Obameter #58: Expand SCHIP

After the failure of the Clinton health care plan of 1993, First Lady Hillary Clinton was looking for a smaller health care plan that would be more acceptable to Republicans and, thus, could potentially be passed into law. Specifically, she wanted a program to insure children whose families were only barely ineligible for Medicare. At the same time, Senator Ted Kennedy (D-MA) was looking to expand his home state's children's health care plan to a national scale, paying for it with an increase in cigarette taxes. Having convinced his friend from the other side of the aisle, Orrin Hatch (R-UT), to co-sponsor the bill (something which conservatives nationally wouldn't forgive him for until his adamant defense of Supreme Court Nominee John Roberts in 2005).

One criticism of the bill at the time was that such a steep cigarette tax increase (from 23¢ per pack to 67¢) would reduce sales to the point where no revenue would actually be produced to offset the $24 billion cost of the bill. Orrin Hatch responded, "If we can keep people healthy and stop them from dying, I think most Americans would say 'Amen; isn't that a great result?' If fewer people smoke, states will save far more in lower health costs than they will lose in revenues from the cigarette tax." Then Senate Majority Leader Trent Lott (R-MS) argued against it, calling it a "big government program" and claiming it did not qualify under the Balanced Budget agreement between the Senate and the White House. Then-President Bill Clinton, who was responsible for compliance to the balanced budget agreement, called up many Senators to personally dissuade them from voting for the bill. On May 22nd, the bill failed in a vote of 55 to 45.

Senator Kennedy considered it a personal betrayal by a White House that cared more about the tobacco lobby than children's health. He and Hatch proposed the bill again a month later, this time as an amendment to the Balanced Budget Act of 1997 and with Hillary Clinton advocating for it in the White House. This time it passed. It passed in the House of Representatives easily, along party lines, and with relatively little drama.

The program was named "the State Children's Health Insurance Program" (abbreviated SCHIP or sometimes CHIP), and works by giving federal funds and a loose template for regulation of the program to states, who then apply the money to health insurance for children who might otherwise be uninsured or underinsured. Though originally aimed at children in families who were had only barely enough income to disqualify them for Medicare, some states have been given exceptions allowing dual coverage by Medicare and SCHIP.

Researchers from Brigham Young University (from Orrin Hatch's home state) and Aizona State University found that children removed from SCHIP tended to cost their states more money due to their care taking place as expensive emergency care rather than relatively cheap preventative care. Researchers from the Congressional Budget Office and the libertarian Cato Institute show that approximately half of children covered by SCHIP moved there from private insurance coverage -- in other words, that the program is "crowding out" private insurance coverage as much as it is covering the uninsured. Also, the expected ten-year cost of $24 billion ballooned to an actual cost of $40 billion.

After the 2006 election, the Democrats jumped to a near-2/3rds majority in both the House and Senate, just shy of what is necessary to override a Presidential Veto. Given their new-found influence, they sought to expand and extend the SCHIP program. In the Senate, they passed a bill intended to increase the planned $25 billion 5-year cost to $60 billion and loosen the federal restrictions on State implementation of the program. In the House they also voted to extend $6.5 billion in Medicare coverage to illegal immigrants. George W. Bush vetoed this SCHIP expansion, saying he opposed centralized, "federalized health care" on principle. Though some Republicans voted to override the President's veto, the overall vote was 13 votes shy and the veto was final.

Within a week, Democrats proposed the plan again, claiming they had improved the restrictions to keep the wealthy and non-citizens from gaining coverage. Bush vetoed it again, and the attempt to override his veto again failed.

By December 21, 2007 the Democrats had managed to find a sufficiently weakened extension of SCHIP that President Bush was willing to sign it into law. Rather than five years of an expanded program, it simply extended the existing plan until March of 2009. Essentially, it was an agreement to put off the question of SCHIP expansion until after the next election.

After Obama's election and the Democrat legislative gains of 2008, the issue was brought up once again. This time, the Democrats proposed to spend $32.8 billion (rather than $35 billion) and raise taxes on a variety of tobacco products to pay for it. 4 million more children are expected to be covered than under the old plan

The drama of the story is more interesting to me than the pros and cons of the policy itself, especially early on when it pitted Orrin Hatch against Trent Lott and Ted Kennedy against Bill Clinton. That was high drama, and I always favor the dissolution of party loyalty in favor of personal ideology. But the policy falls back on the usual, boring issues of government health insurance, "sin taxes", and Washington's complete disregard for budget balancing in name or spirit.

