Among the last budget issues settled by the president and Congress this week was the extension of federal health insurance to uncovered children. Although the two branches were still squabbling over the details at week’s end, they agreed to establish a $24 billion program financed by a 15 cent hike in the tobacco tax.
The most surprising thing about the deal is that it comes three years after the Republican defeat of Clinton’s health care reform plan took the issue off the table. (Full disclosure: I was a Clinton health care policy adviser from 1992 to 1993.) Hill Republicans began warming to the idea of expanding health care coverage in 1995, when Sen. Nancy Kassebaum and Sen. Ted Kennedy proposed a measure that would ban insurers from excluding pre-existing conditions and dropping coverage when people changed jobs. The bill passed in 1996, and as the roaring economy filled government coffers with revenues, conservative Sen. Orrin Hatch teamed with Kennedy in the spring of 1997 to co-sponsor his insurance-for-kids program.
One reason the Republicans agreed to the deal was that it appealed strongly to women, not a natural GOP constituency. Another is that insuring children is much cheaper than insuring adults.
But the success of the program will ride on the details, which remain unclear. Of the 41 million people in the United States who don’t have health insurance, 10 million are children. Nine-tenths of these children have parents who work, and two-thirds of them have parents who work full time. About a third of the uninsured children hail from families with incomes below the poverty line (roughly $16,000 for a family of four). Another third are from families between 100 and 200 percent of poverty (earning between $16,000 and $32,000), and the last third from families that earn more.
For the poorest kids, the state-run insurance program Medicaid helps. In 1990, Congress required Medicaid to phase in coverage of all children below the poverty line, along with a hodgepodge of other kids, by 2002. As of 1997, all impoverished children under age 13 qualify. But about 2 million of them haven’t been signed up. (All of the new proposals include $500 million for aggressive outreach.)
Despite the offer of matching federal dollars, many states don’t try to cover more children: Only Rhode Island, Vermont, Minnesota, Hawaii, and Washington subsidize coverage for children up to 200 percent of poverty or more.
Congress could have filled the gap by ordering the states to cover uninsured kids to the higher income level. But given the current deference to states, this was never seriously considered. Another option would have been for the federal government to cover poor and uninsured kids with a program like Medicare, but this was way too radical for Republican contemplation.
I nstead, Washington agreed to dispense $24 billion in block grants to help the states insure children. But will the states spend all the money on insurance for children? It’s not clear. The Senate wanted rules that would prevent governors from substituting the federal money for existing state spending. But the governors convinced House Republicans to negotiate for looser guidelines that let the states pay for unpaid emergency room and hospital bills–which the states already cover–out of the block grants. The final budget deal allows states to divert up to 15 percent of child-insurance funds to these other purposes.
In the budget negotiations, nearly everyone agreed on providing health insurance at low or no cost to uninsured children whose family incomes dip below 200 percent of poverty. More contentious was what the insurance would actually cover. House Republicans wanted skimpy coverage, while Senate Republicans and the White House wanted coverage at least as good as the high-quality benefits enjoyed by federal employees.
To hold costs down, the $24 billion program doesn’t cover kids who are currently insured. This, of course, is a formula for failure. If the government gives inexpensive, first-class insurance to the uninsured children of low-wage families, low-wage families enrolled in lousy insurance programs will rightly feel cheated. Many insured families have inadequate child benefits, excessive costs, or periods without coverage. To make matters worse, many employers looking to save money (and please their employees) will drop dependent benefits if states provide better coverage than the private plans now do.
What should the government do? If the primary goal is to make certain that families with uninsured children have a fallback, then we should keep the program cheap and cover just the services children don’t get without insurance–like physician and preventive services. Such safety-net insurance could provide good outpatient coverage and minimal hospital coverage. This scheme is far from perfect, but uninsured kids already get the hospital care they need when they’re sick because hospitals pass unpaid costs along to states and private insurers.
But if the primary goal is a future where all children are well covered, Congress should stick with the Senate’s broad insurance benefits, but open the program to all children below 200 percent of poverty–even the currently insured. Because the new budget’s $24 billion is only enough to cover 3 million children, a more ambitious program that covered all of the uninsured and under-insured children in the nation would cost much, much more.
The budget negotiators essentially punted on the issue. The plan gives states some murky coverage options and rules limiting the program to the currently uninsured.
Many will decide on safety-net child coverage. It would assist millions, although a working family earning $25,000 still could face huge hospital bills that they will have to renege on. Other states will choose comprehensive benefits restricted to the uninsured. To discourage employers from simply dropping coverage, the recently uninsured cannot be covered. Families and employers paying more for less insurance will yell and scream. Support will wither. And states will scale back benefits.
Alternatively, states with the best child benefits may go ahead and let the poorly insured switch to the program. Low-wage workers will flock to the program, and federal money will run out. States will come begging. Then Congress must either ante up or shut off a popular new working-class benefit.
Who said health care reform is dead? Congress may be unwittingly creating the thin edge of the wedge that brings major health care reform for children.
