Senate Finance Committee Hearing

Good morning Chairman Hatch, Ranking Member Wyden, and members of the Committee. I am Anne Schwartz, executive director of the Medicaid and CHIP Payment and Access Commission (MACPAC). As you know, MACPAC is a congressional advisory body charged with analyzing and reviewing Medicaid and CHIP policies and making recommendations to Congress, the Secretary of the U.S. Department of Health and Human Services (HHS), and the states on issues affecting these programs. Its 17 members, including Chair Penny Thompson and Vice Chair Marsha Gold, are appointed by the U.S. Government Accountability Office (GAO). While the insights and information I will share this morning build on the analyses conducted by MACPAC's staff, they are in fact the views of the Commission itself. We appreciate the opportunity to share MACPAC's recommendations and work as this Committee considers the future of the State Children's Health Insurance Program (CHIP).

Overview of CHIP

Since its enactment with strong bipartisan support in 1997, CHIP, a joint federal-state program, has played an important role in providing insurance coverage and access to health care for millions of low-income children with incomes just above Medicaid eligibility levels. Over this period, the share of uninsured children in the typical CHIP income range (those with family income above 100 percent but below 200 percent of the federal poverty level (FPL)) has fallen dramatically--from 22.8 percent in 1997 to 6.7 percent in 2015 (MACPAC 2017a). In contrast, during the same period, which included two recessions, private coverage for children in this income range declined substantially--from 55 percent in 1997 to 29.8 percent in 2015 (Martinez et al. 2017).

In fiscal year 201answer any questions you may have., 8.9 million children were enrolled in CHIP-funded coverage (CMS 2017a). States have flexibility in designing CHIP. States can operate these programs either as an expansion of Medicaid, an entirely separate program, or a combination of both approaches. States with Medicaid-expansion CHIP must provide the full Medicaid benefit package, including early and periodic screening, diagnostic, and treatment services, and must follow Medicaid cost-sharing rules. States with separate CHIP provide comprehensive health care services subject to the approval of the Secretary of the U.S. Department of Health and Human Services (the Secretary) or based on a benchmark benefit package. In separate CHIP, states may require premiums and cost sharing, such as copayments and deductibles (although not for preventive services), with a combined limit of 5 percent of income. States receive an enhanced federal match for CHIP, subject to the cap on their allotments, and must contribute a state share to receive their federal funding allotments.

Basis for MACPAC recommendations

Under current law, CHIP is funded through FY 2017, and without congressional action, states will not receive any new federal funds for CHIP beyond September 30, 2017. Mindful of this date, the Commission devoted considerable attention over the past several years to CHIP's role in our health care system and policy approaches for the future. We reviewed available evidence about the quality and affordability of CHIP compared to other alternatives, and focused attention on the implications of various policy approaches for children and their families, states, providers, health plans, and the federal government.

Based on this review, the Commission issued a report this past January recommending that federal funding for CHIP be extended for five years. If CHIP funding is not renewed, many of the children covered under separate CHIP will lose their health coverage. While some of these children may be eligible for private coverage, their families would have to pay considerably more than under CHIP, potentially creating barriers to needed health and developmental services. In addition, they would lose access to services covered by CHIP that are not typically covered by other payers. Those covered by Medicaid-expansion CHIP would not lose coverage but there would be a significant shift in the funding obligation for their coverage to the states.

MACPAC has always looked at CHIP in its context, a relatively small public health coverage program in an evolving array of sources of coverage for children that includes Medicaid, publicly subsidized exchange coverage established by the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended), and employer-sponsored coverage. In the long term, the development of a more seamless system of children's coverage is needed. Such a system would provide comprehensive and affordable coverage to low-and moderate-income children, removing the potential gaps in coverage and care that can affect children as they transition among different sources of publicly and privately financed health insurance.

Moreover, the future of publicly financed health coverage markets currently is uncertain. Over the past few months, Congress has been debating reforms to both Medicaid and federally subsidized exchange coverage that would affect the available alternatives for children in the absence of CHIP. This uncertainty heightens the need for congressional action to extend CHIP.

