NCPA - National Center for Policy Analysis


January 21, 2009

The House made its first down payment on President Obama's health-care plans last week, passing 289-139 a major expansion of the State Children's Health Insurance Program (S-CHIP).  The Senate is scheduled to take it up soon and pass it easily as well.  These days tens of billions in new spending is a mere pittance, but S-CHIP is also the Democratic model for a quantum jump in government health care down the line, says the Wall Street Journal.

S-CHIP will more than double in size with $73.3 billion in new spending over the next decade -- not counting a budget gimmick that hides the true cost. The program is supposed to help children from working-poor families who earn too much to qualify for Medicaid, but since it was created in 1997 Democrats have used it as a ratchet to grow the federal taxpayer share of health-care coverage, says the Journal:

  • With the new bill, S-CHIP will be open to everyone up to 300 percent of the federal poverty level, or $63,081 for a family of four.
  • In other words, a program supposedly targeted at low-income families has an eligibility ceiling higher than the U.S. median household income, which according to the Census Bureau is $50,233.
  • Even the 300 percent figure isn't really a ceiling, given that states can get a government waiver to go even higher.

The political purpose behind S-CHIP has always been to capture the middle class.  Every time the program grows, it displaces private insurance, says the Journal:

  • Even before Democrats struck down rules limiting crowd out, research indicated that for every 100 children signed up -- now more than 7.1 million -- there is a reduction in private coverage for 25 to 50 kids.
  • Exactly the same thing will happen if Obama and Daschle end up introducing a "public option," a government insurance program modeled after Medicare but open to anyone of any income.
  • As with S-CHIP, any net increase in insurance coverage will come by having taxpayers gradually supplant the private system.

Source: Editorial, "The Latest Entitlement: Federal health care at 300% of poverty," Wall Street Journal, January 21, 2009.

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