Hawaii Drops Universal Children’s Health Care Plan

Published January 1, 2009

An economic downturn and ensuing budget cuts have forced Hawaii to abandon the nation’s first universal health care program for children, Keiki Care, after only seven months.

Gov. Linda Lingle (D) discontinued state funding for the program on November 1.

“I voted against the bill when first proposed, and the major part of my argument was a warning that there was no effective means test, which would result in overutilization,” said State Sen. Sam Slom (R-Kahala, Hawaii Kai). “It failed not for lack of funding but because it is a bad bill.”

Slom’s prediction turned out to be correct, as Keiki Care all but supplanted private health insurance coverage for the state’s children.

Private Coverage Crashed

Toni Schwartz, public information officer for the Department of Human Services, affirmed enrollment “skyrocketed” at the expense of private coverage under the Hawaii Medical Service Association’s Children’s Plan, which experienced a staggering 95 percent drop in enrollment after the free program began.

Parents of only 88 children chose to remain as paying customers in the Children’s Plan, which costs $55 a month, as even a $55 plan proved to be no match for free health insurance. Lawmakers did not envision demand would be so high.

Last year, the Hawaii Medical Service Association, an independent licensee of the Blue Cross and Blue Shield Association, partnered with the state to launch Keiki Care, which was supposed to be a three-year pilot project serving a “gap group” of an estimated 3,500 uninsured children. The “gap group” was identified as families whose income is at or above 300 percent of the federal poverty level, making them ineligible for existing state or federal coverage.

The “no-cost” plan touted medical, drug, and dental coverage, no charge for immunizations, a $7 copayment for physician office visits, and a $5 copayment for generic drugs, much less than copayments for employer-sponsored insurance.

SCHIP Similarities

Keiki Care closely resembled the federal State Children’s Health Insurance Program (SCHIP), which targeted uninsured children from families with modest income exceeding the threshold for Medicaid. When Keiki Care launched in April, health care experts were testifying in Congress about SCHIP, many saying any increase in government health insurance spending displaces at least some private coverage.

Nonetheless, Hawaii lawmakers chose to spend surplus revenue on Keiki Care instead of returning it to taxpayers as required by the state’s constitution.

On October 15, Lingle used a news release to notify the Hawaii Medical Service Association of her plan to withdraw financial support for Keiki Care. The release highlighted the effect of recent outreach efforts in increasing Medicaid participation by more than 5,500 children.

Lack of federal funding and failure to attract the “gap” children also were cited as reasons for the decision. The release did not mention the projected state revenue deficit of $162.3 million for the current fiscal year.

No Warning 

An employee at the Department of Human Services said when the legislature appropriates money for various projects, this “doesn’t necessarily mean the money is there.”

Officials at the Hawaii Medical Service Association say there was no warning from the state before the announcement.
“We’re very disappointed in the state’s decision. It came as a complete surprise to us,” said Chuck Marshall, the association’s public information coordinator.

Slom said Keiki Care cost too much and “undermined any genuine health care reforms for all people with the emphasis on choice and options.”

Pearl Hahn ([email protected]) is a policy analyst with The Grassroot Institute of Hawaii, a free-market think tank based in Honolulu.