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The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009) was
passed in the House (H.R. 2) on January 14, 2009. The overall structure of CHIPRA 2009 is
similar to its two predecessors (H.R. 976 and H.R. 3963 from the 110th Congress).
Cost estimates from the Congressional Budget Office (CBO) indicated that H.R. 2 would increase
outlays by $32.3 billion over 5 years and by $65.4 billion over 10 years. Those costs would be
offset by an increase in the federal tobacco tax (mostly from an increase in the federal tax by 61
cents per pack of cigarettes) and other changes, which the Joint Committee on Taxation (JCT)
estimated would increase on-budget revenue by $32.5 billion over 5 years and by $65.6 billion
over 10 years. CBO estimated the bill would increase FY2013 Medicaid and SCHIP enrollment
by 6.5 million, for a total of 37.7 million projected enrollees. About 80% of the increased
enrollment would have occurred among current eligibility groups, rather than new ones. Of the
6.5 million increased average monthly enrollment in FY2013, CBO estimates that 2.4 million
(37%) would have private coverage in the absence of the legislation and that 4.1 million (63%)
would have been uninsured.
Most of this report summarizes changes to current law across the major provisions of H.R. 2 that
would occur if CHIPRA 2009 were enacted.

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Background ..................................................................................................................................... 1
Summary of Major SCHIP Legislation During the 110th Congress ............................................... 1
Overview of the Vetoed H.R. 3963 and H.R. 976 ..................................................................... 2
The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009) ............. 3
Funding/Financing .................................................................................................................... 4
Federal SCHIP Allotments.................................................................................................. 4
Contingency Fund............................................................................................................... 6
Bonus Payments.................................................................................................................. 7
“Qualifying States” Provision............................................................................................. 8
Limitations on SCHIP Matching Rate and Availability of Federal Funds .......................... 8
Eligibility .................................................................................................................................. 9
Pregnant Women ................................................................................................................. 9
Adults.................................................................................................................................. 9
Illegal Aliens and Unauthorized Expenditures.................................................................. 10
Enrollment and Access............................................................................................................ 10
Outreach and Enrollment .................................................................................................. 10
Express Lane Eligibility.....................................................................................................11
Citizenship Documentation................................................................................................11
Premium Assistance .................................................................................................................11
Quality of Care........................................................................................................................ 12
Benefits ................................................................................................................................... 13
Dental Benefits ................................................................................................................. 13
Mental Health Parity ......................................................................................................... 13
Payments for Federally-Qualified Health Centers (FQHCs) and Rural Health
Clinics (RHCs)............................................................................................................... 14
Premium Grace Period...................................................................................................... 14
Clarification of Coverage of Services Provided Through School-Based Health
Centers ........................................................................................................................... 15
Program Integrity .................................................................................................................... 15
Payment Error Rate Measurement (PERM)...................................................................... 15
Improving Data Collection ............................................................................................... 16
Updated Federal Evaluation of SCHIP ............................................................................. 16
Access to Records for IG and GAO Audits and Evaluations............................................ 17
Deficit Reduction Act Technical Corrections—Clarification of Requirements to
Provide EPSDT Services for All Children in Benchmark Benefit Packages
Under Medicaid ............................................................................................................. 17
Other Medicare Provisions...................................................................................................... 17
Revenue Provisions ....................................................................................................................... 18
Tobacco Excise Taxes ............................................................................................................. 18

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Table 1. Timeline of Legislative Action on the Major SCHIP Reauthorization Bills..................... 2

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Author Contact Information .......................................................................................................... 19

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The Balanced Budget Act of 1997 (P.L. 105-33, BBA-97) established the State Children’s Health
Insurance Program (SCHIP) under a new Title XXI of the Social Security Act. SCHIP builds on
Medicaid by providing health care coverage to low-income, uninsured children in families with
incomes above applicable Medicaid income standards. The latest official numbers show that
SCHIP enrollment reached a total of 7.1 million children and nearly 587,000 adults in FY2007. In
FY2008, federal SCHIP spending totaled $7.0 billion, with states projected spending expected to
equal $7.9 billion in FY2009.
In BBA 97, Congress authorized and appropriated funds for FY1998-FY2007, with no federal
appropriations slated for FY2008 and beyond.1 The absence of future federal appropriations
triggered SCHIP legislative attention during the 110th Congress, as reviewed in the next section.
After this brief summary of past legislative action, the report provides a description of the
Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009) as introduced
as (H.R. 2) on January 13, 2009, and passed by the House Rules Committee on January 13, 2009.
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During the 110th Congress, a number of SCHIP bills saw legislative action. A majority of the
SCHIP changes enacted in public laws included provisions to add additional appropriations to
SCHIP, but did not make any major substantive changes to the program.2 The 110th Congress
enacted provisions to:
• address certain states’ shortfalls in FY2007 federal SCHIP funding (U.S. Troop
Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability
Appropriations Act, 2007, P.L. 110-28);
• provide temporary FY2008 appropriations for SCHIP through December 31,
2007 through continuing resolutions (P.L. 110-92, P.L. 110-116, P.L. 110-137,
P.L. 110-149); and
• provide additional appropriations through March 31, 2009 (The Medicare,
Medicaid, and SCHIP Extension Act of 2007, P.L. 110-173).
The 110th Congress also considered SCHIP reauthorization legislation that would have made
important changes to Medicaid and SCHIP. Numerous bills were introduced, and two that were
passed by Congress (H.R. 976 and H.R. 3963) were vetoed by President Bush.3 Table 1 provides
a time line of the legislative action on the major SCHIP reauthorization bills during 2007.

1 For more information on SCHIP funding see CRS Report R40075, What Happens to SCHIP After March 31, 2009?
2 A complete legislative history of the SCHIP program is contained in CRS Congressional Distribution Memorandum
SCHIP Legislative History, by Elicia J. Herz and Chris L. Peterson, available upon request.
3 For detailed information about the provisions in each of these bills see CRS Report RL 34129, Medicaid and SCHIP
Provisions in H.R. 3162, S. 1893/H.R. 976, and Agreement, and CRS Report RS22746, SCHIP: Differences Between
H.R. 3963 and H.R. 976.
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Table 1. Timeline of Legislative Action
on the Major SCHIP Reauthorization Bills
Bill
Conference
House
Senate
Presidential
House
Name Number Vote
Vote
House
Senate
Action
Override
(result)
(result)
(result)
(result)
(result)
(result)a
110th Congress
CHAMPb H.R.
3162
8/1/2007

