NCPA - National Center for Policy Analysis


March 20, 2007

Senate Democratic leaders recently unveiled plans to dramatically expand taxpayer-funded health insurance through the State Children's Health Insurance Program (SCHIP) -- even as 14 states are running out of money to fund coverage in the program now, says Grace-Marie Turner, president of the Galen Institute.

One reason SCHIP is in trouble is because it has allowed states to provide taxpayer-subsidized health care for adults and middle-income families, even when poor children go without coverage.  For instance:

  • In 2005, 87 percent of Minnesota's SCHIP enrollees were adults, as were 66 percent of those enrolled in Wisconsin's program.
  • In Arizona -- which has one of the highest rates of uninsured children in the nation -- 56 percent of those enrolled in SCHIP were adults.

In addition, SCHIP funds are often used to insure children who are not in low-income families, says Turner:

  • In New Jersey, for example, Schip covers children whose parents earn up to three-and-a-half times the poverty line -- an amount that exceeds $72,000 a year.
  • Sen. Hillary Clinton and Rep. John Dingell recently announced their own bill that would subsidize coverage for kids in families earning up to four times the poverty level -- or nearly $83,000 for a family of four.

So what should be done?  First, adults should not be eligible, says Turner.  In addition, Schip should focus on America's poorest families; the program should assist only families who earn up to twice the poverty line, as the law originally intended.

Finally, it must be easier for states to utilize SCHIP as a premium-support program.  It is relatively inexpensive to add children to family policies, but by making the process so bureaucratic, employer-provided plans are underutilized and families are split into private and public coverage plans.

Source: Grace-Marie Turner, "Health Insurance Folly," Wall Street Journal, March 17, 2007.

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