Clearing Up Confusion about the Impact of the CHIP Funding Rescission in Labor-HHS-Education Appropriations Conference Agreement

In June, the Senate rejected a Trump Administration proposal to rescind federal funding for a variety of programs including the Children’s Health Insurance Program (CHIP).  At the time, we had raised significant concerns because the Administration’s rescission package would have eliminated $2 billion from CHIP’s Child Enrollment Contingency Fund.  

Those $2 billion in funds were available to states for the current fiscal year 2018 if they exhausted their CHIP funding due to higher enrollment resulting from unforeseen events such as a recession or public health emergency.  The Administration’s rescission proposal would thus have placed children and families at risk of not having access to needed CHIP coverage if states unexpectedly needed to draw down additional funds from the Contingency Fund to sustain their CHIP programs.  (While the Congressional Budget Office found that the Administration’s Contingency Fund rescission proposal would have had no effect on CHIP spending, that was because CBO expected that states would have sufficient federal funding to sustain their existing programs through the rest of 2018.  But in its estimates, CBO didn’t — and couldn’t — assume recessions or natural disasters will occur.  As a result, while CBO projected that the Contingency Fund dollars being rescinded wouldn’t be needed by any states in 2018, it was still critical to have sufficient funding remain available to respond if enrollment spikes.)

Yesterday, the Senate passed a conference agreement for Defense and Labor-Health and Human Services-Education appropriations for the upcoming fiscal year 2019.  For 2019, section 528 of the conference agreement rescinds $5.65 billion from the Contingency Fund, an amount that is considerably larger than under the Trump Administration proposal.  But this provision does not raise the same concerns.  Unlike the Administration’s proposal to rescind funds made available for the current fiscal year, the conference agreement only affects funds from past years (“amounts that were deposited in the Child Enrollment Contingency Fund prior to fiscal year 2019”) that can never be accessed or spent by states even if they otherwise qualify for additional CHIP funding from the Contingency Fund.  In other words, the conference report rescission would have no effect on state CHIP programs even in the highly unlikely event that some states exhaust their CHIP funding due to higher enrollment resulting from a recession or other emergency.

That being said, we remain concerned that the Administration may again pursue an effort to rescind some fiscal year 2019 funding for the Contingency Fund that states could possibly access and spend in 2019 if they need it.  Such funding, however, should remain fully available to ensure states have sufficient funding for their CHIP programs in 2019 and can maintain health coverage for millions of low- and moderate-income children who rely on CHIP today.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.