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More Kid Stuff

by Tom Miller

Originally published by:

The Competitive Enterprise Institute in
CEI Update, January, 1997

1001 Connecticut Ave NW Suite 1250
Washington, DC 20036

Advocates of politically controlled universal health care coverage have retooled their offensive game plan. Uninsured children will serve as blocking backs for an end run around opposition to regulatory mandates, one-size-fits-all benefit plans, bureaucratic rigidities, and taxpayer-financed cross subsidies. Welcome to the opening round of Village Care 1997.

This month, Senate Democrats launched several initiatives ostensibly aimed at expanding health insurance coverage for children and adolescents up to age 18. Senate Minority Leader Thomas Daschle (D-SD) introduced legislation to provide refundable tax credits to help families purchase insurance for their children. Another proposal by Senators Edward Kennedy (D-MA) and John Kerry (D-MA) would provide federal grants to the states, who would contract with private health insurers to provide such coverage. The Clinton administration is generally supportive of the initiatives, but it has tried to appear more cost-conscious, citing budgetary constraints. White House officials speak more vaguely in terms of expanding outreach efforts to enroll millions more Medicaid-eligible children in existing program coverage subsidizing health insurance for temporarily unemployed workers (and their children), and fleshing out a public health initiative aimed at other uninsured children.

Although there has been a modest increase in the level of uninsured children in recent years, the real political agenda at work here involves efforts to revive the proposed federal takeover of the private medical marketplace. The Clinton administration tried to do this in one ``giant'' step in 1993 and was stopped cold. Now, its congressional allies are asking ``May I?'' regarding several ``baby steps'' toward a nationalized health care system. Same direction, slower pace. The bottom line: Children are healthier and cheaper to insure than adults, they provide a more appealing platform for ``compassionate intervention,'' and they can be used to leverage their parents into a centralized health care plan.

Congressional Republicans, still appearing bloodied and bowed from last year's Medicare reform battles, need to recheck their health policy road maps before they passively bleat a cheaper version of ``Me, too'' regarding this latest political power grab.

First, some background on the newly discovered ``crisis'' in children's health care coverage. In 1987, 12.9% of all children under 18 years old were uninsured. With several mandated expansions of Medicaid coverage for children (beginning in 1986), the uninsured children figure dropped slightly in 1992 (to either 12.4% or 12.7%, depending on statistical adjustments), but it has started to rise again, reaching 14.2% in 1994. At the same time, the percentage of children with private insurance coverage has steadily declined, from 73.6% in 1987 to 65.6% in 1994. Expanded Medicaid coverage for children has picked up most, but not all, of the difference.

Uninsured status for children does not mean that they receive no health care at all, just less health care on average. An Urban Institute study estimates that uninsured children receive approximately 70% of the outpatient visits that they would if they had been insured, and about 75 to 85% of the inpatient days of care. Several other factors to keep in mind are that most spells of uninsurance are fairly brief,48% end within 5 months and only 19% continue beyond 2 years) and adults are more likely than children to lack insurance coverage (18% versus 11%). Finally, even after the costly expansion of Medicaid coverage (courtesy of Rep. Henry Waxman) in the late 1980s, an estimated 2.9 million ``uninsured'' children were eligible for Medicaid in 1994 but did not enroll (30% of all uninsured children).

As noted recently by Merrill Matthews of the National Center for Policy Analysis, there is no nationwide crisis regarding access to prenatal care and immunizations. Moreover, most forms of preventive care are not cost- effective as widespread mandates for all children.

So what are ``astute'' Republican congressional leaders doing in response to the ``Clinton Little'' health care offensive? Cowering in their political bunkers, trying to find a politically cheaper way to show that they care too about this issue, and essentially legitimizing the statist premises of a ... debate that will eventually roll over their feeble alternatives.

