CHIP’s future funding remains uncertain after 2015

November 1, 2013

If federal funding expires, states may opt to reduce eligibility or eliminate programs in 2020.

What will happen in the next few years with the Child Health Insurance Program (CHIP)? Authorization for its funding is due to run out in 2015, although some states might have leftover funds for a while.

A recent report from the Robert Wood Johnson Foundation says that a number of policies under the Affordable Care Act (ACA) should reduce the number of uninsured children, but the lack of CHIP funding authority for future years “raises the possibility that coverage gains that children have experienced will erode.”

Whether Congress would renew CHIP funding for future years is unknown. CHIP is the joint federal-state program that covers children in some families who have incomes too high for regular Medicaid. It covers about 8 million children in families with incomes from 100% to 400% of the federal poverty threshold, according to rules that vary by state. (The current federal poverty threshold is $23,550 for a family of 4.)

Unlike Medicaid, CHIP has a national cap on spending. The federal matching level varies by state, averaging 70%.

One factor in the uncertainty is that states do CHIP coverage differently. In 8 states it is simply an expansion of Medicaid coverage; in 15 states there is a separate CHIP program; and 28 states have a combination of both Medicaid-expansion and separate CHIP programs, according to the Medicaid and CHIP Payment and Access Commission (MACPAC).

Chris Peterson, MPP, a MACPAC staff expert, said at a recent commission meeting that if CHIP is not funded in upcoming years, it appears that children in the Medicaid expansion programs would stay in regular Medicaid and those in the separate CHIP programs would go into the health exchanges, “but there are some questions about how that would work and what those plans would have to do.”

In addition, under the ACA’s Maintenance of Effort provisions, states are not allowed to reduce eligibility and enrollment policies for children under Medicaid and CHIP before fiscal year 2019.

Sara Rosenbaum, a MACPAC member and professor of health policy at George Washington University, said CHIP provides a sort of template for pediatric insurance, although it differs in some important ways from coverage in the exchanges. Scope of benefits is different, she said, but CHIP’s cost sharing “is probably more generous than the exchange coverage.”

The hardest question, she said, is whether there still is “a reason to have an independent basis of financing pediatric care apart from Medicaid, apart from premium subsidies,” particularly because the premium subsidy system under health care reform will theoretically offer purchase of a child-only plan.

Sharon Carte, MHS, another MACPAC member and director of the West Virginia CHIP, said there has always been some “churning” or movement of children between CHIP and Medicaid, which can be administratively burdensome. Now with the health exchanges, she said, “There will be 3 buckets of churning. That’s a major concern.”

Whatever happens to CHIP after 2015, the Congressional Budget Office predicts that the fiscal year 2014 federal spending on the program will actually be 50% higher than in FY 2013. That’s because many parents who begin to seek coverage under the health exchanges will discover that their children are eligible for CHIP, said Peterson. However, because 33 states charge premiums for CHIP, some parents may face premiums from both CHIP and the exchanges, she noted.

Recent years have seen huge progress in reducing the number of uninsured children in the United States. Of all uninsured children, three-quarters will be eligible for some kind of subsidized coverage in 2014, Peterson said at the recent MACPAC meeting. About 48% will be eligible for Medicaid, 20% will be eligible for CHIP, and 7.5% will be eligible for the premium tax credit.

MS FOXHALL is a freelance health writer in the Washington, DC area. She has nothing to disclose in regard to affiliations with or financial interests in any organizations that may have an interest in any part of this article.