If Congress doesn't restart CHIP, Wisconsinites will pay very soon

First off, let’s go to the webpage of the US Department of Health and Human Services to get an explanation of how CHIP started, and how we got to this point.

The Children's Health Insurance Program (CHIP) was originally created under the Balanced Budget Act of 1997. In 2009, CHIP was reauthorized under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), 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 extended funding for CHIP through FY 2015, and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) extended funding for the program through FY 2017. The Budget proposes an additional two-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.

So it’s a very good way for children of working class parents to get covered, especially if that parent doesn’t get health insurance through his/her job. States also like it because it allows more children to be covered without having to spend much (if anything) to do so, because of generous matching levels by Uncle Sam.

States with an approved CHIP plan are eligible to receive an enhanced federal matching rate, which will range from 65 to 85 percent. Beginning in FY 2016, and effective through FY 2019, each state’s enhanced federal matching rate increased 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.

In Wisconsin, this means the Federal government was projected to pick up over 94% of costs under CHIP (as noted in page 3 of the DHS summary by the Legislative Fiscal Bureau), meaning state taxpayers have to pay less than 6% of costs instead of the 41% they would have to pay under the traditional Medicaid program.

Side note, it is ironic that the Walker Administration talks a big game about not taking the 100% funded Medicaid expansion for adults that was part of Obamacare, but they are glad to take Obamacare’s expansion of CHIP funding. It's good that they do, but it’s also very funny/cynical.

The state receives a block grant each year of CHIP funds allowing for the higher matching amount, which makes it likely that at least some of those funds may be left over today (it at least takes a while for the funds to be drawn off of the plans due to delays in claims and such). The Kaiser Family Foundation says those left-over funds will likely run out soon in the near future in many states, which means that those places will have to figure out where the extra money to continue coverage is going to come from.

Because states have assumed continued federal funding in their state budgets, the majority of states will face a funding shortfall if Congress does not extend federal funding. Addressing these shortfalls will likely require special legislative sessions and/or Governor action because state budgets have already been passed. States will face challenges replacing federal dollars since many were already facing budget shortfalls heading into FY 2018.1 States will also face costs associated with implementing program changes in response to loss of federal funding, including system changes and outreach and training costs. For example, Colorado estimates that eligibility system changes to implement program changes will cost $300,000. The Centers for Medicare and Medicaid Services (CMS) indicated that states must factor such costs associated with close out of the program into calculations of use of remaining federal funds.2 If Congress extends funding but does not include the 23 percentage point increase in the federal matching rate that was provided in the ACA, most states will still face shortfalls, since many assumed continued funding with the enhanced match rate.

Of the 42 states (including DC) that provided an estimate of when they will run out of their FY 2017 CHIP allotment, 10 anticipate exhausting funding by the end of 2017 (Figure 1). A total of 32 states project they will exhaust federal funds as of the end of March 2018. These recent state estimates show more states running out of funds earlier compared to previous projections from the Medicaid and CHIP Payment and Access Commission (MACPAC), which found that four states will run out of funding by December 2017.3 In most cases, differences with the MACPAC estimates are small (one or two months); in some cases they result in differences in the projected quarter that federal funds will be exhausted.

Wisconsin is listed as having their enhanced funding run out in March, but the state’s Department of Health Services said last Friday in their quarterly report that they would be good for slightly longer than that.

This projection assumes that Congress will reauthorize the Children’s Health Insurance Program (CHIP)….Wisconsin uses its CHIP allocation to fund costs for Badger Care Plus children who meet the CHIP eligibility criteria, spending approximately $115 million FED in CHIP funds per year. If Congress does not act to reauthorize the program, the state would have sufficient carryover funds from its FFY 17 allocation to cover costs through April 2018. The impact to the Medicaid budget of no reauthorization for the remainder of the biennium would be $134 million GPR.

$134 million in taxpayer funding would barely fit under the $210 million cushion that the just-signed state budget, and would increase the near-$1 billion structural deficit in the General DFund for the next budget. Needless to say, I would think the WisGOPs in charge of the Legislature would like CHIP to continue for fiscal reasons, as it makes a bad budget notably worse.

On a related budgetary note, what the state is getting for regular Medicaid reimbursement from DC is slated to go up in a year, as Jon Peacock from the Wisconsin Budget Project explains, although the reason isn’t necessarily a good one.

Per capita income has grown relatively slowly in Wisconsin over the last few years, and according to the most recent data, it was 5.0% below the national average in 2016. Because that gap has been growing, Wisconsin’s FMAP for 2019 will climb to 59.37%, which is an increase of 0.6 percentage points compared to the rate in federal fiscal year 2018 (which began on Oct. 1 of this year).

That might sound like a relatively small increase in the federal share, but because it is applied to a large amount of spending, that change will save Wisconsin taxpayers roughly $68 million during the last nine months of the 2017-19 budget period. And because the Legislative Fiscal Bureau (LFB) had assumed a smaller increase in the FMAP when it made its 2017-19 Medicaid spending estimates several months ago, the new estimate will yield a state savings of almost $40 million compared to the prior LFB projection. That’s very fortunate because it will largely offset higher cost estimates announced by DHS a couple days ago for certain Medicaid services.

The current FMAP formula, which has been in place for decades, is a very sensible way of allocating more federal support to states that need it more. However, it could be repealed soon if Congress approves the Medicaid block grants or per capita caps that have been part of the recent House and Senate bills to radically change Medicaid and the Affordable Care Act. Under those proposals, Medicaid spending will no longer be based on changes in costs and in state’s financial capacity, and instead will simply be proportional to past spending in each state.

Thankfully, the proposed changes haven’t been approved yet and they wouldn’t take effect for a few years. That’s fortuitous for Wisconsin, since it looks like our income growth is continuing to lag the national rate, and in fiscal year 2019 we will get a significant boost in federal funding from the current formula.

It also means that a bit more of CHIP-type services could be covered by the Feds, but it would still be well below the 94% that is covered today.

But there’s a more practical concern with CHIP and the related Medicaid funding discussions, and it goes beyond the awful possibility of cutting some children off of their health care. October and November are also the key signup times for health insurance for most people, and now one of the options in use is in danger of going away. If CHIP’s fate is not decided within a couple of weeks, parents may have to put their kids onto their own (likely crappier) insurance for next year, or be pushed onto the Obamacare exchanges.

That may end up working out for some people, but it will likely prove too expensive for a lot of working-class families, leading to the horrible choice of being uninsured or cutting some other type of household spending. Or worst of all, the parents don’t realize that there will be a difference, and by the time they get notified that coverage is ending, it’s too late to do anything. In addition to the sickening aspect of this situation even existing in an allegedly civilized country, I can’t see how the end of enhanced funding for CHIP would help our state’s economy at all.



So maybe the Wisconsin-based Speaker might want to spend less time trying to suck up to the Kochs and other donors by getting rid of Obamacare and blowing up the budget by cutting taxes on the rich, and care more about the near-term needs of Americans to continue stability in children ‘s lives by reauthorizing CHIP. These selfish clowns have already fallen down on the job by failing to meet the September 30 deadline, but they can minimize the damage by getting their asses back to work and actually fulfilling their duty to uphold the common welfare.