At a time when states are facing growing fiscal pressures and increasing strain on health systems, the Children’s Health Insurance Program (CHIP) Health Services Initiatives (HSIs) represent an often overlooked source of federal funding offering flexible financing to support outreach and targeted health initiatives to improve children’s health. This source of federally-matched funding becomes increasingly relevant as states start to experience massive budget strains caused by H.R. 1’s $990 billion cut to Medicaid and CHIP and child enrollment in these programs continues to decline.
Unlike Medicaid, CHIP funding is subject to an annual allotment. States may use up to 10% of their total CHIP expenditures for administrative costs, including outreach, translation and interpretation services, and HSIs, as long as expenditures do not exceed the state’s CHIP allotment. Most state administrative costs are much lower than 10%, giving states flexibility to support HSIs. HSIs do not need to exclusively focus on children enrolled in CHIP. If a state is able to meet its administrative needs with less than 10% of the total spend, states can develop HSIs to meet children’s health needs using the remaining money in that capped amount. Even if that amount seems small at first, it goes a long way because it draws down federal matching funds.
The most common use of HSIs in recent years has been funding poison control centers, but states have used HSIs for a wide range of initiatives. For example, parent education services and supports, school-based health services, behavioral health and substance use disorder services, and lead testing and prevention. NASHP offers another useful overview.
CHIP HSIs can also provide supplemental funding for programs like WIC and evidence-based home visiting models or other existing or new efforts to improve child health. For example, Michigan proposed to use a CHIP HSI to extend the postpartum coverage period from 60 days to 12 months for enrollees in the Maternity Outpatient Medical Services (MOMS) program. MOMS combines CHIP’s From Conception to End of Pregnancy option (FCEP) with Emergency Services Only Medicaid to cover pregnant people (prenatal care, labor and delivery) who would be eligible for Medicaid if not for their immigration status, with the CHIP HSI covering postpartum services. These enrollees would otherwise lose coverage at the end of the pregnancy or at 60 days postpartum, depending on how the state pays for care, because Michigan’s 12 months postpartum extension only applies to enrollees fully covered by Medicaid. A CHIP HSI could fund an additional 10 months of postpartum care, ensuring a full year of coverage after pregnancy regardless of immigration status. As the brief explains, Michigan’s expenditure data has room in its cap to cover the estimated costs of this HSI and three states (CA, IL, and MN) have already led the way.
So how do states identify their 10% administrative cap and determine whether the remaining amount is adequate? In preparing this brief, we examined the CHIP Annual Financial Management Reports (FMR) for FY2024. The FMRs are compiled by the Centers for Medicare & Medicaid Services (CMS) from each state’s quarterly reporting of CHIP expenditures and posted on Medicaid.gov. Using these data, we estimated each state’s 10% administrative cap as a share of total CHIP expenditures and MCHIP net expenditures, the amount already applied toward administrative spending, and the remaining capacity under the cap. We also used states’ enhanced federal matching rates to estimate the federal and state shares associated with that remaining capacity.
There are no posted written CMS instructions specifying exactly how the 10% administrative cap should be calculated when estimating remaining capacity under the cap. The methodology used in this analysis reflects our understanding based on discussions with CMS staff.
States may rollover excess CHIP allotment funds for up to two years. As a result, federal CHIP spending in a given year could exceed the state’s current-year allotment if the state is drawing on carryover funds from prior years. Because publicly available data do not allow us to fully account for carryover funds, this analysis compares current-year allotments to federal spending and may show negative “excess allotment” values in some states. These values should therefore be interpreted cautiously.
If this concept still feels a little in the weeds, here is what we calculated for each state.
Across states, the 10% cap on overall CHIP administrative expenses is generally not fully utilized. Most states are using only a fraction of the allowable amount: 35 states using less than half of their administrative cap and only six states – Alaska, Massachusetts, Minnesota, New Jersey, New York and Vermont – approach or reach the 10% limit. States nearing the cap have less flexibility to implement new HSIs or administrative activities without risking exceeding the limit.
In 2024, 48 states and the District of Columbia have remaining capacity under the 10% cap, meaning they are legally permitted to spend additional funds on HSI activities, outreach, translation and interpretation, or administrative costs.
Let’s explore how remaining capacity under the 10% limit could translate into funding that states could use. It is not enough to look at whether a state is under the 10% limit by itself. States must also have sufficient excess allotment to draw down the associated federal funds. Conceptually, states can fall into several different scenarios depending on how these constraints interact. It is worth repeating for clarity: the 10% limit is relative to program spending, not the state’s allotment.
Scenario 1. The state is under the 10% limit and has sufficient excess allotment.
In this scenario, a state has remaining capacity under the 10% administrative cap and enough excess CHIP allotment to draw down the associated federal funds. In other words, the state has fully usable “wiggle room” to increase spending on HSI, outreach, translation and interpretation, or administration.
We used Georgia as an example for Scenario 1. Georgia’s 10% administrative cap is $60.2 million based on our analysis of total CHIP expenditures in 2024. Of that total amount, $18.9 million was used, which leaves $41.3 million in unspent dollars under the cap. Since CHIP, like Medicaid, is a joint state-federal program, the federal government matches state dollars spent on the program at state-specific rates. This rate, or match, in CHIP is known as the Enhanced Federal Medical Assistance Percentage or eFMAP. The federal share of this remaining capacity is $31.4 million and the state’s share is $9.9 million, based on Georgia’s eFMAP of 76.12%. In other words, the state would need to spend $9.9 million to draw down $31.4 million in federal funds, for a total of $41.3 million in additional expenditures. Because these amounts are only a fraction of the state’s excess allotment of $438.5 million, Georgia’s funding is sufficient to pursue a CHIP HSI.
Scenario 2. The state is under the 10% limit but has insufficient excess allotment.
In this scenario, a state has remaining capacity under the 10% administrative cap but does not have sufficient excess CHIP allotment to draw down the associated federal funds. As a result, the state’s “wiggle room” exists on paper but is constrained in practice.
For example, Ohio’s 10% limit is $87.3 million and the state reported $43.7 million in expenditures applied to the 10% cap, allowing $43.6 million in additional expenditures. The federal share of this capacity is $32.7 million. However, Ohio’s excess allotment of $19.7 million is not sufficient to draw down the full federal share associated with the remaining capacity under the cap. As a result, even though the state technically has room under the 10% limit, it cannot fully use that capacity unless Ohio has carryover funds from prior year allotments or additional federal CHIP funds become available.
Scenario 3. The state is nearing the 10% limit and has sufficient excess allotment.
In this scenario, a state has met or has nearly met the 10% administrative cap and has sufficient excess allotment. This means there is no additional federal funding to match spending on items like additional outreach, HSIs, translation and interpretation, and other administrative expenditures.
For example, New York has a 10% cap of $287 million and is using $286 million. So even though the state’s excess allotment of $272.9 million is a sufficient amount, there is only $1.3 million left available within the administrative spending limit. Therefore, New York has no remaining wiggle room for this category of spending because it has already nearly maximized their 10% ceiling.
While this analysis identifies states with remaining capacity under the 10% cap and available federal funds, states’ decisions about whether to use that capacity are influenced by longer-term funding considerations. CHIP allotments are periodically rebased, and states must balance the risk of leaving federal funds unused with the challenge of committing to programs that may need to be sustained in future years. As a result, the decision to expand HSI depends not only on whether states have “wiggle room” in a given year, but also by the timing and predictability of future funding.