In my testimony today, I will present the rationale behind the Commission's recommendations on the future of CHIP funding and children's coverage, as well as the evidence it considered in making its recommendations. I also will address CHIP financing; in particular, how states will be affected if federal CHIP funding ends. MACPAC's most recent analyses focus on when states are projected to run out of CHIP funds and how the requirement that states maintain coverage for children through fiscal year (FY) 2019 will affect states differentially based on their decisions to run CHIP as a Medicaid expansion or a separate program.

MACPAC's Recommendations on the Future of CHIP and Children's Coverage

In a January 2017 special report (made available in print in our March 2017 Report to Congress on Medicaid and CHIP, MACPAC made nine recommendations to Congress to fund and stabilize CHIP, and to move toward a more seamless system of affordable and comprehensive children coverage (Box 1).

Stabilizing children's health coverage

In making its recommendations for CHIP funding, a key priority for the Commission was to ensure the stability of children's health coverage during this period of uncertainty about other sources of coverage. The Commission recommends that Congress extend federal CHIP funding for a transitional period of five years through FY 2022. It also recommends extension of the current CHIP maintenance of effort (MOE) requirement and the 23 percentage point increase in the federal CHIP matching rate through FY 2022.

Rationale. Extending CHIP for a transition period would ensure that low-and moderate-income children would retain access to affordable insurance coverage during a time of uncertainty for coverage markets. The transition period of five years would also provide time to address concerns with affordability and benefits of other coverage sources, which are described in greater detail below. In addition, this period would provide federal and state policymakers time to plan and implement comprehensive children's coverage demonstrations, which the Commission also is recommending.

BOX 1. MACPAC Recommendations for the Future of CHIP and Children's Coverage

Recommendation 1.1

Congress should extend federal CHIP funding for a transition period that would maintain a stable source of children's coverage and provide time to develop and test approaches for a more coordinated and seamless system of comprehensive, affordable coverage for children.

Recommendation 1.2

Congress should extend federal CHIP funding for five years, through fiscal year 2022, to give federal and state policymakers time to develop policies for, and to implement and test coverage approaches that promote seamlessness of coverage, affordability, and adequacy of covered benefits for low-and moderate-income children.

Recommendation 1.3

In order to provide a stable source of children's coverage while approaches and policies for a system of seamless children's coverage are being developed and tested, and to align key dates in CHIP with the period of the program's funding, Congress should extend the current CHIP maintenance of effort and the 23 percentage point increase in the federal CHIP matching rate, currently in effect through FY 2019, for three additional years, through fiscal year 2022.

Recommendation 1.4

To reduce complexity and to promote continuity of coverage for children, Congress should eliminate waiting periods for CHIP.

Recommendation 1.5

In order to align premium policies in separate CHIP with premium policies in Medicaid, Congress should provide that children with family incomes below 150 percent of the federal poverty level not be subject to CHIP premiums.

Recommendation 1.6

Congress should create and fund a children's coverage demonstration grant program, including planning and implementation grants, to support state efforts to develop, test, and implement approaches to providing, for CHIP-eligible children, seamless health coverage that is as comprehensive and affordable as CHIP.

Recommendation 1.7

Congress should permanently extend the authority for states to use Express Lane Eligibility for children in Medicaid and CHIP.

Recommendation 1.8

The Secretary of Health and Human Services, in consultation with the Secretaries of Agriculture and Education, should not later than September 30, 2018, submit a report to Congress on the legislative and regulatory modifications needed to permit states to use Medicaid and CHIP eligibility determination information to determine eligibility for other designated programs serving children and families.

Recommendation 1.9

Congress should extend funding for five years for grants to support outreach and enrollment of Medicaid-and CHIP-eligible children, the Childhood Obesity Research Demonstration projects, and the Pediatric Quality Measures program, through fiscal year 2022.

To further stabilize children's coverage and prevent states from rolling back eligibility, the Commission recommends extending the CHIP MOE through FY 2022. The current MOE, which requires states to maintain the CHIP eligibility levels in place on March 23, 2010 through FY 2019, was established by the ACA (Appendix A). The MOE also prohibits states from adopting eligibility and enrollment standards or methodologies that are more restrictive than those in place prior to the enactment of the ACA ([Sec.] 2105(d)(3) of the Act).

