Senate Committee Considers CHIP Reauthorization

Ken Terry

September 07, 2017

While the US Senate Committee on Health, Education, Labor and Pensions (HELP) heard testimony today from a bipartisan group of governors about how to bolster the Obamacare insurance exchanges, another bipartisan effort was under way in the US Senate Committee on Finance, which heard witnesses testify about what they saw as the urgent need to renew funding for the State Children's Health Insurance Program (CHIP). Federal funding of CHIP is set to expire September 30, the end of the government's 2017 fiscal year.

The bipartisan note was initially struck in the written statement of Finance Committee Chair Orrin Hatch (R-UT), who was absent from the hearing, apparently because he was attending the HELP Committee event. Hatch noted that, 20 years ago, he and the late Senator Edward Kennedy (D-MA) collaborated in crafting the CHIP bill, which became law in 1997. Today, CHIP enjoys broad support from the public and is considered a successful program, he said.

Senator Ron Wyden (D-OR), the ranking member of the Finance Committee, who chaired the meeting, also said he was optimistic that bipartisanship would prevail on CHIP, and he similarly alluded to the Hatch-Kennedy partnership. However, Wyden and Hatch expressed different views on how to keep the program funded.

Hatch noted that Congress could either reauthorize CHIP, which he said would require extensive debate and possibly policy changes, or it could extend CHIP short term because there isn't enough time for a policy debate before CHIP funding expires. Wyden, in contrast, said he wanted the committee to create "a strong, bipartisan agreement that upholds CHIP's promise to families and gives them security for years to come." A short-term extension, he said, would just mean kicking the can down the road, and putting off a decision until December would lead to some states running out of CHIP money.

The Medicaid and CHIP Payment and Access Commission (MACPAC), which advises Congress on Medicaid and CHIP issues, favors a 5-year reauthorization of CHIP to take the uncertainty out of the program for the states during this "transitional period" of healthcare reform, said Anne Schwartz, PhD, the commission's executive director, at the hearing.

Schwartz urged Congress to act quickly. Without renewed federal funding, she said, three states and the District of Columbia are expected to exhaust their federal CHIP money in the first quarter of 2018; another 27 states will run out of money in the second quarter.

Besides calling for the 5-year CHIP reauthorization, MACPAC in January recommended that Congress extend the increase in federal matching rates for CHIP through 2022. The Affordable Care Act (ACA) raised those rates by 23 percentage points through 2019, so this would be a 3-year extension. Currently, 11 states and the District of Columbia have federal matching rates of 100%, and 22 other states have rates of 90% to 99%. These higher rates have persuaded some states to expand children's health coverage, Schwartz said.

Currently, nine states, the District of Columbia, and five US territories run CHIP entirely as a Medicaid expansion. Two states operate CHIP solely as a separate program, and 39 states have combination programs, with some children in CHIP-funded Medicaid and others covered by a separate program. The reasons for this dichotomy are complex, but boil down to the fact that covering all statutory Medicaid benefits costs more than paying for a different benefits package that meets CHIP requirements.

States also have varying eligibility levels for CHIP, although most children insured through the program are in families with incomes between 100% and 200% of the federal poverty level (FPL). The ACA requires states to maintain the CHIP eligibility levels in effect in 2010 through 2019, and MACPAC wants to extend that through 2022, Schwartz said.

Effects of Delay

If CHIP funds run out, Schwartz warned, states with Medicaid-expansion CHIP would have to continue coverage of children in the program, but would receive a lower federal matching rate than they do now. Of the 8.4 million children enrolled in CHIP-funded coverage in 2015, she said, 4.7 million were in Medicaid-expansion CHIP programs.

States with separate CHIP programs can terminate coverage of CHIP recipients if federal funds run out, but are supposed to transition children to plans in the state insurance exchanges. MACPAC projects that in the absence of CHIP, 1.2 million separate-CHIP enrollees would become uninsured because other sources of coverage would be unaffordable to their families. Of the other children, 1.1 million would be enrolled in employer-sponsored plans, and nearly 700,000 would join insurance exchange plans.

Linda Nablo, chief deputy director for the Virginia Department of Medical Assistance Services, which administers CHIP in her state, said that Virginia has a combination program. In total, 123,256 Virginia children with family incomes up to 200% of the FPL receive healthcare via CHIP. Over 58,000 children are enrolled in Medicaid, and 65,000 are in a separate program modeled after the state-employee health plan.

"[CHIP] is now a mature program that is woven deep into the fabric of health care coverage in all states and is a key program protecting the health of children for all of us," Nablo said. She added that, in Virginia, the state recently added coverage of substance abuse for children and pregnant women to its CHIP program.

If CHIP funding is not renewed, she said, families of over 60,000 children in Virginia will be affected. While the money won't be all gone until March, she noted, the state will no longer be able to pay the managed care plans that provide CHIP coverage after January, and the state will have to notify the families and their health providers by the end of November. She supported MACPAC's call for a 5-year extension of CHIP, noting that 1- or 2-year reauthorizations breed instability.

Also testifying was Leanna George, mother of a child covered by CHIP in North Carolina. She said her son Caleb, who is autistic, was continuously covered even when his father switched jobs with a period of unemployment in between. Caleb could be covered by his father's company-sponsored plan if CHIP ended, she said, but the deductible is so high that the family could not pay for the child's care.

Committee member Senator Sherrod Brown (D-OH) asked Schwartz why MACPAC believes it is important to extend CHIP funding for more than 2 years. Schwartz responded that the uncertainty surrounding the health insurance market could lead to a loss of coverage for many children. In MACPAC's view, she said, it is essential to protect children's insurance while these issues are sorted out.

In response to a similar question from Brown, Nablo noted that "we've come very close to the wire this time" in terms of renewing CHIP funding. She wondered how much outreach states would do if CHIP might not be here next year, or whether they would invest in NARCAN kits to treat overdosed children. She'd take any extension, she said, "but 5 years or longer would be a very welcome thing for the states."

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