(225-204)
CHIPRA Ic H.R.
976
8/2/2007 9/25/2007
9/27/2007
10/3/07
10/18/2007
(68-31)
(265-159)
(67-29)
(veto)
(273-156)
CHIPRA IId H.R.
3963 10/25/2007
11/1/2007

12/12/07
1/23/2008
(265-142)
(64-30)
(veto)
(260-152)
111th Congress
CHIPRA 2009 H.R. 2
1/14/2009

(289-139)
Source: Prepared by the Congressional Research Service.
a. Two-thirds majority required for veto override. Both votes were short of that margin.
b. Children’s Health and Medicare Protection Act of 2007 (CHAMP).
c. Children’s Health Insurance Program Reauthorization Act of 2007 (also referred to as CHIPRA I or S.
1893/H.R. 976).
d. The Children’s Health Insurance Program Reauthorization Act of 2007 (also referred to as CHIPRA II) was
a bicameral agreement that passed as an amendment to H.R. 976.
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The 110th Congress’s H.R. 976 (CHIPRA I) and H.R. 3963 (CHIPRA II) shared many common
elements,4 including
• national allotment appropriations totaling $61.4 billion over five years (which
represented an increase of $36.2 billion over the current law baseline of $25.2
billion), distributed to states and territories using a new formula primarily based
on their past and/or projected federal SCHIP spending;
• a new contingency fund (for making payments to states for certain shortfalls of
federal SCHIP funds), which would have received deposits through a separate
appropriation each year through FY2012 and made payments of up to 20% of the
available national allotment for SCHIP;
• new performance bonus payments (for states exceeding certain child enrollment
levels and states that implement certain outreach and enrollment initiatives),
which were to be funded with an FY2008 appropriation of $3 billion and deposits
of certain unspent SCHIP funds through FY2012;

4 A description of the major differences between the two bills across major provisions can be found in CRS Report
RS22746, SCHIP: Differences Between H.R. 3963 and H.R. 976.
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• additional grants for outreach and enrollment that would have totaled $100
million each year through FY2012;
• provisions to remove barriers to enrollment;
• provisions related to benefits (e.g., dental, mental health and Early and Periodic,
Screening, Diagnosis and Treatment [EPSDT]);
• provisions to eliminate barriers to providing premium assistance;
• provisions to strengthen quality of care and health outcomes of children;
• program integrity and miscellaneous provisions, including some that affect the
Medicaid program; and
• tobacco tax changes.
Cost estimates from the Congressional Budget Office (CBO) indicated that H.R. 976 would have
increased outlays by $34.9 billion over 5 years and by $71.5 billion over 10 years,5 and H.R. 3963
would have increased outlays by $35.4 billion over 5 years and by $71.5 billion over 10 years.6
Costs in both bills would have been offset by an increase in the federal tobacco tax (mostly from
an increase in the federal tax by 61 cents per pack of cigarettes) and other changes, which the
Joint Committee on Taxation (JCT) estimated would have increased on-budget revenue by $35.5
billion over 5 years and by $71.7 billion over 10 years.
On any given day in 2007, approximately nine million were without health insurance. Most of
these children came from two-parent families (53%). Most had a parent who worked full time all
year (60%).7 And other data indicate most uninsured children are eligible for Medicaid or SCHIP
(62%).8 According to the Congressional Budget Office (CBO), the two vetoed CHIPRA bills both
would have increased FY2012 Medicaid and SCHIP enrollment by 5.8 million, for a total of 34.1
million projected enrollees. In both bills, about 80% of the increased enrollment would have
occurred among current eligibility groups, rather than new ones.9
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The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA 2009) was
passed in the House (H.R. 2) on January 14, 2009. The overall structure of CHIPRA 2009 is
similar to its two predecessors (H.R. 976 and H.R. 3963 from the 110th Congress).

5 CBO, letter to the Honorable John Dingell (September 25, 2007), available at
[http://www.cbo.gov/ftpdocs/86xx/doc8655/hr976.pdf].
6 CBO, CBO’s Estimate of the Effects on Direct Spending and Revenues of the Children’s Health Insurance Program
(October 24, 2007), available at [http://www.cbo.gov/ftpdocs/87xx/doc8741/hr976DingellLtr10-24-2007.pdf].
7 CRS Report 97-975, Health Insurance Coverage of Children, 2007.
8 Julie L. Hudson and Thomas M. Selden, “Children’s Eligibility And Coverage: Recent Trends And A Look Ahead,”
Health Affairs Web exclusive, August 16, 2007, pp. w618-629.
9 Previously cited CBO cost estimates.
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Cost estimates from the Congressional Budget Office (CBO) indicated that H.R. 2 would increase
outlays by $32.3 billion over 5 years and by $65.4 billion over 10 years.10 Those costs would be
offset by an increase in the federal tobacco tax (mostly from an increase in the federal tax by 61
cents per pack of cigarettes) and other changes, which the Joint Committee on Taxation (JCT)
estimated would increase on-budget revenue by $32.5 billion over 5 years and by $65.6 billion
over 10 years. CBO estimated the bill would increase FY2013 Medicaid and SCHIP enrollment
by 6.5 million, for a total of 37.7 million projected enrollees. About 80% of the increased
enrollment would have occurred among current eligibility groups, rather than new ones. Of the
6.5 million increased average monthly enrollment in FY2013, CBO estimates that 2.4 million
(37%) would have private coverage in the absence of the legislation and that 4.1 million (63%)
would have been uninsured.
The remainder of this report summarizes changes to current law across the major provisions of
H.R. 2 that would occur if CHIPRA 2009 were enacted.
Ȧȱ
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BBA97 created the State Children’s Health Insurance Program (SCHIP) and appropriated $40
billion for SCHIP original allotments from FY1998 to FY2007. The Medicare, Medicaid, and
SCHIP Extension Act of 2007 (MMSEA, P.L. 110-173) appropriated allotments and additional
funding to prevent any state from running out of federal SCHIP funds before March 31, 2009.11
The SCHIP appropriation for original allotments in FY2007, the last year provided for in BBA97,
totaled $5.04 billion. MMSEA provided that same amount annually for SCHIP allotments in
FY2008 and FY2009, stating, however, that these funds “shall not be available for child health
assistance [SCHIP expenditures] for items and services furnished after March 31, 2009.”12
MMSEA also provided up to $275 million to cover any shortfalls of federal SCHIP funds for the
first half of FY2009—that is, through March 31, 2009. However, even if unspent FY2008 and
FY2009 allotments were available past March 31st, 27 states would still need an additional $1.9
billion to prevent any shortfalls for the second half of FY2009.13
For FY2009, the current-law allotments were determined consistent with the past several years’
allotments. Of the national appropriation ($5 billion for each of FY2007, FY2008 and FY2009),
the territories receive 0.25%.14 The remainder ($4.9875 billion for each of FY2007, FY2008 and
FY2009) is divided, or allotted, among the states based on a formula using survey estimates of the
number of low-income children in the state and the number of those children who were

