The Children's Health Insurance Program (CHIP) is funded jointly by the federal government and states through a formula based on the Medicaid Federal Medical Assistance Percentage (FMAP). As an incentive for states to expand their coverage programs for children, Congress created an “enhanced” federal matching rate for CHIP that is generally about 15 percentage points higher than the Medicaid rate — averaging 71% nationally. For example, if a state has a 50% match rate for Medicaid, they may have a 65% match rate for CHIP.
See information on Medicaid financing.
CHIP Funding Allotments
Because CHIP is a capped program, each state is provided an annual CHIP allotment. Every fiscal year, the Centers for Medicare & Medicaid Services (CMS) determines the share of program funding they will pay that year. States must provide matching funds to get their federal funding allotment.
Affordable Care Act Enhances Federal CHIP Funding
The Affordable Care Act extends CHIP through most of 2015 and beginning October 1, 2015 the already enhanced CHIP federal matching rate will increase by 23 percentage points, bringing the average federal matching rate for CHIP to 93%. The enhanced federal matching rate continues until September 30, 2019. More information on federal funding in the Affordable Care Act.
CHIP Expenditure Forms
States can operate CHIP as a program separate from Medicaid, as an expansion of the Medicaid program, or a combination of both program types.
States submit CHIP forms CMS-64 and CMS-21 to CMS to make sure that federal payments for state expenditures under Medicaid and CHIP are appropriate and to track the number of children served by the programs.
CHIP as Medicaid Expansion
Administrative costs associated with CHIP programs operated as an expansion of a state Medicaid program may also be included on the forms CMS-21 if the state opts to claim Federal Financial Participation (FFP) at the enhanced Federal Medical Assistance Percentage.
CHIP as Separate Program
States that operate their CHIP as a separate program use the Quarterly CHIP Statement of Expenditures to submit their actual recorded expenditures and the disposition of federal funds each quarter.
Health Services Initiatives
States have the option to use available CHIP allotment within the 10 percent administrative cap to develop a state-designed Health Services Initiatives to improve the health of low-income children. More information is available here.