Picking a fight on kids


The tragedy in Washington’s escalating confrontation on children’s healthcare is that the legislation Congress is on track to approve this week with substantial bipartisan support advances precisely the goal President Bush claims as his priority.

Bush says he wants the State Children’s Health Insurance Program, a state-federal partnership up for renewal this year, to more narrowly target the poorest children. He’s threatened to veto the bill Congress is completing because he charges it directs too much aid toward middle-income families and would prompt too many of them to drop private insurance and enroll in SCHIP.

But even conservative Senate Republicans such as Utah’s Orrin Hatch and Iowa’s Charles Grassley have complained that Bush’s concerns are, to put it politely, overstated. The best studies of the legislation show that it predominantly focuses its benefits on struggling working families and targets uninsured kids more efficiently than the alternative Bush has touted.


The bill focuses on the kids who are eligible for public insurance under states’ existing rules but haven’t enrolled. Nearly all those children, studies show, live in families that earn less than twice the poverty level, or about $41,000 for a family of four. The legislation gives states bonuses if they sign up more of those overlooked kids -- and also offers more outreach money to help find them. It also, for the first time, reduces federal payments to states for insuring kids in families earning more than triple the poverty level -- about $61,000 for a family of four.

As a result, studies show that the bill primarily benefits the lower-income families Bush talks about. On Tuesday, the Congressional Budget Office reported that the final package Congress is considering would cover almost 4 million uninsured children. Genevieve Kenney of the Urban Institute, a nonpartisan Washington think tank, calculated that more than three-fourths of those kids live in families earning twice the poverty limit or less. That’s not a country club crowd.

Still, analysts agree that the bill would encourage more states to expand eligibility to families in that $41,000 to $61,000 range, both by increasing the program’s overall funding and overriding rules Bush enacted this summer to narrow coverage. The issue is whether that’s the danger Bush insists it is.

Bush is correct that some “crowd-out” of private insurance would occur as parents seek more comprehensive or affordable coverage: the CBO calculates that in addition to the nearly 4 million uninsured kids the final bill would cover, it would also cause another 2 million children with access to private coverage to switch to public plans. That means about one-third of the bill’s spending would benefit kids who have, or could obtain, private insurance.

That sounds inefficient, but every effort to expand access inevitably diverts some benefits to people with insurance. Bush, for instance, is touting tax incentives as the best way to increase coverage. But the independent Lewin Group has calculated that Bush’s proposal would provide 80% of its benefits to people who already are insured -- and half to families earning $75,000 or more.

Besides, in today’s healthcare market, government “crowd-out” hardly seems the most pressing threat. Bush may be worried about middle-class families dropping private insurance, but the bigger problem by far is private insurers dropping middle-income families. The number of uninsured children, after declining steadily since 1998, has soared by 1 million over the last two years. The Urban Institute recently found that 40% of those kids live in the very families Bush wants to weed from the program: those earning more than twice the poverty level. In all, the share of kids receiving insurance from their parents’ employers has dropped every year since Bush took office.

Given those trends, states argue that by expanding eligibility, they are patching holes in the private-insurance system, not poking new ones. Kim Belshe, the secretary of Health and Human Services for California Republican Gov. Arnold Schwarzenegger, observes that the states that have opened SCHIP to more middle-class families are those where health insurance, and living costs generally, are most expensive.

“What may look to be a generous eligibility income level in one state really may be very modest income in another,” Belshe says. Moreover, she notes, SCHIP “isn’t welfare”: all but the poorest families typically pay premiums for it, with more comfortable families paying more.

If Bush vetoes the children’s health bill, and Congress can’t override him, more mandatory cost-sharing for middle-class families might help meet his concerns. The real question is whether Bush wants an agreement or a fight that paints congressional Democrats as big spenders. Until recently, his administration hadn’t worried much about expanding eligibility: Since 2006, it has allowed three states (and the District of Columbia) to extend SCHIP to families earning up to $61,000. Bush’s sudden alarm about including those families suggests less a change in policy priorities than a shift in political strategy.