The State Children’s Health Insurance Program (SCHIP) is a program established to provide health coverage to children and pregnant women in low-income families that have an annual income that falls above Medicaid eligibility levels but do not earn enough to afford private health insurance. The program is jointly financed by the federal government and states but each individual state is responsible for administering SCHIP.
As the time period each SCHIP bill is valid for comes to a close, Congress must consider a number of policy options - extending federal SCHIP funding to maintain the program or letting SCHIP funding expire.
An extension of SCHIP would further additional consideration such as how long to extend federal funding for and whether to implement policy changes. The expiration of federal funding would still leave Congress with a number of options - taking no action, moving SCHIP enrollees into the Medicaid program, or providing SCHIP beneficiaries subsidized coverage in the health insurance exchanges. These last two options would allow at least some former SCHIP beneficiaries continued coverage through SCHIP, Medicaid, or the health insurance exchanges.
One of the biggest debates surrounding the reauthorization and expansion of SCHIP involves the occurrence of “crowding out.” This refers to people dropping private insurance in response to an elevated availability of subsidized coverage.
This concern was a contributing reason for President Bush vetoing the reauthorization of SCHIP in 2007. His concern was that the bill would lead the American Health Care System in the wrong direction i.e. towards socialized medicine. He further stated that an estimated one out of every three people that would subscribe to the new expanded SCHIP would leave private insurance.” In this way, the focus of the program would also be moving away from those poor children who should be the priority.
Estimates of crowd-out have always been controversial among analysts and estimated values tend to vary due to the diversity in populations. Nevertheless, crowd-out is likely to be a particular problem for states expanding their Medicaid eligibility requirements.
For instance, analysis of Medicaid expansions to mothers and children in the 1990s by economists and Obama administration advisers, David Cutler and Jonathan Gruber, calculated that when Medicaid eligibility was broadened, approximately 50% of the new enrollees had dropped their private coverage. More recent analyses by Gruber and Kosali Simon estimated that crowd-out for the SCHIP totaled approximately 60%.
Thus, it is not the question as to whether crowd out occurs because it is impossible to target new policies to cover the uninsured without also reaching some individuals who are currently enrolled in private insurance. The question is actually how efficiently can the program be targeted and implemented to uninsured children to minimize crowding out.
Another debate over SCHIP has been the disguised debate of immigration. Generally speaking, immigrants are more likely to be uninsured than native citizens. They tend to have lower rates of employer sponsored insurance and are less likely to benefit from public coverage programs. Although over 80% of immigrant families have at least one full-time worker, they most likely work in low-wage jobs and in industries that do not offer their employees health insurance.
Fortunately, this concern has been addressed by the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA). This includes a new option for States to provide affordable health coverage in the form of Medicaid and SCHIP to immigrant children and pregnant women who are “lawfully residing” in the United States, including those still within their first 5 years of having certain legal status.
Prior to this, federal law had imposed an arbitrary restriction of a 5-year waiting period before many legal immigrants were permitted to access to Medicaid and SCHIP care. With this said, many states still provided coverage to these residents as a form of reducing inefficient and expensive medical costs.