The chairman of the Senate Finance Committee and the top Democrat on the panel announced on Tuesday night that they had reached agreement on a plan to prevent the imminent exhaustion of federal funds for the Children’s Health Insurance Program.
The current appropriation runs out at the end of this month, and many states will exhaust their allotments of federal money later this year or early next year.
Nearly nine million children receive health insurance through the program, on which the federal government has been spending about $14 billion a year. The program is for children in families that make too much to qualify for Medicaid, but not enough to afford other coverage.
The agreement was announced by the chairman of the Finance Committee, Senator Orrin G. Hatch, Republican of Utah, and the senior Democrat on the panel, Senator Ron Wyden of Oregon.
“Congress needs to act quickly to extend the funding for CHIP,” said Mr. Hatch, who helped create the program in 1997 with Senator Edward M. Kennedy, Democrat of Massachusetts.
Mr. Hatch said the agreement would provide “uninterrupted funding for CHIP” and “increased flexibility for states to administer the program.”
The agreement would provide federal funds for the program for five additional years.
Mr. Wyden said the agreement was “a great deal for America’s kids.”
When the Affordable Care Act was adopted in 2010, some members of Congress suggested that the Children’s Health Insurance Program would no longer be needed because youngsters and their families could get coverage on the open market. But policy experts say that prediction was wrong. Several studies have found that CHIP coverage provides better, more comprehensive benefits for children, at lower cost, than the health plans sold on insurance exchanges established under the Affordable Care Act.
The federal government and the states have historically shared the costs of the CHIP program, with the federal government paying a larger share in states where personal incomes are low. The Affordable Care Act increased the federal share in each state by 23 percentage points. As a result, the federal government pays the entire cost in 11 states.
The agreement by Mr. Hatch and Mr. Wyden would gradually restore the financial partnership between the federal government and the states. The federal share would continue to be enhanced by 23 percentage points, as under current law, for two more years, in 2018 and 2019. The increase would then be halved, to 11.5 percentage points, in 2020, and would be eliminated in 2021 and 2022.
The federal government would still pay a larger share of costs in the Children’s Health Insurance Program than in Medicaid.
House Republicans have expressed a desire to extend the program for five years, but have not worked out the details of legislation.
President Trump’s budget proposed extending the program for two years, through 2019, and called for changes to focus the program on “the most vulnerable low-income families and children that the program was intended to serve.” But the administration has not been deeply involved in deliberations on Capitol Hill.
Nearly 90 percent of children in CHIP are in families with annual incomes below twice the poverty level — less than about $49,000 for a family of four. Since the program was created, the proportion of children who are uninsured has fallen to less than 5 percent today, from nearly 14 percent in 1997.