California Needs Congress to Renew Funding for the Children’s Health Insurance Program

In recent years, Californians have enjoyed expanded access to health care coverage, including sizeable gains among our state’s young people. From 2013 to 2016 alone, the share of California children without health coverage dropped sharply, declining by more than 60 percent. An important factor in this progress is the Children’s Health Insurance Program (CHIP), which during the past two decades has helped millions of California families with low and moderate incomes to afford health care coverage for their children — coverage that would otherwise be out of reach. However, states depend heavily on federal support for CHIP, and federal funding is set to expire soon; Congress should act quickly to renew this spending and reaffirm our nation’s commitment to children’s health.

CHIP Is a Lifeline for Many California Children

CHIP is a joint federal-state program that supports health insurance for almost 9 million children throughout the US during the course of a year. These are children whose families earn too much to qualify for Medicaid (Medi-Cal in California). CHIP and Medicaid work hand-in-hand to make health care coverage available to children, with Medicaid serving as the foundation on which CHIP rests. In California, children from families with incomes up to 266 percent of the federal poverty line (FPL) — or $65,436 for a family of four — are generally eligible for CHIP. At one time, children who qualified for CHIP in California were covered under the Healthy Families Program (HFP), which operated separately from Medi-Cal. However, as part of California’s implementation of the federal Affordable Care Act (ACA) in 2013, the state eliminated the HFP and transferred most enrollees into Medi-Cal, which continues to enroll CHIP-eligible children. Through smaller, separate programs, CHIP dollars also support health care services for children whose families earn up to 322 percent of the FPL in San Francisco, San Mateo, and Santa Clara counties, as well as for unborn children from families up to the same income level. During federal fiscal year (FFY) 2016, about 2 million Californians benefited from CHIP funds, including 1.9 million children enrolled in Medi-Cal.

California Relies on Federal CHIP Dollars

Each year, states receive federal funding that covers a portion of their CHIP costs, with this share known as the federal medical assistance percentage (FMAP). Historically, the federal government paid almost two-thirds of California’s CHIP costs, and the state paid the rest. In 2015, a provision of the ACA boosted the federal government’s share of CHIP funding by 23 percentage points, increasing California’s FMAP from 65 percent to 88 percent through FFY 2019. (This is the fiscal year that will begin on October 1, 2018.) As a result, California pays only 12 percent of the cost of CHIP-funded health care services.

California Faces Higher CHIP Costs if Congress Doesn’t Act Soon

Congress must regularly renew CHIP funding, and the latest extension expires on September 30, the end of the current federal fiscal year. The good news is that CHIP has historically enjoyed bipartisan support, which increases the likelihood that Congress will ultimately renew federal funding for the program. In fact, California and other state policymakers are betting on this outcome. California’s 2017-18 state budget, which took effect this past July 1, cautiously assumes that Congress will indeed reauthorize federal CHIP funding. However, this assumption uses the previous FMAP of 65 percent given the overall level of uncertainty surrounding the future of the ACA amid recent federal proposals. Therefore, even if Congress reverts to the 65 percent FMAP for California, there would be no impact on the state budget. If Congress renews CHIP at the 88 percent FMAP, California’s General Fund costs for CHIP-funded health care would drop by over $500 million per year.

However, in yet another threat to federal programs designed to boost economic security for low-income communities, Congress could drag its feet  on CHIP renewal. While the Senate has begun to move on CHIP, the House has not. With debates over federal budget and tax cuts still looming, Congress may not act on CHIP funding anytime soon. Any delay would increase states’ budgetary uncertainty. For example, California is projected to run out of federal CHIP funds as early as January 2018. However, California would not be able to shirk its responsibilities to CHIP-eligible kids if federal CHIP funding dries up. This is because the ACA requires states to maintain coverage for CHIP-eligible children in Medicaid through FFY 2019; if they don’t, they risk losing all federal Medicaid dollars. This provision holds even if states exhaust federal CHIP funds. Though California would still receive federal Medicaid funds to help defray the state’s CHIP-related costs, this federal funding would be based on a much lower FMAP. As a result, California would have to pay much more to support health coverage for CHIP kids, putting the state under additional fiscal pressure. For those in other programs funded by CHIP dollars, California could impose enrollment caps or move them to private insurance through the state’s health insurance marketplace (Covered California) — but these actions would likely result in some losing insurance. The bottom line is that Congressional inaction on CHIP renewal would both negatively impact the state’s finances and imperil health coverage for some California children.

In yet another policy wrinkle, some GOP proposals have suggested that CHIP renewal be paid for by cuts to Medicaid. In other words, these proposals would pay for extending health coverage for children by cutting health coverage for children (who are major beneficiaries of Medicaid) in other ways. While a timely funding extension for CHIP is highly important, it must not be paid for through cuts to vital programs like Medicaid. Nor should Congress allow Medicaid, which benefits over half of California’s children, to be threatened by lingering proposals to repeal the ACA. In addition to destabilizing health insurance markets, the latest ACA repeal bill — from Senators Bill Cassidy and Lindsey Graham — would impose draconian reductions in federal funding for Medicaid and lead to long-lasting harm to communities across the country. Furthermore, by restarting their efforts to roll back federal health care reform, Senate Republicans are creating needless and costly delays to the CHIP renewal effort.

Congress Can Choose a Different Path

Congressional leaders can choose a different path by moving quickly to fully renew federal funding for CHIP through FFY 2022. A five-year extension would give states greater budgetary certainty and provide more stability for the low- and moderate-income children who rely on CHIP. Moreover, Congress should enact a “clean” extension that doesn’t cut Medicaid or make any of the harmful changes to CHIP that President Trump proposed earlier this year. California’s families cannot afford cuts to either program, and it is up to Congress to ensure that children’s health remains a priority.

— Esi Hutchful