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January 12, 2018

Renewing CHIP for a decade would save the government $6B, CBO finds

Daily Briefing

    A CHIP funding bill (S 1827) would reduce the federal deficit by $6 billion over the next decade if the legislation is authorized for 10 years, while a five-year reauthorization would increase the deficit by $800 million, according to a Congressional Budget Office (CBO) report released Thursday.

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    Federal funding for CHIP—which covered about 9.2 million low-income U.S. children and pregnant women in fiscal year (FY) 2016—expired at the end of FY 2017 after lawmakers could not reach an agreement on how to offset the program's cost.

    HHS allocated emergency funds to several states to prevent disruptions in coverage, and President Trump last month signed a short-term spending bill that included $2.85 billion in CHIP funding for the first two quarters of FY 2018, which will run through March 31. However, CMS officials last week said some states could run out of CHIP funding as soon as this month.

    CBO findings

    The CBO report is based on the Senate's version of the bill, called the Keep Kids' Insurance Dependable and Secure Act of 2017. In its current form, the bill would reauthorize federal funding for CHIP for five years, but Rep. Frank Pallone (D-NJ)—who has supported a longer, permanent CHIP reauthorization—asked CBO to calculate the budgetary implications of a 10-year extension.

    CBO estimated that enacting S 1827 for five years would increase the federal deficit by $800 million between 2018 and 2027. In comparison, a 10-year reauthorization would yield net savings of $6 billion by 2027, CBO said, because the federal costs of providing CHIP coverage over the next decade would be lower than the government would otherwise spend to provide coverage through CHIP alternatives, such as Medicaid, exchange plans, and employer-sponsored coverage.

    CBO said a 10-year CHIP funding extension would increase the federal deficit in 2018, 2019, and 2020, but then reduce the federal deficit in each subsequent year. According to CBO, "the change from annual increases in the deficit to decreases over the 2021-2027 period" would occur largely "because the federal matching rate for CHIP would decline relative to its level in prior years—from an average of 93% in 2019 to 81.5% in 2020 and 70% in 2021 and subsequent years—lowering the federal costs of coverage through CHIP as states become responsible for more of the program's costs."

    Congress' next steps

    In light of the new CBO report, House Energy and Commerce Chair Greg Walden (R-Ore.) said lawmakers are now considering a six-year CHIP reauthorization. "If we go to six years, it may have no cost," Walden said.

    However, Democratic lawmakers still might be reluctant to go along with a shorter reauthorization, given CBO's findings about a 10-year extension. Pallone said, "I want to see those pay-fors gone, and I want to see a permanent reauthorization."

    Walden on Thursday said he aims to bring legislation to reauthorize federal funding for CHIP to the floor next week. It remains unclear, however, whether Congress will seek to move CHIP reauthorization as a standalone measure or attach it to a larger spending bill that Congress must pass and President Trump must sign by Jan. 20 to avoid a government shutdown.

    Funding shortfalls loom

    In related news, 24 states—including Washington, D.C.—could soon see CHIP funding shortfalls if Congress does not reauthorize additional funding for the program this month, according to a new report from the Georgetown University Health Policy Institute's Center for Children and Families

    According to the report, 1.7 million children in 21 of the 24 states could lose coverage by the end of February if the states face funding shortfalls for March.

    The report stated, "While the balance in the redistribution pool may be sufficient to cover February shortfalls enabling all states to cover children through February, it has become increasingly difficult to predict how long funds will last for any particular state" (Mores, Healthcare Finance News, 1/11; CBO report summary, 1/11; CBO report, 1/11; Owens, Axios, 1/11; Minemyer, FierceHealthcare, 1/11; Weixel, The Hill, 1/11; Luthi, Modern Healthcare, 1/11; Raman/McIntire, CQ News [subscription required], 1/11). 

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