Cuts to CHIP Could Throw the Wisconsin Budget out of Balance

Congress failed last week to extend funding for several important health care programs that enjoy broad public support. By not acting on the following three programs, Republican leaders have put the future of these politically popular health programs in limbo, and ongoing inaction could pose a significant problem for the recently enacted state budget.

Each of these three programs expired on September 30:

• the Children’s Health Insurance Program (CHIP), which has enabled states to expand Medicaid access to millions of kids in low-income working families;
• the Maternal, Infant and Early Childhood Home Visiting Program (MIECHV); and
• funding for the nation’s 1,400 community health centers.

None of these programs is going to fold up right away in Wisconsin, but the failure of Congress to reauthorize funding puts their future at risk and makes it much harder for state and local officials and health care providers to plan ahead. A few states may soon need to start notifying some families that the CHIP-financed health insurance coverage for their children could soon end. (Read more here.) That’s not the case in Wisconsin, but an ongoing failure to fund CHIP could create a large hole in the 2017-19 budget bill.

According to the Department of Health Services, ending CHIP would raise the cost of BadgerCare by about $115 million per year, or roughly $9.5 million per month (read report here). That’s the cost of cutting the federal share of spending for CHIP-eligible kids to the Medicaid rate of about 59% in Wisconsin, from the current 94% reimbursement rate for CHIP spending. Another possibility is that Congress renews the CHIP law but repeals the increase in the reimbursement rate to 94% that was enacted in the Affordable Care Act. That scenario, which was recommended by President Trump, would cost Wisconsin about $6 million per month, once it takes effect.

Back in June, the Joint Finance Committee set aside about $50 million in the budget bill – apparently with the intent of protecting BadgerCare and Medicaid from federal cuts. However, later in the process – after the committee approved a new tax exemption for personal property – the $50 million cushion was removed from the budget bill.

CHIP has been an extremely successful program.  Since its creation 20 years ago, the percentage of American children who are uninsured has been cut by nearly two-thirds (from 14% to 5%), as the lower line in the following graph illustrates.

In light of the program’s success, it’s not surprising that CHIP has enjoyed broad support. More than fifty Wisconsin organizations recently sent a letter to the state’s congressional delegation urging them to “reauthorize stable, long-term funding” for CHIP.  The September 21 letter includes a diverse range of groups, including health care providers and advocates, educators, seniors, and faith-based organizations.

In mid-September, Senators Hatch and Wyden unveiled a bipartisan compromise that would maintain the current federal matching rate for CHIP for two years, before reducing it to about 83% in Wisconsin in 2020 and then to the traditional CHIP rate of about 71% in Wisconsin in 2021. That approach seems to have strong support in Senator Hatch’s committee, but it has not been endorsed by Senator McConnell or Speaker Ryan.

For more than 20 years, CHIP has enjoyed broad bipartisan support, and one might expect that to be the case again this year. However, Republican leaders in both houses seem to be determined to pare back spending in order to offset part of the cost of the mammoth tax cut proposal that they are now working on. We may soon see if their tax cut plan, which primarily benefits the top 1% of taxpayers, will lead to significant cuts in health care for children.

Jon Peacock