MACPAC also recommends extending the 23 percentage point increase to the CHIP enhanced matching rate through FY 2022. This increase was enacted in the ACA for FYs 2016--2019. In the current fiscal year, 11 states and the District of Columbia have a CHIP matching rate of 100 percent meaning that the federal government pays for 100 percent of the cost of providing CHIP coverage to children (Appendix B). An additional 22 states have CHIP matching rates ranging from 90 percent to 99 percent (MACPAC 2017a).

The Commission's recommendation reflects the view that an extension to the MOE, which it judged important to retaining gains in coverage, should be accompanied by an extension of enhanced funding. The increase to the CHIP matching rate is also thought to have influenced decisions in 2016 in some states to expand children's coverage, within permissible limits. n1 For example, Florida and Utah expanded Medicaid and CHIP coverage to lawfully residing immigrant children. In July 2016, Arizona reinstated CHIP, which it had previously closed.

The Commission has long held that coverage under separate CHIP authority should not be maintained indefinitely (MACPAC 2014a). The Commission also has stated that children's coverage should be affordable and comprehensive, and state flexibility in program design must be maintained. In the Commission's view, other current sources of coverage do not meet these standards. In addition, over the course of the Commission's deliberation, two additional facts became clear. First, more time is needed for assessing, planning, and implementing changes to address concerns of other coverage sources for children. Second, given the expectation that health insurance markets may face substantial changes over the next few years, federal funding for CHIP would be exhausted before these changes would be fully realized.

Implications if federal CHIP funding is not renewed

If CHIP funding ends and states exhaust available federal funds, the implications for states depend on whether they operate CHIP as a Medicaid expansion or a separate program. As of January 1, 2016, 10 states (including the District of Columbia) ran CHIP as a Medicaid expansion, 2 states had separate CHIP, and 39 operated combination programs (MACPAC 2017a). In the absence of CHIP, children leaving separate CHIP and gaining other coverage likely would face higher cost sharing, different benefits, and enrollment in plans with different provider networks.

Increase in uninsurance. Although the MOE generally requires states to maintain their children's coverage eligibility levels in place when the ACA was enacted, states face different scenarios for separate CHIP and Medicaid-expansion if federal CHIP funds run out. States with Medicaid-expansion CHIP must continue that coverage for children, but instead of receiving the enhanced CHIP match, states will receive the lower Medicaid matching rate. Of the 8.4 million children enrolled in CHIP-funded coverage in 2015, 4.7 million were in Medicaid-expansion CHIP (MACPAC 2017a).

States with separate CHIP are permitted to terminate that coverage if federal CHIP funds run out. In this case, the ACA requires states to develop procedures to automatically transition children from separate CHIP to exchange coverage that has been certified as "at least comparable to" CHIP programs with respect to benefits and cost sharing ([Sec.]2105(d)(3)(B) of the Social Security Act (the Act)). If the Secretary finds that no exchange plans are comparable to CHIP, states are not required facilitate the transition to exchange coverage, although families may obtain subsidized exchange coverage on their own. In November 2015, the Secretary of the U.S. Department of Health and Human Services (the Secretary) did not certify any exchange plan as comparable to CHIP coverage (CMS 2015).

We recently updated our analysis of how an end to separate CHIP would affect children's coverage, finding that in the absence of CHIP, 1.2 million children enrolled in separate CHIP would become uninsured because the cost of other sources of coverage would be unaffordable. n2 We estimate that 1.1 million would enroll in employer-sponsored coverage, and almost 700,000 would enroll in subsidized exchange coverage.

This analysis also found that of the children losing separate CHIP and who would become uninsured:

* 44 percent will be eligible for exchange subsidies;

* 40 percent are eligible for exchange subsidies because their parents do not have an offer of employer coverage or the available employer-sponsored coverage excludes dependent coverage; and

* 56 percent will have an offer of employer-sponsored coverage in the household.

