States Brace for Cutbacks in Kids’ Health Insurance Coverage

Congressional advisers estimate that more than 1 million children could end up uninsured unless funding for the Children’s Health Insurance Program is renewed.

Republican Rep. Regina Cobb (third from left) looks on as Dana Wolf Naimark of the Childrens Action Alliance speaks at a rally in Phoenix on April 11, 2016.
AP Photo/Bob Christie
Aug. 10, 2017, 8 p.m.

The fight to repeal the Affordable Care Act may have strained Congress’s ability to work in a bipartisan manner on most health care legislation, but the two sides will need to come together to renew funding for a program that provides health insurance for children or else risk leaving 1 million kids without coverage.

The Children’s Health Insurance Program, which has had bipartisan support in the past, covers low- and moderate-income children whose families earn too much to qualify for Medicaid. The program’s funding expires Sept. 30, and states are beginning to get nervous about whether there will be continued resources for the program.

“If they fail to authorize [the funding], it’s a seismic event that just hurts children,” said Dan Mendelson, president at Avalere Health. But he added that Congress is likely to renew spending for CHIP because there are no good alternatives. “It’s hard to envision a work-around for most states,” he said.

Two types of CHIP programs face different risks should funding not get renewed: states that have used CHIP funds through Medicaid and those with separate state programs. Most states use a combination of the two.

The Centers for Medicare and Medicaid Services held a call with state officials to discuss contingency planning if Congress deadlocks, according to the National Academy for State Health Policy. NASHP said in its State Health Policy Blog that there were three main choices: phase out separate CHIP coverage and switch the children to Medicaid or exchange coverage, move children under a separate CHIP program to a Medicaid-expansion CHIP program, or establish a combination of these approaches based on income level.

But experts note that the federal matching rate for Medicaid funding is lower than CHIP and enrolling kids in the marketplace could cost families more or put them at risk of losing coverage.

“There are going to be some children currently covered by CHIP who would be at risk of being uninsured without some extension of CHIP funding,” said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities.

For children in CHIP Medicaid-expansion programs, financing will switch to the Medicaid-match rate, causing an increase in the state share of these expenditures. CHIP Medicaid programs would still need to cover those children through September 2019.

“They’re going to have to come up with that money somehow,” said Park, who suggested that other Medicaid services could face cuts to make up the difference.

Separate CHIP programs, on the other hand, can impose waiting lists or enrollment caps to limit expenditures. They would have to screen for Medicaid-eligible children, and then could enroll other children into the exchanges. These states are not obligated to provide coverage if there are no exchange plans available, according to the Congressional Research Service.

But putting children into the marketplaces could come with a cost to families. CMS conducted a study in 2015 that found the average out-of-pocket spending in the market benchmark plan was higher than in CHIP. CMS additionally found CHIP’s benefits to be more comprehensive.

Moreover, the health of the individual market is in question as insurers are still waiting for a clear signal from the Trump administration, or Congress, on whether they will continue receiving payments to offset costs of covering low-income enrollees’ out-of-pocket expenses.

The Medicaid and CHIP Payment and Access Commission has also said many children under separate CHIP programs will lose their health coverage if new funding isn’t provided. Prior MACPAC analysis has projected that 3.7 million children would lose access to separate CHIP coverage, with 1.1 million of those children becoming uninsured while the others would gain coverage from other payers.

While Congress may end up extending the funding, the National Academy for State Health Policy said that states with separate CHIP programs should prepare to potentially close them. And even if it is extended, it’s uncertain whether the matching levels, which were enhanced under the Affordable Care Act, would remain. President Trump proposed in his budget to slash funding for the program and cap eligibility.

“States do not know if and when Congress will continue funding CHIP, and even if federal funds are extended, will the extension include the 23% funding increase upon which states have come to rely?” the group said. “Given the uncertainty, many states have begun internal planning, which includes coordinating with Health Insurance Exchanges and programming for eligibility systems changes.”

Most states are expected to use up the rest of their money by March, according to the Medicaid and CHIP Payment and Access Commission. The commission has recommended extending the federal CHIP funding for five years.

But Mendelson guesses that lawmakers will pass a shorter-term clean bill. “In kind of a higher likelihood scenario, there’s a clean one-year extension, then the debate spills out into the following year,” said Mendelson.

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