SCHIP stands for the State Children’s Health Insurance Program.
It was created in 1997 by Congress and President Clinton, and
this year it is up for reauthorization.
SCHIP was intended to cover children in families who made too
much to be eligible for Medicaid. The law was originally supposed
to limit eligibility to families making not more than 200% of the
poverty line ($40,300 for a family of four), but seven states set
eligibility above 200% anyway. Furthermore, fourteen states have
applied loose enough definitions of “child” to extend coverage to
parents, pregnant women, or childless adults.
Democrats in Congress are trying to capture the spirit of those
states. Bills sponsored by Sen. Hillary Clinton (NY) and Rep.
John Dingell (MI) would permit states to expand SCHIP up to 400
percent of the poverty level. For a family of four, that means
$82,600 a year. Thus, children in families that are in the top 25
percent of income-earners would be eligible for government-funded
health insurance. We’ll bet you didn’t know that poverty reached
so far up the income ladder, did you?
That same legislation would expand the definition of a “child”
even further. Under the Clinton-Dingell legislation, states could
offer Medicaid coverage for families who have “children” up to
age 25. According to the Democrats’ vision, those who are old
enough to drive, vote, enter the military and drink alcohol are
still in swaddling clothes when it comes to health insurance.
Strategically, it would seem that the Democrats are trying to
achieve universal, government-run health insurance by making more
and more Americans “children.” The thinking seems to be that if
government covers enough young adults and the children of enough
people high up the income ladder, then eventually enough of the
public will be supportive of extending such government insurance
to everyone. Call it “socialized medicine on the installment
plan.”
Left as is, SCHIP would cost about $25 billion over five years.
The cost to taxpayers for the Clinton-Dingell version would be
about $85 billion over five years. This past week, the Senate has
tried to appear more “reasonable.” In the Senate Finance
Committee, Senators Max Baucus (D-Montana) and Jay Rockefeller
(D-WV) crafted an SCHIP bill that would spend “only” $60 billion.
It would also only fully match states’ SCHIP spending to cover
children in families with income up to 300% of the poverty line.
States will receive only partial funds if they decide to enroll
children in families above 300% of poverty. It doesn’t take a
genius to figure out that strategy. The Democrats can reasonably
assume some states will enroll children who are above 300% of
poverty, thereby creating a new constituency for more
government-funded health insurance. Five years from now you can
bet that constituency will be pushing Congress to fully fund
children in SCHIP who are above 300% of poverty.
However, Baucus and Rockefeller have had some help from the other
side of the aisle. Republican Senators Chuck Grassley (IA) and
Orrin Hatch (UT) have worked to craft this “compromise.” Again
they have forgotten that the GOP is supposed to be the party of
Reagan, not the party of “let’s spend, but just a little less
than the Democrats want.”
Recruiting new recipients isn’t the only way SCHIP will move us
closer to a government-run system. It will also make private
insurance more expensive. The program at best puts modest demand
restraints on recipients. With little to restrain their demand,
families on SCHIP will increase their use of health care. This
will increase the cost of health care which in turn will increase
the cost of private insurance. As the cost of health insurance
goes up, so will the number of employers dropping their insurance
and the number of uninsured. Although, to our knowledge, no
academic study has focused on the cost-effects of SCHIP, a recent
paper (PDF) has found that the introduction of Medicare had
profound effects on the cost of health care. There is little
reason to think that SCHIP hasn’t had a similar, if less
profound, effect.
Then there is the problem of “crowd out.” Crowd out occurs when
government programs intended to help the uninsured subsidize
those who would otherwise have had private health coverage. Often
times, employers of lower-wage workers decline to provide
insurance knowing such workers can qualify for program like
Medicaid and SCHIP. A recent study by Jonathan
Gruber and Kosali Simon suggested that crowd-out for SCHIP ranged
between 30%-80%. In other words, for every 10 kids signed up for
SCHIP, the number with private insurance drops by 3 to 8.
While Congress and presidential candidates looks for new ways to
intervene in our already heavily socialized health care system,
consumers are growing increasingly frustrated with what they
perceive to be inadequate care at prices that are too high.
Ultimately, what steps like SCHIP expansion might accomplish
(whether by design or not) is to make the current system implode,
thus causing a crisis that opens the door for a single-payer
system. We can hope this does not happen, but in the meantime we
must fight hard against the further government interventions in
the health care market these efforts represent.