However, the average additional premium to obtain family coverage would be 8 percent of income, making the total cost of family coverage equal to 11 percent of family income.

We also previously noted that the majority of separate-CHIP-enrolled children who would become uninsured if CHIP funding is exhausted have family income below 200 percent FPL (61.3 percent) and are non-white (53.9 percent). In addition, 89.6 percent have a full-time worker in the family (MACPAC 2015).

Affordability of coverage. For children in the CHIP income-eligibility range, CHIP coverage is considerably less costly to families with respect to both premiums and out-of-pocket cost sharing than exchange or employer-sponsored coverage (MACPAC 2016, 2015). n3 In 2015, the combined premiums and cost sharing of separate CHIP in 36 states averaged $158 per year per child, $127 for premium and $31 for cost sharing. On average in these 36 states, the effective actuarial value of CHIP coverage was 98 percent. In other words, the plans covered 98 percent of the cost of covered medical benefits and enrollees 2 percent.

If these same children were enrolled in employer-sponsored insurance, they would have faced an estimated $891 per year per child in average annual out-of-pocket spending ($603 for premiums and $288 in cost sharing), and if enrolled in the second lowest cost silver exchange plan, they would have faced an estimated $1,073 per year per child ($806 for premiums and $266 in cost sharing). The effective actuarial value averaged 81 percent in employer sponsored insurance plans and 82 percent in second lowest cost silver exchange plans, with families responsible for the remaining 18 percent to 19 percent through cost sharing (MACPAC 2016).

Adequacy of benefits. MACPAC's comparison of benefits in separate CHIP, Medicaid (including Medicaid-expansion CHIP), exchange plans, and employer-sponsored insurance found that covered benefits vary within each source--between states for Medicaid and CHIP, and among plans for employer-sponsored insurance and exchange plans (MACPAC 2015). Most separate CHIP, Medicaid, exchange, and employer-sponsored insurance plans cover major medical benefits, such as inpatient and outpatient care, physician services, and prescription drugs. Children enrolled in Medicaid-expansion CHIP are entitled to all Medicaid services, including early and periodic screening, diagnostic, and treatment (EPSDT) services that exchange and employer-sponsored plans often do not cover.

Differences are pronounced for dental care, an EPSDT service. Like Medicaid, separate CHIP covers pediatric dental services. However in most exchanges and employer-sponsored coverage, dental benefits are offered as a separate, stand-alone insurance product for which families pay separate premiums and cover cost sharing expenses. More than half of all employer-sponsored plans (54 percent) do not include pediatric dental coverage. Of the employers that offer separate dental coverage, many require an additional premium.

CHIP also covers many services important to children's healthy development that are not always available in exchange plans. For example, all separate CHIP and Medicaid programs cover audiology exams, and 95 percent of separate CHIP programs cover hearing aids. However, only 37 percent of exchange plan essential health benefit benchmarks cover audiology exams, and only 54 percent cover hearing aids (MACPAC 2015). Among employer-sponsored health plans, 34 percent cover pediatric audiology exams and 43 percent cover hearing aids (MACPAC 2015).

Provider networks. The Commission also looked at how CHIP provider networks compare to those of other sources of coverage. Under federal law, CHIP managed care is subject to the same federal provisions that establish standards for Medicaid managed care ([Sec.] 2103(f)(3) of the Act). These provisions require states to establish "standards for access to care so that covered services are available within reasonable timeframes and in a manner that ensures continuity of care and adequate primary care and specialized services capacity" ([Sec.] 1932(c)(1)(A)(i) of the Act). CHIP regulations also specify that a state must ensure "access to out-of-network providers when the network is not adequate for the enrollee's medical condition" (42 CFR 457.495).

Advocates have suggested that separate CHIP networks are better than Medicaid or exchange plan networks because they are similar to private plan networks or because they are designed specifically for pediatric needs (Hensley-Quinn and Hess 2013, Hoag et al. 2011). However, we found little empirical evidence to either support or refute this assertion.

Implications for states

MACPAC has also considered the financial and operational implications for states if CHIP funding were to end, which are described below. Unless funding for CHIP is renewed, states will begin running out of available federal funds during the first quarter of FY 2018, which begins in just a few weeks. All states will exhaust their funds before the end of fiscal year 2018.

