Sinking SCHIP: A First Step toward Stopping the Growth of Government Health Programs

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Federal lawmakers are considering legislationthat could result in millions more middle incomefamilies obtaining health insurancefrom government. Unfortunately, the debateover expansion of the State Children’s HealthInsurance Program is divorced from the realityof who truly needs assistance and the forces thatare making health insurance increasingly unaffordable.

SCHIP and its larger sibling Medicaid currentlyenroll many people who do not need governmentassistance, including some families offour earning up to $72,000 per year. That is adirect result of federal funding rules that rewardstates for making more Americans dependenton government for their health care.

Rather than expand SCHIP, Congress should(1) make private health insurance more affordableby allowing consumers and employers topurchase less expensive policies from other states,and (2) fold federal Medicaid and SCHIP fundinginto block grants that no longer encourage statesto open taxpayer‐​financed health care to nonneedyfamilies. With more Americans able toafford private insurance and no incentive forstates to expand government programs beyondthe truly needy, federal and state governmentscould reduce spending on those programs.

Michael F. Cannon

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, 2nd ed. (forthcoming).