SCHIP Reality Check

nohealthcare.jpgAs the SCHIP saga continues, NPR’s expert health correspondent Julie Rovner made a sobering claim yesterday: many supporters of SCHIP, including Republicans, “say the president doesn’t understand how the bill would actually work.” Here are some of the mismatches between rhetoric and reality:

Bush: “I don’t want the federal government making decisions for doctors and customers.”

Rovner: But SCHIP isn’t the kind of program where government officials make medical decisions. Under SCHIP, children are enrolled in private health insurance. “Typically, children have a choice from among competing private health-insurance companies,” says Stan Dorn, a senior research associate with the Urban Institute, a Washington-based think tank. “There’s no federally specified benefits package. There’s no individual entitlement.”

Bush: “This program expands coverage, federal coverage, up to families earning $83,000 a year. That doesn’t sound poor to me. . . .”

Dorn: “This bill would actually put new limits in place to keep states from going to very high-income levels. SCHIP money would no longer be available over 300 percent of the federal poverty level, which is about $60,000 for a family of four.”

As Rovner notes, “the bill addresses all of the president’s complaints, including his concern that families with private coverage now will drop it in favor of government-subsidized care.”

But once again I’d urge everyone to keep an eye on the regulatory ball, rather than the political conflict here. The administrative process is at least partially based in reason, and that’s where a lot of the action will be. For example, the Administration’s Aug. 17 directive “effectively eliminates SCHIP for children above 250 percent of the federal poverty level (FPL), or $42,925.” It’s already having consequences:

[In September], Louisiana announced that it is likely to cancel plans to expand coverage to 8,000 more uninsured children. This, apparently, is exactly the goal, at least for some of the more conservative think tanks that recently have been engaged in the recent SCHIP debate.

Congratulations, Cato Institute. I have a few more thoughts on the main argument made against SCHIP below the fold.

The “respectable” reason for opposing SCHIP is crowdout–if you provide public insurance to families making between 40K and 80K, they’ll just drop their private insurance and join the public rolls. Of course, crowdout devotees tend to ignore:

1) increasingly expensive private health insurance

2) the growing number of employers who are not providing it

3) the extraordinary expense and tenuousness of private health insurance for those with flagged pre-existing conditions

They also tend to oppose mandates, like guaranteed issue and community rating, that would ease these concerns. Yes, Michael Tanner at Cato is eager to permit health insurers uniformly to charge the sick far more than the poor, despite the predictable consequences of such a policy. [Cato’s solution thus appears to be to speed the bankruptcy of the seriously ill, and then to refer them to Medicaid–whose federal funding would be frozen no matter how many more people need its services.]

But let’s put all that to the side. As this excellent roundup by Sarah Dine points out, crowd-out is an overstated concern:

[Economist Jonathan] Gruber, in a March 2007 letter to John Dingell, chairman of the House Energy and Commerce Committee, clarified some of the findings from his January paper. He wrote: “When we attempt to estimate the particular crowd-out estimates of SCHIP, our estimates are much less reliable. In fact in our most general specifications. . . .we find no evidence of crowd-out in SCHIP per se.” This has been the considered view of many state SCHIP coordinators who have found little evidence of crowd-out as they work to enroll their state residents. A detailed study of ten states combining both econometric estimates or crowd-out with state surveys found rates of 14%.

So if crowdout is the real concern, we’re willing to let 7 children go without insurance so that the eighth remains privately insured? Is this really what it’s come to?

The big question here is whether a private insurance system that leaves so many children uninsured really deserves such solicitude. To the extent it can’t provide assistance to people like the Fields Family, it does not deserve its current market share. Crowd-out may be viewed as a positive, not a negative: a reminder to the current system that if it does not do more to provide basic care to the 45 million or so uninsured, it may be setting itself up for change far more radical than SCHIP.

Photo Credit: bright strangely.

PS: Here is a quote related by Jason Furman at Brookings:

Last week Senator Grassley, the Republican ranking member of Senate Finance, got so angry about the White House’s description of the SCHIP legislation that he said the President’s “understanding of our bill is wrong, and I would urge the president to reconsider his veto message based upon the bill we might pass, not something that some staffer has told him wrongly about our bill.”

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