July | August 2017







States Face Possible Funding Cuts for Children's Health Care 

By Leslie Haymon, policy analyst, CSG Washington, D.C., Michael Carabello, CSG graduate fellow, Emily McCarthy, CSG graduate fellow
Amid the debate over the future of health care policy in Congress, another key health policy debate looms. Funding for the Children’s Health Insurance Program, or CHIP, will expire on Sept. 30. If Congress fails to approve new funding, at least 11 states would begin to run out of federal funding by the end of this year.
On Sept. 14, state legislators and stakeholders met in Washington, D.C., to discuss CHIP, Medicaid and other health policy issues at CSG’s Medicaid Leadership Policy Academy. Kelly Whitener, with Georgetown University’s Center for Children and Families, presented at the policy academy and said she expected CHIP to be funded by Congress, but the timing was unclear. She also said the government funding deal for the remainder of 2017 had been worked out, but CHIP was not included.
CHIP bridges the gap for children in families that earn too much to qualify for Medicaid, but too little to afford private insurance. Currently, about 91 percent of eligible children participate in either a CHIP or Medicaid program. Nearly 9 million children are enrolled, and 2 million of those are in California alone. The uninsured rate for children dropped to 5.3 percent in 2015 from 13.7 percent in 1996 before CHIP was enacted.
CHIP was established in 1997 to provide affordable health care to children living below certain income thresholds and all states participate in the program. It is jointly financed by the federal government and the states and is administered by the states. The federal government’s share of CHIP expenditures is higher than the federal matching rate for the regular Medicaid program. According to Debra Miller, CSG director of health policy, the median upper income level in 2017 is 254 percent of the federal poverty line, however, 13 states have moved CHIP eligibility to over 300 percent of poverty.
On Sept. 18, U.S. Sen. Orrin Hatch of Utah and U.S. Sen. Ron Wyden of Oregon introduced legislation to continue CHIP funding through fiscal year 2022. Current CHIP law calls for the enhanced matching rate for CHIP—23 percentage points above a state’s regular CHIP match rate—to continue in 2018 and 2019.
“The Hatch Wyden bill builds in an exit ramp for states. In 2020, the extra match will be cut in half to 11.5 percentage points and then in 2021 will return to the normal CHIP rate, still above the regular Medicaid match,” Whitener said after the Hatch Wyden legislation was introduced.
The funding measure also contains a maintenance of effort provision that requires states to maintain current CHIP income eligibility standards through 2022. But beginning in 2020, states could scale back income eligibility to 300 percent of federal poverty.
“This is a reasonable compromise. The maintenance of effort is critical to continuing the success in children’s coverage, but after 2020, states will be allowed to make decisions about covering populations over 300 percent,” Whitener said.
CHIP allows states freedom to innovate in program design and federal funding utilization. Thirteen states chose to use the program’s funding to establish a state program entirely separate from Medicaid.  Alternatively, eight states and the District of Columbia opted to use the grants to expand Medicaid, which allows more children to enroll in the program directly. The remaining 29 states designed programs that utilize some combination of a separate CHIP and Medicaid expansion with varying eligibility criteria.
The variations in program design that states enacted two decades ago will dictate how states are impacted if CHIP funds are not continued. A state with a separate CHIP program could continue to provide health coverage, but all funding would be the state’s responsibility. In states with a Medicaid expansion program for CHIP federal funds would continue to flow, but at the regular Medicaid matching rate rather than the enhanced CHIP rate.
“Utah is watching this vote closely, as we have thousands of children who rely on this program for health insurance” Utah state Sen. Brian Shiozawa said. “If we lose federal CHIP funding, we have to figure out a way to cover those children through other means. CHIP is essential to children in our state and it’s our duty to help protect and fight for this vulnerable group in our society.”
Previous CHIP funding extensions were less controversial, but this effort has been delayed by the debates over health care reform. The Hatch Wyden bill maintains the 23 percent point increase in federal matching that was included in the ACA, raising concern about how the House will respond. With all this uncertainty, and 48 of the 50 states having planned their budget with CHIP funding included, states are pushing Congress to reauthorize the program quickly.
"I'm very concerned about the short time remaining for Congress to reauthorize CHIP funding,” Minnesota state Sen. Melissa Wiklund said. “Constituents in my district and across Minnesota rely on continued health care coverage and Minnesota's funds supporting this access will run out at the end of September. These funds are helping more than 125,000 children in Minnesota access doctor visits and get immunizations. The funds also help over 1,700 pregnant women in Minnesota receive vital prenatal care. Children and families depend on this coverage and I strongly encourage Congress to act now."