Short-term CHIP patches threaten to undermine state programs

Congress' short-term funding patches for the Children's Health Insurance Program have put states in the precarious position of running on fumes. But the temporary solutions may do more harm than good as they hamstring CHIP's future.

For Alabama, the latest $2.8 billion CHIP patch Congress passed before Christmas buys the program just one more month of coverage.

At least, that's the best guess for state officials. In fact, they don't know just how much money they will receive to keep their enrollees covered. The CMS hasn't yet told them what their share of that latest appropriation will be.

Due to a budget gimmick, the number Congress used as a baseline for its latest CHIP extension doesn't come close to matching the actual costs for states.

This is because CHIP, as an entitlement program, gets frontloaded with money in the early years of each reauthorization. The money then tapers out to a much smaller sum through a budget measure that essentially makes the program look much less expensive than it actually is.

In a shortfall year, Congress makes up for the difference between that funding number and the actual funding needed by states through a one-time grant.

This strategy is having unintended consequences now.

Congress' last two-year authorization funded CHIP fully for the first year but assigned just $5.7 billion for fiscal 2017 even though the program costs roughly $20 billion annually. Last year, Congress added a supplemental grant and CHIP continued as normal.

But as lawmakers keep punting their final funding agreement on CHIP with patches, the $5.7 billion number suddenly matters because it's the baseline for Congress' patch that lawmakers passed with the expectation it would last the states through March, the month that ends the first half of fiscal 2018.

But it won't, as Alabama has already seen.

"This (funding) has to happen on Jan. 18 or 19," says Bruce Lesley of the Washington-based children's healthcare advocacy group First Focus.

Jan. 19 is when Congress has to pass another continuing budget resolution—this one likely to keep the government funded into February.

While Senate GOP leaders were publicly optimistic these week they can get CHIP funded in this next measure, aides are privately less confident. (A new analysis from the Congressional Budget Office that projects a lower price-tag for the extension following the elimination of the individual mandate penalty could also ease the GOP and Democratic gridlock.) Meanwhile, Congress' calculation of its latest patch has baffled states.

"I just do not understand how they even call (the CHIP) patch a half-year of funding," said Cathy Caldwell, Alabama's CHIP director. "I am trying to get my head around it."

Caldwell, who has to manage the logistics of budgeting for various contingency plans for her program, says the budget target is constantly moving.

For the past couple of months as Congress delayed action, Caldwell says, the CMS has kept changing its estimates of how much money Alabama will receive to tide the state over until lawmakers pass the promised five-year funding.

The CMS has also altered its formulas for how it redistributes some states' unused CHIP funds among states that have shortfalls. That means states like Virginia and Georgia are seeing the projected lifespan of their programs shrink from what they had previously budgeted for.

This, Caldwell said, has complicated her ability to plan.

Alabama was set to freeze enrollment starting Jan. 1 and to terminate its program starting Feb. 1. Letters were due out to families of CHIP kids Dec. 28 if Congress didn't act by then. When Congress passed the short-term patch, Caldwell paused her plan. But she said she can't hold it for long: just three to four weeks.

This conservative delay "is the only reasonable thing to do," Caldwell said.

As she worries about continued disruption to her program, she said Alabama providers are worried too.

The state runs its CHIP and Medicaid on a fee-for-service model insured by Blue Cross and Blue Shield. Providers of the care for the state's 85,000 CHIP kids have a year to bill the carrier for care, and a sudden termination to a program could shoulder physicians and hospitals with hefty unpaid claims.

"Should the CHIP program be terminated, there are likely to be some claims outstanding for which providers may not be paid," says Garland Stansell of Children's of Alabama hospital. "That would cause an increase in uncompensated care. Long-term, those patients who are not covered under another plan would also cause an increase in uncompensated care costs to hospitals."

Garland notes the hospital treats all children, whether or not they can pay.

As the Senate returned to work this week, Majority Leader Mitch McConnell (R-Ky.) said they can get CHIP done on the next continuing budget resolution that must pass by Jan. 19 to avert a government shutdown.

"I know that colleagues on both sides of the aisle are eager to find a long-term solution for the Children's Health Insurance Program," McConnell tweeted Thursday. "Five years, full reauthorization. Let's get this done for working families."

But senior GOP aides are less optimistic, and partisan disagreements show no sign of abating as Congress once again moves to punt its most difficult spending negotiations to February with another short-term package.

CHIP kids, their families, states, providers and carriers are left with the consequences.

"I think most are freaked out," Caldwell said.