Opponents Question Costs of Illinois All Kids Program

Published January 1, 2006

In October 2005, Illinois became the nation’s first state to offer government health insurance to all children regardless of family income. Gov. Rod Blagojevich (D) proposed the “All Kids” health insurance program several weeks before the state’s six-day veto session, and the state Senate approved the measure by a 32-23 vote on October 26. The House voted 79-28 to approve the measure on October 27.

The plan is slated to be up and running by July 1, 2006.

“We’ve worked hard for three years to make health care available for more working and low-income families,” Blagojevich said in a statement. “But thousands of kids from working-class and middle-class families have fallen through the cracks because their families earn too much to qualify for government programs, but still can’t afford private insurance.”

Subsidized through Medicaid

All Kids is designed to provide subsidized health insurance coverage through the state’s Medicaid program. Premiums will depend on family income. Higher-income families will pay higher premiums.

According to the governor’s office, a family with two children that earns between $40,000 and $59,000 a year will pay a $40 monthly premium per child. Each physician visit would cost the family $10. A family with two children and income between $60,000 and $79,000 will pay a $70 monthly premium per child and a $15 co-pay per physician visit. There will be no co-pays for preventive care visits, such as annual immunizations and regular check-ups and screenings for vision, hearing, appropriate development, or preventive dental.

“These premiums for middle-income families are significantly more affordable than typical private insurance premiums of $100 to $200 a month, or $2,400 per child annually,” the governor’s statement said.

Business, Lawmakers Skeptical

Upon approval of the All Kids program, officials at Blue Cross Blue Shield of Illinois said, “Blue Cross and Blue Shield of Illinois already is actively engaged in extending coverage to Illinois children. BCBSIL currently offers an individual policy with a $250 deductible for a premium of about $64 monthly per child. For those who cannot afford even that amount, BCBSIL for years has actively supported such efforts as the Gilead Outreach and Referral Center, which has taken a leadership role in linking people with existing government programs.”

Republicans in the Illinois General Assembly expressed anger and frustration at the concept of the program and the legislation itself.

“Just another press release opportunity for the governor,” said Sen. William Peterson (R-Buffalo Grove), who noted the governor’s media package for All Kids contained 7,800 words while the legislation has only 2,200 words “and almost no details.”

Greg Blankenship, executive director of the Illinois Policy Institute, warns that Maine’s troubled Dirigo Health Plan, passed in 2003, “looks eerily like All Kids–both in structure and in manner of implementation.”

Since Dirigo’s passage, Blankenship points out, Maine’s health care marketplace has suffered an explosion in Medicaid costs, higher health insurance premiums (including a new 2 percent insurance claims tax), an erosion of the private insurance market, uncompetitive health care providers, and an extremely expensive individual insurance market.

Looks Appealing Initially

To subsidize the low premiums for All Kids, Blagojevich will seek a U.S. Department of Health and Human Services waiver to move Medicaid enrollees, except for the blind and nursing home residents, into a state managed care program. The estimated $56 million per year in savings from managed care will pay for what the governor claims will be a $45 million annual program for an estimated 253,000 uninsured middle-income kids.

The program, however, promises to reimburse health care providers at Medicaid rates only. Illinois has some of the lowest Medicaid reimbursement rates in the country, and that has limited Medicaid enrollees’ access to providers, many of whom will not accept Medicaid patients. That forces enrollees into emergency rooms, where care is expensive. Since All Kids will be using Illinois Medicaid reimbursement rates, the access issues are likely to continue.

Opponents of the program argue the money the state is expecting to save by putting Medicaid participants into managed care is conjecture. They project a bleaker outcome for the All Kids program.

“Essentially,” says Blankenship, “Gov. Blagojevich is taking state government into the insurance industry and undercutting the private sector. The abundant supply of cheap government insurance will create an incentive for businesses to dump coverage for employees’ children, because parents can cheaply insure kids through the state. Parents participating in the individual market will be able to forgo covering children, put the kids in Medicaid, and then pocket the difference.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News, published by The Heartland Institute.