Principles for Reauthorization of SCHIP

However, both houses of Congress have passed legislation that would expand SCHIP by extending eligibility to children well into middle-income families. This would crowd out the private coverage that the vast majority of these children already have and would change the focus of the program without a full debate over its implications.

Two-thirds of uninsured children are eligible for either SCHIP or Medicaid under current law, including many children under 200 percent of poverty who are not yet enrolled. Expanding SCHIP to children in higher-income families would mean shifting the focus away from these children who most need help and would grow the program into a middle-class entitlement that goes far beyond its current mission of helping near-poor children. Reauthorization of SCHIP should concentrate on reducing the number of near-poor children who are eligible for coverage.

As a result, we recommend the following principles to guide policy development in reauthorizing SCHIP:

• The primary focus of the State Children's Health Insurance Program should be to cover children in families with incomes at or below 200 percent of poverty. States that wish to expand SCHIP to cover children and adults in higher-income families are free to do so with their own state funds.

For those above 200 percent of poverty, the appropriate federal mechanism for support is through a combination of tax reform and direct financial subsidies to help families purchase the private health insurance of their choice.

• The program's subsidies should be re-structured to encourage the purchase of private health insurance. SCHIP subsidies could be used to allow parents to purchase the health coverage that they believe is best for their children, including adding them to policies that may be offered at their workplaces. Research shows that children and their parents benefit if the whole family is covered.

• The federal-state matching ratio for SCHIP funding should be changed to eliminate the distortions that exist in today's system. States receive a higher federal matching rate for covering SCHIP recipients (which today include many adults) than they receive for covering children eligible for Medicaid, even though these Medicaid children are in families with lower incomes. Congress should focus on fixing the perverse incentives that reward states at a higher level for enrolling higher-income SCHIP children over poorer Medicaid children. The current funding formulas also mean more federal SCHIP dollars will go to wealthier states that can afford to expand the program than to poorer states that do not have sufficient state funds to expand their programs.

• SCHIP must not be turned into another entitlement program modeled after Medicaid, with unlimited federal funds matching state spending on benefits. That would add to the taxpayers' already-overwhelming burden of tens of trillions of dollars in unfunded entitlement liabilities. It also would encourage states to use accounting tricks to inappropriately increase federal payments, as they have done for years in the Medicaid program. SCHIP must remain as a capped funding program to the states, and Congress must require states to live within their allocations.

For more information, please contact Consensus Group signatories:

Grace-Marie Turner

Galen Institute

703-299-8900

gracemarie@galen.org

Nina Owcharenko

The Heritage Foundation

202-608-6221

nina.owcharenko@heritage.org

Joseph R. Antos, Ph.D.

American Enterprise Institute

202-862-5938

jantos@aei.org

Robert E. Moffit, Ph.D.

The Heritage Foundation

202-608-6210

robert.moffit@heritage.org

Robert B. Helms, Ph.D.

American Enterprise Institute

202-862-5877

rhelms@aei.org

Joel C. White

Galen Institute

202-266-2630

JWhite@galen.org

Roy Ramthun

HSA Consulting Services

202-747-4467

roy@hsaconsultingservices.com

Stephen Entin

Institute for Research on the Economics of Taxation

202-463-6192

sentin@iret.org

John Goodman, Ph.D.

National Center for Policy Analysis

972-386-6272

john.goodman@ncpa.org

James Frogue

Center for Health Transformation

202-375-2065

jfrogue@gingrichgroup.com

Ronald E. Bachman, FSA, MAAA

Center for Health Transformation

202- 375-2001

ronbachman@healthcarevisions.net

Merrill Matthews, Ph.D.

Council for Affordable Health Insurance

972-874-5139

policyguy1@aol.com

Sally Pipes

Pacific Research Institute

415-955-6100

spipes@pacificresearch.org

Sewell Hinton Dixon, M.D.

Galen Institute

843-853-6060

shdixonmd@aol.com

Paul Howard

Manhattan Institute for Policy Research

646-839-3319

phoward@manhattan-institute.org

Benjamin Zycher, Ph.D.

Manhattan Institute for Policy Research

818-706-1028

benzycher@bzecon.com

John E. Calfee, Ph.D.

American Enterprise Institute

202-862-7175

calfeej@aei.org

Eli Lehrer

Competitive Enterprise Institute

202-331-2283

elehrer@cei.org

Robert Goldberg, Ph.D.

Center for Medicine in the Public Interest

201-463-1323

rgoldberg@cmpi.org

Peter Pitts

Center for Medicine in the Public Interest

917-279-0938

ppitts@cmpi.org

Elizabeth Wright

Citizens Against Government Waste

202-467-5300

ewright@cagw.org

Brian Williams

National Center for Policy Analysis

202-220-3082

brian.williams@ncpa.org

John R. Graham

Pacific Research Institute

604-733-5646

jgraham@pacificresearch.org

Paul Guppy

Washington Policy Center

206-937-9691

pguppy@washingtonpolicy.org

Thomas A. Schatz

Citizens Against Government Waste

202-467-5300

tschatz@cagw.org

Stuart Butler, Ph.D.

The Heritage Foundation

202-675-1762

stuart.butler@heritage.org

Greg D'Angelo

The Heritage Foundation

202-608-6260

Greg.DAngelo@heritage.org

Thomas Campbell Jackson

Galen Institute

212-662-5604

zeitblom@aol.com

Dean Clancy

Sidley Austin LLP

202-736-8886

dclancy@sidley.com

Eric Novack, M.D.

Phoenix Orthopaedic Consultants

602-741-5660

ericnovack@mac.com