A new study has found that a multi-billion dollar federal government
effort to provide health insurance to children has done nothing to lower
the number of uninsured children but, instead, has resulted in millions
of them losing their private insurance coverage.

The federal program, the

State Children’s Health Insurance Program
was the brainchild of Sen. Orrin Hatch, R-Utah, and Sen. Ted Kennedy, D-Mass., and was approved as part of the Balanced Budget Act of 1997.


authored by researchers at the Center for Studying Health System Change, found that the percentage of low-income children with public coverage has increased while the percentage covered by private insurance has sharply decreased. As a result, there has been no net reduction in the percentage of children that are uninsured.

“We were expecting to see some gains in public coverage for low-income children, given recent expansions, but were surprised to see the decline in private insurance which is, unfortunately, working in the opposite direction,” said Peter J. Cunningham, a senior researcher for the center and one of the study’s authors.

With SCHIP, a $24 billion program, the federal government provides matching funds to states to enable them to expand public health insurance coverage and health insurance for children in families earning less than 200 percent of the poverty level and who don’t qualify for Medicaid. Health and Human Services Secretary Donna Shalala has said an estimated 2.6 million children will be enrolled in the plan by September.

According to the study, for those children qualifying for the SCHIP program, the rate of public coverage increased from 29 percent to 33 percent from ’96-’97 to ’98-’99, while the rate of private coverage fell from 47 percent to 42 percent. The proportion of uninsured remained relatively unchanged at 19 and 20 percent respectively.

But the statistics show that the SCHIP program is causing changes in the uninsured status of children who have access to employer-sponsored coverage through a parent. During the time period studied, the number of low-income children enrolled in private, employer-sponsored coverage fell from 72 percent to 66 percent while enrollment in public coverage increased from 10 to 14 percent.

The study authors attribute this shift to substitution of public coverage for private coverage. However, one of the stated policy goals of the SCHIP program was to prevent extensive displacement of children with private coverage.

Critics of the government program contend that providing a lower-cost or free alternative to families with private coverage has resulted in transferring the cost of insurance to taxpayers, while doing little to help the children who have always been uninsured.

John Goodman, president of the Dallas-based

National Center for
Policy Analysis
and a nationally recognized health-care adviser, told WorldNetDaily that this new evidence demonstrates that government solutions to private problems typically don’t work.

“This finding confirms previous observations that Medicaid expansion comes at the expense of private coverage for children,” Goodman said. “What this means is that we’re spending a lot of money and not getting a lot in return.”

However, some remain firmly behind the effort.

“As more states fully implement SCHIP and restore coverage to families who lost insurance when they left welfare, we should see progress toward the fundamental goal of insuring more children,” said Jocelyn Guyer, a policy analyst for the Center on Budget and Policy Priorities.

The new study also confirms a previous

Congressional Budget
report published in 1998, which found that 40 percent of all children enrolled on the government plan already had private coverage, making the SCHIP program largely redundant but, nonetheless, very expensive.

Many states were already engaging in efforts to address the problem of uninsured children before the federal government stepped into the fray. States had undertaken a variety of initiatives aimed at increasing health insurance coverage and services to children, including plans that partner with nonprofit organizations and other private entities.

But with the availability of federal funds for Medicaid expansion under SCHIP, many of these private initiatives are quickly vanishing in favor of tax-funded programs.

Some are also questioning the methods that states have chosen to implement the SCHIP plan. While states are allowed to create their own plans free from costly Medicaid mandates, virtually every state has either chosen to expand Medicaid or has adopted some version of the typical Medicaid benefits package.

The mandates associated with this approach significantly increase the per capita cost of health insurance coverage. Because the states have chosen Medicaid expansion, the number of children that can be covered by the plan is limited due to the high cost of covering each additional uninsured child and the fixed funding amount made available by the federal government to the states under the SCHIP program.

One alternative to the current SCHIP program may be greater use of the private insurance sector. States could allow private insurance carriers to offer SCHIP benefit plans, resulting in market competition for price and quality, which could enhance the program and stretch funding to include many more children by making health coverage better and cheaper.

But the Health Care Financing Administration, the federal agency that oversees the SCHIP program, is strongly encouraging states to utilize the more expensive Medicaid expansion plan, which may extend the life of the program and result in many more children losing their private health insurance coverage.

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