New CBO Estimate shows ACA Mandate Repeal Cuts CHIP Funding Costs

January 2018 ~

The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) have released an updated cost estimate for the Senate’s Children’s Health Insurance Program (CHIP) reauthorization bill S.1827, the Keep Kids’ Insurance Dependable and Secure (KIDS) Act of 2017.

In a letter to Senate Finance Committee Chair Orrin Hatch, the CBO and JCT write that the new estimate shows that the KIDS Act would only result in an deficit increase of $0.8 billion over 2018-2027, versus the in contract to a previous estimate of $8.2 billion.

The CBO and JCT continue that the new estimate also shows that the bill would extend federal funding for CHIP for five years, through fiscal year 2022 and would make several other changes to CHIP, including a change in the federal matching rate for the program and extension of the requirement that states maintain eligibility levels as they were in 2010.

When compared with the October 20th, 2017 cost estimate for the KIDS Act, the new cost estimate shows a cost over the next 10 years that is smaller by $7.5 billion. The letter states that the “net change in the deficit is significantly smaller than the agencies’ prior estimate primarily because the offset to the cost of funding CHIP for five years is larger.”

The letter explains that CBO and JCT predict the offset that reduces direct spending related to the marketplaces is higher for three main reasons:

  1. Marketplace premiums will increase in light of the individual mandate penalties being removed and “as a result, the federal cost of enrolling a child in coverage through the marketplaces will be higher. Thus, funding CHIP for five additional years—causing some children to be covered in that program rather than through the marketplaces—would result in a larger reduction in spending related to the marketplaces than in the prior estimate,”
  2. Without the penalties related to the individual mandate, a larger share of parents would be uninsured. When funding for CHIP is reduced, some parents seeking coverage for their children would enroll them in a family policy through the marketplaces. While some of those parents would otherwise be insured and could add their children to their coverage, a larger group is now expected to be uninsured and seek coverage for themselves and their children, resulting in higher federal costs. As such, funding CHIP for 5 additional years would result in a larger cut in spending related to the marketplaces.
  3. Final regulations as to how premiums differ by age that increase premiums for children’s coverage through the marketplaces are now incorporated into the estimate causing federal spending per child in the marketplaces to be higher. Those regulations cause federal spending per child in the marketplaces to be higher. Funding CHIP for 5 additional years would reduce the number of children covered through the more expensive marketplaces.

See the full text of the KIDS Act here and the updated cost estimate from the CBO here.

 

 

Source(s): HealthcareDIVE; Fierce Healthcare; Congressional Budget Office; Congress.gov; Kaiser Health News; Becker’s Hospital Review;

 

 

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