CHIP expired 48 days ago. Is the program in real trouble now?

By Heather Bell, managing editor

Federal funding for Children's Health Insurance Program expired 47 days ago, and lawmakers do not appear to be any closer to reaching a deal on a renewal. Funding gaps for CHIP are rare, and a lapse of this length is unprecedented: The only other CHIP funding gap occurred in 2007 and lasted a few weeks.

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"We've never seen sort of a lack of action on CHIP for this long in terms of no new funding," Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities, told the Daily Briefing.

So why is this time different? There are some key differences between the 2007 funding gap and the current lapse that may offer insight into why lawmakers are struggling to reach a deal.

The 2007 CHIP debate

One significant difference is that, last time around, members of Congress were able to reach a deal before the time funding lapsed, but they were not able to get former President George W. Bush's approval. This time, however, lawmakers have yet to reach an agreement on renewal legislation—let alone send it to President Trump's desk.

Here's how it went down back then: Federal funding for CHIP, which at the time was called SCHIP, expired briefly in November 2007 after Bush vetoed two bipartisan bills that would have increased funding and enrollment eligibility thresholds. Though the bills had strong bipartisan support, they both fell short of the votes needed to override a presidential veto.

Lawmakers engaged in some policy disputes over coverage for legal immigrant children and pregnant women, but experts say the key holdup in 2007 was the income eligibility threshold for CHIP.

"There was controversy over how far up the income scale states should have the flexibility to go in covering children," Jocelyn Guyer, a health policy expert at Manatt, told the Daily Briefing.

According to a New York Times article published at the time, Bush said the bills would have undermined the program by encouraging middle-income families to enroll their children in a program that was meant to serve low-income families. The administration around that time had issued guidance to essentially limit enrollment eligibility to 250% of the federal poverty level.

The Huffington Post's Bruce Lesley in 2015 reported that in December 2007, "[j]ust as states were sending out disenrollment notices to families," lawmakers in Congress rallied and passed another bill—the Medicare, Medicaid and SCHIP Extension Act of 2007—that extended the program at existing funding and enrollment levels through April 2009. Bush signed the bill into law Dec. 29, 2007.

The 2017 CHIP debate

Even though House and Senate lawmakers remain divided on CHIP renewal this year, Guyer says there's actually strong agreement on the substance of the bill.

Both the House and Senate bills (HR 3922; SB 1827) are aligned on core policy issues. For instance, both bills provide similar funding levels: $120 billion over five years in the House, versus $100 billion over five years in the Senate. And both bills after two years would gradually phase out the Affordable Care Act's (ACA) 23 percentage point funding bump for CHIP.

"The big divide," according to Park, relates to the funding offsets to help pay for the reauthorization. The House-passed bill includes offsets that Democrats strongly oppose, such as increasing Medicare premiums for beneficiaries with annual incomes over $500,000 and changing Medicaid. Negotiations over funding offsets are ongoing in the Senate, and as a result no pay-fors have been included in the Senate bill.

Unlike 2007, where Bush played a key role in funding lapse, Guyer said this time "it doesn't feel like it's presidential politics, or anything coming from the administration," as President Trump has said relatively little on CHIP.

That said, the current political climate is likely playing a role.

Park noted that the Senate Finance Committee was on track to mark up its bill in early September but was sidetracked by the swift rise and fall of the Cassidy-Graham bill. "That really derailed the progress, the moment toward getting it done and getting it to the Sept. 30 deadline," Park said. Both the House and Senate committees ended up passing their bills in early October.

Coming down to the wire

Experts agree that Congress has pushed the reauthorization very close to the wire; if it doesn't act soon, states will have to begin sending coverage-termination notices to families.

Robin Rudowitz, a Medicaid expert at Kaiser Family Foundation, said states typically assume Congress will act on CHIP, and this year many "states had budgeted for not only the reauthorization but the continuation of the enhanced match rate from the ACA ... so failure to act by Congress will result in budget shortfalls for the large majority of states, once the current funding is exhausted."

According to Park, "For most states, it's November and December [when] at the very least, states with separate state CHIP programs—so separate programs, not CHIP-funded Medicaid expansions—are going to have to send out notices to families that they are likely going to be closing their programs, terminating coverage, things like that."

Another complication for states, according to Park, lies in the way CMS is providing additional redistribution funding—a pool of unspent funds across all states from prior years that CMS can dole out to those facing budget shortfalls. In the past, Park said CMS provided states in need a single lump sum, but this year they are providing the funding on a month-to-month basis. The agency also has not shared publicly how much funding is left.

Park said this approach can make it difficult for states to "know how much they are going to get the next month," which in turn means "they don't know exactly when they will exhaust" their funds. The resulting uncertainty could cause some states to "send out those notices and make efforts to close their programs or make other cuts to their programs earlier than they otherwise would," Park said.

Looking ahead

That said, experts noted the amount of money lawmakers need to offset is relatively modest—about $8.2 billion—and appear hopeful that Congress will reach an agreement in the next few weeks, and will not risk reversing the program's progress in reducing the uninsured rate among children—which CDC data show currently is just over 5%.

As Guyer said, "The program is running smoothly, it's popular, it's well liked on both sides of the aisle, so it's really coming down to paying for it and figuring out the timing."

Health Insurance 101

Confused about the U.S. health insurance system? You're not alone—it's one of the most complicated systems in the world. But our four-part webconference series will help you get up to speed. Join us for the remaining two, or just choose the areas where you need a refresher:

  • Nov. 28: What you need to know about Medicaid managed care
  • Dec. 4: What you need to know about Medicare Advantage
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