The SCHIP authorizing legislation set out criteria that all programs must meet yet left the states a great deal of latitude in determining the structure of the program, eligibility criteria for children, and program implementation. States had the option of organizing their SCHIP program in the form of a new state children’s health insurance program, expanding Medicaid coverage, or establishing a combination of these two approaches. As of December 2000, 17 states had established separate SCHIP coverage, 17 had expanded Medicaid, and 17 had a combination of these two approaches (Smith and Rousseau, 2001). In addition, within federal guidelines, states set eligibility criteria for enrollment. The legislation requires that the states maintain the Medicaid eligibility they had in place on June 1, 1997; thus SCHIP could only be used to expand eligibility for health insurance to those who would not have been eligible under the preexisting Medicaid program. On one hand, if a state chose to implement a Medicaid expansion, it was required to offer those who would be newly covered the same Medicaid benefits package that was already in place. On the other hand, if a state chose to establish a separate SCHIP, it was required to meet the standards laid out by the act that established the program.
The program went into effect on October 1, 1997, but before states could enroll children in SCHIP, they were required to obtain approval of the plan for their program from the secretary of the U.S. Department of Health and Human Services. The plan was required to detail what the state was already doing in insuring children of low-income families, to estimate the number of uninsured children in the state, to describe proposed SCHIP eligibility requirements and benefits, and to describe how the plan would be coordinated with Medicaid and how outreach would be conducted.
By 6 months after the program went into effect, 6 states had obtained approval for their plans; this number increased to 33 by the end of the first year and to 49 by the end of the second year. Two states did not get started until fiscal year (FY) 2000 (Rosenbach et al., 2001). One reason that states were delayed in obtaining approval for their SCHIP plans was the difficulty they had in estimating the numbers of uninsured children who would meet income eligibility criteria for the program in their state and the distribution of eligible children within the state. The Current Population Survey (CPS) is used to allocate federal funds for SCHIP to the states, but the size of the sample is too small to estimate numbers of eligible children for all but the largest staes, let alone for geographic areas within states and to estimate the total number of eligible children in many states reliably. Estimates of the