An initial cap on discretionary spending, expected to save $917 billion over 10 years, does not include cuts to the government’s health insurance programs. But lawmakers punted another $1.2 trillion in savings to a bipartisan “super committee” to figure out. The 12-member committee can pass any cuts members see fit, including reductions in health spending.
One possible target is a provision in the health law passed by Congress last year that prevents states from rolling back eligibility for Medicaid and the Children’s Health Insurance Program (CHIP), the joint federal state health insurance programs for low-income and disabled residents. The Congressional Budget office estimates that repealing the provision would save the federal government $2.1 billion over the next decade.
Twenty-nine Republican governors threw their support behind the option in a June letter to Sen. Orrin Hatch, R-Utah, arguing that states struggling to balance their budgets need the flexibility to cut Medicaid recipients in the years leading up to 2014, when the federal health law kicks in and all Americans earning below 133 percent of the federal poverty level become eligible for the program. The federal government is temporarily picking up the cost of new Medicaid enrollees at that time. CBO analysis said that while such a change would cut Medicaid costs for the state and federal governments immediately, it “would have no significant effect on the number of adults or children eligible for Medicaid” after the health law’s Medicaid expansion goes into effect.
However, the impact of a change in CHIP eligibility is more complicated. Unlike the potential Medicaid cuts, changes to the CHIP program, which currently covers about 8 million children, could extend beyond 2014. If eligibility rules were tightened now, the CBO estimates that enrollment in CHIP would drop by 1.7 million children by 2016, and half of states would drop their CHIP programs altogether. That’s largely because states pay a portion of the costs of the CHIP program, so if they shift those children to the exchanges instead, where low and middle-income families can receive subsidies to purchase insurance, the federal government will absorb the total cost.
By 2016, CBO estimates that CHIP enrollment would be reduced by about 1.7 million people. Many of these people would likely move to insurance purchased through the state health exchanges or through workplaces. But in total, the CBO estimates that in 2016 if the eligibility rules are changed, an additional 300,000 individuals — primarily children — would become uninsured compared to the current estimates for the health overhaul.
Bruce Lesley, president of First Focus, an organization that advocates on behalf of children, and a former longtime Democratic Capitol Hill staffer, says the CHIP effect is “an unintended consequence” that would have a devastating impact on a vulnerable population. “We’ve made so much progress” on children’s health insurance, “the last thing we want to do now is go backwards,” he says.
Even those children who shift to private health insurance plans may also be worse off, Lesley argues, because CHIP requires less cost-sharing by families than private plans and the benefits are built around pediatric needs.
A proposal to repeal the “maintenance of effort provision” for Medicaid and CHIP was also proposed as a separate House bill called the “State Flexibility Act” in May. Despite significant pushback from Democrats, the bill passed through a House Energy and Commerce Health Subcommittee. The CBO based its estimates on that legislation.
Obama and congressional Democrats, however, say eliminating the provision would increase the challenge of expanding Medicaid in 2014. If people lose coverage before Medicaid eligibility is expanded in 2014, Democrats say, they may come into the program in worse health, driving up costs.