Extended Federal CHIP Funding: A Windfall for California, But Use It Wisely

Eugene Lewit, Stanford University

May 19, 2015
Eugene Lewit
Eugene Lewit

With the passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), California will receive more than $1.1 billion in additional federal funds over the next two years, providing an unanticipated opportunity to improve health care for low- to moderate-income children.

Media attention focused mostly on MACRA's change of Medicare reimbursement methodology for physicians, but the continuation of federal funding for the Children's Health Insurance Program (CHIP) for two additional years is also of major significance.

The law's principal benefits to California, as described in my recent issue brief for the California Health Care Foundation, are continued federal CHIP funding of eight coverage programs for more than 1.6 million low- to moderate-income children and pregnant women, and a large increase in the federal share of costs (from 65% to 88%) for those programs. Moreover, the infusion of federal funds comes with no additional strings attached. If federal CHIP funding had not been extended, California would have experienced a similar-sized reduction in federal funds and might have scaled back some programs.

Better Outlook for a Half-Million Children

The new law also fosters an environment conducive to covering many of the 460,000 children eligible for Medi-Cal but not enrolled. The state share of cost for each enrollee in the eight CHIP-funded programs, including CHIP-funded Medi-Cal, will be reduced by two-thirds to 12% for the next two years (although the state share of cost for enrollees in traditional Medi-Cal remains unchanged at 50%).

In addition, the law extends authorization for Express Lane Eligibility, a streamlined process to enroll children in Medicaid and CHIP, and it continues a competitive federal grant program to support outreach and enrollment efforts for Medicaid and CHIP. These grant funds could be supplemented as needed with some of the new CHIP funds to support additional outreach and enrollment efforts.

The new funds could also be used to experiment with policies to improve Medi-Cal for children — for example, to address their identified problems with access to needed care. Limited access to providers in the Medi-Cal dental program has long been an area of concern, and partly due to significant growth in Medi-Cal enrollment associated with the Affordable Care Act (ACA), concerns about children's timely access to primary and some specialty care providers have also grown.

Because of Medi-Cal's low levels of provider reimbursement, advocates, health care providers, and others are urging the state to address access issues by using some of the new CHIP money to augment child provider reimbursement rates — a targeted continuation of the now-expired primary care rate bump contained in the ACA. Increased reimbursement rates may also be attractive because they can be offset in part by federal matching funds. Since there is lack of agreement on whether increased reimbursement rates will significantly improve access to necessary dental and medical care, higher rates could be accompanied by monitoring and evaluation activities to gauge the extent of improvement in children's access to care.

Some of the new money could also be used to extend Medi-Cal coverage to low-income immigrant children not now eligible for coverage.

The Takeaway

MACRA provides an important opportunity to improve health care for children, but the news is not all good. The future of federal CHIP funding after September 2017 is uncertain. Federal funding for CHIP could end or be reduced at that time. Given the possibility of reduced federal CHIP funds, it will be important to use the next two years to identify high-value initiatives that improve access or enrollment and that will warrant continuation if cuts are made.

Governor Jerry Brown's just-released budget revision includes the enhanced federal funding for CHIP programs as a general fund savings, but there still is time, as this year's and next year's budgets are finalized, to make the most of the funding infusion to improve kids' health and dental care.