Exhaustion of federal funds. Federal funding for CHIP is capped and allotted to states annually. States have two years to spend their allotments, and unspent allotments are available for redistribution to other states experiencing CHIP funding shortfalls. n4 Under current law, new CHIP allotments are not available after FY 2017 and unspent FY 2017 CHIP allotments that remain available for expenditures in FY 2018 are reduced by one-third ([Sec.] 2104(m)(2)(B)(iv) of the Act). n5

Under current law, in FY 2018, states may continue to spend unspent FY 2017 allotments and redistribution funds from prior years (an estimated $4.2 billion in total), however these funds are expected to be insufficient to cover expected state CHIP expenses in FY 2018 (an estimated $17.4 billion). n6 Based on state spending estimates submitted to CMS, MACPAC projects that three states and the District of Columbia will exhaust available federal CHIP funds sometime in the first quarter of the fiscal year, and 27 states will do so in the second quarter (Table 1 and Appendix C).

TABLE 1. Projected Exhaustion of Federal CHIP Funds in Fiscal Year 2018

Quarter of fiscal year Number of states States

First quarter (October-December 2017) 4 Arizona, District of Columbia, Minnesota, and North Carolina

Second quarter (January-March 2018) 27 Alaska, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Kansas, Kentucky, Louisiana, Massachusetts, Mississippi, Missouri, Montana, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, and Washington

Third quarter (April-June 2018) 19 Alabama, Georgia, Illinois, Indiana, Iowa, Maine, Maryland, Michigan, Nebraska, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, West Virginia, and Wisconsin

Fourth quarter (July-September 2018) 1 Wyoming

Note: CHIP is the State Children's Health Insurance Program.

Source: MACPAC 2017 analysis using June 2017 Medicaid and CHIP Budget and Expenditure System data from the Centers for

Medicare & Medicaid Services, including quarterly projections provided by states in May 2017.

State policies may also affect when states exhaust their federal CHIP funding. For example, while the ACA's maintenance of effort (MOE) requirement generally prohibits reducing children's eligibility for CHIP, states are permitted to impose enrollment limits "in order to limit expenditures . . . to those for which Federal financial participation is available" ([Sec.]2105(d)(3)(A)(iii) of the Act). States may also take other actions to reduce CHIP spending such as allowing CHIP waivers to expire and cutting payments to plans and providers.

State budgets. Most states have fiscal years that begin July 1; thus they have already set their budgets for the state fiscal year 2018. Despite the uncertainty of federal CHIP funding, 33 out of 40 states responding to a survey about the future of CHIP funding indicated that their state budget assumed that CHIP funding would continue; 21 states have assumed that the 23 percentage point increase in the CHIP match continues as well (NASHP 2017). Absent congressional action, these states will likely experience shortfalls and may have to close their separate CHIP programs or provide coverage to children enrolled in Medicaid-expansion CHIP with substantially fewer federal funds than anticipated.

Operational considerations and timelines. Although states can continue to use FY 2017 funds into FY 2018, they cannot do so indefinitely. Moreover, they have legal obligations to notify families, plans, and providers about future plans, which may include freezing enrollment, transitioning children to other sources of coverage, and making eligibility and enrollment systems changes (NASHP 2017). In some states (e.g., Arizona and West Virginia), state law requires termination of CHIP if federal funding is not available.

Although we are hearing from state officials that they do not wish to unnecessarily alarm beneficiaries and other stakeholders, others are planning to send notices this month with freezes beginning in October and November.

Companion Recommendations to Promote Seamless Children's Coverage

In addition to the recommendations pertaining to federal CHIP funding, the Commission made a number of companion recommendations for moving toward a more seamless system of children's coverage. These recommendations include:

* creating and funding a children's coverage demonstration grant program to support state efforts to develop, test, and implement approaches to providing CHIP-eligible children with seamless health coverage that is as comprehensive and affordable as CHIP;

* eliminating waiting periods in CHIP, aligning separate CHIP premium policies with those of Medicaid, and permanently extending authority for states to use Express Lane Eligibility; and

* extending funding to support outreach and enrollment of Medicaid-and CHIP-eligible children, the Childhood Obesity Research Demonstration projects, and the Pediatric Quality Measures Program. Demonstration grants. State innovation will be a key driver in improving the system of coverage for low-and moderate-income children; federal support of such efforts would ease financial barriers to states that aspire to transform their children's coverage systems.