10 CBO, H.R. 2: Children’s Health Insurance Program Reauthorization Act of 2009 (January 13, 2009), available at
http://www.cbo.gov/ftpdocs/99xx/doc9963/hr2.pdf.
11 For additional information on the current-law status of SCHIP, see CRS Report R40075, What Happens to SCHIP
After March 31, 2009?
12 §201(a)(2) of MMSEA.
13 See the last column in Table 1 of CRS Report R40075, What Happens to SCHIP After March 31, 2009?
14 Another part of the SCHIP statute, §2104(c)(4), makes additional SCHIP allotments available to the territories—$40
million for each of FY2007, FY2008 and FY2009.
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uninsured.15 These amounts are adjusted by a geographic adjustment factor and are limited by
various floors and ceilings to ensure that a state’s allotment does not vary substantially from
certain past allotments.
The overall structure of federal SCHIP allotments and financing in CHIPRA 2009 is similar to its
two predecessors (H.R. 976 and H.R. 3963 from the 110th Congress). Allotment determinations
under these versions of CHIPRA are markedly different from current law. Rather than dividing a
fixed national appropriation on the basis of state survey estimates, CHIPRA 2009 would calculate
a state’s allotment as described below, and if the total of all the states’ and territories’ allotments
did not exceed the national appropriation, that would be the state’s allotment. The national
appropriations for SCHIP allotments under CHIPRA 2009 are as follows:
• $10,562,000,000 in FY2009;
• $12,520,000,000 in FY2010;
• $13,459,000,000 in FY2011;
• $14,982,000,000 in FY2012; and
• $3,000,000,000 for the first half of FY2013 and $3,000,000,000 for the second
half of FY2013.
A “one-time appropriation” of $11,406,000,000 would be added to the half-year amounts
provided for FY2013. These provisions for FY2013 are intended to reduce by $11.406 billion per
year the amount of allotments assumed by the Congressional Budget Office (CBO) for fiscal
years after FY2013.
Although federal SCHIP allotments under BBA97 were made available for three years, allotments
for FY2009 onward under CHIPRA 2009 would be available for two years, with unspent funds
available for redistribution first to shortfall states and then toward bonus payments, described
below.
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FY2009 federal SCHIP allotments for states under CHIPRA 200916 would be based on the largest
of three state-specific amounts:
• the state’s FY2008 federal SCHIP spending, multiplied by a growth factor;17
• the state’s FY2008 federal SCHIP allotment, multiplied by a growth factor; and

15 Low-income children are those at or below 200% of the federal poverty level (FPL), which was approximately
$35,000 for a family of three in 2008. For additional information, see http://aspe.hhs.gov/poverty/.
16 States’ and territories’ federal SCHIP allotments under CHIPRA 2009 are estimated in CRS Report R40129,
Projections of FY2009 Federal SCHIP Allotments Under CHIPRA 2009.
17 This growth factor, called the “allotment increase factor” in the legislation, would be the product of (a) 1 plus the
percentage increase (if any) in the projected per capita spending in the National Health Expenditures for 2009 over
2008, and (b) 1.01 plus the percentage change in the child population in each state (except for the territories, for which
the national amount is used) from July 1, 2008, to July 1, 2009, based on the most recent published estimates of the
Census Bureau.
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• the state’s own projections of federal SCHIP spending for FY2009, submitted by
states to the Secretary of Health and Human Services (HHS) in February 2009.
The largest of these three amounts would be increased by 10% and would serve as the state’s
FY2009 federal SCHIP allotment, as long as the national appropriation is adequate to cover all
the states’ and territories’ FY2009 allotments.18 If not, allotments would be reduced
proportionally.
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For FY2010, the allotment for a state (or territory) would be calculated as the sum of the
following four amounts, if applicable, multiplied by the applicable growth factor for the year:
• the FY2009 SCHIP allotment;
• FY2006 unspent allotments redistributed to and spent by shortfall states in
FY2009;
• Spending of funds provided to shortfall states in the first half of FY2009; and
• Spending of Contingency Fund payments (discussed below) in FY2009, although
there may be none.
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For FY2011 and FY2013, the allotment for a state (or territory) would be “rebased,” based on
prior year spending. This would be done by multiplying the state’s growth factor for the year by
the new base, which would be the prior year’s federal SCHIP spending from allotments,
redistribution and Contingency Fund payments.
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For FY2012, the allotment for a state (or territory) would be calculated as the FY2011 allotment
and any FY2011 Contingency Fund spending, multiplied by the state’s growth factor for the year.
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A Child Enrollment Contingency Fund would be established and funded initially by a separate
appropriation of 20% of the available national allotment for SCHIP in FY2009 (approximately
$2.1 billion). For FY2010 through FY2013, the appropriation would be such sums as are
necessary for making payments to eligible states for the fiscal year, as long as the annual
payments do not exceed 20% of that fiscal year’s available national SCHIP allotment.
If a state’s federal SCHIP spending in FY2009 through FY2013 exceeds its available allotments
(excluding unspent allotments redistributed from other states) and if the state experienced

