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As January CHIP deadline looms, 1.7M kids at risk

Without enough funding to cover March, many states would not be able to cover all children beyond February without accessing redistribution funds.

Beth Jones Sanborn, Managing Editor

A new report from Georgetown University Health Policy Institute Center for Children and Families is lending new urgency to the need for Congress to pass lasting CHIP funding before the end of January. The January 2018 update to the Center's "When Will States Run Out of Federal CHIP Funds" report said that if Congress doesn't approve long-term CHIP funding in January, nearly 1.7 million children in separate CHIP programs in 21 states with projected shortfalls in March could lose coverage by the end of February. 

"As February 1 approaches and Congress has still not taken action, some states are likely to send notices to families alerting them that their child's coverage is in jeopardy and may begin procedures to freeze enrollment."

[Also: Extending CHIP for 10 years rather than 5 saves $6 billion, CBO says]

The report said that 11 states would exhaust all of their leftover FY 2017 allotment and the partial FY 2018 allotment provided by a December 22 Continuing Resolution passed by Congress before the end of February. The exhaustion of these funds means that the states would not be able to cover all children beyond January without accessing redistribution funds. 

Those states are Arizona, Connecticut, D.C., Florida, Hawaii, Louisiana, Minnesota, Nevada, New York, Ohio, and Washington.

[Also: 9M children in limbo as Congress debates CHIP funding]

In March, roughly half the states will be face shortfalls, and without enough funding to cover March expenditures, these states would be unable to cover all children beyond February without accessing redistribution funds.

What's more, there is also an air of uncertainty surrounding how long redistribution funds themselves will last, such that states that anticipate shortfalls  in March will need to take action by February 1 so as to be able to give families in jeopardy of losing coverage at least 30 days notice, the report said.

Researchers looked at the continuing resolutions passed on December 8 and December 22 and consulted with CHIP experts in assessing the laws' impact. Data from an HHS spreadsheet entitled "Children's Health Insurance Program – FY 2018 Emergency Shortfall Redistribution Payments determined under 'Redistribution Special Rule during 1st quarter of FY 2019' Methodology" was analyzed. The sheet included data on leftover FY 2017 allotments, first quarter FY 2018 projected expenditures, and redistributions made as of December 4, 2017. They also included the preliminary allotments for each state of the $2.85 billion appropriation posted by CMS. 

Though based on the most recent public data, the report is based on expenditure data from August 31, 2017 projections.

"These preliminary estimates were to be updated as of November 30, 2017 but CMS has not publicly released any new figures. Updated projections could show that states have higher than originally projected expenditures, as well as lower leftover FY 2017 allotments," the report said.

CHIP serves about 9 million children annually, with each state getting funding based on projected expenditures. States have two years to spend the money and the remaining funds are dumped into a redistribution pool. At the end of FY 2017, a little less than $3 billion was available in unused CHIP funds. Originally the surplus was earmarked for use based on proportionally based on projected shortfalls for the fiscal year.

But changes came thanks to two Continuing Resolutions passed in December. 

Most CHIP programs contract with managed care organizations to deliver services and states pay the MCOs one month in advance of the coverage month. A few states contract with health plans and pay retroactively.  A December 8 resolution state shortfalls were fully covered in the first fiscal quarter of 2018 even if the amount exceeded the state's proportional share. As a result, more than $1.2 billion was paid out to shortfall states. A December 22 resolution changed things again. It included $2.85 billion in federal funding for CHIP for the first half of fiscal year 2018, which began October 1, 2017 and a major change was also made to how remaining redistribution funds would be paid out to states, with the estimated $1.7 billion balance now slated to be paid out to states monthly on a first-come, first-serve basis as they used up their allotments. 

"When this emergency shortfall fund cannot meet the needs of all states, it will be prorated to states based on each state's proportional share of the total shortfall in that month," the report said.

Now, no state is guaranteed a any share of the redistribution funds, and there are no guarantees that additional shortfall monies will be available in any given month. A number of variables could affect the size and timing of state shortfalls including: accuracy of spending projections; events liek this year's disastrous hurricane season and accelerated enrollment thanks to back-to-school enrollment campaigns; boosted spending in anticipation of coverage loss; sudden spikes in state spending; and administrative expenses related to closing programs, system changes or notifying families of coverage changes.

Twitter: @BethJSanborn
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