To encourage and support child-focused efforts, the Commission recommends providing planning and implementation demonstration grants to develop and test models for transforming coverage systems for children. Such models could be developed using existing state plan and waiver authorities, such as those available under Sections 1115 and 1332 of the Act. Developing options for a seamless system of affordable and comprehensive coverage for children across available coverage sources will require resources for research and analysis of markets, needs assessments, stakeholder and expert engagement, as well as legal, regulatory, policy, and cost analyses. These activities are typically not eligible for federal match under state plan authority, and in past efforts to develop and implement health delivery system changes, states have used waiver authority or other grant funding such as the Real Choice Systems Change grant program to finance these planning activities. Historically, state demonstrations have been an effective way to gain experience from which learning and strategies can be gleaned for broader take up by states.

Eliminate CHIP waiting periods and premiums for children under 150 percent FPL. While CHIP has been an enormously successful in reducing uninsurance, steps can be taken to promote greater continuity and seamlessness of coverage within the existing program. MACPAC initially recommended such steps relating to CHIP waiting periods and premiums in order to achieve these goals in March 2014, and continues to recommend them in 2017. There is little evidence showing that waiting periods have deterred crowd-out of private coverage; eliminating them would promote more stable coverage for children, simplify and make CHIP policy more consistent with Medicaid and other publicly finance coverage programs, and reduce administrative complexity and burden for families, states, health plans, and providers (MACPAC 2014b). Eliminating CHIP premiums for families with incomes under 150 percent FPL would reduce uninsurance and align CHIP premium policies with Medicaid policies for lower-income children. Compared to higher-income enrollees, families with incomes below 150 percent FPL are more price sensitive and less likely to take up CHIP coverage for their children when a premium is required (MACPAC 2017).

Express Lane Eligibility. The Commission recommends that Congress permanently extend Express Lane Eligibility (ELE) authority as an option states can adopt to simplify enrollment processes and promote continuity of coverage. ELE, currently authorized through September 30, 2017, permits states to rely on findings from another program designated as an Express Lane agency (e.g., Supplemental Nutrition Assistance Program, the National School Lunch Program, and Head Start) when making Medicaid and CHIP eligibility determinations (including renewals of eligibility).

ELE processes are associated with positive enrollment gains (both new enrollment and renewals), and administrative savings in some states (OIG 2016, Hoag et al. 2013). A federal evaluation indicated that, as of December 2013, nearly 1.4 million children enrolled in Medicaid or CHIP and retained coverage through ELE processes. Federal evaluations have found that some states reported that implementing ELE resulted in administrative savings. For example, one state reportedly saved $7.3 million between 2011 and 2014, and another state reported that the Medicaid agency saved $25.77 per initial enrollment and $5.15 per renewal (OIG 2016). n7 Without an extension, states that have implemented this option would be likely to incur additional costs in reverting to legacy eligibility processes. Should authority for the ELE option expire, the states that have implemented this option could only continue to do so under a Section 1115 waiver. n8

The Commission also recommends that the HHS Secretary, in consultation with the Secretaries of the U.S. Department of Agriculture and the U.S. Department of Education, assess and report to Congress on the legislative and regulatory modifications needed to permit states to use Medicaid and CHIP eligibility determination information to determine eligibility for other designated programs serving children and families. Given the efficiencies and favorable enrollment gains associated with ELE as currently implemented, the Commission seeks information on changes necessary to modify ELE authority so that designated programs can use Medicaid or CHIP eligibility determination information, and the potential for reducing administrative burden for families and states. n9

Renewal of other programs. The Commission recommends extending funding for three programs that focus on improving aspects of coverage or care for children enrolled in Medicaid or CHIP for five years through FY 2022: Medicaid and CHIP outreach and enrollment grants, the Childhood Obesity Research Demonstration (CORD) projects, and the Pediatric Quality Measures Program. In past years, funding for these programs has been renewed alongside CHIP funding.