The tactical ploy likely to be advanced by Hill Republicans involves trading in part of the Earned Income Tax Credit (EITC) program benefits currently provided to the working poor, in return for the mandated purchase of health insurance for their children (and perhaps themselves as well). This budgetary port in the storm tries to minimize the fiscal damage of new health care subsidies by cashing out part of the funding for one of the most rapidly expanding (in other words, overextended and fraud-ridden) income assistance programs for lower income Americans. An even broader funding approach for assisting insurance purchases by uninsured parents and children might involve requiring that part, or all, of the money provided through proposed child-based tax credits must be spent to purchase health insurance.

Sadly, congressional Republicans are preparing to fire artillery shells that will land at their own feet. Their present defense gives up too much ground, and it fails to move the deregulatory ball forward in a market-oriented manner.

First, the EITC trade-in looks cheap and mean, as currently structured. Let me see if I've got this right: Hardworking parents with low wages, just struggling to get by, are supposed to pass up a chance to have a little more cash to buy food and shelter-in order to purchase politically mandated health insurance for their generally healthy young children-because Washington politicians have a better idea about how they should spend their money. The same politicians refrained from imposing such mandates on everyone else, less than three years ago.

Second, if Congress is going to cut funding from the current bloated EITC program, it should carve from the top of the income eligibility scale, not across-the- board. That's where the runaway expansion has occurred since 1993. It's much more politically defensible, and economically more sound, to reduce the overall scope of the EITC subsidy while targeting its resources (including any benefits focused on health insurance) on the poorest segment of current eligibles. Third, the more likely development once the EITC/ mandated health insurance issue is put into play will be an expansion of funding for the combined program. Republicans are opening doors they won't know how to close. Lacking any principled boundary lines between public and private responsibilities, they will have to retreat to green-eyeshade doubletalk that claims to want to do more ``good, but cannot afford it.

Fourth, support for any mandated insurance purchase scheme not only raises all of the old issues from the 1993-94 Clinton Care debate-standardized coverage, mandated benefits, universal versus voluntary coverage, rating restrictions and cross-subsidies, public programs versus private competition, and cost controls-it necessarily gives away the principled high ground on most of them and reverses a number of the hard-earned political points that were tentatively scored during that battle.

Fifth, a full-fledged drive to mandate additional health coverage for lower income children seems at cross purposes to the broader trend toward making Medicaid more flexible (block grants, state waivers, and fewer mandates for state governments) and less costly (capped payments, fewer open-ended entitlements).

Sixth, any expansion of public funding for mandated health insurance coverage of children is likely to ``crowd out'' some of the coverage of dependents under private employers' group health plans. It will also probably dry up further innovation in providing and expanding medical care to children through other private and charitable means.

Finally, the current children's circus on Capitol Hill diverts us from the larger debate over the future of [American medicine]. The market vision of health care reform cannot afford to get caught up in cut-rate compromises over the slow, steady drift toward centralized, political control of health spending decisions. As David Frum points out in The Weekly Standard, every calculated attack on private health insurance markets should be resisted, before a series of ``small'' proposals steadily accumulate to make private coverage ever more expensive and difficult to obtain.

There are true alternatives to politicized health care that can improve the accessibility, affordability, and quality of medical services. They require such public policy changes as neutralization of tax treatment for all health insurance purchases, deregulation of health insurance markets, legal reform of private contract enforcement, better targeting of income-related subsidies, and expanded options for voluntary risk pooling outside the workplace. On the larger front beyond health policy itself, we still need improved macroeconomic policies, comprehensive regulatory reform, and a competition-oriented overhaul of the educational system.

Most of all, we all need to take greater responsibility for the cost and quality tradeoffs in our medical decisions rather than handing them off to third parties. It's time that the adults put childish games aside and focused on restoring more competition, choice, and quality to [American medicine].

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Association of American Physicians and Surgeons
1601 N. Tucson Blvd. Suite 9, Tucson, AZ 85716
Pamphlet No. 1054, May, 1997