N.J. and feds tangle in court over kids’ health care rules

by ROBERT SCHWANEBERG A U.S. District Court judge heard arguments yesterday on whether a federal agency acted unlawfully when it told New Jersey to restrict its program for providing health insurance to children in lower-income families. If enforced, the so-called “August 17 directive” – outlined in a letter by the federal Centers for Medicare and Medicaid Services – could drive some 10,000 New Jersey children out of FamilyCare, the state’s program to insure lower-income families, said Suzanne Esterman, a spokeswoman for the state Department of Human Services. That letter was at the center of yesterday’s arguments before U.S. District Judge Joel Pisano. U.S. Sen. Frank Lautenberg (D-N.J.) is sponsoring legislation to block its implementation, and seven other states have sued to overturn it. Jean Lin, an attorney with the U.S. Department of Justice, argued that the letter simply offered “policy guidance” to states getting federal funding through the State Children’s Health Insurance Program, or SCHIP. Deputy Attorney General Megan Lewis argued that the letter established new rules that states must follow or jeopardize federal funding. She added that those new rules are unlawful because they were adopted without allowing states and other interested parties a chance to comment first. Pisano, who called the case “complex,” reserved decision. The case has far-reaching implications, as SCHIP is a keystone of the state’s long-term efforts to cover 1.3 million residents who lack health insurance. In July, Gov. Jon Corzine enacted the first phase of that program when he signed a bill to cover an additional 50,000 children and 20,000 parents through FamilyCare. The HMO-style program, funded partly through SCHIP and partly by the state, already covers 221,600 adults and children in households below certain income levels, such as $74,200 for a family of four. Earlier this year, a state audit found nearly 1,000 people making more than $85,000 a year had been improperly enrolled. Lautenberg has repeatedly voted to expand SCHIP and succeeded in amending a pending appropriations bill to block the August 17 directive, a move credited with helping to persuade the Bush administration not to enforce it. Although the deadline for complying passed last month, Lin said, “Nothing so far has occurred.” She added there could still be “corrective action” in the future. “Senator Lautenberg believes expanding successful programs like the Children’s Health Insurance Program that insures tens of thousands of children in New Jersey and across the country is a critical step in our effort to increase access to affordable, quality health care,” the senator’s senior adviser, Scott Mulhauser, said yesterday. Lautenberg’s Republican opponent, former congressman Dick Zimmer, said Saturday he supports “the concept of SCHIP” but worries that, if it is expanded, other states would benefit at the expense of New Jersey. “SCHIP was designed for lower-income children. To use it as a pretext to cover higher-income adults undermines the program,” Zimmer said. “If we want to discuss universal health care, let’s do it in a straightforward way.”