* Outreach and enrollment grants created in 2009 have helped to support states, tribes, and community-based organizations in a variety of proactive outreach and enrollment activities. Funds have also supported a national outreach and enrollment campaign (CMS 2016). These grants are needed to maintain the historic successes in finding and enrolling eligible children and in helping them retain coverage at renewal. Absent such grants, state spending on outreach and enrollment would be limited by federal law to the 10 percent cap on CHIP administrative spending. CHIPRA established this program, appropriating $100 million for FYs 2009- 2013. Funding was most recently renewed under the Medicare Access and CHIP Reauthorization Act (MACRA, P.L. 114-10) at $40 million for FYs 2016-2017.

* CHIPRA also established the Childhood Obesity Research Demonstration (CORD) to identify and evaluate health care and community strategies to combat childhood obesity in children age 2-12 enrolled in or eligible for Medicaid or CHIP (Dooyema et al. 2013). CORD project grantees are evaluating whether multi-level, multi-setting approaches that integrate primary care with public health strategies can improve health behaviors and reduce childhood obesity. The second phase of CORD grants focuses on preventive services to individual children and families in Arizona and Massachusetts. Evaluation results which became available in July 2017 from some of the Phase I demonstrations, show a statistically significant reduction in child body mass index and increase in parent satisfaction with obesity related care. Providers who participated in one demonstration showed improved confidence in determining child overweight or obesity status, providing counseling, and setting behavioral goals with families. Most recently, MACRA extended funding for this effort, at $10 million for FYs 2016-2017. Continued federal funding is important to efforts to develop and test strategies to reduce childhood obesity, as well as disseminating results.

* In 2009, the Centers for Medicare & Medicaid Services (CMS) developed a core set of children's health care quality measures for children in Medicaid and CHIP, the first focused effort to measure the quality of publicly funded children's health care in a consistent way on a national level. Since 2010, state participation in reporting the voluntary core set of child health measures has increased; by FY 2014, all 50 states and the District of Columbia reported at least one measure (CMS 2016b, CMS 2011). In its initial phase, the Pediatric Quality Measures Program (PQMP) worked to improve and strengthen the initial child core set by bringing together experts, to develop and improve pediatric quality measures (AHRQ 2016, Sebelius 2014). Current PQMP grantees are assessing the feasibility and usability of the measures at the state, health plan, and provider levels (AHRQ 2016). MACRA extended funding of $20 million over FYs 2016 and 2017.

An extension of PQMP funding will allow the Secretary to continue to develop, test, validate, and disseminate new child health quality measures, and to continue revising existing measures for children enrolled in Medicaid and CHIP. In a November 2014 letter to Congress, MACPAC stated that the needed investments in quality measurement are relatively small, but that they are important, not only for those whose care is financed by Medicaid and CHIP but also for taxpayers (MACPAC 2014b). In the letter, MACPAC noted several key areas in which ongoing work can build on progress to date, including strengthening CMS's capacity to calculate quality measures for states, improving quality measures for individuals with disabilities, and expanding the use of core quality measures in state quality improvement efforts. Continuation of the PQMP could also support efforts to measure and improve care provided to children with special health care needs enrolled in Medicaid and CHIP coverage.

Federal Budget Implications

The Congressional Budget Office (CBO) estimates that these recommendations would increase net federal spending by about $18.7 billion above the agency's current law baseline over a ten-year period of FYs 2017--2026. CBO's estimate also reflects congressional budget rules that require the agency to assume in its current law spending baseline that federal CHIP funding continues beyond FY 2015 at $5.7 billion each year. n10

Conclusion

CHIP has clearly played an important role in providing access to health care coverage to low-to moderate-income children who otherwise would have been uninsured. In addition, CHIP has provided a platform for state innovations to improve take-up of public coverage among eligible but uninsured children, remove enrollment barriers, and focus on the quality of children's care. For example, outreach and enrollment techniques that often began as experiments in CHIP in individual states were subsequently identified as best practices and, in some cases, are now required in all states for both CHIP and Medicaid.

