How is the Children's Health Insurance Program (CHIP) financed?

The Children's Health Insurance Program (CHIP) is financed through a combination of federal and state governments, making this option the most accurate. Under CHIP, the federal government provides matching funds to help cover a portion of the costs incurred by states in providing health insurance to children in families with incomes that are too high to qualify for Medicaid but too low to afford private coverage.

The federal match rate for CHIP is typically higher than that for traditional Medicaid, incentivizing states to expand their health coverage for children. This partnership allows each state to receive federal funding while still having the flexibility to design their own CHIP programs to meet the specific needs of their populations.

The misconception in some of the other choices arises from the belief that financing can come solely from one source or that other types of funding, such as private health insurance companies or grants, are involved. However, CHIP uniquely relies on this joint funding model to effectively extend health coverage to eligible children.