OMB estimates indicate that 900,000 children will lose health insurance due to reductions in federal SCHIP funding.

Despite the success of the State Children's Health Insurance Program (SCHIP) in reducing the ranks of uninsured children, the program now faces significant financing challenges. Analysis based on a model developed by the Centers for Medicare and Medicaid Services indicates that by 2007, 20 states will have insufficient federal funding to sustain their current programs, with the first states affected in 2004. As a result, the Office of Management and Budget projected last year that SCHIP enrollment will fall by 900,000 children between 2003 and 2007. The funding shortfalls are the result of several factors. Federal SCHIP funding fell by 26 percent--by more than dollar 1 billion-in each of fiscal years 2002, 2003, and 2004; dollar 1.2 billion in SCHIP funds has already expired and reverted to the Treasury at the end of fiscal year 2002, and another dollar 1.5 billion will expire at the end of 2003. The SCHIP program also has a redistribution system with targeting and timing problems. However, proposed Congressional legislation restoring federal funding, extending the dollar 2.7 billion in expiring funds, and targeting the funds to the states that most need them could avert most, if not all, of the projected enrollment decline. On the other hand, the Bush administration proposed to extend the expiring funds but does not target them to needy states; the proposal will do little to reduce the magnitude of the decline.