The New York Times reports that the federal government is applying the restrictions placed on SCHIP expansion earlier this year to Medicaid expansion. States wishing to enroll children in families above 250% of the federal poverty level in Medicaid must first enroll 95% of the children under that limit as well as take steps designed to eliminate the crowd-out of private insurance coverage.

As noted by Bush Administration officials in the article, this shouldn't come as a surprise. Obviously it would make no sense to impose these restrictions on the coverage of children by state CHIP programs but allow unlimited coverage by Medicaid programs. To be consistent, the feds need to apply the same standards to each program. 

It's hard to argue against the notion that the poorest children should be covered first. But when there is "free" federal money at stake it seems that state bureaucrats have no qualms about taking this line.