18 Since FY2009 SCHIP appropriations have already been obligated to states for the first half of FY2009 under current
law, Sec. 3(c) of the legislation provides for an accounting adjustment: The full-year FY2009 allotment amounts
available to states under CHIPRA 2009 are to be reduced by amounts already obligated in the first half of FY2009
under current law.
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enrollment that exceeded its target average number (FY2008 enrollment plus annual state child
population growth plus one percentage point per year), payments from the Contingency Fund
would be the projected federal SCHIP costs for those enrollees above the target number in the
state.
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Funds for bonus payments would be payable in FY2009 to FY2013 to states that (1) increase their
Medicaid (not SCHIP) enrollment among low-income children above a defined baseline, and (2)
implement four of the following seven outreach and enrollment activities:
• 12 months of continuous eligibility for Medicaid and CHIP children;
• Elimination of an assets test in Medicaid and CHIP, or use of administrative
verification of assets;
• Elimination of in-person interview requirement;
• Use of a joint application for Medicaid and CHIP;
• Implementation of certain options to ease enrollees’ renewal processes;
• Presumptive eligibility for children; and
• Implementation of “Express Lane,” described in a separate section below.
The payments would be funded by an initial appropriation in FY2009 of $3.225 billion, along
with transfers from four different potential sources:
• National appropriation amounts for FY2009 through FY2013 provided but not
used for allotments;
• Redistribution amounts not spent;
• On October 1 of FY2010 through FY2013, any amounts in the CHIP
Contingency Fund that exceed its cap (described above); and
• On October 1 of FY2011, any unspent amounts in the transitional coverage block
grant for non-pregnant childless adults, described in a separate section below, not
spent by September 30, 2011.
For FY2009, the Medicaid bonus baseline would be equal to the average monthly number of
children in 2007, increased by state child population growth between 2007 and 2008 (estimated
by the U.S. Census Bureau) plus four percentage points, further increased by state child
population growth between 2008 and 2009 plus four percentage points. For subsequent years, the
Medicaid bonus baseline is the prior year’s plus state child population growth plus additional
percentage point increases that are lower than the 4 percentage points for FY2009: for FY2010 to
FY2012, 3.5 percentage points; for FY2013 to FY2015, 3 percentage points; and FY2016
onward, 2 percentage points.
The first tier of bonus payments would be for child Medicaid enrollees that represent growth
above the baseline less than 10%. For these Medicaid child enrollees, the bonus payment would
be equal to 15% of the state share of these enrollees’ projected per capita Medicaid expenditures.
(Projected per capita Medicaid expenditures would be the average per capita Medicaid
expenditures for children for the most recent year with actual data, increased by necessary
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projected annual increases in per capita National Health Expenditures.) For the second tier, 10%
or more above baseline, the bonus payment would be 62.5% of the state share of these enrollees’
projected per capita expenditures.
An eligibility expansion would not qualify a state for additional bonus payments. In order for new
Medicaid children to count toward bonus payments, they must have been able to meet the state’s
eligibility criteria in place on July 1, 2008.
If the available funding for bonus payments to states in a given year is inadequate, the payments
would be reduced proportionally.
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Under BBA97, states faced a maintenance of effort so they could not draw federal SCHIP funds
for child populations already covered under Medicaid. States that had expanded Medicaid
coverage to higher income children prior to SCHIP expressed that this was a penalty against their
early expansion efforts. A provision was added later in SCHIP to permit 11 early expansion
“qualifying states”19 to draw some SCHIP funds for Medicaid children above 150% of poverty,
although with an additional limit in the amount besides just their available federal SCHIP funds
(that is, no more than 20% from each original allotment could be spent toward these Medicaid
children). Like the two vetoed versions of CHIPRA from the 110th Congress, CHIPRA 2009
would permit this spending for Medicaid children above 133% of poverty, and without the 20%
limitation.
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The federal medical assistance percentage (FMAP) is the state-specific percentage of Medicaid
service expenditures paid by the federal government. It is based on a formula that provides higher
reimbursement rates to states with lower per capita incomes relative to the national average (and
vice versa); it has a statutory minimum of 50% and maximum of 83%. The enhanced FMAP (E-
FMAP) for SCHIP reduces the state’s share under the regular FMAP by an additional 30%. The
E-FMAP has a statutory minimum of 65% and maximum of 85%.
CHIPRA 2009 would reduce federal SCHIP payments for certain higher-income SCHIP children.
CHIPRA 2009 would specify that the regular FMAP would be used for CHIP enrollees whose
effective family income would exceed 300% of poverty using the state’s policy of excluding “a
block of income that is not determined by type of expense or type of income,” with an exception
for states that already had a federal approval plan or that had enacted a state law to submit a plan
for federal approval.
Under current law, children in a Medicaid-expansion SCHIP program must be paid for out of
SCHIP funds at the E-FMAP. Medicaid funding cannot be used until a state’s available SCHIP
funding is exhausted. CHIPRA 2009 gives states the option to draw Medicaid funds at the regular
FMAP for Medicaid-expansion SCHIP children.

19 Connecticut, Hawaii, Maryland, Minnesota, New Hampshire, New Mexico, Rhode Island, Tennessee, Vermont,
Washington and Wisconsin.
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Under current SCHIP law, states can cover pregnant women ages 19 and older through waiver
authority or by providing coverage to unborn children as permitted through regulation. In the
latter case, coverage is limited to prenatal and delivery services. CHIPRA 2009 would allow
states to cover pregnant women under SCHIP through a state plan amendment when certain
conditions are met (e.g., the Medicaid income standard for pregnant women must be at least
185% FPL; no pre-existing conditions or waiting periods may be imposed; CHIP cost-sharing
protections would apply). The upper income limit may be as high as the standard applicable to
SCHIP children in the state. Other eligibility restrictions applicable to SCHIP children (e.g., must
be uninsured, ineligible for state employee health coverage, etc.) would also apply. The period of
coverage would be during pregnancy through the postpartum period (roughly through 60 days
postpartum). States would be allowed to temporarily enroll pregnant women for up to two months
until a formal determination of eligibility is made. Benefits would include all services available to
SCHIP children in the state as well as prenatal, delivery and postpartum care. Infants born to
these pregnant women would be deemed eligible for Medicaid or SCHIP, as appropriate, and
would be covered up to age one year. States would be allowed to continue to cover pregnant
women through waivers and the unborn child regulation. In the latter case, states would be
allowed to offer postpartum services.
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Under current law, Section 1115 of the Social Security Act gives the Secretary of Health and
Human Services (HHS) broad authority to modify many aspects of the Medicaid and SCHIP
programs including expanding eligibility to populations who are not otherwise eligible for
Medicaid or SCHIP (e.g., childless adults, pregnant women age 19 and older, and parents of
Medicaid and SCHIP-eligible children).20 Certain states that have covered adults with SCHIP
funds were permitted to do so almost entirely through the use of these waivers. Adult coverage
waivers, which initially are effective for five years, are subject to renewal every three years. Prior
to 2007, waiver renewals for states with adult coverage waivers were approved, even for those
states that were projected to face federal SCHIP shortfalls (e.g., New Jersey, Rhode Island).
Beginning in 2007, however, such waiver renewals have not been approved (e.g., Illinois,
Oregon) or states have begun to transition adult populations out of SCHIP coverage (e.g.,
Wisconsin). As of January 7, 2009, 4 states21 have CMS authority to use SCHIP funds to extend
coverage to certain childless adult populations, and 8 states have such authority to cover parent
populations.22
CHIPRA 2009 would phase out SCHIP coverage of nonpregnant childless adults after two years.
In FY2011, allowable spending under the waivers would be (1) subject to a set-aside amount

