Health Reform WK-EDGE House’s bill to fund CHIP saves $1.1B
Tuesday, October 31, 2017

House’s bill to fund CHIP saves $1.1B

By Jessica Y. Washington, J.D.

The Congressional Budget Office (CBO) released a cost estimate of the proposed House of Representatives bill known as the "Helping Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable (HEALTHY KIDS) Act of 2017" (H.R. 3921). The bill would extend federal funding for the Children’s Health Insurance Program (CHIP) for five years, increase Medicaid funding for Puerto Rico and the Virgin Islands, and change policies that require other sources of health coverage to pay medical claims before Medicaid makes payment. Moreover, the bill would modify payments to hospitals that serve a disproportionate number of uninsured and Medicaid patients and would require states to treat lottery winnings, gambling and legal judgment proceeds, and inheritances as income for Medicaid eligibility purposes. Finally, H.R. 3921 would adjust Medicare premium subsidies for individuals with higher incomes. The CBO estimates that implementing the legislation, on net, would reduce the deficit by $1.1 billion over the 10-year period from 2018 through 2027. Further, based on CBO estimates, the bill would not increase net direct spending or on-budget deficits in one or more of the four consecutive 10-year periods beginning in 2028 (CBO Report, October 19, 2017).

CHIP. The HEALTHY KIDS Act would extend funding for CHIP until 2022, modify the federal matching rate in 2020, and extend certain eligibility requirements. The CBO estimated that it would increase federal spending by $14.9 billion and revenues by $6.7 billion—a net cost of $8.2 billion from 2018–2027. Moreover, enactment of H.R. 3921 would provide $118.5 billion for CHIP allotments to states over a five-year period. The CBO reports that the net cost of the funding extension ($8.2 billion) is substantially less than the amount of funding provided, for the following three reasons:

  1. CHIP is assumed to continue in the baseline beyond its scheduled expiration date;
  2. the increase in spending for CHIP would be partially offset by reductions in the net cost of federal subsidies provided for other forms of health insurance, including Medicaid insurance purchased through health insurance marketplaces established under the Affordable Care Act (ACA) and employment-based health insurance; and
  3. the CBO does not anticipate that all of the appropriated funds will be spent.

States would receive an 11.5 percentage point increase in the matching rate in 2020, under H.R. 3921. The matching rate would return to historical levels in 2021. The CBO estimates that this provision is responsible for approximately $2 billion of H.R. 3921’s net cost. For the most part, H.R. 3921 would extend the eligibility levels requirement through the year 2022. However, rather than the requirement being applied to all children, beginning in 2020, it would be limited to children whose families have incomes below 300 percent of the poverty guidelines. It would also apply to children in families whose incomes are above the poverty guidelines but who do not have employer-based insurance. The CBO estimates that the modified continuation of this requirement would affect at least 98 percent of children who would be enrolled in CHIP if the current requirement were fully extended through 2022. The agency anticipates that more children would enroll in CHIP under H.R. 3921 due to the extension of eligibility requirements scheduled to expire in 2019. The overall cost of covering these children in CHIP would be less than the average cost of covering them in the ACA marketplaces and through employment-based insurance. Therefore, this provision would reduce the estimated net cost of extending CHIP funding through 2022.

Other provisions. In 2017, states received $12 billion in disproportionate share hospital (DSH) allotments for uninsured and Medicaid patients. These allotments, which increase each year by the percentage change in the consumer price index, would be adjusted by scheduled cuts between 2018 and 2025. On net, the CBO estimates that this provision would decrease direct spending; however, the CBO further estimates that additional allotment cuts would result in only a modest reduction in DSH spending.

From 2018–2019, H.R. 3921 would increase the total amount of block-grant funding available to Puerto Rico under Medicaid by more than $1 billion, and would increase funding to the U.S. Virgin Islands by approximately $30 million.

The HEALTHY KIDS Act would modify Medicaid policies that require other sources of health coverage, or third parties, to pay claims before Medicaid pays for the care of an enrollee, and permit states to retain a larger percentage of payments recouped from third parties who provide coverage to individuals made eligible for Medicaid under the ACA.

H.R. 3921 would require states to treat lottery winnings, gambling and legal judgment proceeds, and inheritances as income for the purposes of determining Medicaid eligibility. The CBO projects that the number of individuals who would lose Medicaid benefits under this provision of H.R. 3921 would be modest.

The bill would modify income thresholds for individuals in the highest Medicare premium bracket (80 percent) and create an additional bracket (100 percent) beginning in 2018. The CBO estimates that these modifications would save $5.8 billion from 2018–2027.

ReportsLetters: CBOReports NewsFeed AccessNews AgencyNews CHIPNews FederalFMAPNews MedicaidNews MedicarePartANews MedicarePartBNews PremiumNews FedTracker HealthCare TrumpAdministrationNews

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