HHS FY2016 Budget in Brief

Topics on this page: CMS Children’s Health Insurance Budget Overview | CMS Children’s Health Insurance Program | How CHIP Works | Recent Program Developments | 2016 Legislative Proposals

Centers for Medicare & Medicaid Services (CMS): Children’s Health Insurance Program (CHIP)

The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Children’s Health Insurance Budget Overview

(Dollars in millions)

Table footnotes

1/ The score reflects the impact on CHIP only. See Medicaid chapter for Medicaid impact.
2/ The proposal is paid for through an increase in tobacco taxes that will help reduce youth smoking and save lives.
3/ The net federal impact of this proposal is $30 million in FY 2016, which reflects the impacts to CHIP and Medicaid.  See Medicaid chapter for Medicaid impact.
4/ There are a number of Medicaid and Program Integrity legislative proposals that have a non-budgetary impact on the CHIP program.

CMS CHIP Program

The Children's Health Insurance Program (CHIP) was originally created under the Balanced Budget Act of 1997 (P.L. 105-33).  In 2009, CHIP was reauthorized under the Children’s Health Insurance Program Reauthorization Act of 2009 (P.L. 111-3), which provided an additional $44 billion in funding through FY 2013 and created several new initiatives to improve and increase enrollment in the program.  The Affordable Care Act (P.L. 111-148 and P.L. 111-152) extended funding for CHIP through FY 2015.  The Budget proposes a four-year extension of CHIP through FY 2019.  Since September 1999, every state, the District of Columbia, and all five territories have approved CHIP plans.

How CHIP Works

CHIP is a partnership between the federal government and states and territories to help provide low income children with the health insurance coverage they need.  The program improves access to health care and the quality of life for millions of vulnerable children less than 19 years of age.  In general, CHIP reaches children whose families have incomes too high to qualify for Medicaid, but too low to afford private health insurance. In FY 2014, the CMS Office of the Actuary estimated that an average of 5.6 million individuals received health insurance funded through CHIP allotments at some point during the year.

States with an approved CHIP plan are eligible to receive an enhanced federal matching rate, which will range from 65 to 85 percent.  In FY 2016, each state’s enhanced federal matching rate will increase by up to 23 percentage points to cover between 88 and 100 percent of total costs for child health care services and program administration, drawn from a capped allotment.

States have a high degree of flexibility in designing their programs.  States can implement CHIP by expanding Medicaid, creating a separate program, or a combination of both approaches.  As of January 1, 2015, there were 13 Medicaid expansion programs, 2 separate programs, and 41 combination programs among the states, District of Columbia, and territories. 

A Child Enrollment Contingency Fund was established for states that predict a funding shortfall based on higher than expected enrollment.  The Contingency Fund received an initial appropriation of $2.1 billion in FY 2009 and is invested in interest bearing securities of the United States.  Payments from the Fund are currently authorized through FY 2015.

Through FY 2013, the Performance Bonus Fund authorized payments to states that performed five out of eight specific enrollment and retention activities set out in the Children’s Health Insurance Program Reauthorization Act of 2009.  In FY 2014, CMS awarded $307 million to 23 states based on actual FY 2013 performance.

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Recent Program Developments

Financing:  In addition to extending funding for state allotments through FY 2015, the Affordable Care Act increased each state’s enhanced federal match rate by 23 percentage points, not to exceed a total match rate of 100 percent, between FY 2016 and FY 2019.

Eligibility and Coverage:  Under the Affordable Care Act, states use a simplified Modified Adjusted Gross Income standard to determine eligibility for coverage under a state’s CHIP program.  States can offer continuous eligibility for 12 months regardless of changes in family income, can fast track enrollment using Express Lane Eligibility authority, and can enroll children who are eligible for family coverage under a state employee health plan into CHIP.

Enrollment and Retention Outreach:  The Affordable Care Act increased funding for grants and a national campaign to improve outreach and enrollment to children who are eligible for but unenrolled in Medicaid and CHIP from $100 million to $140 million and extended the funds’ availability through FY 2015.  Of the total appropriation, $112 million was allocated for state and local governments as well as private organizations and $14 million was allocated to increase enrollment of American Indians and Alaska Natives.  Outlay totals for Outreach and Enrollment Grants are reflected in the State Grants and Demonstrations chapter.

Improving Quality:  The Children’s Health Insurance Program Reauthorization Act of 2009 provided $225 million over 5 years for activities that improve child health quality in Medicaid and CHIP, and in FY 2014, 18 states (across 10 grants) continued Quality Demonstrations to test ways to strengthen the quality of and access to children’s health care through a variety of health care delivery and measurement approaches at both the provider and patient levels.  The Protecting Access to Medicare Act of 2014 (P.L. 113-93) allocates $15 million of Adult Health Quality funding provided under the ACA for the pediatric quality measures program, increasing the total appropriation to $240 million.

CHIP Proposals

Extend CHIP Funding through FY 2019:  The Budget proposes to extend funding for CHIP for four years through FY 2019, to ensure continued comprehensive and affordable coverage for CHIP children.  This proposal would also extend the contingency fund and the performance bonus fund authorizations through 2019.  The proposal is paid for through an increase in tobacco taxes that will help reduce youth smoking and save lives.

This extension aligns with the Affordable Care Act requirement for states to maintain the eligibility and enrollment policies that were in place as of March 2010 through FY 2019 for children in Medicaid and CHIP.  A four-year funding extension will provide budgetary stability to states.  Continuing funding for CHIP will also protect children’s coverage and ensure continuity of care for families who rely on the program.

Without Congressional action, CMS estimates states will begin to experience funding shortfalls in December 2015 and all but two states will run out of funding before the end of fiscal year 2016.

Once states exhaust their CHIP allotments, children in Medicaid-expansion CHIP programs would continue to be covered by Medicaid, though states would see a reduction in the federal matching rate for that population.  While many children would be eligible for premium tax credits and cost-sharing reductions through the Marketplaces, some would transition to other forms of coverage, and others could become uninsured.  Recent research also indicates that families with children transitioning from CHIP could face a substantial increase in cost-sharing, and a reduction of certain child-specific benefits, which may be particularly important for children with special health care needs.

Permanently Extend Express Lane Eligibility for Children:  The authority to operate Express Lane Eligibility expires at the end of FY 2015, and the Budget supports an extension of this tool to aid states in furthering their efforts to enroll Medicaid and CHIP eligible children.  See the Medicaid chapter for additional information on this proposal.  [$1.2 billion including $490 million in CHIP costs over 10 years]

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FY 2016 CHIP Legislative Proposals

Dollars in millions

(negative numbers reflect savings and positive numbers reflect costs)
 

Table footnotes

1/ The net cost of this proposal is $11.9 billion over 10 years, which reflects impacts to CHIP and interactions with Medicaid, the Marketplace subsidies, and related impacts.  See Medicaid chapter for Medicaid impact.
2/ The proposal is paid for through an increase in tobacco taxes that will help reduce youth smoking and save lives.
3/ The net federal impact of this proposal is $1.2 billion over 10 years, which reflects the impacts to CHIP and Medicaid.  See Medicaid chapter for Medicaid impact.
4/ There are a number of Medicaid and Program Integrity legislative proposals that have a non-budgetary impact on the CHIP program.

Next:

• Overview
• Medicare
• Program Integrity
• Medicaid
• Children’s Health Insurance Program
• State Grants and Demonstrations
• Private Health Insurance Protections and Programs
• Center for Medicare and Medicaid Innovation
• Program Management

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