ACRU

Peter Ferrara: Veto SCHIP: A Healthy Debate

This article originally appeared in National Review Online on September 24, 2007.

YES, PRESIDENT BUSH, please do veto the massive expansion of the State Children’s Health Insurance Program (SCHIP) that the Democrats are rolling through Congress, as you pledged to do in Thursday’s press conference.

SCHIP was adopted in 1997 to help the states finance health-insurance coverage for children whose parents theoretically couldn’t afford it, but who were not poor enough to qualify for Medicaid. The program runs out on September 30 unless it is reauthorized.

President Bush proposed to increase funding for SCHIP by $5 billion, from $25 billion to $30 billion. But House Democrats passed a bill tripling spending to $75 billion. The Senate bill merely increased spending by more than 100 percent to $60 billion.

In the process, this program supposedly to help poor children get health insurance would finance subsidies to families earning as much as $82,000 a year.

Moreover, around 50 percent to 60 percent of the children newly covered under this massive expansion of the program are already covered by private insurance today. So the massive SCHIP expansion mostly involves a takeover of private insurance coverage by government coverage, as President Bush has said. Under this SCHIP expansion, the cost of covering each new child not currently insured would be as much as 3.5 times the cost of private coverage.

In the 2006 election, voters made clear that they opposed the government-spending increases that had occurred under the prior Republican majority. But the enormous spending increases for SCHIP that the Democrats are now yelping through Congress are ridiculously unjustifiable. Republicans tempted to vote for this gravy train “for the children” should be aware that they will be held accountable as well for supporting runaway spending yet again.

Moreover, our nation already faces an unmanageable crisis of runaway costs in the entitlements programs we already have. The Congressional Budget Office projects that without basic reforms Federal spending will soar over the next 35 years or so from 20 percent of GDP today, where it has generally been for over 50 years now, to close to 40 percent. That is primarily due to our major entitlement programs Social Security, Medicare, and Medicaid. Paying for all of this increased spending would require Federal taxes to double as a percent of GDP. That would be such a fundamental change in our economy that the prosperous America we know today would become unrecognizable.

The Democrats are responding to this by completely ignoring it and just proposing instead the massive expansion of new welfare state programs, such as SCHIP. This constitutes an abuse of the taxpayers and of the public trust.

Republicans rightly trying to fight this SCHIP expansion have unfortunately become bogged down in trying to develop an alternative through the income tax code. Since the bottom 40 percent of households in terms of income do not pay income taxes, and the middle 20 percent pay relatively little, trying to provide assistance to low-income families this way is really not workable.

Republicans should really go on the offensive instead on the whole entitlements issue. We already have a huge program to help the states finance health coverage for the poor — Medicaid. The real Republican/conservative alternative to the SCHIP expansion should be to block grant both Medicaid and SCHIP back to the states, using the model of the highly successful 1996 reform of the old Aid to Families with Dependent Children (AFDC) program. Under those reforms, the welfare rolls under the old program declined by about 60 percent nationwide.

Send the federal funds now spent on both of these programs back to the states in a finite block grant for each state, with the money to be used for a new program designed by each state for its own citizens. Each state would decide at what level of income assistance would be provided, and what would be covered. Each state can then decide if government financing of health insurance for children, which is not expensive and which the vast majority of Americans in truth can really afford, is really the most urgent priority.

Because the block grant is finite, any increased costs for the new state programs would have to be financed by the state itself. And any innovative savings the state achieves would be kept by the state.

The federal financing should be kept level for several years, and then limited to grow no faster than the rate of growth of GDP. That would solve the exploding entitlement problem for these programs.

Conservatives and Republicans can then present this question to the nation: Do you really want to see total federal taxes double relative to the economy?