States face budget shortages if Congress doesn’t extend CHIP funding

“Without federal funding [for the Children’s Health Insurance Program (CHIP)], states would face budget pressures, children would lose coverage, and implementation of program changes could result in increased costs and administrative burden for states as well as confusion for families,” according to a Kaiser Family Foundation (KFF) report published on September 6, 2017. Federal funding for CHIP is set to expire on September 30, 2017. The KFF report provides an overview of states’ plans for CHIP in light of the uncertainty about the future of federal funding and describes how the lack of federal funding will impact states and how children and their families will be affected.

States’ CHIP programs

States can provide CHIP through a separate CHIP program, a CHIP-funded Medicaid expansion, or a combination of the two approaches. If federal funding ends, states with separate CHIP coverage would not be required to maintain coverage. Under the Patient Protection and Affordable Act (ACA) (P.L. 111-148); however, states with CHIP-funded Medicaid expansions or a combination of both approaches would be required to maintain this coverage under the maintenance of effort requirement (see ACA sections 2001, 2101, 10203). Without federal funding, states’ costs would increase, KFF predicted.

Findings from surveys of states

KFF and Health Management Associates surveyed state Medicaid officials about their current budgets and their future plans for the CHIP program.In addition, KFF, along with the Georgetown University Center for Children and Families, conducted interviews with several state CHIP directors.

Key findings include:

  • Forty-eight out of 50 responding states, including the District of Columbia, assumed continuation of federal CHIP funding in the fiscal year (FY) state budgets. Thirty-four states assumed the funding would continue with the 23% enhancement that was included in the ACA.
  • Because states assumed continued federal funding in their state budgets, the majority of the states will face a funding shortage if federal funding is not extended. KFF noted that because state budgets have passed, addressing shortfalls will likely require special legislative sessions and/or governor action. Challenges include replacing federal dollars, costs of implementing program changes as well as system changes, outreach and training costs, and costs to close out the program.
  • Ten states estimated that they would exhaust their FY 2017 CHIP allotment by the end of 2017. Thirty-two states projected they will exhaust their federal funding at the end of March of 2018.
  • The majority of states have not developed plans for actions they would take if Congress does not extend funding but some plan to close or cap enrollment and/or discontinue coverage for children in separate CHIP programs. A few states have state statutes that require them to close CHIP and discontinue coverage if federal funds for CHIP decrease. In a few states, CHIP-funded coverage for other groups such as pregnant women and children in buy-in programs would be at risk for cutbacks.

Impact of loss of CHIP coverage

If states close enrollment or discontinue coverage for children in separate CHIP programs, some children would be uninsured but others could shift to parents’ employer-sponsored plans or Marketplaces plans. Previous enrollment caps and freezes that were a result of state budget pressures, led to coverage losses, left eligible individuals without access to coverage and had negative effects on children’s health and family finances, according to KFF. When enrollment was frozen in Arizona, some children were moved to Medicaid, but six in ten likely were uninsured and the uninsured rate grew following the freeze. In North Carolina, the number of children placed on a waiting list rose to over 34,000. Parents with children affected by the freeze reported that the children needed care during the period they were uninsured. They reported delaying or difficulty in obtaining care for the children, difficulties in obtaining prescription medications for their children, and significant financial hardships.

Actions to prepare for lack of federal funding

States need sufficient time to notify families and other stakeholders of the changes in coverage, make changes to eligibility systems, and train eligibility workers. They must also update contracts with managed care plans and third party administrators and submit necessary state plan amendments. States also must be aware that the steps they take to prepare and costs that they incur may be wasted if they begin to implement the change and Congress takes action after the deadline to extend funding.

The ACA makes a measureable difference with HIV coverage

People with HIV experienced significant coverage gains under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) as a result of Medicaid expansion, the creation of the health insurance marketplaces, and the elimination of pre-existing condition exclusion. According to a Kaiser Family Foundation (KFF) Issue Brief, as long as the future of the ACA remains uncertain, those access and coverage gains are at risk.

Baseline

To develop a baseline for understanding current access to care for people with HIV, KFF examined multiple variables across the three main pathways for HIV coverage and care: (1) Medicaid, (2) private insurance and the ACA marketplace, and (3) the Ryan White HIV/AIDS program. KFF considered factors like states’ Medicaid expansion status, the number of health insurance issuers per county, and AIDS Drug Assistance Program (ADAP) eligibility levels.

Medicaid 

Prior to the ACA’s Medicaid expansion, most individuals with HIV obtained Medicaid coverage through the disability pathway, meaning that coverage was often not obtained prior to a beneficiary’s development of AIDS. Currently, 62 percent of people with HIV live in a Medicaid expansion state, where care is more likely to be accessible through the income pathway, regardless of disability level. Additionally, 24 states provide Medicaid coverage through the disability pathway above the federally mandated level of 73 percent of the federal poverty level (FPL).

