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9 million kids get insurance through CHIP. Congress is about to let its funding expire.

September 30 is the deadline.

Tom Williams / Getty Images
Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

On September 30, funding for the Children's Health Insurance Program expires. After Republicans took a rushed and ultimately failed run at repealing Obamacare one last time, the program’s spending authorization is now at imminent risk of lapsing.

For technical reasons, the money wouldn't just run out on October 1. But nevertheless, advocates are furious that Congress let the deadline get this close without acting.

"This is ridiculous. It’s already too late," Joan Alker, executive director of Georgetown University's Center for Children and Families, told reporters at a briefing earlier this month. "We have never had a situation like this before."

CHIP is a health insurance program created in the 1990s to piggyback on Medicaid and it provides coverage for kids in families with higher, though still lower-middle-class to middle-class, incomes. The program also helps cover pregnant women in some states. It is designed much like Medicaid, with states and the federal government both paying a share of its budget.

About 9 million children across the country get coverage through CHIP, and it costs about $14 billion a year (the feds pick up about three-quarters of that bill). It is a smaller program than Medicaid and Medicare, but it is still a big reason why America has nearly eliminated uninsurance among kids.

The warning signs have been there that Congress would allow CHIP's funding to slip. While most states would have money left over to keep the program running for a matter of months, they have started preparing for the worst.

"We are in the process of developing a contingency plan of shutting down our separate CHIP program," Cathy Caldwell, who runs CHIP in Alabama, told reporters recently.

Some kids would be covered through Obamacare's marketplaces or their parents' work if CHIP shut down, Caldwell continued, but "a fair amount of our children we think will become uninsured."

Yet it still doesn’t look like Congress has the wherewithal to take CHIP up before the September 30 deadline, even with Obamacare repeal dead again.

“Wish I could say we're hearing that, but we aren't,” Cindy Pellegrini, who works on federal issues for the March of Dimes in DC, told me Wednesday. Senate aides also conceded that action was unlikely before Saturday.

The outline of a CHIP deal is already in place

CHIP funding won’t simply run out on October 1 because of the way the program is financed. Federal money is distributed as a lump sum to the states annually, and they then have two years to spend it. So most states will have money left over next month, even if no new federal funding is coming in. But it is nonetheless a perilous position for the program, and some states are staring at big funding cliffs soon.

There was finally positive movement in Congress on CHIP a few weeks ago. Sens. Orrin Hatch (R-UT) and Ron Wyden (D-OR), the chair and ranking member of the Senate Finance Committee respectively, announced the outline of a deal to keep CHIP funded. It would:

  • Extend CHIP's funding for five years, a big win for advocates who wanted a long-term extension
  • Maintain Obamacare's enhanced CHIP federal funding for two more years and then start to phase it down to traditional levels. The 2010 law boosted the federal share by 23 percent — advocates knew that was unlikely to continue indefinitely but wanted a gradual phaseout to make sure states could adjust.

"They do have to give states some kind of ramp and time to plan," Bruce Lesley, who leads First Focus, said recently.

The Hatch-Wyden deal gives CHIP advocates a lot of what they wanted: a longer extension and that off-ramp to lower federal funding for CHIP, not a cliff.

"I am really encouraged by this bipartisan progress which could break the logjam here in Washington and extend CHIP quickly," Alker wrote after the deal was announced. "This would be a victory for the peace-of-mind and economic security of families around the country who rely on CHIP for their children’s health coverage.”

The situation is dire for some states. Axios reported last month that, based on federal projections, at least three states — Arizona, Minnesota, and North Carolina, plus the District of Columbia — would run out of funding by December.

Minnesota appears to be the most dire case. The state health department sent a letter earlier this month warning that its CHIP funding would be exhausted on September 30 and it would have to take “extraordinary measures” to continue coverage in October.

“The pregnant women covered by CHIP would be at risk of losing coverage altogether,” the state said. “However, we are exploring ways to continue coverage temporarily.”

The state would be forced, it said, to take $10 million out of its general fund to cover the cost. More states would likely face difficult choices if Congress continues to allow the funding issue to go unresolved much longer.

But the last-ditch Obamacare repeal plan put CHIP on hold

But any action on CHIP was sidelined when Republicans decided to make one last attempt to repeal and replace Obamacare with the Graham-Cassidy plan. That bill fell short on Tuesday, leaving Congress just a few days to act before the program’s funding is technically expired.

There are two huge outstanding issues, aside from the calendar, that will likely stop Congress from extending CHIP before the end of the month.

  1. Hatch and Wyden haven't yet identified how they'll pay for their plan. Alker estimates they will need to find somewhere between $5 billion and $10 billion in offsets. That money has to come from somewhere. “No one has seen offsets yet,” Pellegrini said.
  2. The House has to agree to it. The Energy and Commerce Committee is working on its own plan, and we don't yet know whether the lower chamber is amenable to such a long extension and the gradual phaseout of the enhanced Obamacare funding.

CHIP advocates have also been nervous that the program could become a battleground for the still-simmering Obamacare fight — that the program's funding could get stuck not because of any disagreements over CHIP itself, but because it becomes the cipher for a separate health care fight.

There were reports earlier this month that Republicans wanted to tuck some Obamacare repeal provisions into the program’s funding extension.

"CHIP is not and never has been a vehicle to drag controversial provisions across," Pellegrini said earlier this month.

That might also explain why Senate leadership has been reluctant to set any firm timetable for taking up the CHIP extension. Hatch has said he doesn't want to see unrelated measures attached to the bill, but once the bill gets on the Senate floor, unexpected things can happen.

"If they put it on the Senate floor, how do they prevent amendments to it or prevent people from pursuing agendas?" Lesley said. "That’s what keeps leadership from even wanting to put it on the floor."

The clock is ticking, though. We're days away from the deadline, and state officials are already preparing to send out notices on October 1 warning CHIP enrollees that their coverage could soon lapse.

The Hatch-Wyden deal is a positive step for the program. But Congress is, as ever, filled with land mines for even routine health care legislation.

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