'Doc Fix' Sets Up Showdown Over Children's Health Insurance

Senate Democrats are pushing for a four-year extension of the program, but the House's bipartisan plan would cut that in half.
by | March 18, 2015

Senate Democrats are insisting on a longer extension of the Children’s Health Insurance Program than the two years included in a bipartisan House plan to restructure how Medicare pays doctors, but whether they’d refuse the entire package -- or whether House Republicans would accept a four-year extension -- isn’t clear.

Funding for the Children’s Health Insurance Program (CHIP), which serves about 8 million kids from low-to-moderate-income families (up to $72,750 for a family of four), will end after September without an agreement from Congress. Governors have called for swift action so they can have greater certainty around their budgets, and the Medicare deal would offer that -- but for a shorter period of time than they and Senate Democrats prefer.

Since its inception in 1997, CHIP has received bipartisan support as it's cut the uninsured rate among children in half. The federal government pays a higher percentage to states than under Medicaid, an average of 70 percent of medical claims versus 57 percent, and allows for greater flexibility to limit its size because it’s a block grant. Failing to continue funding would cost states billions and would leave an estimated two million children uninsured.

The Affordable Care Act (ACA) requires a 23-percent boost in federal funding for CHIP to bring the program in line with higher Medicaid rates but Congress hasn't appropriated the money, meaning whatever funding is left over from a final installment from the federal government in April will likely run out faster because it will be more heavily concentrated per enrollee. 

Senate Democrats support a bill that would extend CHIP through 2019 and provide the funding boost established by the ACA. House Republicans and U.S. Sen. Orrin Hatch of Utah have also pitched a draft proposal to extend the program, but for unspecified period of time and with scaled-back eligibility that advocates for low-income people have criticized.

The Medicare deal being negotiated between House Speaker John Boehner and Democratic leader Nancy Pelosi would scrap the program’s Sustainable Growth Rate, which schedules deep and regular cuts that have been delayed 17 times over the past decade. Both parties want a deal that permanently scraps the growth rate while restraining costs through a less blunt route. The current deal also reportedly includes a two-year CHIP extension at the higher matching rate approved under the ACA.

That leaves Democrats with something to like -- higher matching rates set out in the ACA -- and something to oppose--the shorter CHIP extension--in a broader package that would repeal a widely criticized aspect of Medicare payment policy. “While a two-year extension of CHIP is encouraging, a four-year, clean extension of the program is necessary to ensure stability and certainty for states and families,” said a spokeswoman for Sen. Sherrod Brown, an Ohio Democrat who sponsored the earlier proposal from Senate Democrats.

Asked whether Brown would oppose the larger deal because of the CHIP provision, his spokeswoman said that would depend on the details of the entire package, but he said he was “highly skeptical” of a two-year extension. Democrats are also worried about benefit cuts in Medicare that would pay for the Medicare payment restructuring.

Other Democrats are also avoiding hinging their support on CHIP. Sen. Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, wouldn’t tell reporters Tuesday whether the CHIP extension is a deal-breaker, according to National Journal. "We've got to move on to a modern reimbursement system that will ensure the well-being of Medicare for years to come, but we've got to do CHIP now," Wyden said. "I think the real question is balance. We've got to have a balanced package."

The deadline to either restructure Medicare payments or pass another temporary modification is April 1. There are a host of other forces that also imperil a broader deal, from House conservatives to interest groups for doctors and seniors, but even if the effort on Medicare reform fails, a temporary fix could still include CHIP funding as well, health care lobbyists said.

Some advocates for low-income people said a two-year extension is unlikely to pass the Senate. And Democrats do have support among a bipartisan group of governors. Of the 39 governors who responded to House requests for feedback on CHIP last year, 22 called for an extension at least through 2019.  

Ed Walz, the communications chief for the advocacy group First Focus, pointed out that Democrats aren’t alone in calling for a four-year extension. “We’ve got literally all of the Senate Democrats that would extend it for four years,” said Walz. “It really is a bit of a unified front, and from our perspective it’s hard to see them caving on that.”

If Senate Democrats refuse to budge on the number of years, they’d probably have to give up the increased matching rate authorized by the ACA, said Stephen Northrup, a lobbyist and former top health policy staffer for Senate Republicans. “I think it's possible GOP might consider more than two years, but I doubt they'd consider doing it with the enhanced match,” he said. “Right now, everything is fluid.”

Another veteran Capitol Hill staffer turned lobbyist doubted Democrats would insist on a four-year CHIP extension ultimately, characterizing the disagreement a negotiating tactic between the House and the Senate. “I wonder whether they’ll really block this over that, but maybe it goes to three years to calm them down,” he said. “I think a lot of what’s afoot is just typical House versus Senate [dynamics].”