Statisticians boost effort to block children's health-insurance expansion
- Graphic | Expanding child health insurance
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By Tony Pugh | McClatchy Newspapers
WASHINGTON — In its effort to stop Congress from expanding a public health-insurance program for low-income children, the Bush administration has hit on a compelling argument: the obscure but inevitable phenomenon known as "crowd out."
"Crowd out" happens when parents drop their children's private health insurance to enroll them in cheaper, taxpayer-funded coverage through the State Children's Health Insurance Program. The Congressional Budget Office estimates that for every 100 kids who enroll in the popular program now, 25 to 50 were previously covered in the private market.
Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology, has studied crowd out extensively and likens it to snaring dolphins by mistake in a tuna net.
By targeting children whose families earn up to twice the federal poverty level — $41,300 for a family of four in 2007 — SCHIP, the joint state/federal program, has helped to cut the number of uninsured low-income children by one-third since it was launched in 1998.
But congressional proposals to reauthorize SCHIP and boost its funding would allow states to expand coverage to children from families that earn up to three times the poverty level and more. Crowd out increases as SCHIP's income eligibility is raised.
The CBO expects that by 2012, roughly 1 in 3 new SCHIP enrollees under the Senate and House of Representatives proposals — more than 2 million children — would be the product of crowd out: They probably would have coverage without SCHIP.
Spending taxpayers' money on youngsters who probably don't need the coverage has emerged as the strongest criticism of expanding SCHIP. The CBO crowd-out estimates have bolstered the Bush administration's claims that the bills are an ill-advised detour from SCHIP's original intent: serving low-income children.
But other experts say the CBO projections may be overstated.
Standard estimates hold that SCHIP has reduced employer-based coverage by only 10 percent among eligible children, said Lisa Dubay, an associate professor at the Johns Hopkins Bloomberg School of Public Health. Among all U.S. children, SCHIP has reduced employer-sponsored coverage by only 2 percent, Dubay said.
A 2005 study by Mathematica Policy Research estimated that the crowd-out rate was 6 to 14 percent in 10 states that accounted for 62 percent of America's SCHIP-eligible kids.
Democrats say the findings suggest that the administration's renewed attention to crowd out is just the latest in a string of arguments against widening SCHIP.
"It just seems like he comes up with something new every day," U.S. Rep. Frank Pallone Jr., D-N.J., said of President Bush. "You can't keep coming up with a new reason every week."
Janet Trautwein, the chief executive officer of the National Association of Health Underwriters, cautioned that crowd out has other downsides, however. When parents leave job-based coverage for SCHIP, they leave employer health-insurance funding on the table. And because most kids are healthy, moving them to SCHIP leaves older, sicker people in the private-coverage risk pool, which could cause premiums to increase.
But MIT's Gruber said that sicker children, not healthy ones, were more likely to switch to SCHIP because it probably provided better coverage than employer-sponsored insurance. And while some studies have found that some employers will raise premiums when SCHIP enrollment is expanded, no studies have shown that SCHIP expansion has caused employers to drop coverage.
Gruber and other experts say that some level of crowd out is unavoidable when government programs increase their enrollment but expanding public programs is still the most cost-efficient way to cover the uninsured.
The House bill would cut the number of uninsured children by 5 million by 2012, while the Senate bill would cover about 4 million previously uninsured children.
CBO Director Peter Orszag said few proposals would do a better job.
"We don't see very many other policy options that would reduce the number of uninsured children by the same amount without creating more crowd out than under the House and Senate proposals," he said.
Bush has vowed to veto both measures. Congressional leaders are crafting final legislation to present to him by Sept. 30.
Rather than focusing only on insuring more children, Health and Human Services Secretary Michael Leavitt said, Congress should work to insure all Americans, ideally through Bush's proposed tax credit to help people purchase coverage in the private market.
"The president has made proposals that we would like to see debated," Leavitt said recently.
However, congressional Democrats have no appetite for Bush's tax plan, the benefits of which would go mainly to families who already are covered, Gruber said.
The issue of crowd out isn't new. Before SCHIP began, the CBO projected that 40 percent of new enrollees would have had private coverage elsewhere. That's why SCHIP rules require states to have "reasonable procedures" to minimize crowd out, such as imposing waiting periods before coverage begins and checking the insurance status of applicant children and their families.
But Dennis Smith, the director of the federal Center for Medicaid and State Operations, said states were all but ignoring those provisions by continuing to enroll children from higher-earning families. In response, the Bush administration recently adopted tough new requirements for states that want to raise their SCHIP eligibility beyond two and a half times the federal poverty level.
The first casualty of the new rules was New York's bid to boost eligibility to four times the poverty level. The Bush administration denied the request earlier this month.
McClatchy Newspapers 2007
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