With Congress deadlocked over the reauthorization of the State
Children's Health Insurance Program (SCHIP), policymakers should
set clear criteria to avert a federal taxpayer bailout of states
that have mismanaged their SCHIP programs. The current process
rewards state officials who take advantage of the system and have
expanded eligibility for the program beyond its original target
population: children in low-income families.
Shortfalls and the Bailout Process
As negotiations continue over SCHIP, Congress has thus far
passed two continuing resolutions (CRs) that provided temporary
assistance to the states to maintain their programs. The latest CR
is set to expire on December 14, and Congress is likely to extend
the program for the rest of FY 2008 at its FY 2007 funding level of
$5 billion.
However, Congress will also provide additional funding to
ensure that no state faces a 'shortfall" in FY 2008. A shortfall
occurs when a state has exhausted all available funding for its
SCHIP program. The Congressional Research Service
(CRS) estimates that if current FY 2008 allotments were extended
for the entire year, 21 states would still face a
shortfall.
Typically, states facing shortfalls are bailed out during a
redistribution process, whereby unused funds from other states are
redistributed after three years. However, because the pool of
unused funds is diminishing, states are requesting appropriations
above and beyond the $5 billion. Although current SCHIP law gives
the Secretary of Health and Human Services (HHS) leeway in
determining the distribution process, Congress has recently given
the Secretary explicit instructions to prioritize the distribution
of funds based on when a state will face its shortfall.
The Need for a New Distribution
System
This method of redistributing SCHIP funds is deeply flawed. In
short, it is too simplistic. Congress does not take into account
whether a state's shortfall is a result of exploiting the current
process or meeting a genuine need. For example, of the 21 states
projected to face a shortfall in FY 2008, nine have SCHIP programs
that exceed the income eligibility threshold and/or cover adults.
In addition, based on CRS estimates of the timing of the funding
shortfalls, nearly all of these nine states would be first in line
to receive a bailout.
As shown above, the nine states with SCHIP programs that exceed
the income eligibility threshold and/or cover adults are
California, Georgia, Illinois, Maryland, Massachusetts, Minnesota,
Missouri, New Jersey, and Rhode Island.
These overextended programs also account for the lion's share of
the total shortfall. Of the $1.6 billion shortfall projected by the
CRS, close to $1.4 billion is associated with these nine
states.
Conclusion
Of course, Congress does have the power of the purse; it enjoys
full authority under the Constitution to raise revenue and direct
federal spending. However, Members must remain accountable for how
they spend the taxpayers' money. In the case of SCHIP, the
distribution of federal tax dollars is neither fair nor
reasonable.
Whether the process is determined by Congress or by the HHS
Secretary, policymakers must avert a bailout for states that have
mismanaged their SCHIP programs. In extending SCHIP for FY 2008,
priority should be given to those states that have stayed within
the intent of the original SCHIP law. This common-sense, fiscally
responsible approach is best for taxpayers and for the population
that SCHIP was designed to serve.
Nina Owcharenko is
Senior Policy Analyst for Health Care in the Center for Health
Policy Studies at The Heritage Foundation.