The Truth about S-CHIP

Congrats are due to Marilyn Musgrave, Doug Lamborn and Tom Tancredo for their opposition to the ridiculous S-CHIP legislation.

The Liberal Left has so distorted the facts, that I thought a brief reminder of what S-CHIP really is, would be in order.

Here is some of the analysis done by Republican Study Committee Chairman Jeb Hensarling:

H.R. 976 reauthorizes and significantly expands the State Children’s Health Insurance Program (SCHIP), while increasing cigarette taxes to supposedly offset the bill’s costs. The legislation follows closely the Senate-passed version of SCHIP reauthorization, expanding the program but discarding much of the Medicare-related provisions included in the House-passed legislation. Highlights of the bill are as follows:

Cost: H.R. 976 provides $34.9 billion over five years and $71.5 billion over ten years in new mandatory spending—this spending is on top of the $25 billion over five years that would result from a straight extension of the program. The House-passed version provided $47.4 billion over five years and $128.7 billion in new SCHIP spending (as well as billions of non-SCHIP spending).

The new spending is partially offset by increasing taxes on tobacco products (see below). However, this CBO score overlooks a major gimmick which the bill employs to lower its costs. The bill dramatically lowers the SCHIP funding in the fifth year by 80%, from $14.25 billion in the first six months to $1.75 billion. In all likelihood, such a reduction would not actually take effect, which would make this an effort to generate unrealistic savings in order to comply with PAYGO rules. To that end, H.R. 976 is technically compliant with PAYGO.

Some of the worst parts of S-CHIP include:

Encourages Spending: H.R. 976 shortens from three to two years the amount of time a state has to spend its annual SCHIP allotment. Under current law, states are given three years to spend each year’s original allotment, and at the end of the three-year period, any unused funds are redistributed to states that have exhausted their allotment or created a “shortfall,” i.e. making commitments beyond the funding it has available. In addition, the bill establishes a process through which any unspent funds would be redistributed to any states with a shortfall. Some conservatives may be concerned that this process provides incentives both for states to spend their allotment quickly and to extend their programs beyond their regular allotments into shortfall, so as to be relieved by the unspent funds of other states or the new Contingency Fund (see above).

Expansion to Higher Incomes: Under current law, states can cover families earning up to 200% of the Federal Poverty Level (FPL) or $41,300 for a family of four in 2007 or those at 50% above Medicaid eligibility. However, states have been able to “disregard” income with regard to eligibility for the program, meaning they can purposefully ignore various types of income in an effort to expand eligibility. For instance, New Jersey covers up to 350% of FPL by disregarding any income from 200-350%, allowing them to cover beyond 200% with the enhanced federal matching funds that SCHIP provides.

As of 2010, H.R. 976 increases the eligibility limit to 300% of FPL or $61,950 for a family of four but also continues the current authority for states to define and disregard income. States which extend coverage beyond 300% of FPL would receive the lower Medicaid match rate. The bill also grandfathers states with an approved state plan amendment (or a state about to submit such an amendment in compliance with state law) that already covers those above 300% of poverty. This provision is for New Jersey and New York (seeking to cover 400% of FPL or $82,600 for a family of four). In addition, Section 116 of the bill overturns CMS’ current policy of requiring states to ensure that 95% of the eligible children in their state below 250% of FPL are enrolled before expanding coverage to higher incomes.

Adult Coverage: Under current law, some states cover nonpregnant, childless adults—these states have received waivers in the past in an effort to expand health insurance to uninsured populations, even though the program was intended for children. H.R. 976 would prohibit any further waivers but would provide continued funding for existing coverage of such adults through FY 2008. Beginning in FY 2009, funding for nonpregnant childless adults will be capped at FY 2008 levels, but states would receive the lower Medicaid match and be limited to only covering those already enrolled.

Additionally, the bill also weakens current law regarding illegal aliens recieving S-CHIP monies, increases taxes and penalizes those with private insurance.

The bottom line is simple: the bill would expand the SCHIP program by $35 billion over five years and loosen the program’s eligibility requirements while astronomically expanding the big-government welfare state.