By Samuel T. Wudi
Background
In the United States, Children’s Health Insurance Program (CHIP) funds State programs that provide low-income children healthcare. While CHIP provides a critical service, its decentralization undermines its effectiveness: each state operates its own program. Currently the federal government provides grants to CHIP programs and matches state contributions (“Children’s Health Insurance Program (CHIP).”, n.d.). The variability that this decentralization creates results in difficulties for families, especially those in the process of relocating. Additionally, decentralization prevents CHIP from fully benefiting from economies of scale. This proposal calls for the creation of a permanently funded, federally-administered program to provide health insurance to any child whose household income is below 400% of the Federal Poverty Line.
Health insurance benefits families in two ways. First, enrollment in insurance increases utilization of healthcare. Peterson-KFF Health System’s Tracker calculated that for 2020, 5% of American adults covered by insurance reported delaying or not getting care due to costs, compared to 30% in uninsured adults (Ortaliza, et al. 2022). Second, insurance reduces the risk of financial catastrophe due to expensive or unexpected healthcare costs. Consider two commercially insured patients who pay comparable premiums. The first receives the same annual checkup each year, in addition to biannual blood testing due to a thyroid condition. The second, without a thyroid condition, receives just an annual checkup, except for one year, where expensive orthopedic surgery is required due to a minor car accident. While payments in may equal payments out for both patients over the lifecycle, for the second patient the smoothing of costs over a greater time period dissipated the financial shock of the car accident. A study involving a 2008 Oregon lottery of adult Medicaid spots demonstrated that inclusion in Medicaid virtually eliminated the chance of a catastrophic medical expense, whilst not impacting labor force participation or earnings (Baicker, et al. 2013). In children, the initial extension of CHIP coverage reduced emergency room visits, increased annual checkups, and reduced financial stress within families. CHIP coverage also substantially reduced the number of parents responding that they restricted their child’s activities due to their lack of coverage. Common examples given included not permitting their children to ride a bike or rollerblade, for fear of what an injury could mean for their financial situation (Lave, 1998). Extending CHIP benefits has the potential to replicate the benefits from past expansions: improved access to care for children, and improved family financial stability.
Proposal
This proposal calls for modifying the CHIP program on the basis of the following points.
1. Federalizing CHIP and administering it through the Center for Medicare and Medicaid Services.
2. Extending enrollment eligibility to 400% of the Federal Poverty Line.
3. Permanently funding CHIP.
4. Continuing coverage for enrollees for five years after eligibility is confirmed (using annual income), above the current maximum of 12 months.
5. Using IRS and other administrative data to automatically enroll or send notices of eligibility to households, as able.
On the first point, federalizing this program would reduce variability in program quality across states. Currently, eligibility ranges from Idaho’s 185% of FPL to NY’s 400% (“Children’s Health Insurance Program (CHIP).”, n.d.). These disparities arbitrarily leave some children with, and others without health insurance. Additionally, state administration requires that families seeking to move states subject themselves to new eligibility testing, if they are even eligible in their destination states.
(Gorman 2020)
On the second point, extending eligibility to 400% of the FPL ensures that federalization will not result in any loss of coverage for CHIP households. Some may say that 400% is too high and will cover too many who are not in need. However, federal funds are already matching costs for children up to 300% of the FPL. Children’s insurance is typically inexpensive compared to adults’ insurance; Medicaid/CHIP is especially inexpensive, as the figure on the right demonstrates7.
Extending eligibility could reduce net costs. This expansion, though paid for by the government, could reduce the cost of raising children for families.
Currently, Congress funds CHIP across specific fiscal years, rather than on a permanent basis as Medicare is funded. The point of insurance is to reduce risk. By failing to permanently fund CHIP, Congress creates a cloud of uncertainty around a program meant to create stability. Furthermore, Federal funding turns CHIP into a powerful countercyclical program. During times of downturn as incomes drop, a greater share of the population falls below 400% of the poverty line, so total CHIP spending would expand. This process already happened with Medicaid, just on a messy ad hoc basis. During the 2008 Financial Crisis, as Congress passed a stimulus to increase Medicaid matching rates to prevent states’ Medicaid programs from cutting coverage to stay solvent (Lav, 2009). At that time, the Recession put two aspects of Medicaid into tension: the funding and the eligibility. Medicaid eligibility stayed constant, as did the amount of money the Federal Government matched states. However, state Medicaid rolls swelled, resulting in the aforementioned temporary change in eligibility rate. While that particular episode resolved itself in a way that led to a countercyclical effect, it was by no means a guarantee. CHIP on a federal level would act more effectively as a safety net if the government implements a simple process for increasing its outlays during economic downturns. Insurance programs for children should not be funded on an ad hoc basis. Permanent Federal funding ensures that the full credit and faith of the United States will stand firmly behind providing children with quality health insurance.
Increasing the length of time covered after proof of eligibility will reduce coverage lapses. Using current differences between states’ length of coverage, researchers have seen that longer periods of coverage reduced coverage lapses resulted in fewer children in fair or poor health, and increased healthcare consumption for children with disabilities (Brantley, et al, 2021). Extending length of coverage will reduce coverage gaps and result in easier access for eligible households by reducing the number of times households will have to demonstrate proof of eligibility. To further reduce the burden on households, HHS will use data from the IRS to confirm continued eligibility, thereby preventing families from demonstrating their eligibility at all. These steps will improve uptake in CHIP by creating a less burdensome process for eligible households.
CHIP is an exceptionally important service and safety net for millions of Americans. With years of lessons-learned on how the program functioned using the decentralized approach, we now have an opportunity to make it more effective at providing important health services to children, reducing exclusion error, and creating long term positive effects not just on enrolled children, but on society as a whole.
Bibliography
Baicker, Katherine, Et Al, et al. “The Oregon Experiment – Effects of Medicaid on Clinical Outcomes: Nejm.” New England Journal of Medicine, May 2, 2013. https://www.nejm.org/doi/full/10.1056/nejmsa1212321.
Brantley, Erin, and Leighton Ku. “Continuous Eligibility for Medicaid Associated With Improved Child Health Outcomes.” Sagehub Journals, September 16, 2021. https://journals.sagepub.com/doi/full/10.1177/10775587211021172.
“Children’s Health Insurance Program (CHIP).” Medicaid. Accessed January 2022. https://www.medicaid.gov/chip/index.html.
Gorman, Linda. “Variation in Public and Private Insurers’ Hospital Reimbursements.” NBER, September 9, 2020. https://www.nber.org/digest/sep20/variation-public-and-private-insurers-hospital-reimbursements.
Iris Lav. “Recovery Act Provides Much-Needed, Targeted Medicaid Assistance to States.” Center on Budget and Policy Priorities, February 13, 2009. https://www.cbpp.org/research/recovery-act-provides-much-needed-targeted-medicaid-assistance-to-states.
Lave, Judith. “Impact of a Children’s Health Insurance Program on Newly Enrolled Children.” JAMA. JAMA Network, June 10, 1998. https://jamanetwork.com/journals/jama/fullarticle/187612#:~:text=Parents%20reported%20that%20having%20health,on%20children%20and%20their%20families.
Ortaliza, Jared, Lucas Fox, and Gary Claxton. “How Does Cost Affect Access to Care?” Peterson-KFF Health System Tracker, January 14, 2022. https://www.healthsystemtracker.org/chart-collection/cost-affect-access-care/.