, or paying more later. "The sooner you get treatment and services to families of |these~ children, the better," says Carol Bennet. "Doctors and pediatricians should have a lot more material on hand. My children were late being diagnosed, and there really is a need to start with these children early. There needs to be a set of guidelines, steps to follow, some package of information. You get little snips of things from here and there."

Numerous studies show that early intervention substantially enhances development in children with delays and disabilities, supports family-based care and uses public money efficiently. According to some estimates, for every $1 spent on early intervention states can save between $3 and $7 in future expenditures for institutionalization and special education.

Carol Terwilliger says the prevailing practices don't make sense. "If you don't invest in these children now, they will be institutionalized at great cost to the state. But they might be able to live differently if the money is spent in the early years, on support for the family and training and health care for the child."

Rhonda delaParra echoes her plea. "We care for Conrad at home because we love him. Conrad is a human being and he has a right to be here. And if legislators say, 'Why should we pay for services for a child who will wind up in an institution sooner or later,' I say, why not later rather than sooner?"

Mimi Bodel recently completed a graduate internship at NCSL. Martha King manages the NCSL Maternal and Child Health Project, which is funded under a grant from the federal Maternal and Child Health Bureau.

Dollars and Sense: Federal Assistance

Children with disabilities qualify for help under the following major federal programs: Medicaid, the Maternal and child Health (MCH) Block Grant, and the Individuals with Disabilities Education Act.

Medicaid

Medicaid is a major source of funding for low-income families of children with special health care needs. Medicaid programs cover children age 5 and under who come from families with incomes up to 133 percent of the federal poverty level (states have the option of covering infants up to 185 percent of the poverty level). By 2002, those up to age 19 with family incomes up to the poverty level must be covered.

States must also provide "medically necessary" treatment for children up to age 21 to correct or ameliorate physical or mental problems. This requirement applies to all services reimbursable under federal guidelines, including optional services not covered under a state's regular Medicaid plan.

Waivers allow states to cover certain nonmedical services for Medicaid-eligible people who otherwise would be served in an institutional setting at an equal or higher cost. As of 1991, through this option, 46 states offered home- and community-based services to about 50,000 people with developmental disabilities and other special health care needs. Although most are adults, Medicaid-eligible children with disabilities also benefit from this option.

A state may also cover optional services that are not in its Medicaid plan for a small targeted group of people, such as children who depend on a ventilator. The waiver allows Medicaid reimbursement for home care services for a limited number of people who otherwise need institutional care.

Under the Tax Equity and Fiscal Responsibility Act (TEFRA), states may offer Medicaid services without regard to family income, to certain children with severe disabilities who are living at home.

Maternal and Child Health Block Grant

Thirty percent of the federal money coming to states through this program must be earmarked for children with special health care needs. States provide $3 for every $4 in federal funds. States determine eligibility requirements for receiving services and may charge fees, except to low-income women and children.

State health agencies usually provide MCH block grant services, which may include case management and counseling, home nursing, respite care, hospitalization, surgical care, therapy and training for families.

Grants for special projects of regional and national significance are available to states through the MCH block grant to help implement the family-centered, community-based approach to services and care for children with special health care needs.

Individuals with Disabilities Education Act (IDEA)

Under IDEA, all eligible children with disabilities, beginning at age 3, must receive a free and appropriate public education. The law provides funds to local schools to help pay the excess costs of educating students with disabilities, including funds for special therapies and adaptive equipment. States must meet this requirement to receive federal funds for children in preschool under federal formulas for special education grants.

The act also provides funds to help states develop early intervention services for infants and toddlers with developmental disabilities and other problems. IDEA requires an interagency coordinating council, composed of representatives from many federal agencies, to work on behalf of such children.

Help for Families That Can't Get Medicaid

A few state insurance plans help cover citizens who either can't afford or don't qualify for private insurance. While most of the plans don't cover many of the services needed by children with special health care needs, they help. Such programs include:

Massachusetts: CommonHealth

* Sells health care benefits on a sliding scale to qualifying families.

* Provides broad benefits--therapy, equipment and mental health services.

* Funded by state appropriation ($15 million in 1992).

Minnesota: Children's Health Plan

* Sells inexpensive basic health services to low-income families.

* Funded by annual $10 million state appropriation.

Florida: Healthy Kids Corporation

* Sells liberal health coverage on a sliding scale through public schools.

* Funded by grants and limited state funds.

Florida: Developmental Evaluation and Intervention

* Catches problems early through evaluations in neonatal intensive care units.

* Providers family support.

New Jersey: Catastrophic Illness in Children Relief Fund

* Assists families with catastrophic medical expenses.

* Funded through annual surcharge on certain employers.

Texas: Early Intervention

* Provides support, therapy, equipment and transportation through 75 local programs.

Wisconsin: Family Support

* Supplies up to $3,000 in extensive services a year to families and children.

About half the states: High-risk Pools

* Expensive, but available to those uninsurable through private insurance.

* Most have a waiting period before covering pre-existing conditions.