CHIP is a block grant program in which the federal government makes a capped amount of new funding available for each fiscal year. This capped funding is divided annually among the states into state-specific allotments, determined by a formula set out in the law.

CHIP funds generally must be used to provide coverage to uninsured, low-income children who do not qualify for regular Medicaid. States also can use a limited amount of funds for administrative costs and other non-coverage initiatives, such as outreach.

The federal government pays for 65% to 83% of each state’s CHIP initiatives (depending on the state). The match rate is based on the regular Medicaid match rate, but is significantly higher. See federal matching rates.

Unlike Medicaid the amount that a state can draw down for CHIP is capped. States facing funding shortfalls can obtain additional funding through a child enrollment contingency fund and allotment increases are available for states with approved plans to expand eligibility or benefits.

See the Federal and State Financing page for more information.