Children with Special Health Care Needs: Coverage, Affordability, and HCBS Access

Key Takeaways

The COVID-19 pandemic has had a disproportionate impact on people with disabilities, including children with special health care needs, highlighting the importance of health insurance coverage, affordability, and benefit package contents, like home and community-based services (HCBS). This issue brief describes key characteristics of children with special health care needs and explores insurance affordability and benefits for children covered by Medicaid/CHIP compared to those with private insurance only. This brief provides context for ongoing policy discussions around additional investments in Medicaid HCBS for children with special health care needs. Key findings include the following:

• Medicaid/CHIP covers almost half of all U.S. children with special health care needs, though the share varies by state. These children are more likely to be low-income, a member of a racial or ethnic minority group, and younger than those children covered by private insurance alone.
• Children with special health care needs covered by both Medicaid/CHIP and private insurance have the greatest health care needs, and children with Medicaid/CHIP only are more likely to have greater health needs compared to those with private insurance only.
• While families of Medicaid/CHIP-only children with special health care needs are more likely to face financial difficulty, they find their health care more affordable than those with private insurance only due to Medicaid’s cost-sharing protections.
• Even though children with special health care needs covered by Medicaid/CHIP-only have greater health care needs, they are more likely than those with private insurance alone to report that their benefits are always adequate to meet their needs, allow them to see needed providers, and meet their behavioral health needs, reflecting Medicaid’s robust benefit package.

Medicaid is the primary payer for HCBS and plays a significant role in providing children with special health care needs the long-term services and supports (LTSS) they need to live at home with their families. While unmet need for HCBS for people with disabilities pre-dates the COVID-19 pandemic, the pandemic has brought a heightened focus on the need for additional HCBS. The American Rescue Plan Act provides a temporary increase in federal Medicaid matching funds for state spending on HCBS, and Congress currently is considering additional Medicaid HCBS funding as part of budget reconciliation, which states could use to support the HCBS provider workforce, offer new or expanded HCBS benefits, and/or serve more HCBS enrollees, though the final funding amount has not yet been set.

Introduction

The COVID-19 pandemic has had a disproportionate impact on people with disabilities, including children, whose health and service needs may place them at increased risk of contracting COVID-19 and becoming seriously ill. Children in general also have experienced health care disruptions, mental health challenges, and economic hardships, as the pandemic has coincided with important periods of their physical, social, and emotional development. All of these effects may be intensified for the estimated 13.9 million children, or 19% of all children in the U.S., who have special health care needs.¹ As defined by the U.S. Department of Health and Social Services, these children “have or are at increased risk for chronic physical, developmental, behavioral or emotional conditions and also require health and related services of a type or amount beyond that required by children generally.”² While these data are from 2019 (see Methods box below for details), issues such as unmet need for home and community-based services (HCBS) and health disparities for low-income children and children of color generally pre-dated and have been exacerbated by the pandemic. Consequently, health insurance coverage, affordability, and benefit package contents are especially important for children with special health care needs.

Due to their chronic health conditions, children with special health care needs may rely on long-term services and supports (LTSS), including HCBS. Medicaid is the primary payer for LTSS and provides HCBS such as private duty nursing, attendant care, assistive technology, non-medical transportation to promote community integration, and case management services that help children with special health care needs remain at home with their families. These services may not be covered at all, or may not be covered adequately or affordably, by private insurance. At the same time, state Medicaid HCBS programs and providers have been challenged by the pandemic and accompanying economic downturn. A recent KFF survey found that the Medicaid HCBS provider infrastructure declined during the pandemic, with two-thirds of responding states reporting a permanent closure of at least one provider.

The American Rescue Plan Act (ARPA) provides a temporary increase in the federal matching rate (FMAP) for state spending on Medicaid HCBS to fund activities that expand or strengthen HCBS. While the ARPA enhanced funds are available only for one year, additional federal funding for HCBS is part of the budget reconciliation package proposed by Democratic leaders, though the details continue to be worked out. President Biden earlier this year proposed a $400 billion federal investment in Medicaid HCBS, though it is unclear how much of that funding increase will be approved by Congress as it considers competing priorities in the budget package. The House Energy and Commerce Committee recently released their recommendations for the budget package that includes $190 billion for Medicaid HCBS. This issue brief provides context for ongoing policy discussions by describing key characteristics of children with special health care needs, comparing insurance affordability and access to key benefits among those covered by Medicaid/CHIP and those with private insurance, and considering the implications of additional Medicaid HCBS funding for children with special health care needs.

