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4 Takeaways From Trump’s Plan To Rescind CHIP Funding

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[UPDATED on May 14]

President Donald Trump wants to employ a rarely used budget maneuver called “rescission” to eliminate $15 billion in federal spending, including $7 billion from the popular Children’s Health Insurance Program (CHIP).

Administration officials insist the cuts wouldn’t negatively affect any programs — rather, they would merely return money into the Treasury that Congress appropriated but is no longer needed.

In a statement on the White House blog, Russ Vought, the deputy director of the Office of Management and Budget, said the administration strongly supports the CHIP program. “Rescinding these funds will have no impact on the program,” Vought wrote. “At some point Congress will likely ‘rescind’ those funds as a budget gimmick to offset new spending elsewhere, as it did on the recently passed omnibus. Instead Congress should rescind the money now.”

But child health advocates are wary, particularly since the proposal comes a few months after Congress let funding authorization for CHIP lapse, which forced states to request millions in emergency contingency funds to keep children covered.

CHIP, which covers 9 million children from low-income families that earn too much to qualify for Medicaid, is mostly federally funded. But states operate the program within federal guidelines.

As budget hawks and children’s advocates dispute the effect of the plan, here are some takeaways on the Trump proposal.

What Are Rescissions?

Since the 1970s, presidents have had the power to take back money from federal programs previously appropriated by Congress — if Congress approves. That budget tool is not regularly used. The last president to seek and get approval for one was President Bill Clinton.

Once the president recommends a rescission, Congress has 45 days to approve the request. It needs only a majority vote in each chamber to pass.

If it isn’t approved, the rescission does not take effect.

The president can recommend such cuts only with funds that Congress appropriates. Mandatory programs, such as Medicaid and Medicare, are not subject to rescissions.

Will Cutting $7 Billion From CHIP Really Have No Impact On The Program?

That’s hard to say.

There is $7 billion at stake. The administration says $5 billion can no longer be spent because the period for it to be sent to states has expired. The other $2 billion is being taken from a federal contingency fund for CHIP. That money is to be used only if they face a budget shortfall. The economy is improving, and the administration is betting demand for CHIP will wane, leaving little need for the contingency fund.

“Anytime you cut spending, there is going to be some effect, said Marc Goldwein, senior vice president of the nonpartisan Committee for a Responsible Federal Budget. “But in terms of CHIP, it’s likely close to be zero — these are tiny cuts.”

Still, child health advocates, who endured months of uncertainty about whether Congress would restore federal funding to CHIP in 2017, are worried.

“I think the cut to the contingency fund is particularly troubling,” said Bruce Lesley, president of First Focus, an advocacy group.

Why Is President Trump Using This Budgetary Maneuver?

After signing a $1.3 trillion spending bill in March, the president came under pressure from conservatives in Congress to cut the federal deficit. It is projected to hit nearly $1 trillion next year.

One strategy, according to these conservatives, is to rescind money that has not been spent to keep lawmakers from tapping those funds to pay for other programs.

Should Parents Of Kids On CHIP Be Worried?

Yes, if Congress goes along with the cuts, said David Super, a law professor at Georgetown University. But political analysts suggest that’s not likely to happen since some Republican senators have already spoken out against the move. With Republicans holding a 51- 49 majority in the Senate — and Sen. John McCain (R-Ariz.) battling brain cancer back home — the president likely would need all Republicans in the Senate to pass a rescission.

“This is pure political theater, ugly theater,” Super said.

He notes the administration is telling conservatives the cuts will reduce the deficit. But in media calls, senior administration officials said the cuts won’t have any programmatic effects.

“If the money would not have been spent, there are no savings,” Super said. “Any rescission of money that would not be spent, by definition, cannot reduce the deficit.”

Other programs targeted for cuts include relief funds for Hurricane Sandy, which struck in October 2012, and money allocated to respond to a possible outbreak of the deadly Ebola virus.

Super noted health advocates should be most worried about the $800 million in rescissions identified by the administration to the Center for Medicare and Medicaid Innovation. This program was created by the 2010 Affordable Care Act to find ways to make health programs work more efficiently — and save money.

KFF Health News' coverage of children’s health care issues is supported in part by the Heising-Simons Foundation.

[Correction: This story was updated on May 14 at 3 p.m. ET to correct the size of the federal spending law signed by President Donald Trump in March. It was a $1.3 trillion package.] 

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