Massive Expansion of SCHIP
Congress is poised to pass a massive expansion of the State Children’s Health Insurance Program (SCHIP). Originally, SCHIP was designed to help low-income families who earn too much to qualify for Medicaid gain access to health insurance for their children. However, under the bill currently being considered (H.R. 2), SCHIP’s income eligibility level would rise from the current 200 percent to at least 300 percent of the federal poverty level (FPL), or about $63,000 for a family of four. In addition, some states don’t count certain types of income or have an approved waiver in order to boost eligibility for the program.
For example, New York and New Jersey want to increase eligibility to 400 percent of the FPL, approximately $82,000 for a family of four. H.R. 2 does nothing to constrain states from manipulating eligibility requirements. Taxpayers will be forced to cover the healthcare costs of children in middle-class families rather than setting priorities to provide coverage for low-income families first.
Under the guise of helping children without health insurance, this would be a giant first step toward making the HillaryCare advocates’ vision of a socialist, Canadian-style healthcare system a reality in this country. In fact, President-elect Obama’s chief of staff, Rahm Emanuel, has called SCHIP “spring training” for government-run healthcare.”
Many of the children to be pulled under the SCHIP umbrella already have private health insurance. The Congressional Budget Office (CBO) estimates that SCHIP will incentivize 2.4 million individuals to drop private health insurance coverage in order to enroll in government programs – a higher level of crowd-out in both number and percentage terms than the first SCHIP bill (H.R. 976) presented to President Bush in 2007. The 2007 version of the bill also included provisions to study the phenomenon of “crowd out” and initiatives to reduce this result. Those provisions have been stripped from the current bill.
Estimates on the true long-term costs of SCHIP expansion vary, but CBO has stated that it will cost at least $64 billion over five years. Additional provisions in the bill, including allowing states to cover legal immigrants who have been in the country for less than five years, are widely expected to drive the costs of the legislation even higher.
The vast majority of the funding is supposed to come from a 156 percent hike in the federal cigarette excise tax, which will rise from 39 cents to $1 per pack, a 61 cent increase. Ironically, such excise taxes fall most heavily on the poor – exactly those who are supposed to benefit from the SCHIP expansion. Studies show that increased taxes on cigarettes will result in less revenue because many people either stop smoking or seek illegal sources of cigarettes, such as smuggling or the Internet, in order to evade taxation.
The ultimate result of this backdoor power grab will be that the cigarette excise tax is just the first of many tax increases to come as SCHIP, like virtually every other entitlement program before it, ends up costing more than expected and demands a greater share of tax dollars.
Proponents of universal healthcare failed in the 1990s to impose a government takeover of America’s healthcare system and the massive tax increases that would have been needed to pay for it. This time around, as indicated by Emanuel’s cynical comments, they understand that they can’t impose this takeover all at once without provoking a public outcry. Instead, they have adopted an incremental approach in which they will slowly expand existing government healthcare programs until they crowd out all private insurance. SCHIP may have a benign-sounding title, but its effects will be devastating to taxpayers in more ways than they can imagine.
— John Frydenlund
