HillaryCare, a precursor
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’s expansion plan would basically double, increasing from $1,418 to between $2,508 and $2,859. Moreover, these new cost figures are almost 2.5 times the average cost of private insurance. The House bill expands SCHIP even more -- an estimated 2.2 million to 2.4 million children would gain coverage. As a result, the annual cost to taxpayers of covering an uninsured child would increase by an even larger factor.
Beyond the inefficiency and lack of cost-effectiveness of the SCHIP expansion lies the question of whether the federal government can afford it. The Dems deal with this matter by funding the expansion through a sharp increase in the federal tobacco tax (61 cents per pack in the Senate bill). As Rep. Jim McCrery notes, the government is thus tapping into a declining revenue stream. Tobacco taxes also fall hardest on the working poor -- the very people that SCHIP was intended (at least until this latest round of proposed expansions) to help.
Even with this tax hike, the CBO finds the Senate's expansion (less aggressive than that of the House) revenue neutral only for the first five years. As Rep. McCrery explains, after five years, the Dems can maintain the appearance of fiscal sustainability only by mandating a drop in cost from $8.4 billion in 2012 to a mere $600 million in 2013. This means, of course, that a future Congress will be forced either to radically increase funding or let millions of American children lose their health coverage. And due to the crowd-out effect, it will probably be impossible for many families who lose their SCHIP money to find affordable private coverage.
Why are the Democrats pushing so hard for a middle class entitlement program that will promote inefficiency and waste, wreck the private market, and become fiscally unsustainable by 2013 if not before? It looks like an effort to lure middle-class families into government-run health care.
Sort of like HillaryCare.
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