How are children with special health care needs covered?

Together with the Children’s Health Insurance Program (CHIP), Medicaid covers almost half of all children with special health care needs (Figure 1). Medicaid/CHIP is the only source of coverage for nearly four in 10 children with special health care needs, while another 8% have Medicaid/CHIP to supplement private insurance. Just over half of children with special health care needs have private insurance as their sole source of coverage.

Who Are Children with Special Health Care Needs?

Children with special health care needs with Medicaid/CHIP as their sole source of coverage are more likely to live in a low-income household, compared to those with private insurance only. Nearly two-thirds of Medicaid/CHIP-only children with special health care needs live in a household with income at or below 138% of the federal poverty level (FPL, less than $30,305/year for a family of three in 2021) compared to 7% of children with private coverage only (Figure 2). Federal Medicaid program rules cover children with household incomes up to 138% FPL, but all states opt to expand financial eligibility to higher income levels: as of January 2021, the median financial eligibility level for Medicaid/CHIP children nationally is 255% FPL ($55,998/year for a family of three). Some children with special health care needs qualify for Medicaid based solely on their family’s low income. Other children with special health care needs may qualify for Medicaid through various disability-related pathways, which may expand income limits to 300% SSI ($28,584/year for an individual, equivalent to about 222% FPL) or only consider the child’s own, and not their parents’, income.

The share of children with special health care needs covered by Medicaid/CHIP varies by state. State eligibility limits in pathways for children who qualify for Medicaid/CHIP based solely on their low income range from 175% FPL to 405% FPL. Additionally, most disability-related Medicaid eligibility pathways are optional and vary across states. States must provide Medicaid to children who receive federal Supplemental Security Income (SSI) benefits, but only an estimated 21% of children with disabilities covered by Medicaid/CHIP receive SSI.³ This means that the vast majority of Medicaid children with special health care needs are eligible either based on their family’s low income or through an optional disability-related pathway. Thirty-two states provide Medicaid/CHIP to under half of children with special health care needs living in their state, and 19 states, including DC, provide Medicaid/CHIP to over half of children with special health care needs living in their state (Figure 3 and Appendix Table 1). Factors that likely contribute states covering more children with special health care needs are the state’s income eligibility limits, the percentage of children with special health care needs living in low-income households in the state, and the state’s disability-related eligibility pathway options.

Medicaid/CHIP-only children with special health care needs are more likely to be a member of a racial or ethnic minority group compared to those with private insurance only. Medicaid/CHIP-only children with special health care needs are almost three times as likely to be non-Hispanic Black and 1.5 times as likely to be Hispanic than children with private coverage only (Figure 2). The majority of children with special health care needs with private insurance only are non-Hispanic white, while a majority of those with Medicaid/CHIP are persons of color.

Medicaid/CHIP-only children with special health care needs are more likely to be younger compared to those with private insurance only. One in five (20%) Medicaid/CHIP-only children with special health care needs are age 5 or younger, with the remainder almost evenly split between the 6 to 11 (40%) and 12 to 17 (40%) age groups (Figure 2). Those with private insurance only are more likely to be older, with almost half (49%) between the ages of 12 and 17. The fact that more Medicaid/CHIP-only children with special health care needs are under 12, compared to those with private insurance only, means that they will have a longer wait until a COVID-19 vaccine is available. A vaccine is currently approved for ages 12 and older, and clinical trials are underway for younger age groups.

What Health Conditions and Needs do Children with Special Health Care Needs Have?

Medicaid/CHIP-only children with special health care needs are more likely to have greater health needs compared to those with private insurance only. Medicaid/CHIP-only children with special health care needs are three times as likely to experience fair or poor health and 1.5 times as likely to report their health usually or always affects their daily activities somewhat or a great deal health compared to children with private insurance only (Figure 4). Medicaid/CHIP-only children with special health care needs are more likely to have multiple functional difficulties than those with private insurance only, with just under half of the Medicaid/CHIP-only group reporting four or more functional difficulties, compared to less than one-third with private insurance only (Figure 4). Medicaid/CHIP-only children with special health care needs also are more likely to report serious difficulty in each of the six functional areas compared those with private insurance only (Figure 4). For example, Medicaid/CHIP-only children with special health care needs are almost three times more likely to have serious difficulty dressing/bathing and two times more likely to have serious difficult walking or doing errands compared to children with private insurance alone.

