The children's crusade -- for socialized medicine

Posted: Oct 18, 2007 9:55 PM
The children's crusade -- for socialized medicine

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.

And expand they have. Fifteen states cover kids and families above 200 percent of the poverty level. New Jersey covers kids up to 350 percent of the poverty level. New York wants to go to 400 percent. By making it explicit that federal SCHIP dollars will fund programs up to 300 percent of the poverty line (and occasionally even higher) and by throwing an additional $35 billion at the program throughout the next five years, the Democratic bill guarantees the program will grow well beyond its original purpose of insuring "near-poor" kids.

This makes sense only as a step toward national health insurance for kids. An astonishing 47.1 percent of children are already eligible, as a matter of their family's income, for government insurance (although other factors, such as immigration status, might make them ineligible). Of children in families between 200 percent and 300 percent of poverty, only 9.8 percent were uninsured in 2005. There are less-sweeping means -- like tax credits -- to help these families get coverage in the overregulated, and therefore overly expensive, private health-insurance market.

Meanwhile, there are 5.5 million poor or near-poor kids -- roughly 60 percent of all uninsured kids -- who are eligible for public insurance now, but aren't enrolled in public programs. These unenrolled kids are likelier to come from single-parent or no-parent families and families where all parents are unemployed. They are a hard-to-reach population, but the focus should be on them rather than families with the wherewithal to fend for themselves.

Few things are as destructive of good public policy as outraged invocations of the "children." Democrats probably will benefit politically from their ploy on SCHIP, and advance a goal that goes far beyond low-income kids.

Trending Townhall Video