Commentary

Dodging a Bullet on Kidcare

Perhaps the new budget agreement is good for something after all.

Last week the Senate came within an eyelash of passing another federal health care entitlement: another step towards a government takeover of the U.S. health care system. Only the unlikely intervention of President Clinton, who was trying to preserve the budget agreement, prevented its passage. The Hatch-Kennedy “Kidcare” amendment would have raised tobacco taxes to finance a new middle-class entitlement to children’s health insurance.

Unfortunately, we have not heard the last of Kidcare. Even with the president’s intervention and the budget agreement on the line, the Hatch-Kennedy proposal garnered 45 votes. It will almost certainly return as a free-standing measure.

Supporters of Kidcare have attempted to portray this as a fight between “big tobacco” and children. “Do you stand with Joe Camel or Joey?” asked one advertisement. But don’t be misled. This is not a debate about financing mechanisms. The proposed tobacco tax is nothing more than a tactic to divert attention from the crucial public policy issue at stake: what should the role of government be in the U.S. health care system?

At its core, this debate is not even about children’s health care. There is no crisis of uninsured children in the United States. Insurance for children is extremely inexpensive, and approximately 15 percent of uninsured children are in families with incomes of over $40,000 per year. An additional 30 percent are already eligible for Medicaid, but their parents fail to claim the benefits for one reason or another. Most of the remainder are uninsured for only a brief period.

The Kidcare debate is really about government control. Its supporters, such as Sen. Edward Kennedy and Hillary Clinton, have always believed that government should control the American health care system. They favor a national health care system like Canada’s or Europe’s and see Kidcare as a step down the road to such a system.

But it is a step that would have disastrous consequences for American taxpayers, the American health care system and even the children it purports to serve. Although its beginnings seem modest enough, the Hatch-Kennedy plan would establish a vast new entitlement program that can be counted on to expand dramatically in future years. Originally, the costs for Medicaid and Medicare were projected to be only a few billion dollars. The skyrocketing cost of entitlements is threatening to bankrupt our nation. Creating yet another one is the height of fiscal irresponsibility.

Furthermore, the Hatch-Kennedy plan mandates gold-plated insurance coverage that provides for all the services currently covered under Medicaid — including abortion coverage in seven states. It is possible to purchase catastrophic coverage for children for as little as a few hundred dollars per year. But some estimates of the Hatch-Kennedy bill suggest it will cost as much as $3,000 per child.

Parents paying for inexpensive care out of their own pocket will have every incentive to switch to a cushier policy at someone else’s expense. Since the government would now be willing to pick up the tab for uninsured children, we could expect hard-pressed small employers to drop insurance for their employees’ children, shifting those costs to the taxpayers.

As Kidcare’s costs surge inevitably upward, pressure will build to control them. At that point, the advocates of government-run health care will step forward with the usual calls for regulation and price controls. Socialized medicine will creep closer.

There are free-market alternatives to Kidcare. Medical savings accounts should be expanded and made available to all Americans. The tax treatment of health insurance should be changed to allow individuals without employer-provided health insurance to receive the same tax break that is provided to those who receive health insurance through their work. The health care industry should be deregulated to increase competition and reduce costs.

Advocates of yet another federal health care program should look back on the wreckage caused by forty years of government meddling in the health care marketplace. Let’s learn from our mistakes. The children of America deserve better than Kidcare.

Michael Tanner is director of health and welfare studies at the Cato Institute.