CHIP Financing Basics #2 – Where the CHIP(s) Fall on State Program Design

We at CCF are thinking a lot about the future of CHIP, as Say Ahhh! readers know well. Without legislative action, CHIP funding will expire in September 2015 and, in effect, end the program. So the natural question is: What will happen if CHIP funds are not renewed? The answer (which should surprise few in health policy): It’s complicated. Our new blog series on CHIP financing highlights the many reasons why this is the case.  Today, I take a look at state program design.

How states made decisions with respect to (or in some cases prior to) the creation of CHIP in 1997 makes a world of difference as to what will happen if funding runs out. State program choices are generally categorized in three ways (with some variation in definition depending on the purpose of the categorization), based on the breakdown from our recent report with NASHP:

–       Separate CHIP programs (S-CHIP) (18 states): The state opted to create a new coverage program on top of Medicaid. In some cases, these separate CHIP programs are administered by an agency other than the one that administers Medicaid. For example, in Pennsylvania the Insurance Department administers CHIP, while its Department of Public Welfare administers Medicaid.

–       CHIP-financed “Medicaid expansions” (NOT to be confused with ACA Medicaid expansions for adults, so let’s just call them ‘M-CHIP’) (12 states):  States have the option to simply extend income eligibility in Medicaid for children and use CHIP funds—including the enhanced CHIP match – to pay for the kids at the higher income levels. Maryland, for example, uses CHIP funds to extend Medicaid to children up to 300% of the federal poverty level (FPL).

–       S-CHIP and M-CHIP combination (20 states): The state adopts multiple approaches for different population sub-groups. These states have some combination of M-CHIP and S-CHIP, based on income levels or specific groups (e.g. infants). For example, in Washington, children with incomes up to 200% FPL are M-CHIP, while children between 200% and 300% FPL are in S-CHIP.

Why does this matter for financing? If CHIP funding is not extended, state program design impacts what happens to the kids CHIP covers. In separate CHIP programs, children may lose access to affordable coverage altogether or transition to the health insurance marketplace plans. In M-CHIP programs, the kids will stay covered in Medicaid, but the state will receive decreased federal funding to cover them.  Specifically, we and others, including MACPAC, have interpreted the ACA maintenance-of-effort (MOE) language to mean that if CHIP funding is not renewed, separate CHIP programs would not be subject to the MOE, whereas M-CHIP programs would need to maintain current eligibility levels until 2019. If that holds true and CHIP funding is not renewed, M-CHIP states would lose federal matching funds but still be required to maintain coverage levels. For example, Ohio uses CHIP funds exclusively to pay for children up to 200% FPL to be covered by Medicaid —a “pure” M-CHIP state. If CHIP funding expires, the MOE would prevent the state from reducing income eligibility; instead, CHIP-financed children would revert from the CHIP matching rate (74% today) to the traditional Medicaid FMAP (63%). (For your state’s FMAPs, see here for Medicaid and here for enhanced CHIP.) So, while M-CHIP programs would not see children losing coverage per se, they would experience a big funding cut.

What will this mean for funding cuts or kids losing coverage from state to state?? Stay tuned for more….

(Want to know more? Read our earlier reports on ACA Medicaid/CHIP financing changes,  CHIP’s financing structure and CHIP Financing Basics #1)