Minor Thoughts from me to you

Greg Mankiw hosted a brief back-and-forth about the State Children's Health Insurance Program and how it will be renewed. First, the President's position.

1. We think the "C" in SCHIP stands for "children". Over the past several years, adults have been added to SCHIP. Some were parents of kids with health insurance, others were adults without children. We were responsible for some of those additions, as we approved State waiver requests. We made a policy shift this year, based in part on further input from the Congress, and we're now returning SCHIP to its original purpose. Over the next few years, our policy will return SCHIP to a kids-only program. States that are now covering adults will have to move them onto Medicaid or a State program. While the advocates for HR 976 argue they share this goal, the bill doesn't match the rhetoric - it lets adults in some states back into SCHIP. And in six States (IL, NJ, MI, RI, NM, and MN), more than half of their projected SCHIP expenditures this year are for adults. We think this is the wrong direction for a program that should be about children.

2. We think SCHIP should be about helping poor kids. This bill also raises taxes to subsidize health insurance for some middle-income kids. New York wants to use Federal dollars to cover kids who are clearly not poor: for a family of four, they would like to use Federal tax dollars to pay 65% of health insurance costs for a family of four with income as high as $82,600. (We measure this in terms of a multiple of the "poverty line" - NY wants to cover kids up to "400% of poverty".)

Next up, the Democrats position.

(1) The President supports a proposal that would reduce annual spending on SCHIP relative to inflation and reduce the number of covered children and pregnant women by 840,000 according to the Congressional Budget Office (CBO).

You might ask how the $5 billion increase in spending over 5 years promised by the White House could result in more uninsured. The answer is that for technical reasons the CBO baseline assumes $5 billion in nominal dollars annually going forward, something depicted in the flat green line in your previous post. But spending at this baseline would fall relative to general price inflation and plummet relative to health spending growth. As a result, under CBO's baseline the number of people covered would fall from 7.4 million in 2006 to 3.5 million in 2017, despite an increase in the eligible population.

He says that like it's a bad thing. Unless you assume that the government should be the great health fairy in the sky guaranteeing a doctor in every pot and a nurse in every garage. Or something like that.

To be fair, the response does end this way:

You believe in a smaller government. But in this case there's no free lunch. The White House veto will deliver a smaller government but at the cost of a reduction in the number of currently eligible low-income children covered by SCHIP and an increase in the number of uninsured. You might have better ideas about to reduce the number of uninsured children. But I have a hard time seeing how a Presidential veto could be one of them.

I do have ideas. (One day I'll even write about them.) But part of reforming a system involves avoiding the urge to break it even more than it's already broken. I fear the new SCHIP bill would make it much harder to scale back government involvement later. And that's how a Presidential veto of a bad idea could be one of the ways to reduce the number of uninsured children.

Anyway, if you haven't understanding the back and forth blather (or just haven't cared), this is a good overview of both positions.