OBRA of 1990 requires states to cover all children under age 19, who were born after September 30, 1983, and who live in families with incomes below 100 percent of the federal poverty level.


Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991 cap the federal Medicaid payments to states for spending from provider-related donations or health care taxes (the greater of 25 percent or the total amount collected in taxes for the next year).

Disproportionate Share Hospital (DSH) payments are capped at 12 percent for the national total.


OBRA of 1993 allows children who are covered by Medicaid to also be covered by private insurance carried by a noncustodial parent. The law mandates that states have laws in place to require the cooperation of employers and insurers in obtaining parental coverage.

States may not designate a hospital as a DSH unless the hospital shows that Medicaid beneficiaries account for I percent or greater of its inpatient hospital days. Also, DSH payments may not exceed the hospital's Medicaid and uninsured patient costs combined.


The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 replaces AFDC with Temporary Assistance for Needy Families (TANF), and at the same time delinks Medicaid enrollment from the cash assistance program. States are now permitted to use more liberal income and resource standards to determine Medicaid eligibility.


The Balanced Budget Act of 1997 (BBA) includes the largest reductions in federal Medicaid spending since 1981. The largest source of cost savings is new limitations on federal matching payments to states for reimbursements to DSH hospitals. State-specific allotment limits are also reduced.

BBA also allocates about $20 billion in federal matching grants over 5 years for states to expand health insurance coverage to uninsured children who are not eligible for Medicaid, along with about $4 billion for Medicaid improvements. Amendments to Title XXI of the Social Security Act create the State Children's Health Insurance Program (see Box 1.1 for details).


SOURCES: U.S. House of Representatives (1996); NIHCM (1996); HCFA (1996, 1997b); Balanced Budget Act of 1997 (P.L. 105-33); Schnieder (1997).

States have the option of expanding Medicaid coverage to pregnant women and children beyond the minimum federal requirements. In 1997, 26 states had expanded Medicaid eligibility for children by increasing the age criteria, the income criteria, or both (Gauthier and Schrodel, 1997). Under SCHIP, several states will implement further expansions of eligibility.

Medicaid has had strict eligibility requirements on the basis of income, and this has been a problem for families whose income levels fluctuate. Parents who have seasonal work, parents who work in service industries where there is rapid turnover, and parents who are between jobs may not be able to predict their levels of monthly income and may move in and out of eligibility if they are close to the income limits set in their state.

Medicaid administrative systems typically lack the capacity to follow these children and families at

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