After allowing funding for the Children’s Health Insurance Program (CHIP) to lapse for an unprecedented 114 days, Congress extended CHIP funding through federal fiscal year (FFY) 2023. On January 22, 2018, the President signed a continuing resolution approved by Congress that would end the 3-day government shutdown and adopt the Helping Ensure Access for Little Ones, Toddlers and Hopeful Youth by Keeping Insurance Delivery Stable Act (HEALTHY KIDS Act).
The delay in long term federal financing for what has been long touted as a popular bipartisan program had put families, state officials, and other stakeholders on edge, in some states more than others. What happened and what’s next for CHIP?
What Is CHIP?
The Children’s Health Insurance Program (CHIP) was enacted in 1997 to encourage states to expand access to affordable health coverage following a period when employer-sponsored insurance for children was on the decline and uninsured rates among children were on the rise. As an incentive, the federal government picks up a larger share of costs,historically ranging from 65 percent to 81 percent compared to 50 percent to 73 percent in Medicaid.
States also have more flexibility in designing their programs. Specifically, states may use CHIP funds to expand Medicaid for children (also known as M-CHIP), establish separate CHIP programs, or a combination of the two approaches. M-CHIP programs must follow the same rules as Medicaid with one exception—children must be uninsured. But separate CHIP programs have more flexibility in terms of benefits offered and cost-sharing required of families.

How Does CHIP Funding Work?
CHIP is a block grant program, meaning a fixed amount is appropriated for a set period of time and allocated to states in a specific manner. Congress must act periodically to extend funding for the program, which serves nearly nine million children and pregnant women annually. Each state receives an allotment based on projected expenditures. States generally have two years to spend their allotment and then unspent funds go into a redistribution pool, which is reserved to cover shortfalls states may experience.
So What’s In The Latest CHIP Funding Measure?
Funding for CHIP has been extended retroactively to October 1, 2017 through September 30, 2023. The HEALTHY KIDS Act provides annual allotments that increase from $21.5 billion in FFY 2018 to $25.9 billion in FFY 2023. Based on current spending levels and future projections, the funding is expected to be sufficient to cover the costs in all states. The act also extends the child enrollment contingency fund and addresses several key policy issues and related funding:
- The MOE provision is extended through FFY 2023 but states may roll back eligibility to 300 percent of the federal poverty level (FPL) beginning in FFY 2020. Fourteen states including the District of Columbia (Alabama, Connecticut, District of Columbia, Hawaii, Illinois, Iowa, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Vermont, Washington, and Wisconsin) currently cover children above 300 percent of the FPL. Know more about the chip health insurance pa (Pennsylvania).
- The temporary enhanced CHIP match is phased out in FFY 2021. In FFY 2016, the federal CHIP matching rate was increased by 23 percentage points to between 88 and 100 percent of CHIP costs to help states maintain recent improvements in children’s coverage while guaranteeing eligibility under the MOE. To give states time to plan for a resumption of regular CHIP matching rates, the HEALTHY KIDS Act maintains the bump as planned through FFY 2019 and cuts it in half to 11.5 percentage points in FFY 2020 before phasing it out completely in FFY 2021.
- Express lane eligibility is extended through FFY 2023 allowing states to continue to use findings from other means-tested programs, like the Supplemental Nutrition Assistance Program (SNAP), to determine eligibility and enroll or renew coverage in Medicaid or CHIP for children.
- Additional grant funding is available to continue to fight childhood obesity, provide outreach and enrollment grants to community-based organizations, and extend the pediatric quality measures program, which funds the centers of excellence to improve and strengthen pediatric quality measures.
What’s Next For CHIP?
- CHIP buy-in programs are exempted from minimum essential coverage requirements and can be rated as part of a shared risk pool with CHIP. States with CHIP buy-in programs allow families with income above the CHIP limits to purchase CHIP coverage at full cost, in most cases. CHIP programs are automatically considered to meet minimal essential coverage (MEC) standards but because buy-in programs are not considered part of CHIP they were required to make changes to become MEC compliant like private insurance.
