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States Using Obamacare Dollars to Fill Budget Holes Instead of to Fund Child Health Programs


A relatively unknown Obamacare provision sends billions of tax dollars to the states to pay for the Children's Health Insurance Program, but state politicians are using the money for political gain instead.

A newborn baby holds his mother's hand at the intensive care unit, on March 18, 2012, in Bucharest, Romania. .(AP Photo)

In March 2010, while the details of Obamacare were still being hammered out, Rep. Nancy Pelosi (D-Cali.) famously declared to a frustrated and bewildered American public, “But we have to pass the bill so that you can find out what is in it away from the fog of the controversy.”

Congress did pass Obamacare, and citizens and states have steadily been finding out what’s actually in the legislation ever since.

One of the recent “finds” includes a provision that will shift to the federal government a significant amount of the financial burden previously placed on states for the funding of the Children’s Health Insurance Program.

A newborn baby holds his mother's hand at the intensive care unit, on March 18, 2012, in Bucharest, Romania. .(AP Photo) (AP Photo)

CHIP, formerly called the State Children’s Health Insurance Program, was created as part of the Balanced Budget Act of 1997 to help states provide insurance for children in low-income households who are not eligible for Medicaid. According to the Centers for Medicare and Medicaid Services, an estimated 8.1 million children were enrolled in CHIP in fiscal year 2014.

To help offset the expected growing costs of Obamacare to the states, legislators included a provision in Obamacare that shifts all or nearly all of the CHIP burden to the federal government, beginning this year. Sarah Ferris reports in The Hill that under Obamacare, states will not pay more than 12 percent of CHIP expenses, and 11 states plus Washington, D.C. will not contribute anything. In previous years, federal contributions to CHIP amounted to 65–83 percent.

Shifting the CHIP burden to the federal government could free up as much as $6 billion for states over two years. Special-interest groups and advocacy organizations say the increased federal funding should only be used to improve CHIP, but instead of expanding or shoring up CHIP programs, many states are choosing to use those dollars to help fill budget holes completely unrelated to health care.

According to a report by California Healthline, California is estimated to receive as much as $1.1 billion over the next two fiscal years from the federal government, but Gov. Jerry Brown (D) has already proposed pulling $381 million of state funds from the CHIP program to pay for other programs’ expenses in his recent budget proposal.

In Kansas, Gov. Sam Brownback (R) is receiving significant criticism for his decision to transfer $17.6 million in federal CHIP funding to help cover the estimated $63 million needed to close the state’s budget shortfall.

Sam Brownback (AP) Sam Brownback (AP)

Shannon Cotsoradis, president of Kansas Action for Children, says the federal dollars “could have been reinvested in Kansas children and their families,” according to the Kansas Health Institute.

“I think it’s troubling that Kansas kids continue to foot the bill for unsustainable tax cuts in our state,” said Cotsoradis.

Other states, such as Ohio, are using the federal CHIP funds to fix health-care-related programs. Ohio plans to use its funds to stop what would have been an estimated $100 million cut to Medicaid.

The decision to divert federal CHIP dollars from CHIP to other budget needs is just further proof of Obamacare’s flawed design. Governors and state legislators are using what seems to them to be a lotto-like influx of free cash to make it appear as though their budgets are more sound than they actually are, scoring big politically while the state’s budget situation quietly becomes more unsustainable. Eventually, the federal cash bonanza will stop, and when it does, states will be stuck trying to figure out a way to pay for CHIP and other state programs using money it doesn’t have.

Now that Obamacare is the law of the land, this dangerous and irresponsible political game will likely lead to calls for further reimbursement cuts to doctors, a reduction in the quality of care, and eventually in health care rationing.

It’s a never-ending, vicious cycle of irresponsible government action. The federal government forces programs on states it knows the states cannot afford. The federal government then promises to temporarily help cover the costs, eventually pulling the funding and leaving the states without any way to make up for budget shortfalls. States are then forced to beg the federal government for more money and regulations or to raise taxes. Either way, health care becomes more costly and the American people suffer as a result.

Justin Haskins ( is a pro-liberty writer, editor of The Heartland Institute, and the editor of the Consumer Power Report.

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