The SCHIP legislation has been promoted as something that would provide health insurance to 10 million poor children. Anyone who opposes it is seen as a heartless child-hater. As Harry Reid said,
“Each Republican who voted to uphold President Bush’s heartless veto should be embarrassed that he chose to stand in the way of improving the lives of millions of America’s poorest children,” Mr. Reid said.
Ashamed? This elephant is proud of them. Some background:
SCHIP is funded by the states and the federal government; the feds contribute at least half the cost. It provides health insurance for children whose parents earn up to 200% of the Federal Poverty Level, or 150% of the state’s Medicaid income cut-off, whichever is higher. The FPL for a family of four is $20,650/year. Therefore, children whose parents earn up to about $40k/year are eligible for subsidised health insurance. The funding for this original programme ended on 01 October.
I. Proposed Expansion
Apparently, this benefit was not generous enough. John Rockefeller and Olympia Snowe wanted to expand the programme to cover all children whose parents earn up to 300% of the FPL (or about $62,000/year for a family of four). (The $83,000/year element, for readers who have heard about it, is addressed below.) The median income in America is $48,000/year (here); $62,00/year marks the top 38% of earners. It would also cover mental health and dental care, pregnant women, and the children of documented immigrants. (See, here.)
II. Policy Concerns:
This legislation is problematic for several reasons:
- The Democrats proposed to pay the $50 billion cost through an increase in cigarette taxes or by decreasing reimbursements paid into Medicare Advantage plans. If taxes on cigarettes increase, people will smoke less, and revenue will go down: the tax becomes its own variable when calculating revenue. Second, removing money from Medicare isn’t necessarily the greatest of ideas, either. Somehow, though, no one has called out Democrats for hating on the elderly.
- There will be significant crowd-out. The SCHIP expansion would cover middle-class children whose parents receive health insurance through their employers. Although employers subsidise the plans, there is still a small cost to having a child on one (co-payments, deductibles, and premiums). SCHIP would be cheaper, so parents would enroll their child in that instead. This would do nothing to ensure that the poorest of children are covered but would do a good job of helping the soccer moms of the world have more latte money.
- Covering middle-income children will not increase the largest problem with SCHIP: 2/3ds of uninsured children are eligible for care under the old standards (here). Instead of putting middle-class children into the programme (who presumably have more access to physicians anyway, either through out-of-pocket payments or parental health insurance), it would make sense for states to be required to enroll a certain percentage of low-income children (say, 90%) before covering middle-class children. As children are required to be in school, by law, states could mandate that low-income children either provide proof of insurance or enroll in SCHIP.
III. Federalist Concerns:
President Bush stated that SCHIP would be expanded to cover families who earn up to $83,000/year. New York sought a waiver of the 300% of FPL rule, due to its high cost of living (here). Note that the FPL guidelines have separate levels for Alaska and Hawaii; New York could also lobby for its own guidelines. Furthermore, only 26% of Americans earn more than $82,500/year (here).
As previously blogged, New York has extraordinarily expensive health insurance. Our federalist system allows states to design their own regulations; presumably, they can be tailored to local conditions. States are also “laboratories of experimentation:” that which works in one state may be emulated by others, and that which does not work can be confined to the dust bin of history (or one nutty state).
New York’s waiver undermines the efficiency of this system. Instead of figuring out why a family of four in NYC cannot get health insurance for less than $30,000/year (roughly ten times the cost in other states), it is seeking funding (indirectly, from other states) to offset those expenses. In effect, NY is trying to transfer its inefficiency from itself to the rest of the country.
Upcoming: Part III and the socialist underpinnings of the proposed expansion.