Socialize Medicine—It's For the Kids!

Both the Senate and House of Representatives have passed bills dramatically expanding the reach and cost of the State Children's Health Insurance Progam (SCHIP). President Barack hailed the passage of SCHIP, declaring:

"Providing health care to more than ten million children through the Children's Health Insurance Program will serve as a down payment on my commitment to ensure that every American has access to quality, affordable health care."

And what does this "down payment" accomplish? As the folks at the health care think tank, the Galen Institute explain:

The bill changes the rules of the game, making it much easier for states like New York to put children from families making up to $84,800 a year on this publicly-funded program.

In addition, generous "income disregards" will be allowed, which means that a family can subtract things such as rent or mortgage payments, heating, or food costs from its income in calculating eligibility. That means that children in families making well over $100,000 a year will be eligible for SCHIP.

If your goal were to get as many people on public coverage as possible and to have children grow up thinking they get their health insurance from the government, this would be a good way to start.

Will the nation go as Hawaii has gone? We wrote last year about Gov. Linda Lingle pulling the plug on a state program designed to get to universal coverage. She found out that 85% of the children enrolled previously had private coverage but their parents had dropped it for the virtually free state program.

"People who were already able to afford health care began to stop paying for it so they could get it for free," said Kenny Fink, Hawaii's HHS director.

The same thing will happen across the country with SCHIP. Millions of parents will think it is a better deal to have the taxpayer pay the bill for their children's insurance than to pay for private coverage themselves.

The fact that parents do switch from private insurance coverage to SCHIP is amply backed up by various studies. As I reported earlier:

The Congressional Budget Office (CBO) issued a report in May that found, "For every 100 children who gain coverage as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children." In January, MIT economist Jonathan Gruber and Cornell University economist Kosali Simon published a study that estimated "for every 100 children who are enrolled in public insurance, 60 children lose private insurance." And why not? From the point of view of parents, the government is giving their kids free health insurance, so they can pocket the money they were otherwise spending on private insurance.

The CBO also noted that a broadening of SCHIP to higher income levels "would probably involve greater crowd-out of private coverage than has occurred to date because such children have greater access to private insurance." Recall that 90 percent of kids living in families with incomes between 200 and 300 percent of the poverty level are insured and 95 percent of those in families with incomes over 400 percent are. Crowding out of private insurance helps force the country to take "next step" toward universal government-controlled health care.

But for SCHIP proponents, insurance switching is not a bug, it's a feature. Advocates of universal health insurance hope that as fewer and fewer Americans rely on private health insurance, government-funded health insurance will grow in political acceptance. 

But that strategy could backfire. As the Galen Institute suggests:

The rude awakening will come when parents start searching for a physician who will see their children for SCHIP payment rates that, in some states, pay doctors just $10 or $15 for a visit—not even covering their office overhead. Free insurance will come with a high price.