Commentary

Is Compromise on SCHIP Sunk?

This week, Congress will try to override President Bush’s veto on legislation that would double the size of the State Children’s Health Insurance Program. By all accounts, the Senate will vote to override, but the attempt will fail in the House of Representatives, so the question now is whether the president and the Democratic Congress will find some middle ground.

President Bush rightly complains that some states spend more than half their SCHIP funding on care for adults, not children. In reaching a compromise, congressional Democrats may cave on adult care, and Bush may accede to allowing more middle-class families – most of whom already have private coverage – to enroll in the program.

But in casting aspersions on one another, both Democrats and Republicans continue to skirt the most important questions about SCHIP. When Congress created the program in 1997, its stated purpose was to provide health insurance to children in families earning too much to be eligible for Medicaid, but too little to afford private coverage.

So why is the program so poorly targeted? According to Genevieve Kenney and Allison Cook of the Urban Institute, almost 60 percent of children eligible for SCHIP already have private coverage, while the Congressional Budget Office reports the figure is 77 percent for children targeted by Congress’ proposed expansion. Bloomberg.com reports that SCHIP has already helped one New Jersey family afford private school, Internet access and basic cable.

Health insurance may not even be the best strategy for protecting children’s health. Economists Helen Levy of the University of Michigan and David Meltzer of the University of Chicago surveyed the economic literature and found “no evidence” that expanding health insurance is cost-effective compared to other strategies, such as health screening and education programs, or improving incomes and education.

And few have acknowledged SCHIP’s effect on work incentives. According to the Urban Institute, if a single mother of two earning minimum wage in New Mexico managed to increase her earnings by $30,000, her total income wouldn’t change, because she’d pay $4,000 more in taxes and lose $26,000 in SCHIP and other government benefits. Why is Congress so gung-ho to pull even more families into that low-wage trap?

SCHIP supporters are using their self-professed compassion for children as a bludgeon to suppress perfectly reasonable questions.

Sen. John Kerry, D-Mass., remarks that without SCHIP, “So help me, children will die, and some will end up with permanent disabilities.” Yet there is no evidence that SCHIP saves more children’s lives than efforts to improve prenatal care, for example. So how can Sen. Kerry be adamant about maintaining it?

House Speaker Nancy Pelosi, D-San Francisco, declares that Bush’s veto would prevent 10 million children from obtaining any health care at all. Yet Harvard economist George Borjas found that when Congress cut noncitizen immigrants from the Medicaid rolls in 1996, so many of them subsequently sought jobs with health benefits that insurance levels among noncitizen immigrants actually increased. Why would SCHIP families, who are far wealthier, fare worse?

The media have yet to challenge Kerry, Pelosi, or their amen chorus of pharmaceutical companies, insurers, hospitals, and physicians, who stand to gain by doubling SCHIP spending. (The list of special interest supporters for SCHIP should make us even more skeptical of the program.)

But neither have Republicans put forward a viable alternative for helping low-income families afford coverage, such as greater choice and competition. For instance, the CBO estimates that state regulations increase health premiums by as much as 15 percent. That hits low-income families hardest. Congress could allow consumers and employers to avoid that mark-up by shopping for health insurance nationwide. That would enable millions of low-income families to find more affordable coverage – without raising taxes, subsidizing people who don’t need subsidies, or trapping families in low-wage jobs.

Pelosi & Co. would have us believe that if we care about children’s health, we must support SCHIP. That’s little different than the Republican claim, “If you support the troops, you must support the war.” Both remarks are intended to cut off debate before people start asking crucial questions.

Here’s one: If Congress gave people the opportunity to buy coverage from out of state instead of expanding SCHIP, could it spur an even greater increase in coverage?

We’ll never know unless someone asks.

Michael F. Cannon is director of health-policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It