On October 25, the House of Representatives passed a revised
version of legislation to reauthorize the State Children's Health
Insurance Program (SCHIP). The new bill (H.R. 3963) is a response
to the President's veto of the original SCHIP legislation. The
revised version, however, is largely the same as the original. The
Administration should stand by its recent statement and veto the
revised bill in its current form.
H.R. 3963 shares the following deficiencies with the original
- It raises the general federal income eligibility threshold
for SCHIP from 200 percent to 300 percent of the federal poverty
level (FPL). The authors of the revised bill claim to
have addressed concerns over SCHIP income eligibility. Clearly,
that is not the case. The revised bill has only minor changes
specifically relating to expanding eligibility above 300 percent of
the FPL, and even these changes do not fully close the loophole.
- It covers adults (just in new ways). The revised bill
claims to speed up the process for moving adults off SCHIP. Not
only is this change negotiable, but these adults are basically
moved from one government program to another. States would simply
receive a less generous federal match for covering these adults.
Instead of receiving the enhanced SCHIP federal match, states would
receive a new funding structure for parents and traditional
Medicaid federal matching rates for childless adults.
- It crowds out private coverage in favor of government
coverage. While it includes some provisions addressing the
crowd out issue, the Congressional Budget Office (CBO)
estimates that the revised bill would shift two million children
from private coverage to SCHIP and Medicaid. Heritage Foundation
research has estimated that when SCHIP eligibility is expanded
above 200 percent of the FPL, about 50 percent of newly enrolled
kids are kids who would otherwise have had private health
- It expands the program to "new" populations. Although
some proponents of the revised bill claim otherwise, the CBO
predicts that 1.1 million children would enroll in Medicaid and
SCHIP due to "Expansion of SCHIP and Medicaid Eligibility to New
- It micromanages the premium assistance option. The
revised bill claims to encourage states to adopt premium assistance
models by offering bonus payments to states. However, the bonus
payments are not contingent on states offering premium assistance.
States only have to select five of eight options, one of which is
premium assistance, in order to qualify for the bonus payments.
Furthermore, the general premium assistance provisions in the bill
leave in place the red tape that makes premium assistance less
attractive to states. For example, states still have to "wrap
around" benefits and cost sharing, and Health Savings Accounts and
other high-deductible health plan arrangements are explicitly
prohibited as coverage options.
- It depends on an unstable funding source. The bill
depends on 10 years of tobacco revenue to pay for a 5-year bill.
Therefore, in 2012, either millions of kids will be forced off
SCHIP or Congress will have to inject an estimated $59.3 billion in
new spending to maintain enrollment. Moreover, not only does a
tobacco tax disproportionately target low-income families, but
Heritage Foundation analysts estimate that 22 million new smokers
would be needed to fund the proposal.
- It sets up a contingency fund to bail out overspending
states. The current block grant structure of
SCHIP is undermined by the establishment of a so-called contingency
fund that will help offset the costs of states that overspend their
federal allotment. This contingency fund removes the incentive for
states to exercise fiscal discipline in designing their SCHIP
Congress needs to craft a more balanced approach to addressing
the coverage needs of children. A compromise solution has been
introduced by Senators Mel Martinez (R-FL) and George Voinovich
(R-OH) in the Senate (S. 2193), and by Representatives Marilyn
Musgrave (R-CO), Tom Feeney (R-FL), Tom Price (R-GA), and Tim
Walberg (R-MI) in the House (HR 3888). This compromise reauthorizes
SCHIP for the population it was intended to serve. It does not
displace existing private health insurance for children and
families, which is an increasing concern of more and more Americans
who have come to understand the current debate. Moreover, this
legislation provides tax relief-in the form of health care tax
credits-for middle-income families with children, enabling them to
obtain and keep health care coverage.
Nina Owcharenko is
Senior Health Policy Analyst in the Center for Health Policy
Studies at The Heritage Foundation.
Ibid., Sect. 104 and 301.
Ibid., Sect. 104 and 301.
After increasing SCHIP funding to $13.9
billion by 2012, this bill steeply drops funding down to $3.9
billion by 2017. Assuming that 6 percent annual increases will be
needed after 2012 to keep pace with rising health care costs and
maintain enrollments, an additional $59.3 billion would be needed
between 2013 and 2017. This increases the likely 10-year cost from
the $76.3 billion listed to $135.6 billion.