Medicaid/CHIP-only children with special health care needs are more likely to have an intellectual or developmental disability (I/DD) when compared to those with private insurance only (Figure 4).⁴ By contrast, children with special health care needs reported similar prevalence of both physical and behavioral health disabilities across coverage types. Further, Medicaid/CHIP-only children with special health care needs reporting I/DD are more likely to have co-occurring chronic conditions compared to those with private insurance only (Figure 4). Only 11% of children with special health care needs with private insurance alone reported having a physical disability, behavioral health disability, and I/DD together, compared to 18% of the Medicaid/CHIP only group.

Children with special health care needs who have both Medicaid/CHIP and private insurance have the greatest health care needs compared to other groups. Over half of those with both Medicaid/CHIP and private insurance have four or more functional difficulties, and over one-third of this group have health conditions that usually or always affect their daily activities somewhat or a great deal (Figure 4). These children report higher rates of serious difficulty concentrating, dressing/bathing, and doing errands alone as well as higher prevalence of I/DD and co-occurring I/DD and behavioral health disabilities when compared to the Medicaid/CHIP-only population (Figure 4).

How Does Having a Child with Special Health Care Needs Affect Families?

Medicaid/CHIP children with special health care needs find their health care more affordable than those with private insurance only. Medicaid/CHIP-only children with special health care needs are more than four times as likely to report that their out-of-pocket health care costs are always reasonable compared to those with private insurance alone (Figure 5). Only 3% of Medicaid/CHIP-only children with special health care needs reported paying $1000 or more in out-of-pocket medical expenses compared to 38% of those with private insurance alone (Figure 5). Medicaid program rules entirely exempt certain populations and services from premiums and copays and otherwise require cost-sharing to be nominal. This reflects the fact that the Medicaid population tends to have low incomes and, as in the case of children with special health care needs, may have multiple and ongoing service needs which could lead to high costs without cost-sharing protections.

Families of Medicaid/CHIP-only children with special health care needs are more likely to face financial difficulty compared to those with private insurance only. Families of Medicaid/CHIP-only children with special health care needs are over three times as likely to find it somewhat or very often hard to cover their child’s basic needs and over five times as likely to sometimes or often not be able to afford enough to eat compared to those with private insurance alone (Figure 6). Caregivers of Medicaid/CHIP-only children with special health care needs also are more likely to reduce their hours or stop working due to their child’s health and to spend 5 or more hours a week providing health care at home when compared to those with private insurance only (Figure 6). They also are the least likely to be employed 50 weeks per year compared to other coverage groups, perhaps reflecting the greater amount of time they spend caring for their children’s health needs (Figure 6).

Parent/caretakers of Medicaid/CHIP-only children with special health care needs are more likely to face challenges with their own health compared to those with private insurance only. While 10% of privately insured children with special health care needs have a caregiver with fair or poor physical or mental health, 26% covered solely by Medicaid/CHIP have a caregiver with fair or poor physical health and 19% have a caregiver with fair or poor mental health (Figure 6). Additionally, Medicaid/CHIP-only children with special health care needs are three times as likely to live in a home with only one caregiver compared to those with private insurance alone (Figure 6).

Access to Care and Service Utilization Among Children with Special Health Care Needs

Even though Medicaid/CHIP-only children with special health care needs have greater health care needs, they are more likely than those with private insurance alone to report that their benefits are always adequate to meet their needs (Figure 5). The Medicaid/CHIP-only group also is more likely to report that their insurance meets their behavioral health needs compared to those with private insurance alone (Figure 5). These findings likely reflect Medicaid’s robust benefit package for children, which includes acute and preventive services as well as LTSS and HCBS, which are typically not covered by private insurance. Medicaid’s Early and Periodic Screening Diagnostic and Treatment (EPSDT) benefit includes regular medical, vision, hearing, and dental screenings as well as the services necessary to “correct or ameliorate” physical or mental health conditions. These services must be provided for children, regardless of whether a state chooses to cover them for adults. Medicaid/CHIP-only children with special health care needs are less likely to have a usual source of sick and preventive care (Figure 7), but they are more likely to report their insurance allows them to see needed providers compared to those with private insurance alone (Figure 5). The rates of children with special health care needs who have had at least one preventive visit in the past year and received mental health treatment when needed in the past year are similar across coverage groups (Figure 7). These rates have likely worsened due to the pandemic, with children experiencing delays in preventive care, and children with special health care needs experiencing difficulties accessing specialized services and therapies, especially services that could not be conducted via telehealth.

