DOA
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.
Instead, 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.
