Politics & Policy

Shape Up SCHIP

Congress excuses another health-care disaster in the name of the children.

“It’s for the children.” In American politics, that phrase is a catch-all justification for spending more tax dollars on any government program. After all, who doesn’t want to help needy kids?

#ad#But congressional lawmakers will actually be harming needy children if they move to expand the State Children’s Health Insurance Program (SCHIP) to cover kids in higher-income families, as both houses have voted to do.

Congress has until September 30 to reauthorize the ten-year-old SCHIP. But rather than merely reauthorizing the program, Congress aims to expand SCHIP, allowing states to cover not simply children of low income households, but almost all children.

Expanding SCHIP in such a way, however, would mean shifting focus and resources away from the children who most need help. Moreover, it would grow the program into a massive entitlement that goes far beyond its current mission of helping near-poor children.

Launched in 1997, SCHIP was originally designed to provide health insurance to children whose families earned too much to qualify for Medicaid, and too little to afford private insurance. Today, more than 6 million people are covered under the program — most of whom are indeed children from lower-income families.

In many states, however, the program has veered dramatically off course.

At least seven states have enrolled children whose families earn 300-percent or more of the federal poverty level — about $60,000 a year — and 14 states have used SCHIP dollars to insure adults. Meanwhile plenty of poor children remain uninsured.

Additionally, 14 states have overspent this year’s SCHIP allotment and, with the now looming budget shortfalls, need to be bailed out. Of course it is wrong to reward states that mismanaged federal funding, but that’s exactly what Congress intends to do.

It should be the other way around. Congress, not the states, should make federal spending decisions, and congressional lawmakers should responsibly enforce their SCHIP funding allocations. By rescuing the states who have failed to responsibly manage their federal dollars, congress gives these states de facto power to make the federal funding decisions.

In addition, Congress is poised for a showdown with the White House over the program’s reauthorization before the program expires on September 30.

Two very different bills have passed the House and Senate, and they currently await a conference where congressional negotiators will work out the differences. But both bills take the program far beyond its original intent, and do nothing to fix SCHIP’s structural flaws. PresidentBush, meanwhile, has vowed to veto either bill and is demanding that Congress pass legislation that focuses on the intent of SCHIP to gain his signature.

One thing that Congress should address is the SCHIP-funding formula. When the program was first introduced, Congress decided to send states more money for covering SCHIP kids than for Medicaid, in order to encourage participation in the new program. Today, the federal government funds, on average, fully 69-percent of a SCHIP program’s budget, but only 57-percent of Medicaid.

These funding incentives are precisely backwards. People eligible for Medicaid are almost always poorer than those on SCHIP. So why would the federal government spend more to cover higher-income SCHIP kids, than to cover lower-income Medicaid-eligible children?

If Congress were truly concerned about covering low-income children, then it would acknowledge that two-thirds of America’s uninsured kids are already are eligible for either Medicaid or SCHIP, but aren’t enrolled. Instead of giving states more money to put higher-income children on SCHIP, Congress should encourage states to enroll children who already are eligible.

Further, access to SCHIP should be restricted to those at or below 200-percent of the federal poverty line — to families earning about $40,000 a year — and not be extended to families at 400-percent of poverty — $83,000 a year or more — as the House wants to do.

The Congressional Budget Office (CBO) found that 89-percent of children in families with incomes between 300- and 400-percent of the poverty line, and 77-percent of children in families within 200- and 300-percent, already have private health care coverage.

Spending public dollars on children whose families can already afford to pay for private insurance is wasteful. Those resources should go to children whose families can’t afford any insurance at all.

The CBO estimates that if the program were expanded into higher-income categories, at least one child would leave private insurance coverage for every two new children enrolled in SCHIP. It makes little sense to substitute public dollars for private dollars for already-insured children when resources are needed to provide health coverage to those without insurance.

The additional federal money for a proposed expansion of SCHIP would be better spent helping parents purchase the health coverage they believe is best for their children, such as adding them to policies offered at their workplaces.

Many companies already subsidize health insurance for the dependents of employees. But by just expanding SCHIP, Congress could drive parents away from employer-sponsored coverage. This again is precisely backwards; it actually encourages families to get state assistance, and drives a wedge of government into families.

But what else could we expect from Washington politicians who think that they, not parents, know what’s best for the children?

— Grace-Marie Turner is president of the Galen Institute, a nonprofit research organization focusing on free-market solutions to health reform.

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