Bush Administration, Lawmakers and States Express Concern About CHIP Funding

A "fresh dispute" among the Bush administration, Congress and several states has arisen over funding for the CHIP program, the Washington Post reports. Some officials are concerned that states, responsible for 30% of the program's costs and determining eligibility rules, are not receiving enough funding from the federal government (Goldstein, Washington Post, 10/24). Under CHIP, created in 1997, states have three years to use federal funds appropriated for a given year. If states do not spend the money within that time, the federal government redistributes a portion of the unused money to other states that exhausted their initial funding. Any remaining unused money must be given back to the Treasury. Earlier this month, twenty-five states forfeited $1.2 billion in unspent CHIP funds to the U.S. Treasury. The money, unclaimed after four years, can be used for purposes other than health programs unless Congress passes legislation to return the funds back to state CHIP programs (California Healthline, 10/15). Further complicating the problem, federal CHIP funding will drop by 26% over the next three years because of a provision in the Balanced Budget Act of 1997 (California Healthline, 8/2). The situation has created a "paradox," as states had more funding when their programs were smaller and now are losing those funds as the programs have grown and more money is needed, the Post reports.

Unless the funding situation is resolved, states will have to cut 900,000 children from the program between 2003 and 2006, administration officials estimate. Currently, four million children receive health insurance through CHIP. The Senate in August passed a bill that would help protect some CHIP funds (Washington Post, 10/24). The measure, cosponsored by Sens. John Rockefeller (D-W.Va.) and Lincoln Chafee (R-R.I.), would maintain 2001 federal funding levels for CHIP in fiscal years 2003 and 2004. The legislation also would extend a law that allows unspent CHIP funds to be reallocated to states instead of requiring them to return that money to the treasury (California Healthline, 8/2). In his fiscal year 2003 budget proposal, President Bush also requested that states be allowed to keep CHIP funds. However, the Rockefeller-Chafee measure goes beyond what the Bush administration wants because it would continue to funnel money from states that have too much money to states that need more, the Post reports. The administration would prefer that each state keep its original allotment. Further, the Bush budget proposal does not include any additional funding for CHIP, as the Rockefeller-Chafee measure would. An administration official said that simply permitting states to hold onto their current funding would help them "avoid cutting any children from the program," the Post reports. CMS Administrator Tom Scully said, "We don't want to ... have [the funds] go back ... to be spent on road-building and not health care. Having that money go back to the Treasury at this point makes no sense." The Post reports that the House has yet to address the issue, but HHS officials are urging lawmakers to take up the issue after the election recess (Washington Post, 10/24).