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NO SCHIP

Anthony StintonCascade Commentary

Summary

Congress wants to expand SCHIP to provide more uninsured children with health coverage. While exactly how much private insurance the expansion of public coverage will crowd out is uncertain, the Congressional Budget Office projects that if SCHIP is expanded, 25-50% of new participants would be children who already had private insurance. Instead, Congress and state governments should act to make insurance more affordable.

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Congress is trying to expand the State Children’s Health Insurance Program (SCHIP) to provide more government-subsidized health insurance “for the children.” Contrary to popular criticism, opposition to this wasteful new entitlement does not come from people who are anti-children; it comes from people who care about not shackling future children with an unbearable burden of entitlements.

Congress started SCHIP in 1997 to provide coverage for families too rich for Medicaid but too poor to buy their children health insurance, typically those earning less than twice the federal poverty level (FLP). Both the House and Senate recently passed different bills raising tobacco taxes to continue and to expand the program. The bills will be reconciled and sent to the President sometime after the August recess. The Senate’s more modest proposal expands SCHIP by $35 billion, extending eligibility to children from families with incomes two to three times the FPL—between about $40,000 and $60,000 for a family of four. Since the median income for a family of four in Oregon is about $60,000, this expansion targets children in middle class families.

“77% of the children in these families were already covered by private health insurance in 2005. This expansion invites the parents of these children to drop their private insurance and shift the cost of insurance onto the taxpayers.”

77% of the children in these families were already covered by private health insurance in 2005. This expansion invites the parents of these children to drop their private insurance and shift the cost of insurance onto the taxpayers. While exactly how much private insurance the expansion of public coverage will crowd out is uncertain, the Congressional Budget Office projects that if the program is expanded, 25-50% of new SCHIP participants would be children who already had private insurance. Families with incomes two to three times the FPL buy their own housing, food and transportation; and 77% of them buy health insurance for their children. The SCHIP expansion replaces personal responsibility for personal expenses with a $35 billion taxpayer subsidy. It is fiscally and morally irresponsible. Besides wasting taxpayer dollars, expanding the nanny state expands the number of people who need nannies.

Governor Ted Kulongoski’s proposed Healthy Kids Plan is a state level copy of SCHIP expansion. The plan would raise tobacco taxes to provide more free and subsidized health care for Oregon’s children, and likewise would crowd out private insurance spending and personal responsibility. While the governor seems unconcerned with these negatives, he views the added spending as an especially good deal because it will increase the Medicaid and SCHIP matching funds the state gets from the Federal government.

“More public money is not the answer. Instead, Congress should act to make insurance more affordable.”

The rationale for SCHIP expansion is that rising costs have made health insurance unaffordable for many of the families that an expanded SCHIP would cover. The mounting cost of health insurance and growing number of uninsured are legitimate policy problems. More public money is not the answer. Instead, Congress should act to make insurance more affordable. This would benefit families with uninsured children and everyone else purchasing insurance.

To improve affordability, Congress could make individually purchased health insurance tax deductible, just as employer-purchased health insurance currently is. Senator Ron Wyden and President George W. Bush have separately proposed this. Congress also could allow insurers to sell health insurance across state lines, eliminating barriers to competition that raise health insurance costs. The Senate rejected an amendment to the SCHIP expansion bill proposing this. Oregon’s state legislature could help by reversing the growth in costly health insurance mandates. There are other good ideas for insuring more Americans, but expanding SCHIP is a bad idea. Doing so will insure few children currently without insurance, at great cost, while decreasing personal responsibility and increasing dependence on the government. When he gets this bill, in any version, President Bush should veto it, even though it is “for the children.

Anthony Stinton is a research associate at Cascade Policy Institute, Oregon’s premier free market public policy think tank. To read other publications on health care policy, visit www.cascadepolicy.org.

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