The Entrepreneurial View #452
The SCHIP Battle in the Health Care War
by Raymond J. Keating
It's turning out to be another example of a government program expanding far beyond what was originally intended.
In 1997, Congress and the Clinton White House set up the State Children's Health Insurance Program, or SCHIP. The idea was to subsidize health coverage for children whose families earn too much to qualify for Medicaid, but have trouble affording private insurance.
Sounds good to some. But is government really the answer? Don't government programs grow both in terms of their costs and their reach?
SCHIP, due to expire on September 30, now costs federal taxpayers $5 billion a year. That covers about 70 percent of the costs, with state taxpayers chipping in subsidies as well.
President Bush is calling for a 20 percent boost in the program to $6 billion a year for the next five years. But that's not enough for Congress. The U.S. House of Representatives passed an SCHIP bill on September 25 by a vote of 265-159 that would vastly expand the program, and therefore, the corresponding costs.
SCHIP covered some 6 million children during 2006. To illustrate the mission creep already at work, this program for children also covered 670,000 adults. Under the proposed expansion, the number of children would leap to 10 million, while pushing more adults into Medicaid.
By the way, the Congressional Budget Office has estimated that 2 million children would be shifted from private insurance to this taxpayer-funded program. Does that make any sense? Well, it does if your ultimate objective is to move the entire nation into a taxpayer-funded, government-run health care system.
Eligibility for SCHIP would be expanded to cover middle to upper-middle income earners - topping $82,000 for a family of four in New York and $72,000 in New Jersey, for example. For good measure, the bill also would open the door to "express enrollment" in the program, reducing requirements to show eligibility and thereby expanding the opportunity for fraud and abuse.
The annual costs would double compared to the President's proposal, and would be paid for, in part, with a 156 percent increase in the federal excise tax on a pack of cigarettes, taking it from 39 cents to $1.
However, even these numbers do not reveal the true costs. House Budget Committee Ranking Republican Paul Ryan (R-WI) pointed out the budget shenanigans buried in the bill that hide its full costs: "The Majority's bill language is manipulated to mask the true cost of their massive entitlement expansion, by creating a precipitous funding ‘cliff.' It dramatically increases federal funding to enroll new children in SCHIP for the next five years, then - six months into 2012 - it abruptly cuts SCHIP funding by 80 percent - which is below current levels. Specifically, the bill authorizes $14.25 billion during the first six months of 2012; then slashes the amount to $1.75 billion for the second six months of that year; and then assumes the lower level for the duration of the program. The likelihood of all this happening is, approximately, zero."
What does this mean? Ways and Means Committee Ranking Republican Jim McCrery (R-LA) summed it up this way: "Their plan essentially puts a gun to the head of a future Congress, which will face a simple choice: radically increase SCHIP funding or let millions of American children lose their health coverage."
Meanwhile, according to USA Today, 41 governors support the bill in Congress. Of course, they do. They get to tout an expanded program with the bulk of funding coming from the federal government. The governors can spend more without having to do the dirty job of jacking up taxes themselves.
The legislation is expected to sail through the Senate.
It also must be noted that the 61-cents tax hike on cigarettes not only would hit lower income earners hard, but small businesses as well. Small retailers are most likely to be hurt when sales are lost and/or consumers have fewer dollars left to spend on other items. In addition, as the program's costs relentlessly expand and smoking continues to decline, other taxes will have to be tapped to cover the costs.
Fortunately, President Bush has pledged to veto this legislation. And it does not look like the House will have enough votes to override. At this point, the administration favors reauthorizing the program as it exists now, including the President's $5 billion increase in funding over five years. That certainly is far preferable to what Congress is pushing.
But all of this was completely foreseeable. SCHIP is another government health care program that sounded nice to many when first proposed - keep in mind that it became law with a Republican-controlled Congress and a Democrat in the White House - but it was destined to become another tool in the effort to push the nation ever closer to socialized medicine. Advocates for big government health care are quite skilled at taking a few slices of bread, and then coming back later for more until they finally get the entire loaf.
Perhaps we can take heart from President Bush being willing to do the right thing with his veto pen. Then all we need is a shift in the health care debate away from more government, and toward more market reforms that expand choice and competition.
In the end, only two real choices exist when it comes to health care reform. Either more government involvement -- and therefore more government control, higher costs and rationing of care -- or greater freedom in the marketplace where consumers ultimately make the call.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
This article may be reprinted with appropriate citation and credit.
