Week Three — Where Are We Now with CHIP Funding?

Congress missed the Sept. 30, 2017, deadline to extend federal funding for the Children’s Health Insurance Program (CHIP), so there is currently no new or guaranteed future federal support for the program that covers an estimated 9 million children. There are two proposed bills to reauthorize CHIP – the Senate’s KIDS Act of 2017 and the House of Representative’s Healthy Kids Act – that were approved by their respective committees to advance them in the legislative process for consideration by the full Senate and House.

Meanwhile, the first states to exhaust their annual CHIP allotments are now working with the Centers for Medicare & Medicaid Services (CMS) to secure short-term funding to continue their programs as long as possible.

Financing for CHIP, a block grant-funded program, was most recently appropriated through the Medicare Access and CHIP Reauthorization Act (MACRA) passed in 2015. MACRA included two years (FFY 2016 and 2017) of CHIP funding allocated to states through annual allotments. States spend their allotted CHIP dollars at different rates for many reasons, including geographic differences in health care costs; varied types of service delivery; and what benefits are covered by a state’s CHIP program.

As a result, at the end of this fiscal year, states have varying amounts of unspent CHIP funds remaining. Because there are currently no newly-appropriated federal dollars supporting CHIP, states can use the unspent funds from FFY 2017 to continue to support their CHIP programs.

However, there is a “claw-back” provision in MACRA that requires states to reduce their FFY 2017 carryover or unspent allotment by one-third and return it to the federal treasury. The claw-back provision was designed to reduce MACRA’s overall cost and the amount Congress needed to “off-set” or “pay for” the program in order to pass the bill. Losing a third of the carryover funds is a serious challenge to states because they need this money to continue their CHIP programs in the absence of Congressional action to extend the program.

The Administration predicts a national CHIP shortfall of $13 billion in fiscal year 2018 without a CHIP extension. There is approximately $3 billion in unspent CHIP dollars from FFY 2016 that will be redistributed proportionately across all states as their CHIP carryover funds run out, but it is not clear exactly how much each state will receive. To claim their portion of the redistributed funds, states must contact CMS the month before they exhaust their FFY 2017 carryover money. CMS will then provide states with information and calculations of expected funds, which will be provided through a monthly grant. Federal estimates suggest on average each state will be able to fund one or two more months of CHIP, but this projection doesn’t take into consideration unanticipated costs, such as increased enrollment or high utilization.

Minnesota, which is the first state to exhaust its available 2017 carryover funds, has received a redistribution payment. Additional states have begun conversations with CMS to better understand what they can expect to receive. State officials report frustration at the prospect of receiving their portions of the redistribution funds on a monthly, piecemeal basis rather than a lump sum. It leaves them with limited capacity to plan the final weeks of their programs’ funding. And while the individual calls with CMS provide state-by-state technical assistance, the lack of formal guidance on the payment of redistribution funds lacks transparency and eliminates the capacity to plan with peers for contingencies, such as when or how states should notify families that the program may be ending.

State officials remain optimistic that Congress will take action to re-establish federal CHIP funding, but patience is beginning to wane as their remaining CHIP funds are depleted. The uncertainty around CHIP funding may also influence how families act – will people use more services now because they fear an end to the program? How will new enrollment and renewals be affected? These questions complicate a state’s ability to budget and predict when funds will be exhausted.

Additionally, states have legal obligations to notify families if the program is going to expire. State officials hope Congress will act soon, but in the meantime they must develop contingency plans, knowing that worst-case scenarios that would include dis-enrolling children need to be developed with a careful approach so as not to unnecessarily alarm families. But the clock is ticking, and states need the certainty only Congressional action can provide.