KIDDIECARE: Big-Government Fears Are Founded, Critic Says
The ten-year, $48 billion federal effort to insure children of the working poor was touted as an opportunity to allow states a chance to try innovative approaches in health coverage. But John Locke Foundation President John Hood, writing in the current National Review, contends that the actual wording of the State Children's Health Insurance Program (S-CHIP) statute "leaves almost no room for states to use S-CHIP money to experiment with free-market reforms," such as vouchers, tax credits, and medical savings accounts. As a result, Hood writes that Kiddiecare, "a supposed GOP policy victory or at least a draw, is turning out to be nothing more than another expansion of the Great Society into the middle class."
Hood points out that the Kiddiecare law effectively favors Medicaid expansions over market-based programs. First, "states that elect to use S-CHIP dollars to help families buy into their employer's dependent coverage must impose a six-month waiting period, during which the children cannot be enrolled in the employer plan." But no such time requirement applies to Medicaid expansions. Hood further notes that Kiddiecare "restricts enrollment fees, premiums, deductibles and copayments to very low levels: essentially the same nominal levels of so-called cost-sharing allowed in the Medicaid program." With such caps in place, Hood says "[f]ew private health plans will want to participate ... because of the lack of disincentives for people to use unnecessary medical services." And while the Kiddiecare law imposes "less strict" cost-sharing rules on families earning above 150% of the poverty level, the law still prohibits total fees that "exceed 5% of family income." According to Hood, this "would complicate a state's request to use S-CHIP dollars to fund medical savings accounts ... because withdrawals from MSAs to pay for children's routine medical bills would have to be treated as cost-sharing and thus be strictly limited by the federal government." Finally, states that set up "their own insurance programs are not allowed to use S-CHIP dollars to cover children of state employees, local employees, teachers or other" public-sector workers. This prohibition, however, does not apply in cases of Medicaid expansions -- "yet another provision tipping the balance in favor of expanding the welfare state."
Hood argues that the result of Kiddiecare "will be what the skeptics said at the outset: the growth of Medicaid and other forms of government-run health care." He says Congress should have instead "extended to small businesses and individuals the protection against state mandates that decades-old federal laws already give to" self-insured companies, an exemption he maintains would help make coverage more affordable. In addition, Hood says Congress should have "created tax credits to offset income and payroll taxes on insurance premiums and MSA deposits paid by individuals" (4/20 issue).