CBO Issues Cost Estimate for HEALTHY KIDS Act
H.R. 3921
HEALTHY KIDS Act of 2017
As ordered reported by the
SUMMARY
H.R. 3921 would extend federal funding for the
(CHIP) for five years, increase Medicaid funding for
On net, CBO estimates that implementing the legislation would reduce the deficit by
CBO estimates that enacting H.R. 3921 would not increase net direct spending or on-budget deficits in one or more of the four consecutive 10-year periods beginning in 2028.
H.R. 3921 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA).
ESTIMATED COST TO THE FEDERAL GOVERNMENT
The estimated budgetary effect of H.R. 3921 is shown in the following table. The costs of this legislation fall within budget function 550 (health).
By Fiscal Year, in Millions of Dollars
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-2022 2018-2027
INCREASES OR DECREASES (-) IN DIRECT SPENDING
Sec. 101-104 - CHIP
Estimated Outlays 1,438 4,489 3,601 1,615 1,740 1,372 632 4 2 0 12,883 14,893
Sec. 105 - Modifying Reduction in Medicaid DSH Allotments
Estimated Outlays 1,356 0 0 0 0 0 0 0 -761 -788 1,356 -193
Sec. 106 -
Payments
Estimated Outlays 796 241 4 0 0 0 0 0 0 0 1,040 1,040
Sec. 201 -
Liability
Estimated Outlays 70 110 -160 -330 -520 -535 -555 -580 -605 -635 -830 -3,740
Sec. 202 Treatment of Lottery
Winnings
Estimated Outlays -13 -27 -43 -61 -66 -70 -75 -80 -86 -91 -210 -612
Sec. 203 - Medicare Premium
Subsidies
Estimated Outlays -270 -380 -410 -470 -550 -600 -650 -740 -830 -880 -2,080 -5,780
Total Changes
Estimated Outlays 3,377 4,432 2,992 754 604 167 -647 -1,396 -2,281 -2,394 12,159 5,608
INCREASES OR DECREASES (-) IN REVENUES
Sec. 101 - CHIP
Estimated Revenues 160 736 998 1,169 1,311 1,262 1,036 -1 0 0 4,374 6,671
On-Budget 105 486 660 772 866 836 687 -1 0 0 2,889 4,411
Off-Budget b 55 250 338 397 445 426 349 0 0 0 1,485 2,260
NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM
INCREASES OR DECREASES (-) IN DIRECT SPENDING AND REVENUES
Impact on Deficit 3,217 3,696 1,994 -415 -707 -1,095 -1,683 -1,395 -2,281 -2,394 7,785 -1,063
On-Budget 3,272 3,946 2,332 -18 -262 -669 -1,334 -1,395 -2,281 -2,394 9,270 1,197
Off-Budget -55 -250 -338 -397 -445 -426 -349 0 0 0 -1,485 -2,260
Notes: Components may not add to totals because of rounding; CHIP =
a. CBO has updated the estimates of total budget authority that were incorrect in the
b. All off-budget effects would come from changes in
BASIS OF ESTIMATE
For this estimate, CBO assumes that H.R. 3921 will be enacted near the start of calendar year 2018.
H.R. 3921 would extend funding for CHIP through 2022, change the federal matching rate in 2020, and extend certain eligibility requirements. CBO and JCT estimate that enacting this legislation would increase federal spending by
Extension of Funding. The bill would provide a total of
First, pursuant to the rules that govern CBO's baseline, certain expiring programs, including CHIP, are assumed to continue in the baseline beyond their scheduled expiration dates. In accordance with those rules and the structure of CHIP financing in 2017, CBO assumes the continuation of
Second, the increase in spending for CHIP would be partially offset by reductions in the net costs of federal subsidies provided for other forms of health insurance, including Medicaid, insurance purchased through the health insurance marketplaces established under the ACA, and employment-based health insurance. Those reductions would occur because most of the people who would receive coverage through CHIP as a result of enacting H.R. 3921 would otherwise receive federally-subsidized coverage under current law.
Specifically, CBO estimates that of the approximately six million children who would be covered by CHIP under H.R. 3921:
* About 40 percent would be covered by Medicaid under current law. Thus, enacting H.R. 3921 would reduce federal Medicaid spending by
* About 25 percent would receive subsidies for private health insurance purchased through the marketplaces under current law. Children in families with income between 138 percent and 400 percent of the poverty guidelines who are not eligible for Medicaid would generally qualify for subsidies to purchase health insurance through the marketplaces if they do not have access to employment-based coverage through a parent. If H.R. 3921 is enacted, CBO estimates those subsidies would be
* About 25 percent would participate in employment-based health insurance under current law, because some parents with offers of family coverage through an employer will choose to enroll their children in such plans. Under H.R. 3921, CBO and JCT estimate that revenues would be
* Fewer than 10 percent would be uninsured under current law and some would be
subject to the penalty associated with the individual mandate. Enacting H.R. 3921 would reduce federal revenues associated with collecting that penalty by less than
Finally, the net cost of the extension is less than the
Enhanced Federal Matching Rate. Under current law, a 23 percentage point increase in the CHIP federal matching rate that went into effect in 2016 will expire after 2019. The average matching rate would return to historical levels of about 70 percent beginning in 2020. Under H.R. 3921, states would receive an 11.5 percentage point increase in the matching rate in 2020 and the matching rate would return to historical levels beginning in 2021. CBO estimates that approximately
Maintenance of Eligibility Levels Requirement. Under current law, states are required to maintain CHIP eligibility levels, methodologies, and procedures as they were on
H.R. 3921 would mostly extend this requirement through 2022. Instead of the requirement applying to all children, beginning in 2020 it would be limited to children in families with income below 300 percent of the poverty guidelines. It would also apply to children in families with income above 300 percent of the poverty guidelines who do not have access to an offer of employer-sponsored insurance through a family member. (Because the vast majority of children in CHIP are in families with incomes below 300 percent of the poverty guidelines, CBO estimates that continuing this requirement, as modified by H.R. 3921, would affect at least 98 percent of children who would be enrolled in CHIP if the current requirement were fully extended through 2022.)
