How Should We Be Thinking About CHIP in the New World Order?

Group of happy smiling kids playing tug-of-war with rope in green park,

Recent press accounts have noted that Republicans are thinking about using the Children’s Health Insurance Program (CHIP) as a bargaining tool to entice Democrats to vote for health legislation that replaces the Affordable Care Act (ACA). CHIP’s funding expires on September 30, 2017, which means that Congress must act soon to ensure that it continues beyond that date.

There are any number of ways CHIP renewal could be approached legislatively – for good or for ill. I don’t intend to speculate in this blog on Congressional motives or methods but rather to examine what would be the best policy approach for children and their families.

In light of Congressional leaders stated intent to repeal the ACA and block grant Medicaid, the path forward for renewal of CHIP funding becomes even more complicated. Repeal of the ACA is already projected to double the number of uninsured children.  As recent research from the Urban Institute underscores, repeal of the ACA will have immediate consequences for children’s coverage with a projected 4.4 million expected to lose coverage by 2019. The impact on parents losing coverage is projected to be even worse with an estimated 113 percent increase in the number of uninsured parents by 2019.

As readers of SayAhhh! know, the U.S. reached a historically high level of coverage of 95% for children in 2015. The fundamental question is whether the uninsured rate will continue going down, as it has done for many years now, or start going back up.

CHIP is only one piece of the puzzle to fully address that question. These coverage gains for children are a result of many years of Medicaid and CHIP working together – with Medicaid providing coverage to a far larger number of kids (37 million v. 8.4 million in CHIP – over half of whom are actually enrolled in Medicaid coverage financed by CHIP)[1]. On top of the progress made for kids over the past couple of decades through Medicaid and CHIP, the ACA solidified and built on these gains with the largest decline in the uninsured rate for kids on record from 2013 to 2015.

So, with this background, what are the key contextual issues to consider as CHIP renewal is contemplated?

The discussion about renewing CHIP should not be viewed as a proxy for how Congress is addressing children’s health. CHIP is an enormously important and successful program for kids.  But it only works so well because it sits on the shoulders of Medicaid. Without a strong Medicaid foundation, the current CHIP structure would collapse, and the U.S. would not have achieved these amazing coverage gains for kids.

In addition to covering many more children, Medicaid covers those with greater health care needs and fewer financial resources. And Medicaid’s financing structure allows for flexibility in times of recession when enrollment goes up or health care costs rise. Even if CHIP is extended in its present form, the progress on children’s coverage could be seriously eroded by other proposals that would alter Medicaid. If Congress follows through on proposals to impose caps or cut Medicaid in any significant way, the nation’s positive trajectory on bringing down the uninsured rate for children will reverse course.

Repealing coverage options for parents in the ACA will result in fewer children being covered as well. As our regular readers know, it is a well-established phenomenon that rolling out new coverage options for parents and other adults has the beneficial effect of lowering the number of uninsured children as well through something which we call the “welcome mat effect”. This is because the majority of uninsured children are eligible for Medicaid or CHIP already but not enrolled and parents learn about their eligibility when they come in to sign up. It is entirely possible that the swift movement by Congress to repeal the ACA is already having a negative effect on the welcome mat or “woodwork” effect. A less robust set of coverage options for parents will certainly result in fewer children receiving coverage as well.

Repealing the ACA heightens the importance of maintaining stability in children’s public coverage options (Medicaid and CHIP).  Repealing the ACA in and of itself will raise the number of uninsured children and parents as described above — which is bad news for families. Given the relative importance of Medicaid and CHIP for kid’s coverage, we must examine the following key questions: How could Congress protect children from the consequences of repealing the ACA? What are the key issues likely to emerge in the CHIP renewal discussion that will make an important difference for children?

Specific issues to consider in CHIP renewal:

  • Keep the “maintenance of effort” (MOE) in place for Medicaid and CHIP. This provision of the Affordable Care Act ensures that states cannot lower their income eligibility levels for Medicaid and CHIP eligibility for children. In a world with functioning marketplaces, some questioned whether CHIP should continue indefinitely. But in a world of ACA repeal, with no marketplace or premium subsidies on offer, it is absolutely essential that the current system of public coverage for children (i.e. Medicaid and CHIP) remain as stable as possible amidst the chaos. Continuing the maintenance of effort provision is the best way to protect children from the turmoil.
  •  Current Medicaid and CHIP financing structures and levels must remain intact. In order for states to be expected to maintain their current levels of coverage (i.e. retaining the MOE), funding must remain steady. This includes no significant cuts or changes to Medicaid as well as maintaining the “CHIP bump”, which increased the federal share of CHIP costs. The need for these two provisions to work together (the MOE and the CHIP bump) was recognized by MACPAC in its recent recommendations to Congress on CHIP renewal. In fact, MACPAC recommends extending CHIP funding for 5 years, along with 3-year extensions of the MOE and the CHIP bump, so that these core provisions for children would all be in place through September 30, 2022.
  • Other provisions that create additional barriers to coverage should be avoided. For example, states can choose to remove the five-year bar for lawfully residing children and cover them in Medicaid and CHIP. In the last year, two more states, Florida and Utah, chose to do so. Today 31 states, including the District of Columbia, cover these children. Let’s hope the anti-immigrant rhetoric doesn’t result in actions that would take flexibility away from state leaders to cover lawfully residing children without a five-year delay.

A review of the Congressional Republican’s CHIP discussion draft from 2015, which I blogged on here, offers hints of other possible policies that would create new barriers to coverage for children. These include mandating longer periods of uninsurance (known as waiting periods) for kids before they can enroll in CHIP and the reversal of the ACA’s alignment of family eligibility for all children under 138% of the poverty line into Medicaid (i.e. the “stairstep” kids) – among other examples of policies that could turn the clock back.

So, as we wait to see where Congressional leaders will go on the question on renewing CHIP, the devil will be in the details. The even more important question about the future success of CHIP is whether or not it will be able to build upon the stable foundation provided by Medicaid.

[1] https://www.macpac.gov/wp-content/uploads/2015/01/EXHIBIT-31.-Child-Enrollment-in-CHIP-and-Medicaid-by-State-FY-2015.pdf

Joan Alker
Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy

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