Waiver is a life-saver for parents on state health insurance

About 18,000 low-income parents in Minnesota will keep their health insurance under the MinnesotaCare program after state leaders persuaded the federal government to revise an earlier decision cutting $135 million in federal funds from the program over the next three years.

At issue was a decision in August 2007 by the Bush administration that states could not cover health care for parents using funds from the federal State Children's Health Insurance Program (SCHIP).

The new decision was announced by Gov. Tim Pawlenty. He and all 10 members of Congress from Minnesota had petitioned federal officials to renew a waiver that had allowed the coverage in the past.

About 118,000 people were enrolled in MinnesotaCare last year, about 30,000 of them parents.

The SCHIP program has been the focus of a heated political fight between Congress and the White House. Last year Bush twice vetoed Democratic proposals to expand the program, arguing that they would have diluted SCHIP's original focus on poor children.

Those bills would have had far more impact on other states, which rely more heavily than Minnesota on the program to insure low-income children. Congressional Democrats may revive the proposals in coming months.

In Minnesota, which already surpassed most states in covering children, the state had used SCHIP money to help pay insurance costs for low-income parents. Minnesota argued that children in low-income families are more likely to get appropriate medical care when their parents also have insurance.

State officials were surprised when they discovered the policy shift, which would have barred states from using the money for parents' health insurance, in a 29-page document outlining federal changes affecting the state's subsidized MinnesotaCare program.

Under the new decision, effective through June 2011, coverage for Minnesota parents will be paid by Medicaid, a federal-state program for low-income families and the disabled, instead of SCHIP. That means it may cost the state a bit more because the federal government pays about half of Medicaid costs, compared with about 65 percent of SCHIP.

In exchange, the state will use SCHIP money for some children now covered by MinnesotaCare, Pawlenty said.

Affected are parents in MinnesotaCare with incomes between 100 percent and 200 percent of poverty, or about $42,000 for a family of four.

The program was created by the Legislature in the early 1990s to cover low-income families who aren't poor enough for Medicaid. The result is that most low-income children who don't qualify for Medicaid are covered by MinnesotaCare -- which made it hard for the state to tap federal SCHIP funding.

Fewer than 1,000 children in Minnesota are covered by SCHIP, said Marc Kimball, spokesman for the Minnesota Children's Defense Fund.

"Minnesota historically has done a much better job of covering health care for low-income children," Kimball said. "Still, there are 85,000 kids in Minnesota without health insurance, so we're not perfect."

Warren Wolfe • 612-673-7253