Increasing Urgency for States on Congressional Action for CHIP

We are five weeks away from September 30th, the date current federal funding for the Children’s Health Insurance Program (CHIP) is set to end. Although states can use some of the unspent federal funds that were previously allocated to them, it is projected that those funds will be exhausted during the next fiscal year, beginning as soon as December 2017 for several states. As a result, there is mounting pressure on states to make decisions and take action regarding the operation of their CHIP programs.

Nearly all states have already finalized their FY2018 budgets, and the majority of them have assumed that funding for CHIP will be extended and will include the 23 percentage point federal match increase that is in current federal law. If federal CHIP funding is not extended soon states will need to set up processes for shutting down their separate CHIP programs. If funding is extended without the 23 percent bump, CHIP/Medicaid agencies along with state budget officers will need to assess the magnitude of their state’s funding shortfalls and determine the cost of maintaining coverage for children. For many states, involving the Governor or even convening a special legislative session may be necessary to move forward to establish policy and system changes or to allocate new funding to address the loss of the 23% bump, which would be costly.

Additionally, a growing number of state CHIP officials have reported to NASHP that they are further analyzing their state’s remaining federal CHIP funds. They are starting with the Medicaid and CHIP Payment and Access Commission’s (MACPAC’s) projections of when states will exhaust their federal CHIP funding, which assume all funds will be spent on covering services for enrollees. However, if Congress doesn’t extend federal funding soon, states will need to initiate contingency plans and there are costs associated with making programmatic changes. States assumed federal funding would continue for CHIP, so there are no funds allocated in state budgets to shut down their CHIP programs. As a result, states will need to use their remaining federal CHIP funds to help absorb those costs. It is hard to calculate exactly what those costs will be, but states will need to:

  • Invest staff time and financial resources to develop communication plans, including notices to the public about program changes;
  • Train call center staff to communicate with families;
  • Review and in some cases terminate or change contracts with third party administrators or health plans;
  • Make enrollment and eligibility systems changes, which are very costly;
  • Develop a transition process, which may include starting with an enrollment freeze or disenrollment and transferring accounts to the Exchange;
  • Submit waivers or state plan amendments to CMS; and
  • Review and change state law and regulations.

States will also need to reserve a portion of their current CHIP funding to cover claims from fee-for-service medical providers as they have months (in some states up to a year) to file their claims after service is rendered. The amount of funds a state will need to withhold for future claims varies depending upon their service delivery structure, but it is a factor many states will need to consider.

Most importantly, the projections are made using data from previous months’ expenditures, which is the best information states have. But they are just projections. There are factors that could result in states spending more for their CHIP programs in the coming months that are not captured in the current projections. Such factors include increased enrollment as a result of stakeholders’ ‘back to school’ outreach and enrollment campaigns or unanticipated high costs or increased utilization of medical services.

And finally, there is language in some state statutes that requires federal participation to continue operating some portions or all of their state CHIP programs. So, in addition to weighing fiscal concerns, state officials are actively reviewing their own statutes to decide how soon they may have to initiate changes to CHIP. For instance, Colorado has already provided information to the public on their website about the current status of federal CHIP funding and explains that the enrollment in the state’s CHIP program may be affected if federal funding is not extended.

Many state officials have shared that to thoughtfully close their CHIP programs, they would have already begun to make changes and initiated transitioning children to other potential sources of coverage. However, even with the continued uncertainty about future federal funding for CHIP, state officials remain hopeful that Congress will act soon to extend the program. States do not want to unnecessarily disrupt children’s coverage and are doing everything they can to protect their continuity of care.

While anxiety levels differ across states because they have different rules about noticing and are projected to exhaust funds at different times, over half of the states are likely to run out of federal funds within the second quarter of FY2018. Officials from several of these states have said they can hold off on making any changes until perhaps October, in the hopes that Congress is able to pass a 5-year funding extension that will offer them some predictability to continue to successfully operate their programs.