Politics & Policy

Compromise, Congress

Get together on S-CHIP.

Congress is hell-bent on passing a massive expansion of the State Children’s Health Insurance Program (S-CHIP). The program was originally designed to help children in low-income working families, but lawmakers would push eligibility for this form of public assistance higher into the upper reaches of the middle-income scale. President Bush, meanwhile, has pledged to hold the line against a massive spending increase that will displace the existing private health coverage for millions of families, add to current and future tax burdens, and transform — over time — a limited welfare program into the equivalent of another middle-class entitlement.

The congressional leadership and its liberal allies are trying painting him as mean-spirited, stingy, and insensitive to the pressing health needs of children.

But the president is right. We should target public assistance, fueled by hard-earned tax dollars, to the neediest Americans — not use it to destroy existing private coverage or shift ever-higher health costs onto the taxpayers, who are already footing roughly half of America’s entire health-care bill through Medicare and Medicaid payments.

Nobody disputes the need to help poor children. That isn’t the issue. The problem is that Congress would push eligibility for public assistance for children with family incomes at roughly $42,000 per year upward into the middle class, among families making $62,000 per year. But in that category, 77 percent of children already have private health coverage. Congress would also “grandfather in” eligibility for even higher income families in New Jersey and New York, including families making approximately $83,000.

The results of a growing body of health-policy research are clear: When government officials expand public health programs, private health-insurance coverage contracts. Moreover, this “crowd-out” of private coverage gets worse the higher you go up the income scale with public program expansion.

An independent Heritage Foundation analysis shows that for every 100 children in middle-income families ($41,300 to $82,600 per year), between 54 and 60 of those children would lose private coverage. For employers who cover dependents, the incentives are powerful: Why cover the kids in a family policy if the government will pick up the tab? Dump them.

Undermining existing family health-insurance coverage, and thus shifting even higher costs to the taxpayers, is bad public policy. But for patients, the quality and timeliness of care is even worse. According to the Centers for Disease Control, patients in public programs like Medicaid and S-CHIP are four times more likely to end up getting care in an emergency room than patients with private insurance. A sound public policy would reverse these ugly dynamics, not further burden already crowded emergency rooms.

There’s no reason why Democrats and Republicans in Congress cannot forge a sensible compromise. First, all agree that S-CHIP should be continued for kids in low-income working families, with an increased financial commitment to cover these children. Second, all agree that many middle-class families struggle with health-care costs and that many employers have trouble maintaining coverage for family members. Finally, there’s an emerging consensus that health care tax credits can expand health coverage for middle-class families, while allowing them to keep what they have or get better health coverage if they wish.

Sen. Mel Martinez (R., Fla.) is proposing a sensible compromise that reflects this consensus. It would continue the S-CHIP program to fulfill its original purpose, focusing on kids in working families with an annual income under $42,000. But the compromise would add a middle-class child health-care tax credit, worth $1,200, for families with children enrolled in either employment-based coverage or coverage purchased outside the workplace. The tax credit would be available to all families with incomes between $41,300 to $61,950, reaching as many as 10.5 million children in those income categories. This would be far more effective than the flawed bill the president vetoed, which would have added only 1.2 million children to the rolls.

Such middle-class tax relief would also help to stabilize health insurance among middle-class families, encouraging employers to retain dependent coverage.

Sound policy is also sound politics. If Democrats and Republicans can act upon the elements of a workable compromise, they both win. But the kids will be the biggest winners.

 – Robert E. Moffit is director of the Center for Health Policy Studies at the Heritage Foundation.


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