How to Cover the Kids

Published August 1, 2007

Who could be against health insurance for children? People who want government to run the whole health care system are counting on there not being very many.

That’s why you see a big push to expand the State Children’s Health Insurance Program (SCHIP), the state-run, federally subsidized program to provide health insurance to children whose families earn too much to qualify for Medicaid. Since children are the healthiest age group and child health insurance is the cheapest insurance found anywhere, the theory must be that SCHIP is a lot less expensive than tackling a really serious problem.

One disadvantage of living in a democracy is that people actually get to vote on these things. Fearing something much worse, I joined the Urban Institute’s Gene Steurle a few years back with a simple proposal: Parents should show proof they have insured their children (by employer plan, Medicaid, direct purchases, etc.) before claiming the $500 child tax credit.

Now that the credit has climbed to $1,000 per child, the case is stronger than ever. Republican members of Congress who ignored our idea will now have to explain why only they and Ebenezer Scrooge want to deny families both a tax credit and free health insurance.

Dropping Private Coverage

In the unlikely event that voters are inclined to listen, the arguments against SCHIP are quite strong. Harvard economist David Cutler and MIT economist John Gruber find for every additional $1 spent on Medicaid, private insurance spending contracts by 50 cents to 75 cents. For SCHIP expansion, Gruber estimates the contraction is 60 cents.

If people can get free insurance from the state, they drop their private coverage. Or employers stop offering private coverage as a fringe benefit. The result: a massive shift of the burden from the private sector to taxpayers–while making only a minor dent in the percentage of uninsured people.

Also, of the eight million uninsured children in this country, fully 70 percent already qualify for Medicaid or SCHIP. Their parents just have not bothered to enroll them!

Sorry if I ruined your day.

John Goodman ([email protected]) is president of the National Center for Policy Analysis in Dallas.