The State Children's Health Insurance Program (SCHIP)

INVESTOR'S BUSINESS DAILY
Posted Wednesday, September 26, 2007 4:20 PM PT

The bill that would more than double current spending on children's health care to $60 billion over the next five years passed by a surprising 265 to 159 vote late Tuesday, with 45 GOP representatives in favor. Just a month ago, the bill could only muster support from a lonely five Republicans.

What happened? Did the GOP suddenly realize the merit of the bill, and have a change of heart? Hardly. They just feared being baited in next year's elections by Democratic challengers taunting them for being "anti-children."

As Democrat Charles Rangel of New York noted, when lawmakers go back to their districts, "the question is, were you with the kids or were you not?" Some Republicans won't have an answer.

Too bad. The only hope now is that President Bush will follow through on his threat to veto it. Because 290 votes would be needed to override a veto, it looks like he might succeed.

In doing so, Bush will be vilified and excoriated for being against children. But let's look at this bill without blinders, shall we?

As passed by the House, the State Children's Health Insurance Program, known as SCHIP, will create a major new middle-class entitlement even as we face looming national bankruptcy from our $50.5 trillion (yes, you read that number right) in planned spending under Social Security and Medicare.

Today, some 6.6 million kids are covered under SCHIP, at a cost of about $25 billion over five years. The new bill raises that to 9 million kids covered, at a cost of $60 billion. It pays for it with a 61-cent hike in the tobacco tax.

Sounds good, except that tax will hit the poor hardest. And those it helps are not poor. Under the new bill, families earning $83,000 a year could be eligible. If this bill were targeted at the poor, President Bush and the Republicans wouldn't oppose it. But it isn't. It's a new, radically expanded middle-class entitlement.

That, by the way, includes families like the Siravos of New Jersey, profiled recently by Bloomberg News. The Siravos earn $56,000 a year, own their own home and drive two used cars. They also pay $9,000 a year to send their only child to a private school.

Yes, things are a bit tight for the Siravos, as with many American families. But should the working poor subsidize health care for the Siravos and other middle-class families?

And should those who, unlike the Siravos, send their kids to public schools but buy health insurance, now do the opposite?

That's the problem — SCHIP's expansion sets up perverse incentives, such as encouraging those with private insurance to dump it in favor of subsidized care. This isn't just talk. According to health care economists David Cutler and Jonathan Gruber, for every 10 children enrolled in SCHIP, six drop their private insurance.

There are other problems. For instance, far from being "about the children," SCHIP already covers 670,000 adults. The new law will increase that. Thanks to loopholes, illegal aliens are eligible too.

Add it all up, and SCHIP's costs will be much, much higher than the $60 billion forecast — just as happened with Medicare.

Ironically, a Republican-controlled Congress created SCHIP in 1997 to help the poor — those up to 200% of the poverty level.

But Democrats, along with many state governors, now want to expand that to up to 400% of the poverty rate — or $83,000 for a family of four. That's upper-middle-class, not poor.

This is a very bad, very cynical bill, disguised as an effort to help children. If it becomes law, spending will soar and we will have taken another foolish step down the road to a poorly run, expensive and inefficient nationalized health care system.

President Bush would be right to veto it.