Marketplaces 

In 33 states, where 83 percent of people with HIV live, there are three or more issuers in the ACA marketplace. While five states—Arkansas, Oklahoma, South Carolina and Wyoming—had only one issuer in 2017, some states had several. For example, Wisconsin had 15 insurers, New York had 14, and California had 11. KFF also looked at issuer representation in counties with high incidence of people with HIV. While 43 percent of people with HIV live in one of the eighteen (18) states with an average of three or more issuers per county, the majority of people with HIV—57 percent—live in one of the 33 states with less competition—one or two issuers per county.

Ryan White

The Ryan White HIV/AIDS Program provides outpatient HIV care and treatment to low and moderate income individuals. The program serves more than half of the people diagnosed with HIV in the country. The average eligibility level for the medication assistance program is 386 percent FPL. While 17 states use an eligibility level of 400 percent, 72 percent of people with HIV live in a state with eligibility levels at or above the national average. While the Ryan White program would continue to operate with an ACA repeal, many individuals currently covered by marketplace or Medicaid plans would likely turn to the program for coverage. Due to the program’s limited resources, KFF estimates that such an over-reliance could cause individuals to lose access to care.

CMS grants New Hampshire Medicaid funding compliance extension

CMS has clarified that New Hampshire’s Medicaid expansion may end next year, but the current program can continue until the end of 2018. CMS stated that New Hampshire’s use of voluntary donations from health care providers and hospitals in the New Hampshire Health Protection Fund fails to comply with the federal requirements. CMS raised the possibility that federal funds may be withheld which would have resulted in a termination of the program.

The Medicaid statute in Section 1903(w) of the Soc. Sec. Act and implementing regulations at 42 CFR Sec. 433.54 and 433.66 establish a prohibition on provider-related donations, except in very limited circumstances. In a letter to New Hampshire officials, CMS indicated that there is a relationship between the donations and Medicaid payments, because Medicaid expansion is conditioned on the receipt of donations as articulated in New Hampshire legislation. The state’s use of voluntary donations from hospitals to supplement federal Medicaid funding violates federal law. The non-federal share financing of the New Hampshire Health Protection Program or Medicaid expansion through the use of provider-related donations to pay for Medicaid service-related costs violates the requirement that a bona fide provider-relation is a donation that has no direct or indirect relationship to Medicaid payments.

The 50,000 New Hampshire residents participating in the Medicaid expansion will not see any change in their coverage through the current re-authorization which continues until the end of 2018.New Hampshire’s next legislative session will need to address compliance with the federal law for the 2019 budget to bring the state’s non-federal share financing into compliance with the existing federal statute and regulations. Otherwise, Medicaid expansion in the state will lose federal funding. Governor Chris Sununu (R) stated that stripping coverage from Medicaid enrollees would have been “grossly unfair,” and will use the transition period to consider future changes.

Wrap-around Medicaid gives states administrative headaches

Medicaid premium assistance, where Medicaid acts as wrap-around coverage for a private health insurance plan, is administratively complex for states and may not work well. In an issue brief, the Kaiser Family Foundation (KFF) considered what is known about wrap-around Medicaid coverage, and looked at financial implications of such a program.

Wrap arounds

According to KFF, states with Medicaid premium assistance programs use Medicaid funds to purchase private coverage for Medicaid beneficiaries. Federal law requires these programs to make the purchased private coverage on par with what the state’s Medicaid program would cover, but private insurance generally covers less than Medicaid and requires more out-of-pocket payments. Therefore, states with these programs must provide supplemental benefits and cost-sharing protections, known as “wrap arounds,” to insure that cost sharing does not exceed Medicaid limits. In general, states with these programs have low enrollment rates, and therefore, there is limited data available to determine how well the programs work.

Administrative complexity

States have found that Medicaid premium assistance programs require a lot of administrative work to determine exemptions, track and manage cost sharing under multiple private plans, and track wrapped covered benefits. The administrative burden led multiple states to discontinue Medicaid premium assistance programs and to merely use their own managed care delivery systems. However, that burden can be minimized. When Arkansas created its Medicaid premium assistance program under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), it contracted with a limited number of standardized plans. The standardization made it easier for the state to track and manage the wrap-around payments.

Financing

KFF looked at legislative proposals that would expand wrap-around Medicaid coverage and noted that, in order for such a program to be effective, it would need adequate federal funding, because such programs are required to be cost effective compared with traditional Medicaid coverage. It also noted that, if these programs were done under a waiver program rather than through traditional Medicaid, the funding would be limited in duration and amount, leaving it uncertain whether the program would be able to continue in the future.