Health Care for Children, aka Future Retired Persons

Congress is considering a reauthorization and expansion of the State Children's Health Insurance Program (SCHIP), with the intent to get something on Mr. Obama's desk as soon as he assumes the Oval Office. 

Words are flying on both sides of this effort, and one of the groups jumping into the fray is AARP. 

AARP? 

The organization says in its letter to congressional leaders that "This is vitally important to many of AARP's members who are raising grandchildren." Hmm, ok. But the next sentence is more realistic: "It also is an important building block for AARP's priority of enacting comprehensive healthcare reform to provide all Americans with affordable health care." 

Many have called SCHIP expansion merely a "down payment" on a more universal installation of government-administered health insurance. AARP's fervent endorsement supports that view. 

AARP praises the legislation as "fiscally responsible because costs are offset by an increase in the federal tobacco tax," adding that this is "smart health policy" as well because it discourages smoking.

That logic doesn't work, however, as Heritage Foundation economist Bill Beach has explained. Writing about the 2007 proposed SCHIP expansion, Mr. Beach and co-author Michelle Bucci lamented the effects a tobacco tax increase would have -- not exactly what lawmakers would hope:

"Not only are some policymakers considering imposing a large, new burden on a small portion of the population, but they have chosen a revenue source that is in decline and will decrease even faster if the tax rate rises. Due to the sensitivity of consumers to increases in the price of tobacco products (known as "price elasticity"), the average consumer purchases fewer cigarettes when the price increases. Consequently, the additional revenue generated from increasing the tax will decline over time.

"Due to this price elasticity, policymakers will somehow need to recruit new smokers if they insist on using the tobacco tax revenue to support SCHIP at proposed funding levels over the long term."

AARP didn't mention whether it would start a campaign to recruit new smokers, of course. 

While everyone wants to see children receiving proper health care, SCHIP is simply becoming less and less the program it was intended to be.

The legislation would allow states like New York to expand SCHIP coverage to children in families making more than $80,000 a year. This expansion will make it harder for states to focus on enrolling the children who most need coverage, as Hawaii painfully learned.

The first priority for lawmakers should be making sure poorer, uninsured children are insured. At least two-thirds of uninsured children already are eligible for SCHIP or Medicaid but aren’t enrolled. Supporting states' efforts to focus on covering these children, including giving their parents the option of private health insurance, would be money well spent.