CBO expects that more children would enroll in CHIP under H.R. 3921 because of the extension of the eligibility requirements that are scheduled to expire in 2019. Overall, the cost to the federal government of covering these children in CHIP would be less than the average cost of covering them in the marketplaces and employment-based insurance. As a result, CBO estimates that this provision would reduce the estimated net cost of extending CHIP funding through 2022 by about
Based on historical spending patterns for similar activities, CBO estimates that those provisions would increase outlays by approximately
Modifying Reduction in Medicaid DSH Allotments
Under current law, allotments are made to states for payments to hospitals that treat a disproportionate share of uninsured and Medicaid patients (DSH allotments). In 2017 states received
Over the 2018 and 2019 period, H.R. 3921 would increase the total amount of block grant funding available to
Medicaid Third Party Liability
The bill would make several changes to policies in Medicaid that require other sources of health coverage, or third parties, to pay claims under their policies before Medicaid will pay for the care of an enrollee. On net, those changes are expected to reduce direct spending by
Under current law, if a state is aware that a Medicaid enrollee has potential third-party coverage, the state must reject a provider's claim until it has been submitted to the third party. If a state identifies a third party after a claim is paid, the state must seek reimbursement from the third party. For certain services, states are required to pay first or to pay Medicaid claims even if a third party is likely liable and then seek to recoup that payment from the third party. Currently, states must pay those claims within 30 days.
However, beginning in 2018, states will have 90 days to make such payments. Any amounts recouped by the states from third parties must be shared with the federal government at the same rate as the federal government reimburses states for Medicaid services. Based on administrative data from the
Two provisions of the bill would amend current standards for paying claims that fall under the exception to states paying first. Beginning in fiscal year 2018 the bill would delay, for two years, policies that allow states to wait up to 90 days before paying claims that fall under the exception. In fiscal year 2020 the bill also would eliminate the requirement for states to pay first for services for prenatal care, preventive pediatric, and for individuals on whose behalf child support enforcement is being carried out. On net, CBO expects that these provisions would increase the amount paid for services by third parties and reduce the amount paid by Medicaid. In total, CBO estimates these provisions would reduce direct spending by
H.R. 3921 also would amend the definition of other sources of health coverage to exclude worker's compensation and property and auto insurers. In fiscal year 2016, collections from these insurers accounted for approximately 30 percent of total reimbursements from third parties. CBO estimates that excluding these insurers from liability would increase direct spending by
Finally, the bill would allow states to keep a larger percentage of payments recouped from third parties who provide coverage to individuals who were made eligible for Medicaid under the Affordable Care Act (ACA). This provision would provide an incentive for states to increase their efforts to recoup payments. However, CBO expects that few individuals made eligible under the ACA have coverage from a liable third party and, as a result, recoveries would not increase recoveries enough to offset the cost of allowing states to keep a greater share of the recoveries. On net, CBO estimates that the provision would increase direct spending by
Treatment of Lottery Winnings
Under current law, most non-disabled adults who apply for Medicaid and have substantial funds in a bank account could still qualify for Medicaid because the eligibility rules do not permit assets tests (an asset test counts the resources, such as savings accounts, that applicants may have available to them beyond their earnings and other income). Similarly, while most current enrollees who gain substantial lump sum income must report that income to their state Medicaid agencies, which would cause most to lose their coverage, those individuals could reapply again the next month once the lump sum income would be treated as an asset.
H.R. 3921 would require states to treat monetary winnings from lotteries and other lump sum forms of income such as from gambling, legal judgements, and inheritances as income for purposes of determining Medicaid eligibility. For amounts less than
Based on lottery data from the state of
Medicare Premium Subsidies
Under current law, an income-related monthly adjustment amount (IRMAA) is applied to basic premiums for Medicare enrollees in parts B (which covers physicians' and other outpatient services) and D (which covers outpatient prescription drugs) with relatively high income. The income thresholds for the higher premiums are divided among four brackets, which are frozen through 2019. The lowest bracket is set at
PAY-AS-YOU-GO CONSIDERATIONS
The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in the following table. Only on-budget changes to outlays or revenues are subject to pay-as-you-go procedures.
CBO Estimate of Pay-As-You-Go Effects for H.R. 3921, as ordered reported by the
By Fiscal Year, in Millions of Dollars
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018-2022 2018-2027
NET INCREASE OR DECREASE (-) IN THE ON-BUDGET DEFICIT
Statutory Pay-As-You-Go Impact 3,272 3,946 2,332 -18 -262 -669 -1,334 -1,395 -2,281 -2,394 9,270 1,197
Memorandum:
Changes in Outlays 3,377 4,432 2,992 754 604 167 -647 -1,396 -2,281 -2,394 12,159 5,608
Changes in Revenues 105 486 660 772 866 836 687 -1 0 0 2,889 4,411
INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITS
CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028.
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
H.R. 3921 contains no intergovernmental or private-sector mandates as defined in UMRA.
PREVIOUS CBO ESTIMATE
This revised cost estimate supersedes the cost estimate for H.R. 3921 that CBO transmitted on
ESTIMATE PREPARED BY:
Federal Costs:
ESTIMATE APPROVED BY:
Deputy Assistant Director for Budget Analysis
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