January 19, 2010

Medicaid and CHIP: Enrollment, Benefits, Expenditures, and Other Characteristics of State Premium Assistance Programs

The United States Government Accountability Office writes in this report that fiscal pressures, rising health care costs, and increases in the number of uninsured may lead states to look toward public-private partnerships to help finance health insurance coverage. Through Medicaid and the State Children's Health Insurance Program (CHIP), states have had long-standing authority to operate premium assistance programs that subsidize the purchase of private health insurance. The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) provided states with additional options for operating premium assistance programs.

As of November 2009, states had not implemented premium assistance programs under the new authorities provided by CHIPRA, but states were continuing to operate their programs under preexisting authorities. Through premium assistance programs, states use Medicaid funds, CHIP funds, or both to subsidize the cost of private health insurance for eligible individuals. As such, premium assistance programs contrast with direct coverage, where states provide Medicaid or CHIP benefits to enrollees by paying doctors and other providers directly or contracting with managed care organizations. One potential benefit reported is that premium assistance programs could generate cost savings for Medicaid and CHIP by leveraging private financial resources for health insurance coverage and decreasing enrollment in direct coverage. Additional potential benefits include helping families make the transition to private health insurance, expanding coverage to family members who are not themselves eligible for coverage under Medicaid or CHIP, and supporting the private insurance market. Reports also note that premium assistance may be more expensive than providing direct coverage through states? Medicaid and CHIP programs. Finally, reports have raised the possibility that premium assistance programs may create incentives for families to reduce their contributions toward the cost of health insurance coverage, thus shifting the costs of coverage to public funds.