House HEROES Act Would Also Further Raise CHIP Matching Rate

The temporary 6.2 percentage point increase in the federal Medicaid matching rate enacted as part of the Families First COVID-19 legislation (P.L. 116-127) benefited the Children’s Health Insurance Program (CHIP) as well.  Because the formula used to calculate each state’s CHIP matching rate is based on the regular FMAP, the Families First FMAP increase resulted in an increase of 4.34 percentage points for each state and territory’s CHIP matching rate starting January 1, 2020 and extending through the duration of the public health emergency.

The new COVID-19 response bill (the HEROES Act, H.R. 6800), which the House will likely consider on Friday, May 15, would further increase the FMAP to provide critically needed, additional federal support for state Medicaid programs.  It would provide a total FMAP increase of 14 percentage points, including the Families First 6.2 percentage point increase, for the period July 1, 2020 through June 30, 2021 (the last quarter of fiscal year 2020 and first 3 quarters of fiscal year 2021).

Like with the Families First increase, the HEROES Act FMAP increase would have the effect of raising the CHIP matching rate by a total of 9.8 percentage points.  In other words, it would further increase the CHIP matching rate by 5.46 percentage points for one year, on top of the Families First 4.34 percentage point increase.  Based on the most recent Congressional Budget Office baseline and assuming the public health emergency ends on or before June 30 of next year, the combined impact of the Families First Act and HEROES Act (if it was enacted) would roughly provide an additional $2.4 billion in federal support for state CHIP programs.

However, there are several important caveats to this estimate.  First, it assumes states have sufficient CHIP allotments to accommodate the increased CHIP matching rate in both fiscal year 2020 and 2021.  To ensure that states obtain the full benefit of the combined CHIP matching rate increases, the allotments for both years would also need to be adjusted accordingly.  Second, the estimate assumes that states receive the entire CHIP matching rate increase under the House bill.  Under current law, there would be a CHIP matching rate limit of 85 percent that would be in effect in fiscal year 2021.  Without an exception, that would limit the size of the fiscal year 2021 matching rate increases in about one-third of states as well as in the territories.  Third, it likely dramatically understates the benefits of the matching rate increase.  It does not account for higher spending resulting from sharply increased CHIP enrollment due to the economic crisis as well as any greater CHIP spending per beneficiary due to the costs of COVID-19 screening and treatment.  The CBO baseline has not yet been updated to account for COVID-19’s impact on CHIP spending and enrollment.  Finally, it assumes that a previously scheduled reduction in the CHIP matching rate in fiscal year 2021 takes effect.  As I have previously written, a 11.5 percentage point decrease in the CHIP matching rate for fiscal year 2021 should also be delayed until the end of the health and economic crisis.  Such a delay would increase the amount of additional federal support for CHIP provided under both the Families First Act and the HEROES Act.

Edwin Park
Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy.