NCPA - National Center for Policy Analysis

S-CHIP NOT THE BEST OPTION FOR STATES

December 7, 2007

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, say Edmund F. Haislmaier, a senior research fellow, and Greg D'Angelo, a research assistant, both with the Heritage Foundation.

Consider:

  • In 2006, about 1.5 million children in families between 200 percent and 300 percent of the federal poverty line (FPL) did not have health insurance coverage.
  • The theoretical cost to each state of expanding their current S-CHIP program to 300 percent of the FPL would be an additional $740 million in the first year of the program expansion -- on top of what states are already spending on S-CHIP.

In actuality, a S-CHIP expansion would encourage many families with current private coverage to switch their children to S-CHIP coverage -- a phenomenon known as "crowd-out."  According to a Heritage analysis:

  • Among families with incomes in the range of 200 percent to 300 percent of the FPL, the crowd-out effect is between 44 percent and 51 percent.
  • Thus, the states in the aggregate would end up enrolling about 2.7 million to 3 million more children in S-CHIP as part of the proposed expansion--about twice the estimated 1.5 million.
  • Furthermore, despite federal match rates that are more generous than Medicaid, the proposed expansion would collectively add at least $1.3 billion to $1.5 billion annually to state government budgets.
  • Also, expanding S-CHIP eligibility would become even costlier over time as program costs continue to increase.

Because states already face fiscal challenges, a better option would be for Congress to keep S-CHIP focused on lower-income children and pass a health care tax credit that could help middle-class families obtain or keep private health insurance.

Source: Edmund F. Haislmaier and Greg D'Angelo, "Expanding SCHIP: Not the Best Option for States," WebMemo #1725, Heritage Foundation, December 6, 2007.

 

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