SCHIP and "Crowd-Out": The High Cost of Expanding Eligibility

http://www.heritage.org/Research/HealthCare/wm1627.cfm ^

[cool2007]

Congress is engaged in an attempt to end the federal stalemate over reauthorization of the State Children's Health Insurance Program (SCHIP), which is set to expire at the end of the month. Rather than refocus SCHIP as a targeted safety net for low-income uninsured children, the two chambers passed bills to extend the safety net to children in families with significantly higher incomes.

Expanding SCHIP eligibility further up the income ladder is not a good way to help families that lack insurance yet have incomes above the current federal threshold. Enrolling children in families at these income levels is inefficient and will disrupt the private coverage many of them have today. This is because government programs and taxpayer dollars will increasingly become substitutes for private coverage and funding. This policy-induced phenomenon, known as "crowd out," substantially increases the cost of covering uninsured children.

The Heritage Foundation conducted an econometric analysis of the likely crowd out associated with the House and Senate bills. This analysis was based on a modified and extended version of the methodology developed by MIT professor Jonathan Gruber, a leading expert on the crowd-out effect. This analysis found that Congress's expansion proposals for SCHIP could cover as many as 2.4 million newly eligible children, but because of crowd out, the ranks of the uninsured would decrease by only 1 million. This is because, for every 100 newly eligible children in families with incomes between 200 and 400 percent of the federal poverty level (FPL), 54 to 60 children would lose the private coverage that they have today. [1]

[srmorton]

As the Freepers know, I am one who often enjoys watching Oprah, but yesterday’s show was unbearable. She has fallen for Al Gore and his global warming radicalism and now has apparently done the same for Michael Moore’s “sick” rantings about the best health care system in the world. I could hardly bear to even half listen to the show and had to resort to muting the TV and averting my eyes whenever Michael Moore’s ugly face appeared.

This comment is actually about Karen Ignagni, the president of an organization that lobbies for health insurance companies. She must have told the viewers at least three times to contact their representatives and urge them to pass the changes to the SCHIP program. I was thinking as I watched her how stupid she must be to be on the Clinton-Moore bandwagon because, if they succeed, she will be out of a job along with all of the private insurance companies she represents. Political correctness can totally blind people to the reality of their situation.

[cool2007]

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