I haven’t written yet about the congressional battle over extending the State Children’s Health Insurance program (SCHIP), and I don’t think my partners have either. The issue is an important one in itself and also, quite likely, a precursor of a larger battle that soon will be fought over “HillaryCare” or some variation thereof.
Currently, SCHIP is a targeted program that provides health insurance for children of low income families. Congressional Democrats, though, are trying to expand the program by providing it to children in families with much higher incomes — incomes well in excess of the approximately $42,000 per year (or twice the poverty level) that President Bush and congressional Repubicans propose.
However, as Paul Winfree and Greg D’Angelo of the Heritage Foundation point out:
Expanding SCHIP to cover children in higher income families is not an efficient or cost-effective way to reduce the ranks of uninsured children. As the safety net is cast further up the income ladder, it will increasingly substitute government programs and taxpayer dollars for private coverage and funding.
This phenomenon is known as the “crowd-out effect.” Winfree and D’Angelo are able to estimate the extent and consequences of this effect, using as their starting point an econometric methodology developed by MIT professor Jonathan Gruber, coupled with findings by the Congressional Budget Office regarding the crowd-out that resulted from previous SCHIP expansions.
They find that under the Senate’s SCHIP expansion, an estimated 1 million to 1.2 million children would gain SCHIP coverage, but between 467,000 and 611,000 children would lose private coverage. Due to poor targeting and the relative cost of crowd-out, the annual cost to taxpayers of covering an uninsured child under the Senate