Medicaid vs. CHIP: Understanding the Differences

Medicaid vs. CHIP: An Overview

Medicaid and Children’s Health Insurance Program (CHIP) both play a critical role in ensuring that children in lower-income families have sufficient health care coverage. Although they are both federal programs largely implemented through the states with joint financing, the two programs differ in many respects.

Medicaid

Medicaid was enacted in 1965 as part of the Social Security Act to provide health coverage to families with dependent children living below the federal poverty line (FPL). Originally, Medicaid required states to provide coverage for children through age 5 up to 133% of FPL and 100% of FPL for school-age children. Medicaid coverage for children was expanded under the Affordable Care Act to cover all children up to 138% of FPL.

Medicaid requires states to cover a broad range of services, including check-ups, physician and hospital visits, and vision and dental care. It also requires coverage for Early and Periodic Screening, Diagnosis, and Treatment (EPSDT), long-term care, and services provided at Federally Qualified Health Centers (FQHCs).

Unlike CHIP, Medicaid can provide free or low-cost medical coverage to adults as well.

When Obamacare, or the Affordable Care Act, was passed in 2020, only certain children were eligible to be covered by Medicaid, even if they were raised in the same family. Before the ACA, only children between 6 and 19 years old were affected by the eligibility threshold of only 100 percent of the FPL. However, since 2010, that eligibility is now at least 138 percent of the FPL for all children, regardless of age.

CHIP

CHIP was created as part of the Balanced Budget Act of 1997 to build on Medicaid coverage for low-income children. States are able to utilize federal funds for CHIP to expand their Medicaid program or create a standalone program, or a combination of both. The primary goal of CHIP is to expand the reach of government-funded health care coverage to more low-income children.

As part of CHIP, the states have simplified the enrollment process, making it easier for children to obtain coverage. Although CHIP covers more children, its coverage options are more limited than Medicaid. CHIP doesn’t offer coverage for EPSDT services.

CHIP was designed to cover children who fall outside of Medicaid eligibility, but who otherwise were not able to be insured through a family plan. This program vastly increased the number of children eligible for health insurance. However, CHIP is not governed by the same legislation as Medicaid and offers drastically different levels of coverage.

Key Differences

With more than 76 million enrollees in Medicaid and 6 million in CHIP, Medicaid is larger in size and scope than CHIP. Working together, the two programs are coordinated to provide coverage to all low-income children up to 300% of the FPL threshold. Although the ACA has established minimum requirements across all healthcare programs, there are still some key differences in the way Medicaid for children and CHIP are administered on a state level.

Matching Funds

The federal government matches state spending for both Medicaid and CHIP. To encourage more participation by states, the CHIP match rate is higher than the Medicaid match rate. On average, states receive 56% in matching funds for Medicaid spending, but they receive 71% for CHIP spending. However, under Medicaid, there are no pre-set limits or caps for federal matching funds. Under CHIP, matching funds are capped and states are limited to their specific allotment of funds.

Coverage Requirements

Although states are allowed a certain amount of flexibility in the design of coverage under Medicaid and CHIP, there are far fewer restrictions in the operation of separate CHIP programs. Medicaid has higher minimum comprehensive coverage requirements that include EPSDT services. States can design CHIP coverage around its minimum coverage requirements and choose to include benefits covered under Medicaid.

Cost Sharing

Under Medicaid, states are not allowed to impose premiums and cost-sharing for mandatory coverage. States that have established a separate CHIP program may impose premiums and cost-sharing.

Under the ACA, efforts are being made to better coordinate Medicaid and CHIP in both their coverage options and their administration by the states. The ACA seeks to create a continuum of coverage from the cradle to the grave with the goal of reducing the number of uninsured individuals. Efforts are underway to provide a more streamlined and coordinated enrollment process for the states, using the two programs as a way to increase enrollment, especially among children.

How to Apply for Medicaid and CHIP

Determining qualification for Medicaid or CHIP is a rather straightforward process. There is an income calculator on the healthcare.gov Medicaid page to determine qualification based on income. This is a useful tool but does not automatically determine eligibility.

One way to apply for Medicaid and CHIP is through the Health Insurance Marketplace. Once you submit an application, your state agency will contact you regarding enrollment. At the time of application, you will also learn if you qualify for an individual plan as well, possibly with some savings based on income.

The second way to apply for Medicaid and CHIP is through your state's Medicaid agency. Following this link will allow you to select your state. Once your state is selected, you will be able to follow a provided URL that directs you to the Medicaid homepage for your state's Medicaid agency.