“The Affordable Care Act is an endless source of tortured political maneuverings.
Another example will soon demand Congress’ attention: Extending the Children’s Health Insurance Program (CHIP). The program was created in 1997, in the aftermath of the failed Clinton health reform initiative, to provide health coverage for pregnant women and uninsured children in families that make too much to qualify for Medicaid. Congress votes regularly to extend this joint federal-state program.
When the ACA was passed in 2010, it reauthorized CHIP through 2019, but the law only provided funding through fiscal 2015. That means CHIP will expire in September if Congress doesn’t act.
But it gets worse: The Affordable Care Act also calls for a 23% increase in the federal match rate starting in 2016 without providing any money to pay for it. The Congressional Budget Office estimates that the enhanced match will cost $10 billion in increased federal spending over four years, without providing coverage for a single additional child. CHIP spending totaled $13 billion in FY 2014, including $9 billion in federal funds and $4 billion from the states.
There is bi-partisan support to continue funding CHIP, which provides health coverage to 8.1 million lower- and middle-income children and 10,000 pregnant women. In the summer and fall of 2014, congressional leaders worked together on a bipartisan basis to engage state governors by gathering their feedback on the future of CHIP. On December 3 of last year, the Energy and Commerce highlighted strong bipartisan support for extending CHIP funding in a Health Subcommittee hearing.
But the bipartisanship appears to have come to an end. Democrats, led by Ohio Sen. Sherrod Brown, have introduced legislation to continue the CHIP program without needed reforms and to expand federal spending but without any spending offsets.
Democrats are outraged because they want to spend more taxpayer money and are calling Republicans heartless for resisting.
Chairman Fred Upton of the House Committee on Energy and Commerce, Health subcommittee Chairman Joe Pitts, and Senate Finance Chairman Orrin Hatch have offered a discussion draft of legislation that would limit federal funding for CHIP for families above 250% of poverty and eliminate federal funding for those at 300% of poverty and above. Republicans also want to put the “S” for State back in SCHIP to emphasize the state nature of the program and give states more flexibility in managing the program. It also would allow states the option of using longer waiting periods for enrollment to help prevent the “crowd-out” effect.
From the beginning, there have been serious problems with crowd out in which children with private health insurance are lured into CHIP, which generally has much lower costs than private insurance in premiums and co-payments.
The ACA threw another wrinkle into the CHIP debate with the creation of new tax subsidies through the health insurance exchanges for people earning up to 400% of poverty, or $95,000 a year. Families whose children are eligible for CHIP can pay significantly lower premiums by putting their children on the taxpayer-supported CHIP program than in policies on the exchanges which often have sky-high deductibles.
Income eligibility for CHIP varies by state and age group. Across the states, the upper income eligibility level ranges from 175% of the federal poverty level to 405%, or nearly $100,000 for a family of four. California and New York are at the high end; North Dakota, Idaho, Alaska, and Arizona are at the low end.
A child living in New York, for example, would qualify for free coverage under the state’s CHIP program if the family has income of about $45,000 a year. And they could qualify for coverage with premiums of only $30 a month if they earn $72,000 a year. Children in families earning up to $95,000 a year can qualify for CHIP.
In the Empire State and elsewhere, these higher-income children are most likely to already have had private insurance. But no matter. Once they are eligible for government coverage, their families have an incentive to drop that private insurance in favor of lower-cost CHIP coverage.
Many states hire private insurance companies to administer their CHIP program, giving families some choice over coverage and a defined network of providers. But in other states, CHIP works like Medicaid with low payment rates to physicians and hospitals, which limits access to doctors, especially specialists.
The federal government reimburses states for a portion of every dollar they spend on CHIP up to state-specific limits, called allotments. The feds pay an average of 70% of CHIP expenditures, but the formula varies by state. By statute, the federal matching rate can range from 65% to 85% of what states spend on the program, higher than the minimum 50% match rate for lower-income citizens enrolled in Medicaid. The ACA calls for increasing the statutory range of the federal match rate for the program from a minimum of 88% to 100%.
The Upton-Pitt-Hatch CHIP proposal would extend federal matching funding so that 98% percent of children would still be eligible for the program. Only the top 2% of kids at the upper income level would be impacted by the proposed limits. If states wanted to keep them on the program, rich states like New York and California could do that with their own funds.
But you have to ask the question: Is putting more children on taxpayer-supported coverage, including many who have private insurance, really the right choice to make? Virtually all of these children in the higher-income tiers would be eligible for subsidized coverage through the health insurance exchanges or through their parents’ employment policies, but premiums may be higher.
The issues are the same: Democrats want to spend more on health care, and Republicans are heartless and could leave children without coverage if they resist. But Republicans are not resisting: They are simply trying to trim the program so that it does not spend money that taxpayers don’t have and to make sure the program works for those who need it.
And most importantly, does it make any sense whatsoever for the federal government to encourage families with higher incomes to drop private coverage for their children, compromising access to care for those with much lower incomes who may have no place else to go for coverage?
CHIP reauthorization is a battle worth fighting because it is a harbinger of things to come with future ACA battles.”