20 The Deficit Reduction Act of 2005 prohibited the Administration from approving any new waivers after February 8,
2006 that permitted SCHIP funds to be used for nonpregnant childless adults. States that already had childless adult
waivers could continue them.
21 States with CMS authority for SCHIP childless adult waivers include Arizona, Idaho, Michigan, and New Mexico.
22 States with CMS authority for SCHIP parent coverage waivers include Arizona, Arkansas, Idaho, Minnesota,
Nevada, New Jersey, New Mexico, and Wisconsin.
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from a separate allotment that is tied to waiver spending for such populations in FY2010; (2)
matched at the state’s regular Medicaid FMP rate; and (3) available only for individuals who were
actually enrolled in FY2010. States would be permitted to apply for Medicaid waivers to continue
coverage for these populations, but for FY2012, such waivers would be subject to a specified
budget-neutrality standard (tied to the state’s 2011 spending on this population). For succeeding
fiscal years, allowable spending under the waiver would be tied to the state’s spending on this
population in the preceding fiscal year.
Coverage of parents would still be allowed, but beginning in FY2012, allowable spending under
the waivers would be subject to a set-aside amount from a separate allotment and would be
matched at the state’s regular Medicaid FMAP unless the state was able to prove it met certain
coverage benchmarks (related to performance in providing coverage to children). In FY2013,
even states meeting the coverage benchmarks would not get the enhanced FMAP for parents but
an amount between the regular and enhanced FMAPs. Finally, the provision would prohibit
waiver spending under the set-aside for parents whose family income exceeds the income
eligibility thresholds that were in effect under the existing waivers as of the date of enactment of
this act.
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Legal immigrants arriving in the United States after August 22, 1996 are ineligible for Medicaid
or SCHIP benefits for their first five years here. Coverage of such persons after the five-year ban
is a state option. CHIPRA 2009 would permit states to waive certain restrictions which result in a
five-year delay for coverage of necessary health services in order to allow states to provide
Medicaid or SCHIP coverage to pregnant women and children who are (1) lawfully residing in
the United States, and (2) are otherwise eligible for such coverage. The SCHIP state plan option
made available under this provision would only be available to states that (1) elect this state plan
option under Medicaid, and (2) in the case of pregnant women coverage, elect the SCHIP state
plan option to provide assistance for pregnant women. This provision would be effective upon the
date of enactment of this act. CHIPRA 2009 would prohibit federal funding for individuals who
are not lawfully residing in the United States, and would provide for the disallowance of federal
matching funds for erroneous expenditures made on behalf of such individuals under Medicaid
and CHIP.
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CHIPRA 2009 would include provisions to facilitate access and enrollment in Medicaid and
SCHIP. As described above, CHIPRA 2009 would establish bonus payments to states that (1)
increased child enrollment in Medicaid or SCHIP by certain amounts, and (2) performed a certain
number of specified outreach or enrollment activities. CHIPRA 2009 would authorize $100
million in outreach and enrollment grants above and beyond the regular SCHIP allotments for
fiscal years 2009 through 2013. Ten percent of the allocation would be directed to a national
enrollment campaign, and 10 percent would be targeted to outreach for Native American children.
The remaining 80 percent would be distributed among state and local governments and to
community-based organizations for purposes of conducting outreach campaigns with a particular
focus on rural areas and underserved populations. Grant funds would also be targeted at proposals
that address cultural and linguistic barriers to enrollment.
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In addition, the bill would create a state option to rely on a finding from specified agencies (e.g.,
those that administer programs such as Temporary Assistance for Needy Families, Medicaid,
SCHIP, and Food Stamps) to determine whether a child under age 19 (or an age specified by the
state not to exceed 21 years of age) has met one or more of the eligibility requirements (e.g.,
income, assets or resources, citizenship, or other criteria) necessary to determine an individual’s
initial eligibility, eligibility redetermination, or renewal of eligibility for medical assistance under
Medicaid or SCHIP. CHIPRA 2009 would not relieve states of their obligation to determine
eligibility for Medicaid, and would require the state to inform families that they may qualify for
lower premium payments or more comprehensive health coverage under Medicaid if the family’s
income were directly evaluated by the state Medicaid agency. The bill would also drop the
requirement for signatures on a Medicaid application form under penalty of perjury.
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The Deficit Reduction Act of 2005 (DRA) requires citizens and nationals applying for Medicaid
who claim to be citizens to provide both proof of citizenship and identity. Before DRA, states
could accept self-declaration of citizenship for Medicaid, although some chose to require
additional supporting evidence. CHIPRA 2009 would provide a specific alternative, which would
allow a state to use the Social Security Number (SSN) provided by individuals and verified by the
Social Security Administration (SSA), and provide an enhanced match for certain administrative
costs. (SSNs by themselves do not denote citizenship, because certain noncitizens are eligible for
them.) The bill also would also add a requirement for citizenship documentation in SCHIP.
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Under current law, states may pay a beneficiary’s share of costs for group (employer-based)
health in SCHIP if the employer plan (1) covers SCHIP minimum benefits, (2) meets SCHIP cost-
sharing ceilings (5% of family income), and (3) ensured enrollees have not had group coverage
for a specified period of time (typically four to six months). Under Medicaid, states may
implement a premium assistance program if the employer plan is comprehensive, and cost-
effective for the state. Under Medicaid, an individual’s enrollment in an employer plan is
considered cost-effective if paying the premiums, deductible, coinsurance and other cost-sharing
obligations of the employer plan is less expensive than the state’s expected cost of directly
providing Medicaid-covered services. To meet the comprehensiveness test under Medicaid , states
are required to provide coverage for those Medicaid-covered services that are not included in the
private plans. In other words, they must provide wrap-around benefit coverage. It has proved
prohibitive for many employer plans and states to meet all of these requirements. To circumvent
these restrictions, most states operating SCHIP premium assistance programs do so under
waivers.
Under CHIPRA 2009, states would have the option to offer premium assistance for Medicaid and
SCHIP-eligible children and/or parents of Medicaid and/or SCHIP-eligible children where the
family has access to employer-sponsored insurance (ESI) coverage, if the employer pays at least
40% of the total premium (and meets certain other requirements). Under CHIPRA 2009, a state
offering premium assistance could not require SCHIP-eligible individuals to enroll in an
employer’s plan; individuals eligible for SCHIP and for employment-based coverage could
choose to enroll in regular SCHIP rather than the premium assistance program. The premium
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assistance subsidy would generally be the difference between the worker’s out-of-pocket
premium that included the child(ren) versus only covering the employee. For employer plans that
do not meet SCHIP benefit requirements, not only is a wrap-around permitted but would be
required.
