CBO Says Funding CHIP Actually Saves Gov’t Billions. So What’s The Holdup?

It has now been more than 100 days since the Republican-controlled Congress allowed funding for the Children’s Health Insurance Program (CHIP) to lapse, and despite several infusions of stopgap funding from both Capitol Hill and the Department of Health and Human Services, states could run out of money as early as next week. By March, according to a new report from Georgetown University, nearly half of all states will exhaust all of their federal funding. The program covers nearly 9 million children and pregnant women across the country.

While members of Congress on both sides of the aisle insist that CHIP must be reauthorized, GOP leaders have yet to even schedule a vote, and the program has been stuck in limbo for months amid disagreements about how to pay for it.

A new email from the Congressional Budget Office to lawmakers obtained by TPM notes, however, that renewing the program could actually save the federal government money.

Extending CHIP for 10 years would save a total of $6 billion, CBO staffers said. The internal estimate comes just a few days after the agency reported publicly that it had slashed its estimate of how much it would cost the government to renew CHIP for five years—from $8 billion to around $800 million—following Republicans’ move to repeal the individual mandate as part of a tax overhaul.

“With all of their policies that have driven up premium costs in the individual market, not just the mandate repeal but also cutting cost-sharing reduction payments, they made CHIP even more of a bargain than it already was,” Joan Alker, the executive director of Georgetown University’s Center for Children and Families, told TPM.

Essentially, killing the mandate dramatically raises premiums in Obamacare’s individual market, which is where millions of low-income families currently enrolled in CHIP would have to turn were the program to disappear. The higher those premiums go, the more the government has to pay in subsidies. So by raising the cost of not renewing CHIP, Republicans have dramatically lowered the cost of reauthorizing it.

But Matthew Fiedler, an economist at Brookings’ Center for Health Policy, told TPM that this not much of a cause for celebration, as part of the reason for the new, lower cost of CHIP is the expectation that many more parents around the country will go uninsured.

“If you think about a world with no CHIP, a lot of families would still want to have their kids covered, so they would look for private insurance in the individual market,” he explained. “There, once you’ve covered your kids, it’s basically free to cover yourself on the same policy, because of how the premium tax credits work. But if CHIP comes back, the parent is the only one to remain on the policy, facing a cost for the coverage. Without the mandate, more parents are likely to drop their insurance than CBO used to think.”

The news that renewing CHIP is now a net cost-saver, Fiedler emphasized, “isn’t really a silver lining of the repeal of the individual mandate. We’re going to have lower coverage for parents than we used to.”

Still, Democrats are seizing on the new information from CBO to push for swift renewal of CHIP, saying the past arguments about offsetting its cost are now irrelevant.

“This should be a no brainer,” said Rep. Frank Pallone, Jr. (D-NJ) in a statement citing the CBO e-mail showing the program to save billions over 10 years. “We should stop the uncertainty and permanently extend CHIP.”

Meanwhile, the nearly $3 billion for CHIP that Congress passed in December could run out in just a few weeks.

“CHIP has never operated like this before—on a short-term, month-by-month basis. You can’t manage a health program like that. It just doesn’t work,” Alker said. “We expect to see states start to send out notices out to families that CHIP may expire or possibly order enrollment freezes by February 1st if Congress doesn’t act.”