Each individual point is easy. I support healthy children. I oppose government insurance plans. I prefer state implementation over centralized, national programs. I oppose sin taxes, but not so much as I oppose most other forms of taxation. And the lack of balanced budgeting in Washington is the biggest, most publicly harmful disgrace in politics today.

Beyond all that, my greatest criticism is the great casino of health insurance. Public option, private option, however you slice it the design of health insurance is inherently a scam, a black hole which sucks away money from everyone.

Okay, I need to back up. That's a hugely controversial claim that needs better explication than that.

In a world without health insurance of any kind, a person like me would either save money or not and, in a medical emergency, would either be able to pay or not. Thus they would either live or not. It's a harsh world. People live or die based on how much money they have, or how much they can borrow or beg from banks, friends, and family. It's not a world I especially like.

The basis of medical insurance comes from people seeing the harshness of this world and seeking relief from it. Thus, they set up small, local groups dedicated to taking small, voluntary donations from many people to create a fund from which they can pay for emergency medical care. Ten people each give $10 a month to a central fund so that, on their 5th anniversary, they can pay $60,000 for heart bypass surgery for one of them. Ten people just paid for one person's life. That's fine, they're all friends and they feel heroic to be able to save their friend. It's a good thing for everyone.

It works so well, in fact, that big thinkers decide to do the same thing on a bigger scale. They establish charities, corporations, or government programs to provide such peace of mind to a great many people.

Voluntary donations to charities work great - people expect their money to help the unhealthy, and don't much care whether they personally benefit or not. They likely won't personally witness the results of their donations and, thus, won't be as willing to donate. But it works. It's worst fault is a tendency toward the impersonal, including the possibility that your money will go to help someone you wouldn't personally approve of helping. But that's pretty minor, espeically when compared the next few options.

Payments to Insurance Corporations are expected to pay for themselves, which pits customer and provider inherently against each other in a zero-sum game: either the company survives because the customers lose money, or the company goes bankrupt. Any insurance company that still exists gets more than it loses and, thus, it's customers lose more than they get. If that means they charge too much, or reject claims they should approve, or whatever means it takes the company will try to be profitable which is necessarily at the customers' expense. It's Las Vegas Insurance: the house always wins. But who knows? Maybe the peace of mind is worth more money than the customer loses. Maybe, for people besides me, especially people with worse than average health, maybe it's a worthwhile thing. Of course it's good for the big lotto winners who get their cancer care or open heart surgery paid for. But just like Vegas, the system only works when winners are an extreme minority.

Then comes the government option. In true socialized medicine is where everyone pays to one big pot and the pot pays for everyone's insurance. If you're healthy, you don't know who is benefiting from the money you pay in. If you're sick, you don't know who's saving you. And if you're too sick and the government bureaucracy sentences you to die because the cost/benefit ratio of saving you is just too high. It's just as harsh as the insurance-free world, but without any element of self-determination.

And lastly, the public option. The great government opt-in plan, paid by everyone for a select, needy few. The few certainly win - the get more health care paid for them than they can otherwise afford. But the many are paying for medical care twice - once for the public option of the few, and again for their own care. Thus, there is always a financial incentive to join the few. Either a line is drawn saying "This is all those who qualify," or the many continue to join the few until there is no one left to pay for the program. Covering more people inherently means more weight on the many or fewer benefits for the few. And that is exactly what Obama's SCHIP promise was to do: cover more children.

4 million children will step up from the lowest medical care demographic in the country to the SCHIP level, which is quite good. And the rest of the country will fall a tiny, imperceptible bit to pay for it. Does that improve the average? It doesn't improve my life, I know that. It doesn't improve my infant nephew's life; he doesn't qualify for SCHIP. All my family and friends will be hurt a teeny, tiny bit. But I shouldn't care. It's for the children, right? A small subset of the children are worth a broad, shallow layer of financial suffering over the rest of us. It's not so bad.

The reasoning of in the previous paragraph is what will continue to strain the economy of this country until it fails. Every new program is not too bad until the sum of them is beyond endurance. Or maybe it'll never go that far. Maybe it'll just be a constant annoyance in the lives of hundreds of millions, an inconvenience they ignore and endure forever for political correctness' sake. I still don't want it. It's still wrong.