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As Congress was finalizing bipartisan legislation to reauthorize the State Children’s Health Insurance Program (SCHIP), the Center for Medicaid and Medicare Services (CMS) circulated, on August 17, 2007, a new federal directive in the form of a letter to program directors. The directive dramatically alters rules that had governed SCHIP for the past ten years, limits states’ ability to design and finance their own programs, and gives them exactly one year to amend their individual SCHIP programs or risk corrective action by the federal government.

CMS imposed a uniform, federal gross income cap of 250 percent of the federal poverty level or $42,925 for a family of four. CMS does not have legal authority to set income caps on SCHIP, so CMS accomplished a de facto cap by limiting states’ flexibility to cover children above 250 percent of the federal poverty level, allowing the higher coverage only when states prove that they meet new federal guidelines.

The directive demands that, before raising income eligibility to higher levels, states must show that they have enrolled at least 95 percent of all uninsured children already eligible for SCHIP or Medicaid—that is, children with incomes below 200 percent of the federal poverty level. Based on estimates by the Urban Institute of the Census Bureau’s Current Population Survey, state Medicaid and SCHIP participation rates among low-income children range from a low of 51 percent in Nevada to a high of 89 percent in Vermont. Overall, enrollment rates vary widely among states and are difficult to measure. What data CMS will accept to show participation numbers among the already eligible but uninsured is still not clear.

Once the participation rate requirement is met, states are allowed to expand their programs above 250 percent of the federal poverty level only if they can show that they have reasonable procedures to prevent “crowd-out,” a process where parents move children from private coverage to the publicly funded SCHIP program. States must prove that private employer-based coverage for lower-income children has not declined by more than 2 percent over the past five years. Employer coverage has been on the decline for many years. According to a survey conducted in October 2007 by the Employee Benefit Research Institute, employer-sponsored coverage between 2000 and 2005 dropped almost 9 percent for children under 18. This is a trend that states have little control over, and once again CMS has not issued clear guidelines for “reasonable procedures” that states may use to measure such trends.

The CMS directive, effective August 2008, has already had a significantly negative impact on children’s coverage. The directive is not only slowing down the coverage of uninsured children but also leaving more children uninsured as some states pull back on SCHIP eligibility or scrap planned expansions. Congress must repudiate the CMS directive as inconsistent with CMS authority and with good policy. The focus should be on insuring all children, a goal that is within sight if CMS gets out of the way.

To learn more, contact Melissa Cubria at melissacubria@povertylaw.org or 312.263.3830 ext. 241.

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Thirty-seven million Americans live in the state of poverty, but who cares and what are we going to do about it? As a country, we were forced to confront our progress when the Gulf hurricanes revealed places of deep poverty. Like the task of building levees and responding to an immense national catastrophe, the job of taking on the complex structural causes of poverty is well beyond what compassionate individuals can do. To address the root causes of poverty, Congress and the President must adopt the right priorities, enact needed laws, and adequately fund essential programs. This week the Shriver Center released its 2007 Poverty Scorecard to hold leaders accountable to that very task.

The 2007 Poverty Scorecard: Rating Members of Congress assigns letter grades to each member of the U.S. Senate and House of Representatives according to his or her voting records on poverty-related issues that came to a vote in 2007—legislation on affordable housing, health care, education, labor, tax policy, and immigrants’ rights. With the help of a national advisory board and other antipoverty experts, the Shriver Center identified and analyzed fourteen Senate votes and fifteen House votes.

“This Scorecard is important because it looks at a whole range of critical issues, all of which have to be addressed by the country in order to deal with millions of Americans, more than the population of California, who live in poverty every single day,” said John Edwards, the former senator, Democrat of North Carolina, during the teleconference release of the Scorecard. “We can get the congressional leadership that we need, but it’s crucial that voters be educated, that they know who’s doing the right thing and who’s not.”

Edwards noted that many of the bills—such as increasing the minimum wage and making it easier for workers to unionize—that failed in Congress last year would have easily helped pull Americans out of poverty. These policy changes reflect the view that if you are working full-time, you should not be struggling to pay the bills, Edwards said.

“People who are working ought to be able to provide for their family,” he said. “People who are working full-time should not be in poverty.”

The goal of the Shriver Center’s Poverty Scorecard is not just to identify poverty-fighting initiatives that Congress acted upon in 2007 and grade each member on how they voted. The Shriver Center also hopes that the evaluation will shine a light on how Congress is doing, that it will elevate the issue of poverty on the national agenda, and that members of Congress will be moved to pay greater attention and perform better in the fight against poverty.

For further information, contact Joanna VanderWoude at jvanderwoude@povertylaw.org or 312.263.3830 ext. 253.

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When rebate checks from the economic stimulus begin arriving this May, taxpayers will be asking themselves, Is it time to save or spend? While the government hopes that consumers will spend the money, the Shriver Center recommends another course. The best financial decision is to save, invest, or pay off debt. For the most part, Americans claim that they will make the right choice.

According to a recent survey by American Century Investments, almost two of every three Americans do not plan to spend tax rebates included in the proposed government stimulus package. Roughly 36 percent of those receiving a rebate plan to pay off loans or credit card balances, and another 25 percent plan to save or invest it.

By stimulating savings and investment with rebate money, Americans can begin overcoming the consumer overspending habit that has contributed to the current economic crisis. In 2005 the net private savings rate was negative for the first time since the Great Depression, and, given the stormy forecasts of a looming recession, it is good advice to save those rebates for a rainy day. This means breaking from the borrow-and-spend mentality that has thrown many Americans into debt, and using rebates to prepare for future emergencies or needs.

