The price of extending CHIP is now so low it saves the government money

The CBO says a 10-year CHIP extension costs less than nothing.

Extending the Children’s Health Insurance Program’s budget for an additional decade would save the federal government $6 billion, according to new estimates from the Congressional Budget Office.

CHIP’s funding expired 103 days ago, on September 30. For months now, negotiations in Congress have stalled over how to pay for the program that covers 9 million low- and middle-income children. Republicans proposed a series of deeply partisan spending cuts to cover the costs of extending CHIP, such as slashing Obamacare programs and Medicare.

So far, the debate has centered on a five-year extension of CHIP’s budget. But the new projections, issued in a letter to Rep. Frank Pallone (D-NJ), suggest that switching to a permanent or 10-year extension may side-step the debate about how to pay for the program altogether.

In an interview with Vox, Pallone said he is now planning to advocate for a permanent extension of CHIP’s budget.

“Our problem has been the pay-fors,” he said. “We’ve been negotiating those and we want to eliminate the bad pay-fors that sabotage the ACA. Now, I hope that wouldn’t be a problem at all, that they would just eliminate those things.”

Senate Finance Ranking member Ron Wyden (D-OR) has also tweeted favorably about the 10-year extension. His committee has jurisdiction over the health program’s budget.

His spokesperson, Taylor Harvey, elaborated: “Sen. Wyden has always supported extending CHIP for as long as possible, including a permanent extension that would save taxpayers billions of dollars while giving kids long-term health care security. He is working day and night with Chairman Hatch to secure a long-term funding extension for this key lifeline for kids and families across the country.”

The Congressional Budget Office has previously estimated that it would cost the federal government $800 million to extend the CHIP program for another five years.

But it also expects that extending the CHIP program even further will actually save the government money. That’s because, without CHIP, CBO thinks a decent number of kids will transition into the Obamacare marketplaces. There, the government will have to subsidize their coverage — and spend more on those tax credits than they would just keeping the kids in their current CHIP health plans.

“Extending funding for CHIP for 10 years yields net savings to the federal government because the federal costs of the alternatives to providing coverage through CHIP (primarily Medicaid, subsidized coverage in the marketplaces, and employment-based insurance) are larger than the costs of providing coverage through CHIP during that period,” the nonpartisan budget agency writes.

Part of what makes CHIP especially cheap to extend right now is the recent repeal of the Affordable Care Act’s individual mandate. That policy is expected to make the premiums in the Obamacare marketplaces more expensive — which means the federal government would have to spend more money subsidizing those premiums for low- and middle-income enrollees.

“I don’t want to be jumping for joy, but as a result of this awful policy, CBO now says that CHIP will cost significantly less — and that over a decade, it will produce a net savings,” Pallone says.