As Congress continues to focus on tax reform, there has been relatively little conversation about a recently lapsed federal program that funds health insurance for children in low-income households. The Children’s Health Insurance Program (CHIP) is primarily targeted at households that have too much income to be eligible for Medicaid, but not enough to afford private health insurance.
While CHIP has enjoyed bipartisan support since its creation in 1997, the program’s lapse illustrates a broader problem with our health-care debate: federal control over health care and health insurance markets. Obamacare has demonstrated the pain concentrated power can unintentionally inflict on American families, with millions of canceled health-care plans, years of skyrocketing premiums, and rapidly narrowing provider networks. The debate over CHIP extends this painful lesson.
It’s true that CHIP may be slightly better than other federal programs such as Medicaid since it provides states with far more flexibility to administer the program. Moreover, households receiving CHIP benefits are routinely expected to share in some of the costs, and are typically better consumers of care than those enrolled in Medicaid. But CHIP is far from perfect. And with its reauthorization up for debate, Congress has the opportunity to go one step further and truly empower states and improve CHIP in the process.
First and foremost, CHIP should be a fully state-administered program, not a federal responsibility. The federal regulation of health insurance only drives up premiums, hinders market forces that reduce the cost of care, and perpetuates a cartel-like system between insurers and government that leaves patients with few options. If, instead, states had full control over this program with no federal strings attached — similar to a block grant of Medicaid — they would have the ability to tailor it to the needs of their own residents. This would improve health outcomes for the children enrolled in the program and lower total costs as well. States could use the resulting savings for any number of policy reforms, such as health savings accounts for lower income households or funding for state-based high-risk pools serving those with preexisting conditions.
Allowing CHIP to move forward without reform would be a lost opportunity for Congress. In 2015, supporters of the legislation specifically argued for a temporary two-year authorization of CHIP to allow time to make reforms. The time has come.
Some of these reforms — such as ending the burdensome maintenance of effort requirements hindering state flexibility and better targeting of CHIP’s funding to the children truly in need — are also critical for addressing our growing national debt. In the state of Texas, roughly 400,000 children receive health insurance through CHIP. State officials who work with these families every day know better than Washington the needs of parents and their children. If Washington would get out of the way, state policymakers could improve the program and protect taxpayers.
Instead of simply extending CHIP, Congress should relinquish control and empower states to take charge of reforming this program.