Public-Private Switch Snarls Kids Insurance Program

The biggest fight in Congress over renewing a popular federal health insurance program for kids has to do with how many will leave private coverage to get government insurance instead. Too many, says President Bush. But every plan to help the uninsured involves some substituting of public for private coverage; the trick is figuring out how to keep it to a minimum.

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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

Congress this week is debating the renewal of the State Children's Health Insurance Program known as SCHIP. It's a popular program. So as NPR's Julie Rovner reports, lawmakers trying to forge a deal have been surprised to find themselves swimming in some pretty turbulent waters.

JULIE ROVNER: In the 10 years since it began, the SCHIP program has reduced the number of uninsured children in the U.S. by about a third. Nearly everyone agrees that's a success, and nearly everyone - from members of Congress, to nation's governors, to President Bush - wants to renew the program that will otherwise expire at the end of September.

But how many children should be covered? President Bush, earlier this year, proposed to scale back eligibility for the program, which is generally aimed at families who earn too much to qualify for the Medicaid program and too little to afford private insurance.

President GEORGE W. BUSH: Members of Congress have decided, however, to expand the program; to include, in some cases, up to families earning $80,000 a year, which would cause people to drop their private insurance in order to be involved with a government insurance plan.

ROVNER: In that speech two weeks ago at a manufacturing plant in Maryland, the president was describing a concept known as crowd out. That's when the government takes over something the private sector had been paying for.

Jon Gruber, a health economist at the Massachusetts Institute of Technology, says some degree of crowd out is inevitable when designing programs to help the uninsured.

Mr. JON GRUBER (Health Economist, Massachusetts Institute of Technology): The analogy, I think, is most helpful here is to think of the old problem of trying to catch tuna when they swim with dolphins. If you think of the insured is the tuna and the privately insured is the dolphins, what we like to do is design a net that just captures uninsured tuna without catching the insured dolphins. The problem is, the insured dolphins and the uninsured tuna swim together.

ROVNER: While the Senate bill would, in a few cases, allow families with higher incomes to qualify for the SCHIP program, most of the money is targeted towards children at the lower end of the income scale. According to the Congressional Budget Office, 85 percent of the 4 million children who'd gain coverage have income at or below current eligibility levels. Gruber says that targeting of low-income kids minimizes the crowd-out effect.

Mr. GRUBER: The best way to catch the most tuna while not catching the dolphins is to cast your net in a part of the ocean where it's mostly tuna. Well, the part of the ocean where it's mostly tuna is the low-income population that's eligible for public insurance.

ROVNER: President Bush has threatened to veto both the Senate bill and the even larger House measure. He says Congress should, instead, look beyond SCHIP and take up a proposal to change the way health insurance premiums are taxed. His proposal would benefit more people. But Gruber says it would give a lot more money to already privately covered dolphins and a lot less to the uninsured tuna.

Mr. GRUBER: If you give a tax break, that's mostly going to be to middle and higher income people, which mostly already privately insured. And that's why expanding public insurance is by far the most efficient way to increase insurance coverage even if it's some crowd out is the result.

ROVNER: Republicans, however, continue to maintain that individuals can spend their own money better than the government can - a theme that echoes through not just the SCHIP debate, but through the health reform debate writ large.

Julie Rovner, NPR News, Washington.

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