Lessons of the SCHIP Legislative Debate

1. Vetoing excessive government spending demonstrates fiscal responsibility. This seems odd coming from the man who had no problem creating a Medicare prescription drug benefit with a greater unfunded liability than the entire Social Security program. When it comes to excessive federal spending, SCHIP is a drop in the bucket compared to Medicare Part D.

2. The legislation would use SCHIP funds to cover adults, not children. This too was an odd objection coming from the president. Yes, many states spend more SCHIP funds on adults than on children. But whom does the president think approved the waivers that allowed this to happen?

3. The legislation would offer subsidies too far up the income ladder. The president was horrified to find that states like New Jersey already offer SCHIP subsidies to families of four making $72,000. This too seems a bit disingenuous. Those eligibility cutoffs didn’t rise that high all by themselves. And they had been sitting around apparently unnoticed until Congress wanted to raise them higher. Moreover, this is the same president who approved a Medicare prescription drug entitlement that today provides subsidies to seniors even higher up the income ladder. Of course, there is one important difference between Medicare Part D and SCHIP. Seniors vote. Kids don’t.

4. The president is concerned that greater SCHIP subsidies would crowd‐​out private health insurance. This is undeniably true. But where were the president’s crowd‐​out worries when his administration was approving states’ SCHIP expansions? Where was his outrage when Medicare Part D crowded out private coverage among the 75 percent of seniors who already had drug coverage?

1. SCHIP is just a program for children in families that earn too much to be eligible for Medicaid, but not enough to afford private coverage. This is clearly incorrect, and always has been. At the time it was enacted, more than 60 percent of children who became eligible for SCHIP already had private coverage. If SCHIP’s purpose was only to help children in that gap between Medicaid and private coverage, it surely failed that purpose. But then again, maybe that never was the intent.

2. House Speaker Nancy Pelosi (D-CA) said that in vetoing the SCHIP expansion, President Bush was effectively saying, “I forbid 10 million children in America to have health care.” Anyone with passing familiarity with SCHIP knows the program covers millions of children who would have health insurance anyway — and even more children who would still get health care if the program disappeared tomorrow. Moreover, Pelosi should have a better understanding of government’s role in a liberal democracy (and of the veto power). She should know that there is a difference between the government not funding something and forbidding it. Yet the Speaker thinks that vetoing SCHIP expansion is the equivalent of storm troopers kicking in clinic doors to stop a well‐​baby visit.

3. SCHIP often subsidizes private coverage, therefore SCHIP is not socialized medicine. Socialism occurs when the political system directs economic activity. SCHIP takes resources out of private hands and dictates that and how those resources will be spent. It makes no difference that privately held insurance companies deliver the benefits – except that it creates yet another constituency that supports socialism. SCHIP proponents may not like it when opponents play off the public’s knee‐​jerk response to the term “socialized medicine,” but they can hardly complain when they themselves play on the public’s knee‐​jerk response to “do it for the children.”

4. Unless we expand SCHIP, children will die. At the same time SCHIP supporters make such claims, they decry the fact that Medicaid and SCHIP are so under‐​funded that some children die because they can’t in to see a dentist. Yet supporters sought to pull even more children into these programs and pay for it with an unstable funding source (an increase in the tobacco tax). Researchers can find no evidence that expanding health insurance is a cost‐​effective way of improving health – which is another way of saying that for all we know, children may die because we expand SCHIP rather than pursue some other strategy.

5. SCHIP expansion will help low‐​income Americans. Actually, the subsidies were targeted primarily to middle‐​class families, while the tobacco tax increase guaranteed that the cost would fall disproportionately on people with low incomes. So much for Robin Hood.

6. New York Times columnist Paul Krugman makes the curious claim that detractors oppose SCHIP because the program “works.” How so? SCHIP is poorly targeted. There is no evidence that it is a cost‐​effective way of improving children’s health. It makes health care more expensive for those outside the program. It does not address the systemic problems that lead to low‐​quality pediatric care. It reduces the benefits of education and work effort, helping to trap families in low‐​wage jobs. And it covers four uninsured children for the price of ten – a bad bargain even by government standards. If your goal is to maximize children’s health, there is no way one can defensibly claim that SCHIP “works.” If, however, your goal is to maximize something else, such as political control over the nation’s health care sector, then I think you have a much stronger case.