For the child’s coverage using premium assistance, no cost-effectiveness test would be required
regarding the cost of the private coverage (plus any necessary wrap-around) relative to regular
SCHIP coverage. However, for SCHIP-eligible children who receive coverage under an
expansion of Medicaid and elect to receive a premium assistance subsidy under this provision,
Medicaid current law requirements regarding comprehensiveness and cost-effectiveness would
still apply. CHIPRA 2009 would establish a separate test for family coverage. If the SCHIP cost
of covering the entire family in the employer-sponsored plan is less than regular SCHIP coverage
for the eligible individual(s) alone, then the premium assistance subsidy could be used to pay the
entire family’s share of the premium. In states that offered premium assistance, CHIPRA 2009
would require states and participating employers to do outreach. Finally, states would be
permitted to establish an employer-family premium assistance purchasing pool for employers
with less than 250 employees who have at least one employee who is a SCHIP-eligible pregnant
woman or at least one member of the family is a SCHIP-eligible child.
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CHIPRA 2009 includes several provisions designed to improve the quality of care under
Medicaid and SCHIP. First, this bill would direct the Secretary of HHS to develop (1) child health
quality measures, and (2) a standardized format for reporting information, and procedures to
encourage states to voluntarily report on the quality of pediatric care in these two programs.
Examples of these initiatives would include (1) grants and contracts to develop, test, update and
disseminate evidence-based measures, (2) demonstrations to evaluate promising ideas for
improving the quality of children’s health care under Medicaid and SCHIP, (3) a demonstration to
develop a comprehensive and systematic model for reducing children obesity, and (4) a program
to encourage the creation and dissemination of model electronic health record format for children
enrolled in these two programs. The federal share of the costs association with developing or
modifying existing data systems to store and report child health measures would be based on the
matching rate applicable to benefits rather than one of the (typically) lower matching rates
applied to different types of administrative expenses.
Second, this bill would improve the availability of public information regarding enrollment of
children in Medicaid and SCHIP. Several reporting requirements would be added to states’ annual
SCHIP reports, including for example, data on eligibility criteria, access to primary and specialty
care, and data on premium assistance for employer-sponsored coverage. The bill would also
require the Secretary to improve the timeliness of the enrollment and eligibility data for Medicaid
and SCHIP children contained in the Medicaid Statistical Information System (MSIS) maintained
by CMS and based on annual state reported enrollment and claims data. Finally, certain managed
care safeguards applicable to Medicaid (e.g., process for enrollment, termination, and change in
enrollment; beneficiary protections; quality assurance standards) would also be applied in the
same manner to SCHIP.
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Under SCHIP, states may provide coverage under their Medicaid programs, create a new separate
SCHIP program, or both. Under separate SCHIP programs, states may elect any of three benefit
options: (1) a benchmark plan, (2) a benchmark-equivalent plan, or (3) any other plan that the
Secretary of HHS deems would provide appropriate coverage for the target population (Secretary-
approved coverage). Benchmark plans include (1) the standard Blue Cross/Blue Shield preferred
provider option under the Federal Employees Health Benefits Program (FEHBP), (2) the
coverage generally available to state employees, and (3) the coverage offered by the largest
commercial HMO in the state. Benchmark-equivalent plans must cover basic benefits (i.e.,
inpatient and outpatient hospital services, physician services, lab/x-ray, and well-child care
including immunizations), and must include at least 75% of the actuarial value of coverage under
the selected benchmark plan for specific additional benefits (i.e., prescription drugs, mental health
services, vision care and hearing services).
CHIPRA 2009 would add or modify several benefits available to children under CHIP. The bill
also addresses payment of premiums and related sanctions.
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Under this bill, dental services would become a required benefit under SCHIP and would include
services necessary to prevent disease and promote oral health, restore oral structures to health and
function, and treat emergency conditions. States would have the option to provide dental services
through “benchmark dental benefit packages” modeled after the benchmark plans for medical
services described above (e.g., FEHBP, state employees and commercial HMO options). The bill
also includes provisions for dental education for parents of newborns and dental services through
federally qualified health centers. Information on dental providers and covered dental services
would be available to the public via the federal Insure Kids Now website and hotline. The child
health quality improvement activities described above would include measurement of dental
treatment and services to maintain dental health. GAO would conduct a study on children’s
access to dental care under Medicaid and SCHIP. The report on this study would include
recommendations for federal and state actions to address barriers to dental care, and the
feasibility and appropriateness of using qualified mid-level providers to improve access.
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Medicaid and SCHIP state plans may define what constitutes mental health benefits (if any).
Current law prohibits group health plans from imposing annual and lifetime dollar limits on
mental health and substance abuse benefits that are more restrictive than those applicable to
medical and surgical coverage. Similarly, group health plans may not impose more restrictive
treatment limits (e.g., total outpatient hospital visits or inpatient days) or cost-sharing
requirements on mental health or substance abuse coverage compare to medical and surgical
services. Under Medicaid, most individuals under age 21 receive comprehensive basic screening
services (i.e., well-child visits, immunizations) as well as dental, vision and hearing services,
through the Early and Periodic Screening, Diagnostic and Treatment Services or EPSDT benefit.
In addition, EPSDT guarantees access to all federally coverable services necessary to treat a
problem or condition among eligibles.
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CHIPRA 2009 would ensure that, in the case of a state SCHIP plan that provides both medical
and surgical benefits and mental health or substance use disorder benefits, such a plan must
ensure that the financial requirements and treatment limitations applicable to such mental health
or substance use disorder benefits comply with the requirements of section 2705(a) of the Public
Health Service Act in the same manner as such requirements apply to a group health plan.
Generally, this means that the financial requirements and treatment limits applicable to mental
health or substance use disorder benefits must be no more restrictive than the financial
requirements and treatment limitations applicable to substantially all medical and surgical
benefits covered under the state SCHIP plan. In addition, state SCHIP plans must also conform to
additional mental health parity provisions in section 2705(a) of the Public Health Service Act
with respect to availability of plan information and out-of-network providers. State SCHIP plans
that include coverage of EPSDT services (as defined in Medicaid statute) would be deemed to
satisfy this mental health parity requirement.
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Under current Medicaid law, payments to FQHCs and RHCs are based on a prospective payment
system. Beginning in FY2001, per visit payments were based on 100% of average costs during
1999 and 2000 adjusted for changes in the scope of services furnished. (Special rules applied to