Congress now faces an important decision regarding the future of CHIP and its approach to providing a stable, affordable, and adequate source of coverage to millions of low-and moderate income children. MACPAC's recommendations provide advice on how to ensure a stable source of affordable and comprehensive coverage for low-and moderate-income children during a period of uncertainty affecting other health care markets.

When the Commission made its recommendations in January, it noted the urgent need for congressional action. With the end of the fiscal year in sight, the Commission must underscore the need for Congress to act as soon as possible to extend CHIP so that states do not respond to uncertainty around CHIP's future by implementing policies that reduce children's access to needed health care services.

The Commission's longer-term vision looks to state innovations that would create a more seamless system of children's coverage, provide comprehensive and affordable coverage for low-and moderate-income children, and remove the potential for gaps in coverage and care as children transition between different sources of publicly and privately financed health insurance. Such a system would promote greater alignment between Medicaid, CHIP, and other insurance sources and would smooth out transitions between them. The recommendations of the Commission reflect these goals and take steps to provide states and their federal partners the tools to transform children's coverage.

Thank you, members of the Committee. I would be happy to answer any questions you may have.

Endnotes

n1 The definition of targeted low-income child at section 2110(b) created a CHIP upper income-eligibility limit of no greater than 50 points above the state pre-CHIP Medicaid income levels.

n2 Urban Institute analysis for MACPAC of Health Insurance Policy Simulation Model-American Community Survey (HIPSM-ACS), August 2017.

n3 Premiums and cost sharing are permitted for children in separate CHIP (capped at 5 percent of family income), but they generally are prohibited for children in Medicaid.

n4 MACPAC projects that the federal CHIP funding that states have received through their FY 2017 allotments and the redistribution funding that is available from prior year allotments will be adequate to cover projected state spending in FY 2017 (MACPAC 2017b). Four states and the District of Columbia are projected to have CHIP spending that exceeds their FY 2017 allotment, but these states are expected to receive redistribution funds in FY 2017 sufficient to cover their projected CHIP funding shortfall. Approximately $3 billion in redistribution funding is available in FY 2017 (MACPAC 2017b).

n5 States experiencing CHIP funding shortfalls can also receive contingency fund payments if their CHIP enrollment exceeds target levels specified in Section 2105(n) of the Act. However, contingency fund payments are not available for FY 2018 and subsequent years.

n6 The projected FY 2018 federal CHIP spending of $17.4 billion includes states and territories.

n7 Savings were the result of reduced staff time to complete eligibility determinations due to simplified enrollment processes, according to state reports (OIG 2016).

n8 As of January 1, 2016, eight states use ELE for children at Medicaid enrollment, five states use ELE for CHIP enrollment, seven states use ELE for children at Medicaid renewal, and three states use ELE for CHIP renewal (KFF 2016).

n9 Specifically, the report should describe the legislative and regulatory changes necessary to allow designated programs to use publicly subsidized health program findings to determine eligibility for other programs. The report should also assess the operational challenges and technical feasibility of this policy, and evaluate the implications of broadening ELE authority.

n10 The Congressional Budget Office (CBO) makes unique assumptions regarding the future of CHIP, which will affect the projected federal cost of legislative proposals it examines. CBO is required to assume that CHIP and certain other expiring programs continue in perpetuity at the last appropriated level (2 USC 907(b)(2)(A)(i)). However, in order to reduce the long-term federal spending projected by CBO under these assumptions, the Children's Health Insurance Program Reauthorization Act (CHIPRA) was worded so that the last appropriated level for CBO's purposes was $5.7 billion in FY 2013 rather than the $17.4 billion actually appropriated for FY 2013. In extending federal CHIP funding by two years, the ACA continued the use of this language so that the last appropriated level for CBO's purposes for CHIP past FY 2015 is $5.7 billion rather than $21.1 billion.

Read this original document at: https://www.finance.senate.gov/download/09072017-schwartz-testimony&download=1