States traditionally divide their Section 317 federal immunization budgets between vaccine purchase and infrastructure or programmatic investments. Over the last 5 years, the private health care sector has assumed greater responsibility for providing immunizations to vulnerable populations (especially participants enrolled in Medicaid and SCHIP). This shift has had a profound impact on the nature of the services states are required to provide, stimulating a need for greater oversight and assessment efforts while also reducing the need, in some areas, for direct services for disadvantaged populations within public health agencies.

Vaccine Purchase. Prior to the VFC program (before FY 1995), the states routinely used Section 317 funds for vaccine purchase. In FY 1993, for example, Congress appropriated $193 million (more than 80 percent of the total Section 317 budget) for vaccine purchases by the states and $45 million for infrastructure grants (less than 20 percent of the total Section 317 budget). States were expected to gear up quickly in response to disease outbreaks, and federal funds provided them an opportunity to extend clinic hours, hire additional staff, and purchase enough vaccine to address special circumstances or short-term needs.

The implementation of VFC in the wake of the 1989–1991 measles epidemic shifted the routine purchase cost of vaccines for most Medicaid-enrolled children from state to federal funds and resulted in substantial savings to the states. The total size of these savings has not been estimated. The ways in which states used their Medicaid savings varied considerably and often depended on the state’s needs and health finance organizational structure. Eight states (California, Connecticut, Idaho, Kentucky, Massachusetts, Minnesota, Nebraska, and North Carolina) used their vaccine purchase savings to increase their reimbursement fees to Medicaid providers for administration of immunizations. Some states expanded the eligibility criteria for Medicaid programs, or used the VFC savings to purchase additional vaccines for school health programs or other groups not covered by VFC, such as the underinsured (insured children whose health plans do not cover immunizations).

While total federal immunization budgets grew significantly with the creation of VFC, federal support for immunization programs within the states decreased during the past 5 years. Although states achieved cost savings with the creation of VFC, they incurred other administrative costs within the program for which they drew on other revenue streams, including Section 317 funds. In addition, states did not apply their Medicaid savings to support other immunization roles in such areas as data collection, surveillance of coverage rates, and development of preventive interventions for the general population or high-risk groups. The administrative separation of state Medicaid offices and public health agencies

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