Varied sources offer consumers advice on handling rebates. The Internal Revenue Service (IRS) and the National Community Tax Coalition have answers to frequently asked questions: if taxpayers use direct deposit of tax refunds into one account, the stimulus payment will also be deposited to that account. If the taxpayer uses the split refund option with Form 8888, the IRS will send the stimulus payment via paper check.  David Wyss, chief economist for Standard & Poor’s, acknowledges that, for individuals, it is best to either save or pay off credit cards. The National Foundation for Credit Counseling offers several alternative uses, such as opening a retirement account, starting a tax-free college savings plan, or creating a savings account. Thomas Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants, cosponsors a campaign called “Feed the Pig,” which also advises consumers on savings programs.

Meanwhile, refund anticipation loan providers threaten to strip rebate funds from taxpayers. In response, Senators Charles Schumer (D-NY) and Chuck Grassley (R-IA) sent a letter of warning to the loan provider industry to halt “instant rebates” and to abide by state laws capping interest rates. Grassley stated, “The companies that offer these loans need to stand down and not try to exploit an economic downturn for their gain at taxpayer expense.” A copy of the letter can be found here.

For more information on tax preparation assistance, the Economic Stimulus Act of 2008, and the upcoming stimulus rebate, contact Dory Rand at doryrand@povertylaw.org or Brian Clappier at brianclappier@povertylaw.org..

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Policy Overview at Shriver Center Presents Ideas for Illinois

With the baby boomer generation approaching retirement and life spans growing longer, concerns over retirement savings have increased. Social security, the most important source of income for the majority of retired Americans, is not enough for a truly secure retirement. In Washington State the Economic Opportunity Institute has been developing universal retirement savings accounts that will make it possible for more low-wage workers to save for retirement. At the Shriver Center, Gary Burris, the institute’s senior policy associate, recently presented an overview of the organization’s plans.

Currently less than 47 percent of workers participate in an employer-sponsored retirement plan. This savings gap disproportionately affects low-income employees and those working at small or medium-sized businesses. According to the institute, only 18 percent of those earning less than $20,000 and 20 percent of those employed by a business with fewer than 10 workers have pension coverage. Low-wage workers and small businesses often find pension plans unaffordable and complex to implement.

Washington Voluntary Retirement Accounts offer simplified options. These state-sponsored, universal, portable, 401(k)-style, defined contribution plans would have a positive impact on retirement security, business competitiveness, and national economic performance. The institute envisions a two-tiered system, with a workplace-based individual retirement account open to all workers, and a deferred compensation 401(k)-type or SIMPLE IRA-type (Savings Incentive Match Plan for Employees Individual Retirement Account) program open to all employers who choose to participate for their employees. The accounts would be available to any worker who elects to have tax-deferred contributions deducted directly from each paycheck. Employers may choose to contribute to employee accounts independently or match employee contributions, and all accounts would be portable when workers change jobs. Participants would be able to choose from a number of investment options, ranging from conservative to aggressive funds. More information on Washington Voluntary Accounts can be found here.

The Washington State Department of Retirement Systems would handle many in-house administrative functions but would subcontract with private companies for services such as record keeping and investment education. These plans would not displace private pension providers since the plans target those not served by the private pension market.

The Shriver Center is bringing together a number of parties to discuss the future of voluntary retirement accounts in Illinois. Several other states, such as Maryland, West Virginia, California, and Pennsylvania, have shown interest in similar state-level retirement plans.

For more information on Washington Voluntary Retirement Accounts and the Shriver Center’s work to introduce similar pension programs in Illinois, contact Dory Rand at doryrand@povertylaw.org or Brian Clappier at brianclappier@povertylaw.org.

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Recently discharged veterans are struggling to find jobs due in part to employer concerns about their mental health, according to a 2007 study, Employment Histories Report, by the U.S. Department of Veterans Affairs (VA). A separate 2007 report by the U.S. Department of Labor shows continued high complaint levels from reservists who were unable to reclaim their old jobs after returning home from military service.

The VA survey found that 18 percent of veterans discharged in the last three years were unemployed. Among those who were employed, 25 percent earned less than $21,840 a year. The report largely attributed this to insufficient job support networks and mentoring. But it also found that employers showed reluctance to hire veterans due to concerns about their technological skills and education and their mental health and ability to adapt to civilian life. Employers interviewed for the report suggested that veterans were often perceived as being at risk of posttraumatic stress disorder. 

From 1991 to 2003 the average unemployment rate for veterans discharged within the previous two years was 9.5 percent, compared to 4.3 percent for a comparative sample of nonveterans. While government benefits and disability pay added to veterans’ total income, veterans still tended to receive lower wages and were more likely than nonveterans to be in low-income families for up to eight years after being discharged.

The survey showed that 48 percent of recent veterans used the GI Bill program, and 29 percent used the Transition Assistance Program. But the survey found that participation in the GI Bill program was not strongly linked to job successes, such as high earnings, increased responsibilities, or advancement opportunities. The study encourages the government to revamp and improve these programs and to promote veterans as capable employees.

According to the Labor Department report, reservists filed 1,357 complaints with the department in 2006. Most complaints were related to denials of old jobs or benefits after reservists returned from tours of duty in Iraq. While complaints remained high, they were down from the nearly 1,600 received in 2005, the highest level reached since 1991.

Since 1990, some 4.4 million service members have been discharged from active duty. The VA report surveyed 1,941 veterans who were discharged between December 2004 and December 2006. It was conducted by the consulting firm Abt Associates Inc. and is available online at http://www1.va.gov/vetdata/page.cfm?pg=5. For more information, contact Martin Stainthorp at martinstainthorp@povertylaw.org.

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