entities first established after 2000.) For subsequent years, the per visit payment for all FQHCs
and RHCs equals the amounts for the preceding fiscal year increased by the percentage increase
in the Medicare Economic Index applicable to primary care services, and adjusted for any
changes in the scope of services furnished during that fiscal year. In managed care contracts,
states are required to make supplemental payments to the facility equal to the difference between
the contracted amount and the cost-based amounts.
CHIPRA 2009 would require states that operate separate and/or combination SCHIP programs to
reimburse FQHCs and RHCs based on the Medicaid prospective payment system. This provision
would apply to services provided on or after October 1, 2009. For FY2009, $5 million would be
appropriated (to remain available until expended) to states with separate SCHIP programs for
expenditures related to transitioning to a prospective payment system for FQHCs/RHCs under
SCHIP. Finally, the Secretary would be required to report to Congress on the effects (if any) of
the new prospective payment system on access to benefits, provider payment rates or scope of
benefits.
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No statutory provision specifies a grace period for payment of SCHIP premiums. Federal
regulations require states’ SCHIP plans to describe the consequences for an enrollee or applicant
who does not pay required premiums and the disenrollment protections adopted by the state.
These protections must include the following: (1) the state must give enrollees reasonable notice
of and an opportunity to pay past due premiums prior to disenrollment, (2) the disenrollment
process must give the individual the opportunity to show a decline in family income that may
qualify the individual for lower or no cost-sharing, and (3) the state must provide the enrollee
with an opportunity for an impartial review to address disenrollment from the program, during
which time the individual will continue to be enrolled.
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CHIPRA 2009 would require states to provide SCHIP enrollees with a grace period of at least 30
days from the beginning of a new coverage period to make premium payments before the
individual’s coverage may be terminated. Within 7 days after the first day of the grace period, the
state would have to provide the individual with notice that failure to make a premium payment
within the grace period will result in termination of coverage and that the individual has the right
to challenge the proposed termination pursuant to the applicable federal regulations. This
provision would be effective for new coverage periods beginning on or after the date of
enactment of this act.
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A number of coverable benefits are listed in the SCHIP statute, such as “clinic services (including
health center services) and other ambulatory health care services.” CHIPRA 2009 provides that
nothing in Title XXI shall be construed as limiting a state’s ability to provide SCHIP for covered
items and services furnished through school-based health centers.
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Federal agencies are required to annually review programs that are susceptible to significant
erroneous payments, and to estimate the amount of improper payments, to report those estimates
to Congress, and to submit a report on actions the agency is taking to reduce erroneous payments.
On August 21, 2007, CMS issued a final rule for PERM for Medicaid and SCHIP (effective
October 1, 2007) which responded to comments received on a interim final rule, and included
some changes to that interim final rule. Assessments of payment error rates related to claims for
both fee-for-service and managed care services, as well as eligibility determinations are made. A
predecessor to PERM, called the Medicaid Eligibility Quality Control (MEQC) system, is
operated by state Medicaid agencies for similar purposes.
CHIPRA 2009 includes a number of detailed requirements with respect to the applicable of
PERM requirements to SCHIP. For example, the provision requires that the final PERM rule
include (1) clearly defined criteria for errors for both states and providers, (2) a clearly defined
process for appealing error determinations by review contractors, and (3) clearly defined
responsibilities and deadlines for states implementing corrective action plans. The bill would also
require the Secretary to review the MEQC requirements with the PERM requirements and
coordinate consistent implementation of both sets of requirements, while reducing redundancies.
The Secretary would also be required to establish state-specific sample sizes for application of
PERM requirements to SCHIP for the first fiscal year that begins after the date on which the new
final rule is in effect for all states. In establishing such sample sizes, the Secretary must minimize
the administrative cost burden on states under Medicaid and SCHIP, and must maintain state
flexibility to manage these programs. Finally, the bill would apply a federal matching rate of 90%
to expenditures related to administration of PERM requirements applicable to SCHIP. The
provision would also exclude from the 10% cap on SCHIP administrative expenses all
expenditures related to administration of PERM requirements applicable to SCHIP.
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Under current law, the Secretary of Commerce was required to make appropriate adjustments to
the Current Population Survey (CPS) which is the primary data source for determining states’
SCHIP allotments (1) to produce statistically reliable annual state data on the number of low-
income children who do not have health insurance coverage, (2) to produce data that categorizes
such children by family income, age, and race or ethnicity, and (3) where appropriate, to expand
the sample size used in the state sampling units, to expand the number of sampling units in a
state, and to include an appropriate verification element. For this purpose, $10 million was
appropriated annually, beginning in FY2000.
CHIPRA 2009 would provide $20 million for FY2009 and each subsequent year thereafter to
produce these data for SCHIP purposes. In addition to the current-law requirements of the
appropriation, for data collection beginning with FY2009, in consultation with the Secretary of
HHS, the Secretary of Commerce would be required to (1) make adjustments to the CPS to
develop more accurate state-specific estimates of the number of children enrolled in SCHIP or
Medicaid, (2) to make adjustments to the CPS to improve the survey estimates used to determine
the child population growth factor in the new financing structure under this bill and any other
necessary data, (3) to include health insurance survey information for the American Community
Survey (ACS) related to children, and (4) to assess whether estimates from the ACS produce
more reliable estimates than the CPS for the child population growth factor in the new SCHIP
financing structure established under this bill. On the basis of that assessment, the Commerce
Secretary would recommend to the HHS Secretary whether ACS estimates should be used in lieu
of, or in some combination with, CPS estimates for these purposes.
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The Secretary of HHS was required to conduct an independent evaluation of 10 states with
approved SCHIP plans, and to submit a report on that study to Congress by December 31, 2001.
Ten million dollars was appropriated for this purpose in FY2000 and was available for
expenditure through FY2002. The 10 states chosen for the evaluation were to be ones that utilized
diverse approaches to providing SCHIP coverage, represented various geographic areas
(including a mix of rural and urban areas), and contained a significant portion of uninsured
children. A number of matters were included in this evaluation, including (1) surveys of the target
populations, (2) an evaluation of effective and ineffective outreach and enrollment strategies, and
identification of enrollment barriers, (3) the extent to which coordination between Medicaid and
SCHIP affected enrollment, (4) an assessment of the effects of cost-sharing on utilization,
