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A quick note on CHIP, block grants, and the tax cut

Summary:
This piece from the WaPo makes an important point, which I’d like to embellish a bit. A few months ago, Congressional authorization for the CHIP program expired, and they still haven’t reauthorized the funding, which is a block grant to states in support of this health coverage program for 9 million low-income kids and pregnant women. On Friday, Utah posted a notice online saying it probably will run out of CHIP funding by the end of January. Earlier in the week, Colorado notified families that their coverage might end early next year. Arizona, California, Ohio, Minnesota and the District are also nearing the end of their funding, as is Oregon, whose Democratic governor, Kate Brown, has directed the state’s health authority to continue financing CHIP through April out of its reserves.

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This piece from the WaPo makes an important point, which I’d like to embellish a bit.

A few months ago, Congressional authorization for the CHIP program expired, and they still haven’t reauthorized the funding, which is a block grant to states in support of this health coverage program for 9 million low-income kids and pregnant women.

On Friday, Utah posted a notice online saying it probably will run out of CHIP funding by the end of January. Earlier in the week, Colorado notified families that their coverage might end early next year. Arizona, California, Ohio, Minnesota and the District are also nearing the end of their funding, as is Oregon, whose Democratic governor, Kate Brown, has directed the state’s health authority to continue financing CHIP through April out of its reserves.

Unlike Medicare, Medicaid, SNAP, and other programs that automatically expand and contract with need, block granted programs depend on Congressional re-authorization. Therein lies one of the problems (I’ll get to another below) and the article raises an important concern:

…imagine this same situation, but applied to Medicaid, the program that covers far more Americans — around 70 million.

The reason Congress must reauthorize funding for CHIP is because it’s a block grant program, meaning that states are provided with a set amount of federal dollars instead of an ongoing funding stream (as with Medicaid).

Were Congress to convert Medicaid into block grants, as Republicans tried to do in multiple health-care bills this year, it’s feasible lawmakers might show the same delay in letting funding lapse, throwing states into uncertainty on an even larger scale.

In other words, what’s going on with CHIP is a potent warning against block granting other safety net programs, like Medicaid or SNAP (moreover, we’ve written that the CHIP block grant is set up to work better than the ones proposed for Medicaid). This is a very well known problem, btw, to those of us who followed the block-granting of TANF (cash payments to poor families). Its funding froze and its anti-poverty and counter-cyclical effectiveness have been hugely diminished.

Here’s a new problem in this space. If the Republican tax bill passes, as I suspect it will, and they significantly reduce the state-and-local tax deduction, those states that want to raise the revenues necessary to support block-granted programs will have a much harder time doing so, since their residents can no longer write off most or all of these tax payments against their federal liabilities.

In this regard, Republicans are up to a devious bait-and-switch. They want to convert safety net programs that current respond to need into fixed-funded block grants, while at the same time reducing states’ ability to support these programs.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

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