The Balanced Budget Act of 1997 specifies that states applying for funds to establish children's health insurance programs must submit plans that describe the strategic objectives, performance goals, and performance measures that they will use to meet those goals and objectives. These plans will become legal documents, and DHHS will hold the states accountable for implementing them (IOM, 1998).

In early 1998, the Health Care Financing Administration and Health Resources and Services Administration of DHHS began to discuss the development of reporting requirements and other regulatory mechanisms to help monitor the performance of the states in meeting the objectives of the state plans.

In addition to the technical and methodological challenges described above, there are other challenges in developing performance measures and other strategies for monitoring methods of accountability in children's health care. Some of these challenges are not specific to children's health care, such as the fundamental inadequacy of the health care industry's clinical information systems or the lack of an evidence base for most current clinical services. However, special challenges relate to children. These include: (1) the inability to know the maximum potential for each child's physical, mental, and social health status, and therefore to detect and measure shortfalls; (2) ambiguity about the health care