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NATIONAL CENTER FOR POLICY ANALYSIS

Expansion of the State Children’s Health Insurance Program

Issues and Research

On October 3, President Bush vetoed a bill passed by Congress to expand funding for the State Children's Health Insurance Program (SCHIP) by $35 billion, paid for with a $0.61 tax on cigarettes. The House passed the bill by a vote of 265-159 and it passed 67-29 in the Senate.

The Congress has provided “temporary” funding for SCHIP in the meantime, and will soon attempt to override the veto. The Constitution requires a 2/3 “supermajority” to override a veto, which seems probable in the Senate, but the House is more than 20 votes shy of being able to override the veto at this point.

Health policy analysts with the National Center for Policy Analysis (NCPA) say “the president was justified in vetoing the expansion, and suggest it provides Washington with an opportunity to go back to the drawing board to pass more effective health care reforms.” Below is a collection of research examining the issues involved in the SCHIP debate:

Expanding SCHIP Shouldn’t Mean Expanding Intent
The original bipartisan intent of the S-CHIP program was to provide health insurance to low-income uninsured children.

Many states are already expanding this program to include adults – Read: "Put the Children Back in SCHIP."
This bill would have expanded coverage to middle-income kids (those living in households earning up to $62,000) most of which (77%) already have private health insurance – Read NCPA Brief Analysis: "SCHIP: Robin Hood in Reverse."
Heritage: Congress must prevent the expansion of welfare into the middle class by capping eligibility for both SCHIP and Medicaid. Read: The SCHIP Negotiations: A Backdoor Approach to Expanding Medicaid to the Middle Class?

Government Insurance Shouldn’t Come at Expense of Private Insurance
The intent of the SCHIP program was to provide insurance to children whose families couldn’t afford private insurance.

Research suggests 50% to 60% of newly eligible enrollees are currently covered by private insurance, but will drop their private coverage to enroll in the “free coverage” – Read the Heritage Foundation's study: "SCHIP and Crowd-Out: The High Cost of Expanding Eligibility."
The bill would do little to enroll those children who are already eligible for SCHIP or Medicaid but have failed to sign-up – Read NCPA Brief Analysis: "SCHIP: Robin Hood in Reverse."
Heritage: Congress should create a premium assistance program that empowers parents to make decisions for their children with regard to health care coverage. Read: The SCHIP Bill: Why the Premium Assistance Provisions Won’t Work

Congress Shouldn’t Tax the Poor to Fund Benefits for the Middle-Class
The proposed expansion of SCHIP into the middle-class would be funded in large part by a $.61 tax increase on cigarettes.

Research shows these taxes disproportionately impact the poor – Read NCPA Task Force Report: "Taxing the Poor."
Federal lawmakers are considering legislation that could result in millions more middle income families obtaining health insurance from government. Unfortunately, the debate over expansion of the State Children's Health Insurance Program is divorced from the reality of who truly needs assistance -- Sinking SCHIP is a Step toward Stopping the Growth of Government Health Programs

Health Care Spending is on an Unsustainable Course
While President Bush called for an increase in spending on SCHIP, Congress’ bill more than doubled the amount of spending over 5 years ($25 billion to $60 billion). And by limiting the budget window to just 5 years, Congress ignored the long-term budgetary consequences of this expansion.

Research shows health care spending by both the federal and state governments is unsustainable -- Read NCPA Brief Analysis: "Is Health Care Spending Out of Control?"
Overlooked in the current debate over SCHIP expansion is the impact it would have on the quality of children's health care, particularly among families who already have superior private insurance coverage -- SCHIP Will Not Improve Quality of Kids' Health Care
State lawmakers need to remember that while an expanded State Children's Health Insurance Program (S-CHIP) program might bring their states more federal dollars, those dollars are conditional on state governments spending additional tax money to match. Read: Heritage: Expanding SCHIP: Not the Best Option for States

What Should We Do Now?
The President’s veto provides Washington with the opportunity to try a different approach. Rather than expand public entitlements, Congress should focus on ways to expand private coverage, making it more affordable and accessible.

One idea is to help states reform their Medicaid programs -- Read NCPA Brief Analysis: "Reforming Medicaid: More Flexibility for the States."
Another idea is to combine the government safety net with tax credits and other tools to expand private coverage – Read Heritage Foundation's "SCHIP: Crafting a Better Compromise to Cover Kids."
Finally, the NPCA just published a roadmap to reform that provides solutions for the problems of cost, access and quality -- Read NCPA's new "Handbook on State Health Care Reform."
A tax credit could help middle-class families offset the rising cost of health insurance, enabling them to keep their existing coverage or to secure health coverage in the non-group market if they cannot get it through an employer -- The More Children, More Choices Act of 2007: Middle-Class Tax Relief for Families with Kids

For more information on health reform issues, visit the NCPA's Consumer Directed Health Care Web site.

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