Jan 11, 2018

Funding CHIP would save the government money, CBO says

Federal CHIP funding expired in September. Photo: Matt McClain/The Washington Post via Getty Images

Funding the Children’s Health Insurance Program just keeps getting cheaper. The Congressional Budget Office originally said a five-year extension would cost $8.2 billion over a decade, then lowered the cost to $800 million. Today, CBO said a longer, 10-year extension would ultimately save taxpayers money — about $6 billion over a decade.

Why it matters: Congress’ failure to extend federal CHIP funding is not the result of a fight over CHIP, but rather a fight over how to offset the costs of extending CHIP. Now, though, there are potentially no costs to offset. That ought to make this much easier for Congress to (finally) accomplish.

How it works: Funding CHIP does cost money, obviously. So how does it work out into a net savings? It's because covering kids through CHIP is cheaper than the alternatives, CBO says.

  • If kids aren't covered by CHIP, they'd likely be covered by some combination of Medicaid, subsidized private insurance through the Affordable Care Act, or parents' employer-based health plans (which the federal government also subsidizes). That would ultimately cost more than simply paying for CHIP, CBO said.
  • That analysis has changed since Republicans repealed the ACA's individual mandate. Repealing the mandate will likely cause premiums for ACA coverage to rise dramatically, and that's why CHIP coverage is suddenly so much cheaper when compared to private insurance.
  • Why is a 10-year CHIP extension cheaper than a five-year extension? Because the proposal CBO evaluated would gradually lower the federal government's share of overall CHIP funding, pushing more of those costs to the states over time. The longer the extension, the more it reflects those savings.

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