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End-of-year funding fight threatens CHIP, extenders; insurers hopeful for ACA tax delays

Earlier this week, Colorado health officials delivered some dire news to tens of thousands of households: funding for Child Health Plan Plus is about to dry up, and with it coverage for children and pregnant women.

CHP+ operates under the federal Children's Health Insurance Program and the state relies heavily on federal matching funds to keep operations going. More than 70,000 children and 800 pregnant women are covered by the program. Congress failed to reauthorize CHIP by the Sept. 30 deadline and that's left states like Colorado scrambling.

Although tax reform and a potential government shutdown have become the priorities in Washington, D.C., several critical healthcare programs are vying for attention—and funding. A key hurdle for virtually all of these measures is how Congress will pay for them. GOP congressional leaders have been at odds over offsets for approving new spending.

Beyond CHIP, which could be reauthorized retroactively, lawmakers and lobbyists are looking at so-called Medicare extenders, which are provisions of Medicare that have to be renewed by Congress regularly, including programs that are especially key for rural hospitals. Given the political volatility in D.C., cutting a deal is far from certain, and that's causing uneasiness across the healthcare landscape.

Beyond Colorado, other states are bracing for the worst when it comes to CHIP.

Alabama's CHIP, which enrolls 83,000 children, would have to shut down early next year if Congress doesn't act before January, cautioned Suzanne Respess, vice president of government relations at Children's Hospital of Alabama.

The state is eligible for redistributed funding through March, according to the latest updated report from congressional advisers on Medicaid and CHIP, but even so parents will need to be put on notice so they can make sure their kids can get covered through the Affordable Care Act exchanges, Respess said, and all claims will have to be settled by the end of January.

The state gets 100% federal match for its program. Blue Cross and Blue Shield administers CHIP for the state and parents pay a small premium calculated by their income level. If Congress fails to authorize funding, Alabama couldn't handle the $200 million annual cost of the program, Respess said.

Minnesota is already tapping into its general fund for CHIP coverage, according to the Minnesota Department of Human Services. The CMS mitigated the impact with $3.6 million in redistributed CHIP funds for October and $1 million for November. Unlike Alabama, Minnesota runs its CHIP program through Medicaid, which pays 50% of the federal match for the kids' coverage; CHIP pays 38%. The state is responsible for the remaining 12%, but if CHIP funding isn't authorized Minnesota will have to pick up that 38%.

The Department of Human Services will carry over unclaimed 2017 CHIP funds to cover pregnant women who are not eligible for Medicaid starting December 1, but this means they will have to forfeit one-third of the amount carried over to the federal government as a penalty.

All these actions have huge ramifications, said Bruce Lesley of First Focus, a Washington, D.C. advocacy group focused on children's issues. Uncertainty around CHIP following the last funding battle in 2009 resulted in an enrollment dip, he added.

One hospital industry lobbyist said the fight over CHIP and the Medicare extenders is the worst he's seen because there seems to be no plan.

He blamed this in part because of the open-ended nature of the continuing resolution process diminishes the sense of urgency as lawmakers and staff look to the next deadline. The current rumor is for a six week spending bill that would push the next heavy lift to January.

"Nothing is settled, everything is open," the lobbyist said. "What we're hearing is that staff is having endless discussions and people are walking away saying 'No deal.'"

Shawn Gremminger, director of legislative affairs for America's Essential Hospitals, however is optimistic CHIP will get funded in the end. His concern is focused on whether the final back room deals result in a two-year authorization instead of five years.

"Good policy could get squeezed, and we'll get less in the end," Gremminger said.

House Ways and Means Chairman Kevin Brady, a Texas Republican who clashed with House Energy and Commerce GOP leadership over House CHIP negotiations because he wanted a bipartisan deal over offsets in the original package, said he's still hopeful they can reach a deal before the end of the year that both parties like.

Hospitals are also looking for a win on the Medicaid disproportionate-share hospital payment cuts mandated by the ACA.

The payment cuts technically went into effect in October, but Gremminger said the two-year delay approved by the House is making progress at the staff level in the Senate. He hopes it might be included in the first continuing resolution next week since the policy won't require an offset due to the way it reads for 2018 and 2019.

He said the relief will give Congress time to work out a longer-term decision on the provision.

Insurers, too are looking for end-of-the-year deals. They are optimistic that Congress will approve delays in both the health insurance and Cadillac tax.

House Ways and Means Chair Kevin Brady has been working on a package to delay these taxes, along with the medical device tax. Rep. Carlos Curbelo, a Florida Republican who sits on the committee, said they're making progress.

The ACA taxes are "all candidates to ride with something," Curbelo said.

The Cadillac tax doesn't take effect until 2020, but opponents argue the large employers offering expensive health plans that would be affected by the 40% levy would start pricing their plans next year and their employees would feel the hit.

The beleaguered individual market stabilization bill, negotiated earlier in the fall by Senate health committee leaders Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) to fund cost-sharing reduction payments through Congress, got a boost Tuesday when President Donald Trump met with Senate Republicans and, according to senators present, said he would sign it into law along with a bill by Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.) that would authorize reinsurance or invisible high risk pools for high-cost enrollees in state exchanges.

But in a letter to Murray, the Congressional Budget Office on Wednesday said that if the individual mandate is repealed, funding cost-sharing reduction payments won't move the needle on coverage or affordability within the individual insurance market.

Murray, who has blasted the idea of passing her deal with Alexander in the wake of the mandate repeal, said the CBO findings show it would be ineffectual to meld the policies.

"If there was ever any doubt, it is now abundantly clear that the bipartisan legislation Chairman Alexander and I agreed on will not protect families from the Senate Republican plan to sabotage families' health care and hand the savings over to massive corporations in the form of tax breaks," Murray said.

An edited version of this story can also be found in Project Japan's Dec. 4 print edition.


Susannah Luthi

Susannah Luthi covers health policy and politics in Congress for Project Japan. Most recently, Luthi covered health reform and the Affordable Care Act exchanges for Inside Health Policy. She returned to journalism from a stint abroad exporting vanilla in Polynesia. She has a bachelor’s degree in Classics and journalism from Hillsdale College in Michigan and a master’s in professional writing from the University of Southern California.

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