The Bump in Federal CHIP Funding: A Chance to Invest Freed-Up State Funds in Kids

[Editor’s note: The joy of CHIP funding extension has CCFers breaking into song. We had a difficult time not headlining this post “All About that Bump,” to be sung “It’s all about that bump, ‘bout that bump, more funding” to this popular tune.]

As the ink was drying on H.R. 2 (now Public Law 114-10), the recently-passed Sustainable Growth Rate-Children’s Health Insurance Program (CHIP) package, state advocates for kids were already thinking carefully about what the funding extension of CHIP might mean in their state. High on the list of elements to celebrate was the 23-percentage point increase to the federal CHIP match rate.

Here at CCF, questions are beginning to roll in about how this bump in federal funding for CHIP will actually work and whether it might provide opportunities it for states to make additional investments in children’s health. Below is a short Q & A designed to answer some of these initial questions.

What is the Bump in Federal CHIP Funding?

A key element of H.R. 2 is that it preserves funding for a 23 percentage-point increase to the federal CHIP match. As background, the 23-percentage point increase for CHIP was included in the Affordable Care Act in 2010. However, because CHIP funds were set to expire in September 2015, it was not clear that the funding increase would actually take effect. With the passage of H.R. 2, the federal CHIP funding increase is now set to begin on October 1, 2015 (FFY 2016) and will be in place for FFY 2016 and FFY 2017. After FFY 2017, all funding for CHIP will expire again and will need to be refunded.

How does the Federal CHIP Funding Bump Work?

The funding increase begins on October 1, 2015 (FFY 2016). At that time, the match rate for both Medicaid expansion and/or separate CHIP programs will rise 23 percentage points. This is not a complicated calculation. For example in Illinois, on October 1, 2015 (FFY 2016), the match rate for both the state’s Medicaid expansion and separate CHIP programs will rise from 65.62 to 88.6. But to make it even easier, you can find your state’s federal match rate now and with the federal funding bump here. (And for those of you watching financing closely, never fear: the language includes a rule to ensure that the CHIP allotment formula must take the bump into account before determining FFY2016 allotment)

This boost in federal funds is likely to lead to more than $3 billion in additional federal funds for CHIP in states based on some preliminary estimates we put together last year with our colleagues at the Center on Budget and Policy Priorities (and hope to update soon).

What can these funds be used for?

These additional federal funds can only be used for the CHIP program—that’s, of course, how the match works. Earlier this year, NASHP reported that at least 18 states had counted on this bump in their budget planning—this was the case in Ohio, for example, where advocates note that the federal bump will prevent a cut of nearly $100 million to Medicaid, which would have likely impacted coverage for the lowest-income kids. However, this boost in federal funding also provides an opportunity for states to invest state dollars it would have spent on CHIP in other programs that improve children’s health. This is especially true in state that didn’t bank on the bump in their budgets. Some children’s advocates are already beginning to push for their states to invest in improvements to access to care, outreach and enrollment for hard to reach populations, and other more specific ideas about how states can reinvest these freed-up state funds in children’s health.

Even with CHIP passed and signed by the President, there’s no shortage of work for state advocates to capitalize on this win for children’s coverage. The 23 percentage point bump in federal funding could be a rare opportunity for states to invest freed-up state money in improving children’s health. ♫ It’s all about that bump, ‘bout that bump, more funding! ♫