The reauthorization of the State Children's Health Insurance Program
illustrates the difficulty of having a sensible policy discussion in the
context of American politics, as currently practiced.
According to congressional Democrats, opposition to their reauthorization
proposals means support for allowing low-income children to go without
According to Republicans, the Democrats are proposing socialized medicine
on the installment plan.
A sensible policy discussion begins with what the debate isn't about:
health insurance coverage for low-income children.
SCHIP was intended to provide federal subsidies to insure children up to
200 percent of the federal poverty level, or a family income of about
$40,000 a year. The program expires this year and needs to be reauthorized.
No one opposes reauthorization for its intended purpose. The Bush
administration has proposed reauthorization for this targeted population
with an extra $5 billion in funding over the next five years, over the
current base of $25 billion.
The problem is that SCHIP has expanded beyond its original scope, as so
often happens with federal programs. In the early years, many states
couldn't use all of their SCHIP money, so the feds permitted excess funds
to be used by other states to extend coverage to children beyond 200
percent of the poverty level and even adults.
In Arizona, the SCHIP plan is called "KidsCare". A Government
Accountability Office study found, however, that 56 percent of the people
enrolled in “KidsCare” were actually adults.
Fifteen states now provide SCHIP coverage for children above 200 percent of
the federal poverty level and 14 states cover adults.
Congressional Democrats propose not only to fund these existing expanded
programs, but provide enough funding for other states to substantially
expand eligibility as well. In all, Democrats are proposing to more than
double SCHIP funding, allowing universal coverage up to 300 percent of the
federal poverty level, as Gov. Napolitano has proposed for Arizona.
That would provide coverage up to a family income of about $60,000 a year.
Since the median family income in the United States is just over $46,000,
this reaches well into the middle class.
Here, a confusion surfaces between the issues of universal access and
federal subsidies. There are a lot of middle-class American families that
have difficulty obtaining health insurance coverage. Every state, however,
can provide universal access by allowing buy-ins to its Medicaid program.
The question SCHIP reauthorization poses is whether the federal government
should be subsidizing the health insurance of middle-class families. There
doesn't seem to be any justification for it, particularly funded the way
congressional Democrats are proposing.
To pay for the SCHIP expansion, Democrats are proposing to raise tobacco
taxes by up to 61 cents a pack.
Tobacco taxes are highly regressive. So, basically, Democrats are proposing
to tax the poor to pay for the health care of the middle class.
Tobacco taxes are also highly uncertain. Health care advocates like them
because the evidence is that they do reduce consumption. However, states
and the federal government have already loaded up various programs, many
involving health care and children, on their backs. The odds are very
strong that tobacco taxes will not produce the revenues being obligated.
Now, Republicans are making these points. But they also are employing a
scare tactic of their own, that Democratic proposals are basically
socialized medicine on the installment plan.
However, government programs to provide subsidized access to what is still
a private system of health care providers are very distinct from
European-style national health care systems. Moreover, federal tax policy
also heavily subsidizes private, employer-provided health insurance. So,
this is not a clean choice between public and private approaches.
At the end of the rhetoric, however, congressional Democrats aren't
proposing to reauthorize a program to insure low-income children. Instead,
they are proposing a massive expansion of subsidized health care to
middle-class families, funded by a large increase in heavily regressive
That's an unwise, unfair and fiscally risky scheme.