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House Bill Slashes CHIP Funding, Shifting Costs to States and Children

Legislation that the House Energy and Commerce Committee approved this week would sharply cut funding for the Children’s Health Insurance Program (CHIP) starting in just two weeks, shifting costs to states and likely forcing them to cut children’s health coverage significantly. It would also undercut efforts to extend health reform’s Medicaid expansion to the 19 states that haven’t yet adopted it and the nearly 3 million poor Americans who remain uninsured as a result.

The 2010 health reform law boosted the federal CHIP matching rate for each state by 23 percentage points for four years starting in fiscal year 2016. This means the federal government now picks up 93 percent of the cost of state CHIP programs, on average.

With overwhelming bipartisan support, Congress voted last year to extend overall federal CHIP funding for states through 2017; the legislation reaffirmed the matching rate increase by letting it take effect as scheduled.  The Energy and Commerce bill would overturn this bipartisan agreement and eliminate the increase as of March 31. That would:

  • Shift costs to states. States would have to pay a greater share of CHIP costs through 2019 than if the match increase remains in place. Their added costs would total more than $3 billion a year, assuming Congress, as expected, extends federal CHIP funding past 2017.

    States have used the federal funding boost to expand and improve children’s health coverage as well as to sustain their overall Medicaid and CHIP programs. Florida and Utah, for example, expanded coverage to legal immigrant children. Also, Arizona — the only state that doesn’t cover children through CHIP — is considering reestablishing its CHIP program due to the matching rate increase. The House bill would likely force these states to curtail or drop these improvements.  And all states would likely have to make other sizable Medicaid and CHIP cuts to offset the loss of federal funding. 

    This would be particularly disruptive as states are already three-quarters of the way through their fiscal years (which run from July 1 to June 30 in most states) under budgets that assume the 23 percentage-point match increase, and states have completed or are finalizing their 2017 budgets.

  • Deter states from adopting the Medicaid expansion. Some expansion opponents argue that the federal government will renege on its commitment to pick up nearly all the costs of the Medicaid expansion. To date, they’ve had no evidence to support this claim, and the Administration has made clear for years that it opposes any Medicaid or CHIP provision shifting costs to states.  But if the House measure became law, opponents could point to the eliminated CHIP match increase to significantly bolster opposition to expanding Medicaid, as over half of children with CHIP-funded coverage receive it through Medicaid.