NCPA - National Center for Policy Analysis


June 1, 2007

We should not expand the State Children's Health Insurance Program (SCHIP), the state-run, federally subsidized program to provide health insurance to children whose families earn too much to qualify for Medicaid, says John C. Goodman, president of the National Center for Policy Analysis (NCPA).

Since children are the healthiest age group and child health insurance is the cheapest insurance found anywhere, Goodman and Gene Steurle of the Urban Institute recommend that parents should be required to show proof they have insured their children (by employer plan, Medicaid or direct purchases) before claiming the $500 child tax credit (the tax code's reward to the middle class for having children).  Now that the credit has climbed to $1,000 per child, the case is stronger than ever.

The arguments against SCHIP are quite strong, says Goodman:

  • Harvard University economist David Cutler and Massachusetts Institute of Technology economist John Gruber find that for every additional $1 spent on Medicaid, private insurance spending contracts by 50 cents to 75 cents. 
  • For SCHIP expansion, Gruber estimates the contraction is 60 cents.

If people can get free insurance from the state, they drop their private coverage or employers stop offering private coverage as a fringe benefit, says Goodman.  This results in a massive shift of the burden from the private sector to taxpayers -- while making only minor dent in the percent of people uninsured.  Also of the 8 million uninsured children in this country, fully 70 percent already qualify for Medicaid or SCHIP -- their parents have just not bothered to enroll them.

Source: John C. Goodman, "Covering the Kids," National Center for Policy Analysis, May 31, 2007.

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