- Going forward, the HEALTHY KIDS Act exempts CHIP buy-in or look-alike programs from MEC standards, meaning they can impose limitations like annual or lifetime limits if benefits are identical to CHIP. The HEALTHY KIDS Act also codifies the ability of states to develop the rate (or cost of coverage) for CHIP buy-in programs as part of a shared risk pool with the larger CHIP program. While CMS has previously maintained that there was no prohibition on risk pool sharing, this new provision explicitly addresses the issue.
There’s already talk of Congress coming back to extend CHIP for an additional four years. After an unprecedented lapse in funding, it would offer peace of mind to families knowing their children’s coverage is secure while giving states the predictability needed to manage their programs. Will a long-term extension of CHIP become a catalyst for states to do more to advance children’s coverage as it has in the past?
CHIP’s enactment in 1997 was accompanied by a new determination to expand children’s coverage. Over the years, states steadily increased participation of eligible uninsured children by pioneering innovations in enrollment and retention. Through a performance bonus program, the 2009 CHIP Re authorization Act incentivized states to increase enrollment of eligible children in Medicaid by removing red tape and simplifying the application and renewal processes. Adoption of these methods was accelerated by the ACA’s requirement for states to advance the use of electronic data to reduce paperwork and increase government efficiency.
But it’s critical to recognize that CHIP sits on the shoulders of Medicaid. For every child that relies on CHIP, four children are enrolled in Medicaid. As such, CHIP and Medicaid must work in tandem to advance coverage and improve access and the quality of care. As I noted in this September 2017 Health Affairs commentary, there is long list of actions states could take—starting with expanding eligibility in states with levels below the national median (255 percent of the FPL). Eliminating CHIP waiting periods and adopting 12 months or longer of continuous eligibility would get kids into care quicker and reduce churning on and off coverage. CHIP programs could improve coverage by adopting Medicaid’s benefit standard and the American Academy of Pediatricians Bright Futures Guidelines for preventive care. States could advance their quality improvement efforts by reporting the full Core Set of Children’s Health Care Quality Measures in Medicaid and CHIP.
But there is reason for concern as some states and the federal government take steps to chip away at Medicaid for low-income families. These efforts will undoubtedly spill over to negatively impact children by reversing the welcome mat effect that Medicaid expansion has had on children’s enrollment, not to mention improving parent health and family economic security. If the foundation of Medicaid that CHIP rests on is weakened, there is little doubt that the nation’s success in covering children will be at risk.
There is a key lesson to be taken from what happened to CHIP over the past four months. As a block grant program, CHIP’s lapse in funding does not bode well for Medicaid if it were to follow a similar model—as proposed during the attempts to not only repeal the ACA but also change the financing structure of Medicaid. CHIP is a popular program, enjoying bipartisan support. It has been adequately funded over its 20-year history and includes a contingency fund that provides shortfall funding in case enrollment costs exceed projections.
But even CHIP got caught up in partisan politics and states came perilously close to freezing new enrollment and disenrolling children. As for the Medicaid block grant proposals considered in 2017, they would not even adequately fund Medicaid based on future spending projections, as CHIP does. Rather, the proposals would have reduced federal funding, resulting in larger cuts over time and jeopardizing coverage for low-income families and adults.
Even if Medicaid’s guaranteed funding structure remains intact, will states use waivers to abandon the ACA’s streamlining goals and impose new barriers to coverage such as work requirements, lockouts for missing deadlines for payments and paper work, more frequent renewal cycles, and lifetime limits on benefits for parents and adults? A case in point is the Kentucky Medicaid waiver, which estimates that 100,000 people will lose coverage.
Ultimately, the courts will decide whether the Trump administration has the authority to approve these kinds of changes that clearly do not advance the goals of the Medicaid program to ensure that low income and vulnerable populations have access to health care. As these efforts dominate health news, less attention and fewer resources are focused on innovative ways to improve the quality of care and health outcomes for children who rely on public coverage.
So even though CHIP’s future looks rosy with a long-term, perhaps even 10-year, extension, it alone cannot protect the nation’s success in covering 95 percent of children. CHIP is indelibly linked to Medicaid, as is the future of children’s coverage.