enrollment and retention, and (5) an evaluation of disenrollment or other retention issues.
CHIPRA 2009 would require the Secretary of HHS to conduct a new, independent federal
evaluation of 10 states with approved SCHIP plans, directly or through contracts or interagency
agreements, as before. The new evaluation would be submitted to Congress by December 31,
2011. Ten million dollars would be appropriated for this purpose in FY2010 and made available
for expenditure through FY2012. The current-law language for the types of states to be chosen
and the matters included in the evaluation would also apply to this new evaluation.
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Every third fiscal year (beginning with FY2000), the Secretary (through the Inspector General of
the Department of Health and Human Services) must audit a sample from among the states with
an approved SCHIP state plan that does not, as a part of that plan, provide health benefits
coverage under Medicaid. The Comptroller General of the United States must monitor these
audits and, not later than March 1 of each fiscal year after a fiscal year in which an audit is
conducted, submit a report to Congress on the results of the audit conducted during the prior
fiscal year.
Under CHIPRA 2009, for the purpose of evaluating and auditing the SCHIP program, the
Secretary, the Office of Inspector General, and the Comptroller General would have access to any
books, accounts, records, correspondence, and other documents that are related to the expenditure
of federal SCHIP funds and that are in the possession, custody, or control of states, political
subdivisions of states, or their grantees or contractors. This provision would also apply for the
purpose of evaluating and auditing the Medicaid program.
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Under the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefit under
Medicaid, most individuals under age 21 must have access to comprehensive basic screening
services (i.e., well-child visits including age-appropriate immunizations) as well as dental, vision
and hearing services. In addition, EPSDT guarantees access to all federally coverable services
necessary to treat a problem or condition among eligible individuals.
The Deficit Reduction Act of 2005 (DRA; P.L. 109-171) gave states the option to provide
Medicaid to states-specified groups through enrollment in benchmark and benchmark-equivalent
coverage that is nearly identical to plans available under SCHIP. For any child under age 19 in
one of the major mandatory and optional eligibility groups in Medicaid, wrap-around benefits to
the DRA benchmark and benchmark-equivalent coverage includes EPSDT.
CHIPRA 2009 identifies specific sections of current Medicaid law (instead of all of Title XIX as
specified in DRA) that would be disregarded in order to provide benchmark benefit coverage. It
also specifies that an individual’s entitlement to EPSDT services would remain in tact under the
Medicaid benchmark benefit package option under DRA.
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Under current law, physicians are generally prohibited from referring Medicare patients for
certain designated services to facilities in which they (or their immediate family members) have
financial interests. However, among other exceptions, physicians are not prohibited from
referring patients to whole hospitals in which they have ownership or investment interests. Under
this legislation, a hospital with physician ownership and a Medicare provider agreement on
January 1, 2009, would be required to meet other specified requirements to be exempt from the
self-referral ban. The hospital would have to comply with requirements that prevent conflicts of
interest, ensure bona fide investment, and address patient safety concerns. Also, the percentage of
total assets held in the hospital by physician owners or investors could not exceed that as of the
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date of enactment. With certain exceptions, these hospitals would not be able to increase the
number of operating rooms, procedure rooms, and beds after the date of enactment. To the extent
that such expansions are permitted, any increase would be restricted to the main campus of the
applicable hospital. Hospitals that are converted from ambulatory surgical centers after the date of
enactment would not be eligible for an exception from the self referral prohibition.
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The source of revenue for CHIPRA 2009 would be an increase in tobacco excise taxes. H.R. 2
would also incorporate a revision in corporate estimated tax payments to shift revenues into the 5-
year budget horizon.
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The vast majority of tobacco taxes are on cigarettes, which account for 97% of federal tobacco
tax revenue. Under current law, excise taxes on cigarettes and other tobacco products include the
following rates:
• federal cigarette taxes: $0.39 per pack;
• small cigars: $.04 per package of 20;
• large cigars: 20.719% of sales price, not to exceed $48.75 per 1,000 units (i.e., a
maximum tax of almost $.05 cents per cigar);
• chewing tobacco: $.01 per ounce;
• snuff: $.04 cents per ounce; and
• pipe and roll-your-own tobacco: $.07 cents per ounce.
There are also taxes on cigarette paper and cigarette tubes. These taxes are imposed per pound
and the rates are as follows: (1) $0.195 for chewing tobacco, (2) $0.585 for snuff, and (3) $1.0606
for pipe and roll-your-own tobacco. There are also taxes on large cigarettes that are essentially
non-existent (although a tax is necessary for administrative reasons).
CHIPRA 2009 would increase taxes on cigarettes and tobacco-related products (effective April 1,
2009) to the following rates:
• federal cigarette taxes would be increased to $1.00 per pack;
• small cigars would have their taxes gradually increased to the same level as
cigarettes: $0.25 per pack in 2009-2010, $0.50 in 2011-2012, $0.75 in 2013-
2014, and $0.50 in 2015 and thereafter;
• large cigars would be subject to a tax of 52.4% of sales price with a maximum of
$0.40 per cigar;
• chewing tobacco would be increased to approximately $.03 cents per ounce (and
$0.50 per pound);
• snuff would be increased to $.09 per ounce ($1.50 per pound);
• pipe tobacco would be increased to $.18 per ounce ($2.8126 per pound);
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• roll-your-own tobacco would be increased to $1.53 per ounce ($24.62 per
pound). The definition of roll–your-own tobacco would be expanded to include
tobacco that could be used to make cigars. The large increase in roll-your-own
tobacco reflects concerns that this tobacco might substitute for cigarettes;
• cigarette papers taxes would rise from $1.22 per 40, to $3.13;
• cigarette tubes would rise from $2.44 to $6.26.
CHIPRA 2009 also would include provisions affecting floor stock taxes that would apply to items
removed from the manufacturer before the April 1, 2009, effective date, and subsequently sold
after that date. The person holding the items on April 1, 2009, would be liable, and there would be
a $500 credit per person. (A person is considered to be a controlled group. For example, a
corporation can not receive the $500 credit for each of its subsidiaries.) The floor stocks tax
would also apply to products in a foreign trade zone (i.e., imports). The purpose of the floor stock
tax would be to prevent the stockpiling of tobacco products before the April 1, 2009, effective
date for future sales.
CHIPRA 2009 would also impose some regulatory and reporting requirements on manufacturers
and importers of processed tobacco other than the tobacco products subject to excise taxes.
Finally, CHIPRA 2009 would expand the scope of penalties for not paying the tobacco-related
tax, clarify the statute of limitations, and mandate a study of tobacco smuggling.

ȱȱȱ

Evelyne P. Baumrucker
Sibyl Tilson
Analyst in Health Care Financing
Specialist in Health Care Financing
ebaumrucker@crs.loc.gov, 7-8913
stilson@crs.loc.gov, 7-7368
Elicia J. Herz
Jane G. Gravelle
Specialist in Health Care Financing
Senior Specialist in Economic Policy
eherz@crs.loc.gov, 7-1377
jgravelle@crs.loc.gov, 7-7829
Chris L. Peterson

Specialist in Health Care Financing
cpeterson@crs.loc.gov, 7-4681

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