Federal Financing for the State Children's Health Insurance Program (CHIP) Page: 2 of 16
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Federal Financing for the State Children's Health Insurance Program (CHIP)
The State Children's Health Insurance Program (CHIP) is a means-tested program that provides
health coverage to targeted low-income children and pregnant women in families that have annual
income above Medicaid eligibility levels but have no health insurance. CHIP is jointly financed
by the federal government and the states, and the states are responsible for administering CHIP.
The federal government's share of CHIP expenditures (including both services and
administration) is determined by the enhanced federal medical assistance percentage (E-FMAP)
rate. Statutorily, the E-FMAP can range from 65% to 85%. The Patient Protection and Affordable
Care Act (ACA; P.L. 111-148, as amended) included a provision to increase the E-FMAP rate by
23 percentage points for most CHIP expenditures from FY2016 through FY2019. With this
increase, the E-FMAP ranges from 88% to 100%.
The federal appropriation for CHIP is provided in statute. From this federal appropriation, states
receive CHIP allotments, which are the federal funds allocated to each state and the territories for
the federal share of their CHIP expenditures. In addition, if a state has a shortfall in federal CHIP
funding, there are a few sources of shortfall funding, such as the Child Enrollment Contingency
Fund, redistribution funds, and Medicaid funds.
In statute, FY2017 is the last year a federal CHIP appropriation is provided, so a law would need
to be enacted if federal funding of CHIP is to be continued. Even though federal CHIP funding is
set to expire after FY2017, states are expected to have federal CHIP spending in FY2018 because
states will have access to unspent funds from their FY2017 allotments and to unspent FY2016
allotments redistributed to shortfall states (if any). According to an estimate conducted by the
Medicaid and CHIP Payment and Access Commission, without additional federal CHIP funding,
three states (Arizona, Minnesota, and North Carolina) and the District of Columbia are projected
to exhaust their federal CHIP funding by the end of the first fiscal quarter of FY2018, and more
than half of states are projected to exhaust their federal CHIP funding by the second fiscal quarter.
Under current law, the ACA maintenance of effort (MOE) requirement for children is in place
through FY2019. The MOE provision requires states to maintain income eligibility levels for
CHIP children through September 30, 2019, as a condition for receiving federal Medicaid
payments (notwithstanding the lack of corresponding federal CHIP appropriations for FY2018
and FY2019). If federal CHIP funding expires, the MOE requirement would affect CHIP
Medicaid expansion programs and separate CHIP programs differently. States with CHIP
Medicaid expansion programs must continue to cover their CHIP children once federal funding is
no longer available. However, states with separate CHIP programs would not be required to
continue coverage after enrolling eligible children in Medicaid or certified qualified health plans.
With FY2017 being the final year for which federal CHIP funding is provided in statute,
Congress's action or inaction will determine the future of CHIP and of health coverage for CHIP
children. In considering the future of CHIP, Congress has a number of policy options, including
extending federal CHIP funding and continuing the program, or letting CHIP funding expire.
This report provides an overview of CHIP financing, beginning with an explanation of the federal
matching rate. It describes various aspects of federal CHIP funding, such as the federal
appropriation, state allotments, the Child Enrollment Contingency Fund, redistribution funds, and
outreach and enrollment grants. The report ends with a section about the future of CHIP funding,
including the options for extending CHIP funding and what could happen if federal funding
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Mitchell, Alison. Federal Financing for the State Children's Health Insurance Program (CHIP), report, September 29, 2017; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1042336/m1/2/: accessed April 24, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.