While Medicaid/CHIP-only children with special health care needs are more likely to find their insurance benefits adequate compared to those covered by private insurance alone, a group of these Medicaid children recently filed a lawsuit arguing that a new Section 1115 waiver in Tennessee could worsen access to care. For details, see Box 1 below. Another challenge is the change in benefit package experienced by individuals who age out of comprehensive coverage provided through the Medicaid EPSDT benefit at age 21. If needed services are not covered by Medicaid, this can have implications for those with chronic conditions as they try to maintain continuity of care and remain in the community as they age into young adulthood, as private insurance is unlikely to cover LTSS and paying for services out-of-pocket may be unaffordable. For example, a recent New York Times article details how in New York, the change from “medically fragile child” to “medically fragile adult” includes lower Medicaid payment rates for nurses that could result in young adults with disabilities losing access to in-home services and being forced to move into nursing homes.

Looking Ahead

Medicaid is a significant source of coverage for medical, behavioral health, and LTSS for children with special health care needs. As the primary source of coverage for HCBS, Medicaid plays a major role in providing children with special health care needs the LTSS they need to live at home with their families. Medicaid makes coverage affordable by limiting cost-sharing and protecting children from high out-of-pocket costs and covers services that private coverage typically does not, including LTSS. During the pandemic, children have experienced health care disruptions, mental health challenges, and economic hardships, and these issues may have been intensified for those with special health care needs, making health insurance coverage, affordability, and benefit package contents especially important. Experts note that going to school in-person is beneficial for children’s social, emotional, and physical health and can provide access to important health services and address racial and social inequities. However, uncertainty remains around what in-person learning will look like as cases remain high due to the Delta variant, and the transition to “the new normal” may be difficult for some children, especially those whose health and functional needs place them at increased risk of COVID-19 and who may require special education services that may not be adequately provided remotely.

While unmet need for HCBS for people with disabilities pre-dates the COVID-19 pandemic, the pandemic also has brought a heightened focus to the need for additional HCBS. During the COVID-19 public health emergency (PHE), states have taken a number of emergency Medicaid LTSS actions, such as HCBS benefit expansions and provider payment rate increases for HCBS. CMS has encouraged states to consider making these changes permanent, though states will require adequate financing to retain many policy changes. Additionally, state actions to unwind emergency authorities and resume regular eligibility renewals at the end of the PHE have implications for maintaining continuity of coverage and services.

The ARPA provides a temporary 1-year increase in federal matching funds for spending on Medicaid HCBS, though the federal policy debate about the extent to which increased HCBS funding should be extended is continuing. A recent KFF survey found that a few states reported plans to direct some of the new ARPA funds to support family caregivers. Recent CMS guidance confirms that states may use these funds to pay family caregivers, provide equipment and supplies, and offer respite care. Although President Biden earlier this year proposed a $400 billion federal investment over 10 years to expand access to Medicaid HCBS and strengthen the direct care workforce, it is unclear how much of that funding increase will be approved by Congress as it considers competing priorities in the budget package and calls among some to reduce the overall spending level. The reconciliation bill being considered by the House includes $190 billion for HCBS. Increased federal funding for Medicaid HCBS beyond the current 1-year could enable states to support the HCBS provider workforce, offer new or expanded HCBS benefits, and/or serve more HCBS enrollees, all of which can benefit children with special health care needs.

Methods

The data in this analysis draw from the 2019 National Survey of Children’s Health (NSCH), the most current data available. The NSCH and this analysis use the CSHCN Screener to identify children with special health care needs. To meet the criteria for having a special health care need, a child must experience a health consequence that is due to a medical or other health condition that has lasted or is expected to last for 12 months or longer. This analysis breaks down indicators by health insurance coverage status for children with special health care needs but does not include estimates for uninsured children or children who did not report coverage status. This is due to many of the estimates for these children not meeting the minimum standards for reliability.