Continued Congressional Inaction on CHIP Underscores Need for Change in Priorities

Last week, as has been widely reported, President Trump issued an Executive Order allowing short-term insurance plans to be offered for up to an entire year and the sale of association health plans. As my colleague, Sabrina Corlette, wrote in US News & World Report, “The executive order sets the stage for new health plans that do not have to comply with Obamacare’s insurance rules, including requirements that plans cover a basic set of minimum benefits like maternity care, prescription drugs and mental health treatment, and refrain from setting premiums based on a person’s age, gender or health status.”

During the same week, President Trump also eliminated the cost-sharing reduction subsidies (aka CSRs) to persons purchasing coverage on the marketplace below 250% of the poverty line. These two actions are very destructive changes which are expected to undermine the marketplace and consumer protections – Sara Collins of the Commonwealth Fund describes the two actions as a One-Two punch with the potential for a knockout of the marketplace by 2019.

What is less widely known is that the elimination of CSRs is actually estimated by the Congressional Budget Office (CBO) to cost a significant amount of federal dollars! CBO estimates that federal deficits would increase by $6 billion in 2018 $21 billion in 2020, and $26 billion in 2026. This is because it is expected that insurers will react to the change by charging higher premiums and this will lead to greater subsidies. Indeed as the New York Times’ Margot Sanger-Katz explains, 40 states have already done so in pricing their 2018 products. Because most consumers who purchase coverage through the Marketplace pay a fixed amount of their income in premiums, the federal tax credit will rise to accommodate higher costs. President Trump can’t change the premium tax credits by fiat so these costs will accrue to the federal government.

At the same time, the extension of funding for the Children’s Health Insurance Program (CHIP) continues to languish in Congress. As of this writing it is 20 days since funding expired. CMS made some small emergency infusions to 5 states that have already experienced funding shortfalls. Leftover funding will soon run short, though, and states are already experiencing challenges running their programs with this high degree of uncertainty. We’re working on a report right now to explain in more detail the consequences of Congressional inaction on CHIP.

Despite the reality that berating Congress is one of President Trump’s favorite activities, we have heard nothing from him on the importance of extending CHIP which finances health coverage for nine million children. CHIP coverage ensures greater access to needed health services, better educational outcomes, and provides financial protection for these families in the event of illnesses and injuries that are big or small.

The lack of Congressional action on CHIP funding is especially frustrating because both parties in the House and the Senate have agreement on CHIP policy! That is no small feat in the land of health policy. Is there anything else of consequence that the House and Senate agree on never mind the two parties in both bodies?

But no bipartisan agreement has been reached about how to pay for CHIP’s extension. Extending CHIP costs $8.2 billion over ten years according to CBO – this sounds like a lot of money but this is small change for the federal government (less than one half of one percent of federal mandatory outlays). It pales in comparison to the cost of taking away people’s cost-sharing subsidies! This is not a heavy lift to pay for.

My dad used to sometimes say “Don’t snatch defeat from the jaws of victory.” Congress could get CHIP done very quickly and provide peace of mind to nine million children and their families who rely on CHIP for their health coverage. The President could show his concern for working families that he claims to represent. My fingers are crossed.

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