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News of the Day ... In Perspective


Funds for covering children diverted to adults

On the campaign trail in Iowa, Hillary Clinton said the “best way to begin moving toward health care coverage for everyone is to guarantee it for children.”

SCHIP, the State Children’s Health Insurance Plan, the first step in the back-up plan for incremental Clinton Care, was supposed to do just that for poor children.

Created 10 years ago, SCHIP set up block grants to the states, capped at $40 billion over 10 years. But the states are running out of money, and $60 billion is being asked for over the next five years to expand SCHIP to every eligible child.

Six of nine states that had overspent their allotments and were surveyed by the Government Accountability Office (GAO) cover adults through their SCHIP programs. In Minnesota, 87% of SCHIP enrollees were adults; as were 66% in Wisconsin. Although Arizona has one of the highest rates of uninsured children in the nation, 56% of its SCHIP enrollees are adults.

In 14 states, SCHIP covers children whose families have incomes above 200% of the poverty level (annual income of $41,300). New Jersey covers children up to 350% of poverty ($72,000 per year).

A National Bureau of Economic Research study showed that as much as 50% of new SCHIP enrollment was offset by declines in private coverage: the “crowding out” effect.

While SCHIP was supposed to have an option to subsidize parents who add children to their family policies, the administrative requirements are so onerous that few states have succeeded in doing this. Instead, the taxpayer has to pick up the full tab for a more expensive method.

The “funding formulas for SCHIP are upside down,” writes Grace-Marie Turner. SCHIP was supposed to cover children whose familes made too much for Medicaid but not enough to afford private coverage. Instead, the federal government matches state spending at a higher percentage for higher-income children than for lower-income Medicaid children (Galen Institute, Health Policy Matters 2/16/07).

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