The Children’s Health Insurance Program (CHIP) has been a vital part of America’s health care safety net since its creation in the 1990s. Last year, it provided coverage for almost 9 million children. CHIP is traditionally considered a bipartisan success story and has played a critical role—together with Medicaid and the private market reforms in the Affordable Care Act—in reducing the rate of uninsured children to a historic low of 4.8 percent.
However, CHIP’s funding is not permanent and must be reauthorized this September. Recently, the bipartisan National Governors Association strongly recommended that Congress extend CHIP funding for five years, explaining that “access to health insurance is critical to ensuring a healthy start for our nation’s children.”
Unfortunately, the Trump budget rejects this bipartisan tradition of support by proposing to cut CHIP funding by 20 percent. At first glance, the budget’s proposal to extend CHIP funding for two years may appear to be a positive step. In reality, however, the budget pairs this extension with funding cuts and policy changes that would result in children losing CHIP coverage and potentially becoming uninsured. Even including the cost of the funding extension, the Trump budget would cut CHIP by a net $3.4 billion from fiscal year 2017 to fiscal year 2018—a 20 percent reduction.
CHIP is essential to ensuring that low-income children have health coverage
CHIP provides quality, affordable coverage to low- and moderate-income children above Medicaid’s income eligibility thresholds, with states having substantial flexibility to run CHIP as an expansion of their Medicaid programs or as a separate program. CHIP’s benefits are specifically designed to meet children’s health and developmental needs comprehensively, with much lower cost sharing than most private insurance plans.
CHIP is jointly financed by states and the federal government. The Affordable Care Act (ACA) strengthened CHIP by increasing the federal matching rate that states receive for CHIP by 23 percent and instituting a “maintenance of effort” requirement for states to maintain current Medicaid and CHIP eligibility standards for children until 2019. In addition, the ACA increased the mandatory Medicaid eligibility requirement for children over age 6 from 100 percent of the federal poverty level (FPL) to 138 percent of the FPL.
Trump budget cuts would reduce CHIP enrollment
The Trump budget includes three major policy changes that would reduce CHIP enrollment and likely result in children becoming uninsured.
First, the budget would eliminate the ACA’s 23 percent increase to the federal matching rate for CHIP. This would significantly shift costs from the federal government to states, making it harder for states to afford to maintain current levels of CHIP coverage.
Second, the budget would eliminate the ACA’s maintenance of effort requirement for CHIP. With these protections gone, states could take actions such as reducing CHIP eligibility, freezing enrollment, or making it more difficult to enroll. Before the ACA, it was not uncommon for states to take these types of actions to limit CHIP enrollment, especially during economic downturns. The budget also allows states to shift children ages 6 to 18 whose families earn between 100 percent and 138 percent of the FPL from Medicaid to CHIP; this aligns with the American Health Care Act, which would repeal the ACA’s increase in mandatory Medicaid eligibility for children in this age group.
Third, the budget would cap eligibility for federal CHIP funding at 250 percent of the FPL. The upper income limit for CHIP eligibility in 24 states, including the District of Columbia, is above 250 percent. As a result, under the Trump budget, these 24 states would lose federal matching funds for some of the children they currently cover, likely forcing states to make cuts to their CHIP programs.
Taken together, these proposals are explicitly designed to push states to drop kids from CHIP coverage. The Trump budget does not attempt to deny this. Rather, it euphemistically describes the rollback of funding and eligibility as intended to “return the focus of CHIP to the most vulnerable and low-income children”—by cutting off coverage for children whose families have slightly higher incomes.
Furthermore, these proposed cuts to children’s health coverage come in addition to the Trump budget’s $610 billion in cuts to Medicaid and the American Health Care Act’s $834 billion in cuts to Medicaid, both over 10 years. Combined, these cuts would slash federal Medicaid spending roughly in half in 2027, an unprecedented retrenchment of the government’s role in ensuring coverage for low-income children and families. Together, Medicaid and CHIP cover almost 36 million children, or nearly 40 percent of children in America.
The Trump budget is not an acceptable starting point for the CHIP reauthorization debate
The budget’s proposed rollback of children’s health coverage is particularly egregious given the upcoming congressional debate over CHIP reauthorization this September. The Trump budget’s approach to CHIP adds to uncertainty not only for families who benefit from CHIP coverage but also for state legislators and governors formulating their state budgets for the upcoming year.
As Congress begins work on extending CHIP funding, it should reject the Trump budget’s approach and instead consider the National Governors Association’s recommendation for a five-year extension at current federal funding levels. Rather than cutting CHIP in order to help finance tax cuts for the wealthy, the top priority should be protecting children’s health coverage.
Thomas Huelskoetter is the policy analyst for the Health Policy team at the Center for American Progress.