Don't Go Down With The SCHIP

You tell me if this doesn't sound eerily familiar:

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 already 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% of the federal poverty level (FPL), 54 to 60 children would lose the private coverage that they have today.

The crowd-out effect isn't so much what catches my eye about SCHIP, though the effect itself is par for the course with entitlement programs. Unlike economic prosperity, expenditures in markets severely contricted by the public sector really are "zero-sum games," with the extra dollars (sucked out of taxpayer pockets) artificially inflating demand, and therefore the price of the good or service offered, leading to its inevitable rationing by bureaucratic edict. This is, I suppose, an exception to the adage, "If you want less of something, tax it; if you want more of something, subsidize it". Why else do people think the health care system is "broken"? Between federal interventions, entitlement programs, and the distortions of third-party payment, the degree to which health care consumers actually pay health care providers for medical services is vanishingly small - with, of course, the government deflecting the blame for the mess it has created onto "Big Insurance," just as HMOs were scapegoated for the collapse of HillaryCare v. 1.0.

What grabs my attention about this SCHIP renewal legislation is how the Democrats are extending its reach up the income ladder to ensnare the middle class. As I recall, that was precisely the political strategy employed by the Clintonoids back in their first run for the presidency in 1992 - the infamous "putting people first" agenda that sought, particularly via Her Nib's "Health Security Act," to take the welfare state out of the "poor" fringe and entrench it squarely and, well, "securely" in the political mainstream. After all, it's easier to support welfare reform when you're not on welfare. If everybody is welded to the federal teat, the number of political "third rails" proliferates exponentially - and guess which party would be controlling the switch?

Brother Meringoff also connected the dots:

Why are the Democrats pushing so hard for a middle class entitlement program that will promote inefficiency and waste, wreck the private market, and become fiscally unsustainable by 2013 if not before? It looks like an effort to lure middle-class families into government-run health care.

Sort of like HillaryCare.

And v. 2.0., and v. 1.0, and Medicaid, and Medicare, and Social Security....

Their imminent policy and political peril abruptly dawned on GOPers this week, as Senator Mel Martinez (R-FL) is leading the charge for an SCHIP alternative that would not expand the recipient pool but would instead offer a child health care tax credit for families with incomes between 200% and 300% of the poverty level.

Given that the household income range for the tax credit is approximately $40,000 to $60,000 per year - and that SCHIP already covers families up to twice the inflated "official" "poverty" level - one could make a convincing argument that the Martinez alternative bill is far too leftish and statist, when what should be done at minimum is to cut the upper end of the SCHIP income range down to the poverty level itself in order to limit its mission to, you know, helping the "poor". Otherwise known as "welfare," which was supposed to have been "reformed" over a decade ago. Guess it's making a comeback, huh?

So why is it drawing widespread conservative support? Because the Right is playing defense - "prevent" defense, specifically. We're always on the defensive when it comes to touchy-feely issues like health care, but what we're trying to prevent is "the precursor to HillaryCare," or "socialized medicine on the installment plan."

Since under the SCHIP expansion bill MY family is (just barely) within the "benefit" income range, and I most emphatically do NOT want my current private coverage bulldozed out from under me, Republicans had better get behind the Martinez bill. Even if it's just buying time, it's political capital well spent.