Democrats are altogether too modest in the claims they make for the SCHIP children's health-insurance program. They talk only about what it does to cover needy families with uninsured kids, but never about all the wondrous things it can do for middle-class families with their own private insurance.
The children's health program is the occasion of the biggest domestic-policy dust-up of Bush's presidency. Bush vetoed the Democratic re-authorization of the bill as too profligate. The House upheld his veto, but not without Democrats gleefully portraying the president as an enemy of children's health.
At bottom, the argument is about whether the government will extend public coverage further up the income scale -- including to families already with their own insurance -- in a push toward national health insurance. All children below the poverty line ($20,650 for a family of four) are eligible for Medicaid. So the argument over SCHIP is not about "poor kids." Congress enacted the program in 1997 to help cover kids whose families aren't poor, but still can't afford insurance, basically in the income range of up to 200 percent of the poverty line.
The Congressional Budget Office says that the rate of uninsured among these kids fell from 22.5 percent in 1996 to 16.9 percent in 2005. Many of these children, if uninsured, would get publicly funded health care anyway, through public clinics and the like. For them, SCHIP makes sense.
The problem is that, as families earn more, they are more likely to have private insurance, and SCHIP lures them from private insurance onto government insurance. In a paper published by the National Bureau of Economic Research, economists Jonathan Gruber and Kosali Simon found that, as eligibility expands, "private insurance coverage is reduced by 60 percent as much as public insurance coverage rises." The CBO estimates that the reduction in private coverage is as much as 50 percent -- in other words, for every 100 children enrolled in SCHIP, 50 children are dropped off private coverage.
The technical term for this phenomenon is "crowding out"; the nontechnical term is "socializing medicine." Since the federal government picks up two-thirds of the tab for state-administered SCHIP programs, states have an incentive to expand coverage to better-off families -- for every $1 they spend on the benefit, the feds pony up $3.
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