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CBO: Cost of CHIP Renewal Smaller Than Projected

News should ease Congress’ task to pass legislation

The Congressional Budget Office now estimates the Senate CHIP bill would cost $0.8 billion over 10 years. (Bill Clark/CQ Roll Call file photo)
The Congressional Budget Office now estimates the Senate CHIP bill would cost $0.8 billion over 10 years. (Bill Clark/CQ Roll Call file photo)

Lawmakers will have to come up with only less than $1 billion to renew the Children’s Health Insurance Program, according to a new Congressional Budget Office analysis released Friday. That estimate, far lower than previous projections, should ease lawmakers’ task of passing legislation this month.

In a four-page letter to Senate Finance Chairman Orrin G. Hatch, CBO Director Keith Hall said the Senate CHIP bill would cost $800 million over 10 years. Prior to this, the CHIP bill needed to be offset by about $8 billion over 10 years. The total cost of CHIP over 10 years would be $48.4 billion, but decreases in Medicaid and health care marketplace spending would offset much of that amount.

Lawmakers in both chambers and in both parties have agreed to renew CHIP for five years, but a dispute over how to pay for it has been the main issue delaying passage. House Republicans suggested a number of offsets that would change Medicaid, Medicare and the existing federal Prevention and Public Health fund established under the 2010 health care law as part of a CHIP bill that the House passed mostly along party lines. House and Senate Democrats largely opposed these offsets.

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A major factor accounting for the lower CBO cost projections comes from action last month, when Congress passed a tax overhaul that repealed the penalties that most consumers must pay if they don’t get health insurance.

Hall attributed the reduction in CHIP costs to three main factors. First, the CBO expects marketplace premiums under the health care law to be higher due to the lack of mandate penalties. If Congress funded CHIP for five years, more children could be covered under that program instead of the more costly exchanges. Because CHIP coverage would be cheaper than the exchange plans, marketplace spending would be lower than previously projected.

Second, a greater share of parents could become uninsured without the individual mandate. If Congress does not act to provide more CHIP funding, parents may attempt to preserve their children’s health care by enrolling them in a family plan through the marketplace. Some of these parents may have been previously uninsured, so that would increase federal costs. But if CHIP is renewed, the CBO said that would reduce marketplace spending.

Third, the CBO analysis considered changes the Trump administration made to regulations regarding premiums varying by age. Children’s premiums in the marketplace would be higher under those changes. But if Congress renews CHIP funding and some of those children are covered by CHIP instead of the marketplace, then the federal government could save money overall.

“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,” Hall wrote.

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