Heritage Foundation Leadership for America

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Welfare for the Well-Off?

Congress soon may turn a program meant to help low-income kids into a new taxpayer-funded entitlement for the middle class. Proposed changes could make nearly three out of every four American children eligible to receive "free" government-run health care.

At issue is a new direction proposed for the State Children's Health Insurance Program (SCHIP), a federal block-grant program created in 1997 to help states cover medical expenses for children in low-income working families.

Originally budgeted at $40 billion over 10 years, the program is on track to be reauthorized at almost triple the cost -- topping $58 billion over the next five years. And that would be only a down payment, if some in Congress prevail.

Currently, SCHIP eligibility is targeted to help only those households at or below 200 percent of the federal poverty line. That's a $40,000 annual income for a family of four.

One bill now under consideration would double that cap--to 400 percent of poverty. If approved, Uncle Sam would start paying the medical bills for kids whose folks earn as much as $82,600 a year (or more, for families larger than four).

The Heritage Foundation, a think tank based in Washington, D.C., calculates that, if this expansion is approved, nearly three out of every four American kids--71 percent--could be enrolled in either Medicaid or SCHIP by the year 2012.

"That would be a big mistake, increasing dependence on the government for health care and placing a greater burden on taxpayers," warns Heritage health care analyst Nina Owcharenko. "A better solution would be to improve access to private coverage instead of chipping away at it."

She notes that SCHIP already has helped fuel expansion of America's government-run health systems. Some states use the supposedly child-centered program as a stepping stone to universal coverage by providing health care to parents, pregnant women and even adults with no children at all.

Owcharenko recommends a consumer-driven, market-based alternative that restores SCHIP's original mission, reinforces private coverage and puts budget-conscious families in control - not budget-busting bureaucrats. Key elements: providing a tax credit to help families pay for private coverage, converting SCHIP into a defined contribution and encouraging states to reform their insurance markets.

More information on SCHIP and children's health care may be found here.