SCHIP: A Pox on All Branches

Last Tuesday, President Bush vetoed H.R. 976, which would significantly expand the State Children's Health Insurance Program (SCHIP - pronounced "es-chip").

This veto, one of the few of Bush's entire Presidency, sparked wide-ranging outrage and ridicule, including from The Daily Show with Jon Stewart.

For this observer, none of the participants in this issue - not the President, not Congress, not the media - have acquitted themselves in a responsible manner.

SCHIP is a federally funded, but state administered health insurance program for children that was created in 1997. Up to now, it has provided benefits for children in families with incomes up to 200 percent of the federal poverty level. According to the Congressional Budget Office, SCHIP has reduced the number of children living without health insurance. Between 1996 and 2005, the percentage of families with incomes between 100 and 200 percent of the federal poverty level who were uninsured fell from 22.6 to 16.9 percent.

The SCHIP expansion, as passed by Congress, would increase funding by $35 billion over five years. (President Bush's FY08 budget proposed a $4.8 billion increase over five years.) It would also allow states to make families with incomes up to 300 percent of the federal poverty level eligible for benefits under the program. This increase would be funded by an increase in federal cigarette taxes - the increase in revenue being required under Congressional PAYGO rules, which require any increase in spending to be matched by an increase in revenue.

In a paper released about a month ago, The Concord Coalition pointed out a number of problems with the proposed SCHIP expansion. According to the Coalition, the SCHIP expansion complies with PAYGO rules, but only in a technical sense. In order to comply with PAYGO, appropriations for the expansion are to be dramatically reduced in FY 2012. However, a special appropriation to be made that year - one that will not be counted toward PAYGO compliance - will make up for the reduction in regular financing. In other words, when all costs are included, the SCHIP expansion will cost more than the new revenues being allocated.

Another longer-term fiscal issue with the SCHIP expansion is the revenue source being used to offset it. Cigarette taxes are a diminishing revenue source over the long term. Over a period longer than the five years provided for in the proposed expansion, cigarette tax rates would need to be periodically increased in order to match the increase in spending just to maintain services at stable levels. At a certain point, the ability of cigarette taxes to support SCHIP would diminish significantly. While using cigarette taxes to fund childrens' health programs sounds great, it doesn't work over the long-term.

The Concord Coalition also points out that the SCHIP expansion is not accompanied by any means of cost control. Given the size of increases in health care costs that affect all sectors of the economy, it is not reasonable to support an expanded program simply with a tax increase, as the congressional SCHIP expansion does.

Finally, the expansion of the program targets families that may have less need for the benefits. The need for such a program for families making less than 200 percent of federal poverty level is well-established - and in this sense, the program has been a success. The degree to which families making between 200 and 300 percent of federal poverty level do not have available health care coverage is not clear. According to the Concord Coalition, "some evidence exists that some parents who otherwise would have enrolled their children in private plans are switching coverage to SCHIP."

Even if children whose families make between 200 and 300 percent of federal poverty level ought to receive benefits under SCHIP, the expanded program must be funded in a responsible and stable manner over the long term. Budget deficits and long-term obligations in Social Security and Medicare already challenge the long-term economic health of this country. The children being served now by SCHIP will potentially face in their middle age economic stagnation brought about by choices being made now.

Congress is certainly not the only party to blame for this. While President Bush is narrowly correct on the fiscal questions surrounding the SCHIP expansion, his tax cuts and his open-ended commitment to military operations in Iraq dwarf any fiscal effect produced by SCHIP. Without the tax cuts and our Iraq operations, it might be possible to consider a fiscally sound method of funding SCHIP at the levels proposed by Congressional Democrats.

UPDATE: This afternoon, I crossposted this piece at Blue Mass. Group; there was quite a discussion. I'm more convinced of the need for the program expansion, but I still find the conduct of the President, Congress, and the media (including Jon Stewart) to be irresponsible and less than completely honest. While it may be naive on my part to expect more responsible and honest behavior from our government and the media, it is important that someone begin to hold these power centers in our society to higher standards - higher standards than currently allow an important issue like this to be obscured, misdirected, or simply the object of a joke.

Comments

[Charley on the MTA]

David, a good-natured challenge for you: Go to the Massachusetts Health Connector, find some plans, and imagine making between $40-60k (as an two-income family -- half that for a single-income family) and trying to afford the family plans.

And then report back to us if you still think that the need to subsidize 200-300% of FPL is "not clear." Massachusetts decided to do so -- correctly, IMO.

[David Eisenthal]

For me, the public policy goal of SCHIP should be to make sure that children who would be otherwise uninsured or underinsured get coverage.

Yes, unsubsidized health plans are expensive for middle income familes, but I'm not sure the extent to which kids are going uninsured because of it.

My larger point, though, is that if we establish the need to subsidize insurance for these kids, we need to find a better way to pay for it than the cigarette tax - and Congress needs to be more straightforward about the costs - and their contribution to the federal deficit.

[Peter Porcupine]

David - I am commenting here rather than on BMG, as the discussion is more on-topic.

I am wary of the SCHIP expansion for the simple reason that we have not, and to a certain extent cannot, cost out the expansion. We need to be more wary, not less, of expanding entitlement programs.

A local example - look at the growth of senior prescription drug government benefits from Senior Pharmacy under Cellucci, to Prescription Advantage under Swift, to Medicare Part D under Bush. When Part D was introduced, there was a lot of angst about even signing up for it, as it might take away Prescription Advantage beneifts. Instead, PA has been re-configured as a wrap around program, so seniors still have full coverage. HOW MUCH WILL THIS COST? How much MORE in decades to come? and yet, in less than 10 years, it has become an untouchable sacred cow. The Mass. state budget is genuinely hovering around 50% for health related entitlement programs with no end in sight - for ALL state monies - which is why we have exploding manholes and collapsing bridges.

Also - I wish to register my continuing objection to using the words health CARE and health INSURANCE interchangeably. We DO have universal CARE now; not pretty, perhaps emergency room or clinic based, but care nonetheless. We do NOT have universal INSURANCE yet, and I am not convinced that government is the right delivery system for that. We DO have almost universal coverage for those over 65, and I would look at THAT as the model if we expand, not the plush Senate health insurance programs that activists point to. Virtually every person in Medicare buys a supplement to cover holes in the government system. I am not convinced that universal insurance would work any differently, except we'd pay twice - in taxes and in premiums.