Feds to pick up Indiana’s tab for CHIP kids health insurance

WASHINGTON — Indiana is getting a sweet deal for the federal-state program that provides health insurance for low- and moderate-income children.

Instead of picking up 76.62 percent of the cost of Indiana's Children's Health Insurance Program, the federal government will cover 99.62 percent for the next two fiscal years.

Some advocacy groups had hoped the funding bump states will enjoy starting in October would be spent on efforts to enroll more children in CHIP, or to otherwise boost child health programs. There's room for improvement in Indiana, which has one of the lowest CHIP participation rates.

But the extra $25 million a year Indiana will get won't expand the program. Instead, it will make up for a decline in funding the state has received under a 1998 agreement between states and major tobacco companies, said state Sen. Luke Kenley, chairman of the Indiana Senate Appropriations Committee.

Indiana has spent the tobacco payments on a variety of health-related programs, including CHIP. But its share was cut after the state was found not to be diligent in enforcing compliance by smaller cigarette manufacturers.

"It did help us quite a bit," Kenley said of the federal increase in CHIP funding. "We were sort of facing a crisis."

The funding boost was included in the 2010 Affordable Care Act as a way to keep states from shrinking CHIP programs as other coverage options became available.

Subsidized private insurance, for example, is now available through health exchanges for families earning up to 400 percent of the federal poverty level — $80,360 for a family of three. Children in families that earn up to 250 percent of the federal poverty level are eligible for Indiana's CHIP.

But exchange plans usually cost participants more than CHIP and provide fewer benefits, said Edwin Park, vice president for health policy at the Center on Budget and Policy Priorities. The solution was meant to prevent states from tightening eligibility rules for CHIP, while giving them more federal funding to relieve budget pressures.States would save money if kids moved to exchange plans because those subsidies are funded entirely by the federal government.

"There was no specific requirement that states have to do things in exchange for receiving the (higher) match," Park said. "But the idea is that if state budgets are of concern, that you're avoiding other cuts."

Even if a state can't change eligibility rules, for example, they could make other changes, such as cutting reimbursement rates to providers or reducing benefits.

More than 73,334 Hoosier kids were enrolled in CHIP at the end of last year.

The federal match is rising 23 percentage points for each state, where the base rate is determined by such factors as the state's per-capita income, health expenditures and growth in its population of children.

While the federal government will be picking up at least 88 percent of the costs in every state, it will cover the entire cost in 11 states. Indiana is one of seven states where the federal government will be paying 98 percent or more.

Bruce Lesley, president of the advocacy group First Focus Campaign for Children, is worried that if states don't have to pay at least 10 percent of the cost, there's not enough incentive to make sure the program works well.

"Children's health insurance coverage is inexpensive and states have managed the program very well," he said. "But if you don't have any skin in the game anymore, if there's fraud and abuse, or the health plans come in and ask for a gigantic increase, states now have less of an incentive to combat that."

Lesley had also hoped that states would use the boost in federal funding to improve health care services to kids.

Created in 1997 to provide coverage for kids whose families made too much to qualify for Medicaid but not enough to purchase private insurance, CHIP has helped cut uninsured rates in half for low-income kids nationally.

But unlike Medicaid, states get a set amount of money for the program and don't have to provide coverage to every person who's eligible.

Indiana has never spent more than its federal allocation.

While participation rates in CHIP and Medicaid have gone up in recent years, Indiana's 84.2 percent rate in 2013 was still seventh-lowest among states, according to Georgetown University's Center for Children and Families.

And Indiana was the only Midwestern state where the share of children without health insurance (8.2 percent) was higher than the national rate (7.1 percent) in 2013.

Elizabeth Wright Burak, senior program director at Georgetown University's Center for Children and Families, said Indiana is not among the majority of states that allow a child, once enrolled in CHIP, to stay covered for 12 months regardless of the household's income fluctuations. In addition, Indiana requires children to be uninsured for 90 days before becoming eligible.

"Indiana could certainly make strides if they got rid of their waiting period," she said.

Kenley, however, is worried about what will happen to funding levels after the two-year boost. The Affordable Care Act increased funding from 2016 through 2019. But Congress only agreed for now to extend CHIP through 2017.

"We just feel so much at the mercy of the federal government and don't have the ability to control our own future here," Kenley said.

Contact Maureen Groppe at mgroppe@gannett.com or @mgroppe on Twitter.