Medicaid and CHIP--More Choices, Less Stigma


The Problem: Together with the Children's Health Insurance Program (CHIP), Medicaid spending has ballooned to over $500 billion annually (fueled most recently by the Affordable Care Act), with growth forecast to continue at some 6 percent a year, creating huge stresses on government budgets. Since Medicaid spending averages 24 percent of state budgets versus just 8 percent of federal expenditures, the effect of growth is much more serious for states, made even more critical because--as opposed to the federal government--most states are constitutionally required to balance their budgets.

The BETTER WAY: The program will be split into two parts, reflecting the two very different populations combined in the present structure: children and families (and certain low-income adults in some states), and the aged and disabled. While children and families use the same types of medical services at much the same rate as most of the US population, the aged and disabled often suffer from chronic illness, and may be dependent on various forms of long-term care. It is appropriate that the two groups' different needs have different solutions.


"Compared with other industrialized nations, the United States is unique in having a separate healthcare program--one with the reputation of providing inferior care--for its lower-income citizens..." -- from the Campaign study report.


Children and families (and low-income adults) in the current Medicaid program, along with CHIP enrollees, will be merged into the overall private insurance population, but with special protections. 

Like the rest of the private insurance population, the former Medicaid and CHIP enrollees will receive premium support based on their reported incomes. Those at or below 100 percent of FPL will receive premium support sufficient to acquire zero-deductible, minimal co-pay coverage at no cost. Additionally, all those below 150 percent of FPL will receive priority assignment to the lowest cost available health plan, but with the option of purchasing other coverage.

The aged and disabled (including dual eligibles) will remain in state-administered programs, but with partial federal funding provided through block grants.

Block grant funding will increase annually at the rate of GDP growth, with states matching federal funding at the FMAP rate. This approach reflects the relatively stable and less economy-variable nature of this group and is expected to encourage better coordination of care and more use of social service alternatives to minimize medical needs.




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