Though the Children’s Health Insurance Program is traditionally supported by both political parties, funding for it expired on Sept. 30 and hasn’t been reauthorized. Many participating states have thus threatened to cut off both the new enrollment and existing health insurance coverage for children in their state if the federal government does not meaningfully provide financial support for this critically important safety net program.
But what exactly is CHIP, and why is its federal funding so important to the health and safety of children throughout the country?
The program was created as a part of the Balanced Budget Act of 1997. It was intended to be a federal/state partnership to support the healthcare needs of children who are in families with incomes that are too high to qualify for Medicaid and too low to be able afford commercial insurance coverage.
At the time of its inception, CHIP was the largest taxpayer-funded health insurance program for children since the Medicaid program was established in 1965. It has a similar formula, whereby the federal government contributes a means-tested amount to each state based upon its per capita income—except that the rate is higher than for the Medicaid program.
Each state is permitted to create its own eligibility criteria and rules for CHIP. However, most states use a maximum income level of approximately $48,240 for a household with one member, $64,960 for a household with two members, $81,680 for a household with three members, etc., which represents approximately 200% of the federal poverty level.
The program also protects low- to moderate-income families from incremental increases in their incomes that would otherwise disqualify them from participation by capping the premium and cost-sharing components to 5% of a family’s total income. This often makes this coverage far more cost-effective than paying for additional coverage through employer-sponsored insurance.
Combined, Medicaid and CHIP cover 39% of the nation’s children, enabling more than 95% of all children in the United States to have insurance—a historic high.
CHIP itself covers 9 million children and provides comprehensive coverage of screening, diagnostic and treatment services. In addition, it covers childhood coverage that most commercial carriers do not, including:
- Speech and language therapies.
- Hearing tests and hearing aids.
- Pediatric dental care.
- Children with special needs such as developmental disorders or delays.
- Children in rural areas, many of which have few accessible healthcare resources available.
Without CHIP, the number of uninsured children would go up significantly, resulting in higher uncompensated care and bad debt for healthcare organizations and practitioners, delay in the diagnosis and treatment of serious and potentially life-threatening conditions, and increased healthcare costs for children with insurance (due to more concentrated risk pools and adverse selection). There will also be little, if any, coverage for children with special needs, and the disproportionately high cost of covering them would be shifted onto other insured children.
Interestingly, 44% of children are enrolled in CHIP programs that are separate from the state’s Medicaid program, so if federal funding runs out, the state may unilaterally and without penalty discontinue its CHIP program. In addition, 56% of children are enrolled in programs that are considered part of their state’s Medicaid expansion program, which may also be vulnerable to closure based upon a state’s financial resources.
In December, Congress passed a spending bill that authorized $2.85 billion to keep CHIP funded temporarily. But the program will require at least another $13 billion in funding to remain at its current level, and states have warned that children will lose health insurance coverage short of full funding.
States that do not terminate coverage will require parents to contribute higher out-of-pocket expenses that they may or may not be able to afford.
While both political parties believe in the value of CHIP, each would like to fund it in significantly different ways. Democrats would like to fund a five-year extension without any partisan funding offsets, while Republicans would like to attach higher premiums to Medicare beneficiaries, cut the Affordable Care Act’s public health fund and shorten the grace period for beneficiaries who fail to pay ACA premiums as a precondition to funding CHIP.
The question is, can the political parties come up with a bipartisan solution that will support a five-year extension of the CHIP program while addressing partisan political concerns?
Jonathan H. Burroughs, M.D., MBA, FACHE, FAAPL, is a certified physician executive and a fellow of the American College of Healthcare Executives and the American Association for Physician Leadership. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.