What's Wrong with SCHIP?

President Bush has plenty of supporters who agree he should have blocked the children's health care expansion. Michael Cannon, the Cato Institute's Director of Health Policy Studies, explains why.

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FARAI CHIDEYA, host:

Despite pressure from Edelman and others, Congress may not have the votes to overturn the S-CHIP veto. And the president has plenty of supporters who agree he should have blocked the health care expansion. One of them is Michael Cannon. He's the Cato Institute's Director of Health Policy Studies.

Michael, welcome.

Mr. MICHAEL CANNON (Director of Health Policy Studies, Cato Institute): Thank you for having me.

CHIDEYA: So let's go back to Marian Wright Edelman. She just argued the case for insuring working families that don't qualify for Medicaid. So let me present you with a scenario: You have a two-parent family with three children. They work hard, but they can't afford health insurance premiums because their employers aren't helping them out much. So wouldn't that family benefit from the S-CHIP expansion?

Mr. CANNON: Well, a lot of families would benefit from the S-CHIP expansion. The problem with this expansion is that it's not - well, there are a number of problems with it. Unfortunately, not many of them are being discussed in the current debate. And one of those problems is that the expansion is not targeted very well. In fact, the S-CHIP program itself is not targeted very well at those people who need help. If you look at S-CHIP as it exists right now, 60 percent of the children who are eligible actually already have private health insurance.

And if you look the expansion that Congress would like to pass, the children that they're trying to expand S-CHIP to encompass, 77 percent of those children already have private health insurance. So if this is, you know, an expansion that's - or a program that exists to help those who are in need, it doesn't do a very good job of targeting its assistance to those who are in need, which I think lends credence to the charge that the proponents of this program are not interested in targeting this - targeting it to only the people who need help. They are really more interested in pulling more people on to the roles of government programs and crowding out private insurance.

Now, you had mentioned that I'm a supporter of the president's veto. It's not - that's not quite accurately as I'm not a supporter of the president's position because I have taken the position that rather than - or not only should the president veto the expansion of S-CHIP, but the president and Congress should let this program expire. And…

CHIDEYA: So you want to see it all disappear and…

Mr. CANNON: Well, and you - when you say that, you have to take a moment to convince people that you're not a moral degenerate. The reason that I want this program to expire is because I think it is - it does a poor job of helping families who are in need.

And there are a number of reasons for that. For one, it's not very well targeted at them. It discourages low-income families from climbing the economic ladder, which could have health consequences for the children. It increases the cost of private insurance for those who remain outside the program. And there's no evidence that this is a cost-effective way of improving children's health. In other words, there could be other interventions that would get more health for the money.

CHIDEYA: Sorry to interrupt, but what other interventions are you thinking of and are those going to come from private sector, government? What, specifically, are you talking about that could deal with the millions of kids who are uninsured and the other ones who - Marian Wright Edelman, among others - argue are underinsured?

Mr. CANNON: Well, if you're talking about government interventions, there are other approaches, some within the area of health and some outside of the area of health that could have as positive an effect on health outcomes as expanding health insurance. Those could include discrete programs such as vaccinations, and - Ms. Edelman mentioned one of them - prenatal care and other screening programs, or interventions targeted at increasing incomes or improving education because those have also been correlated with health outcomes.

But we're not even having a debate over whether those approaches should be utilized or not. And I think that, you know, that's one area where the debate over S-CHIP has been lacking.

And I think that part of the reason is, is another reason to be skeptical of this bill, which is something else Ms. Edelman brought up, that the insurance industry favors this bill. The physician lobbyist says it favors this bill, the lobbyists for the hospitals and the pharmaceutical companies because they all stand to gain tremendously from having, you know, greater subsidies, greater government subsidies for health care.

But I'm not sure that we should be expanding government health insurance enriching those special interest groups when they can't point to evidence that they, you know, would give - deliver the most health for the taxpayers' money.

CHIDEYA: Michael, just quickly, what do you think is in the tealeaves for overriding the veto?

Mr. CANNON: I'm not very good at making those sorts of political predictions. I never would have guessed that the president would have taken so strong a stance against this bill.

What I would like to see though is, you know, a better effort to provide health insurance to these targeted families. And I think that the simplest way for Congress to do that would be just to let individual consumers and employers purchase health insurance from outside of the state in which they reside. Creating that sort of a national marketplace for health insurance could reduce the regulatory costs that states add on to insurance policies, which the CBO has estimated increased premiums by up to 15 percent. And the people who are going to be helped by that the most are going to be the people whom S-CHIP is trying to target except we would be able to help them without raising their taxes, without pulling them into dependence on government and discouraging them from climbing the economic ladder or having - creating any of the other ill effects that this S-CHIP program creates.

CHIDEYA: Well, Michael, thank you.

Mr. CANNON: Thank you.

CHIDEYA: We've been speaking with Michael Cannon, director of health policy studies at the Cato Institute. And he spoke with us from our headquarters in Washington, D.C.

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