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SCHIP Bait and Switch

Posted By Dennis Smith On October 22, 2009 @ 11:07 am In Obamacare | Comments Disabled

Now that the Baucus Plan has been introduced as actual legislative language, it is clear more time is necessary to have a full understanding of the massive 1,500 page bill [1]. As members get the opportunity to read the bill, more problems are likely to emerge on a daily basis.

For example, the Baucus Plan either puts states into fiscal jeopardy or provides another budget gimmick to avoid paying the full cost of the legislation through the treatment of the State Children’s Health Insurance Program (SCHIP). The SCHIP provisions have significant budgetary implications for either the federal government or the states. Section 1611 of the Baucus Plan provides a new 23 percentage point increase in the federal funding for SCHIP. That would seem like good news for states. However, under current law, there are no additional appropriations for SCHIP after 2012 and the Baucus Plan does not provide any increased funding. There is a budget cliff in 2013 that will cut federal funds for SCHIP in half.
In scoring the Baucus Plan, the Congressional Budget Office (CBO) must assume its current law baseline remains level.

With the increased federal percentage under Section 1611, states will substitute the federal dollars for state dollars so long as federal funds are available. In other words, the federal funds in the SCHIP pipeline will be spent faster, depleting the funding earlier than what would occur under current law. When that happens, states will be hit with a choice—reduce SCHIP benefits to lower the overall cost of the program or switch to Medicaid. Switching to Medicaid means returning to the regular Medicaid match rate. Instead of an 88 percent federal match rate as promised by Section 1611, for example, New York will get only a 50 percent match rate. The states, who have been promised that the federal government would bear the majority of the cost of the new Medicaid expansion for adults, will end up paying more than they do under current law for their children.

To pay for SCHIP reauthorization at enhanced match rates would like cost the federal government $40-$50 billion. Leaving the funding out either means the legislation is not really paid for, which breaks the President’s promise to the budget hawks, or it shifts those costs to the states. Someone deserves an explanation.


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[1] the massive 1,500 page bill: http://finance.senate.gov/press/Bpress/2009press/prb101909.pdf

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