Unbiased Analysis of Today's Healthcare Issues

What happens to CHIP?

Written By: Jason Shafrin - Dec• 26•17

The Children’s Health Insurance Program (CHIP) is a federal program that provides matching funds to states in order for them to provide health insurance to children.  The program was designed to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid.

Currently, however, the program is in jeopardy.  In fact, federal funding for CHIP expired September 30.  Some states, such as Colorado, have supplied emergency funding to keep CHIP afloat in their states.  On December 21, the federal government did pass $2.85 billion of emergency funding.  As funding was backdated to October 1, the 6 months of funding will only cover expenses through the end of March, 2018.

There are arguments on both sides of the aisle about the merits of CHIP.  Provide health insurance to kids has clear value to these children and their families.  Also, CHIP makes the U.S. society more equitable.  Those opposed to CHIP may prefer other ways to help kids get insurance, such as vouchers to purchase private insurance, or may even prefer to end CHIP and spend the tax money on other federal programs (e.g., education, defense), or tax cuts or may fear that CHIP may decrease the labor supply of parents who otherwise would work to get coverage for their kids.

Regardless of where you stand on the political spectrum, this uncertainty is clearly bad for all involved.  States have a hard time planning their budgets if they are unsure whether federal funds will materialized.  The federal government’s need to dip into emergency funding leads to a lack of fiscal discipline.  These expenses should be planned for.  Most importantly, parents and their children need to be able to plan for the future.  If CHIP is available, clearly many parents will want this coverage for their children.  If the program is not available, however, then perhaps some would return to work at suboptimal jobs rather than continue a job hunt in order to get health insurance for their family.  Large purchases (e.g., house, car, durable goods) clearly depend on the amount disposable income families have and this amount would decreases significantly if they had to buy insurance rather than be covered through CHIP.

Clear planning, transparency, and predictability are the hallmarks of good government.  This debate over CHIP funding–similar to the debates over the “doc fix” over physician reimbursement–shows that these emergency funding approaches are not only bad for the budget, but they hurt the people they are supposed to help by increasing the amount of uncertainty in their lives.

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