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February 2009

Obama Administration Rescinds CMS August 17th Directive

On the same day he signed the renewal of the Children’s Health Insurance Program (CHIP) into law, President Obama issued a memorandum that voided previous restrictions the Bush administration had placed on state efforts to use CHIP funding to expand coverage to children in families with incomes above 250 percent of the federal poverty level (FPL).  The Bush restrictions, collectively known as the August 17th directive, were designed to ensure maximum enrollment of children below 200 percent FPL and minimize crowd out of private insurance.  However, state leaders argued the provisions of the directive were impossible to meet and left thousands of children without health care coverage.  Though the Centers of Medicare and Medicaid Services (CMS) later stated that it would not withhold funding from states that failed to meet the directive’s provisions by the August 2008 deadline, the Bush administration never rescinded the directive.

The directive had threatened to derail numerous state efforts to expand children’s health insurance coverage.  President Obama’s move to rescind the directive eliminates confusion regarding how states should pursue CHIP expansion. Though the directive’s barriers to expanding coverage have been dropped, the CHIP renewal legislation does contain a provision that limits the federal matching rate to states expanding coverage above 300 percent FPL to the less generous Medicaid reimbursement rate.  For more information on the August 17th Directive see the Georgetown University Center for Children and Families website.