Congress OKs, Expands SCHIP

Published May 1, 2009

President Barack Obama’s signing of legislation reauthorizing and expanding the State Children’s Health Insurance Program surprised no one, but it raised plenty of concerns among health policy experts and budget watchdogs.

House Resolution 2, the State Children’s Health Insurance Reauthorization Act of 2009, extends taxpayer-funded insurance eligibility to children whose family income is up to three times the federal poverty level; the previous limit had been twice the poverty level. The measure also allows states to offer dental coverage through the State Children’s Health Insurance Program (SCHIP) to children who have private health insurance that does not include dental care.

HR 2, which reauthorizes the program through fiscal year 2013 at an estimated total cost of $33 billion, includes provisions exempting New Jersey and New York, two states that already had expanded SCHIP eligibility to families with income over the new limit, from all income eligibility requirements.

Crowding Out

The SCHIP expansion violates the program’s original mandate and, by crowding private insurers out of the market, could serve as gateway legislation to a national taxpayer-funded health care program.

“If we are going to have SCHIP [at all], it should not expand the definition of ‘poor children’ to include people in their twenties or families with incomes up to $80,000 per year when the median in most states is well below that amount,” said Joseph Coletti, a fiscal and health care policy analyst at the John Locke Foundation.

“The Congressional Budget Office estimated that of every additional 100 children enrolled in SCHIP, between 25 and 50 of them would be switching from private insurance,” said Stephen Entin, president and executive director of the Institute for Research on the Economics of Taxation.

“Some would be switched out of their parents’ employer-provided plans, and some from their parents’ individual insurance plans. This crowding out of private coverage would shift the cost of the insurance from private wallets to the public purse,” Entin noted.

“Expanding SCHIP drags millions of participants into state-directed programs for no good reason,” Entin added. “Rather than put millions more children into a government-run insurance program, we should reform the tax treatment of health insurance to encourage and enable more families to get private coverage that is not dependent on one’s place of employment.”

‘Coverage Without Access’

Dr. Robert Goldberg, vice president and director of programs at the Center for Medicine in the Public Interest, said the SCHIP expansion will “create the health care equivalent of public housing for the middle class.

“People will find they have coverage without access to care,” Goldberg added, “since doctors will not accept reduced reimbursement, the limits on what they can and cannot do, or the restrictions on what drugs they can prescribe—all imposed in the name of quality [but] based on comparative effectiveness studies funded by the government and conducted by organizations run by the same health plans that are getting the government contracts for SCHIP.”

Contradictory Funding Source

Entin points out the tax hike will hit hardest those it’s supposed to help.

“The main funding mechanism for expanding the program is a regressive tobacco tax hike that would hurt low-income families, including families currently receiving SCHIP assistance,” Entin said. “It would raise the federal cigarette tax by $0.61 per pack and impose similar or higher tax hikes on other tobacco products.”

That would be a regressive tax, Entin said, because “low-income individuals are far more likely to be smokers than middle- and high-income individuals, and for those who do smoke, people with lower incomes spend a higher percentage of their incomes on cigarettes and the associated tax than do people with higher incomes.

“This bill is neither sensible health care nor tax policy,” Entin concluded.

Thomas Cheplick ([email protected]) writes from Massachusetts.

For more information …

U.S. House Resolution 2 (The State Children’s Health Insurance Reauthorization Act of 2009):