Why Bush Was Dumb To Veto SCHIP

It greases the skids for universal health care.

Children asked President Bush not to veto the State Children’s Health Insurance Program

In vetoing reauthorization of the State Children’s Health Insurance Program, George W. Bush has fired the first shot in the battle over health-care reform. The likely result will be to help mobilize support for further government intervention in the health-care market, which would be a very good thing. Thank you, Mr. President!

SCHIP, which is funded jointly by the federal government and the states, was created in 1997 as a sort of consolation prize after Congress defeated the Clinton administration’s proposed restructuring of the health-care industry. Its purpose was to provide health insurance to low-income children whose families earned too much to qualify them for Medicaid. States were given broad discretion to set eligibility rules, with the result that in New Jersey, which had the most generous rules, a family of four could participate in S-CHIP even if its income were as high as $72,275. (In explaining his veto, Bush misstated that ceiling as $83,000. He also failed to point out that two months ago his administration effectively lowered the ceiling to about $52,000 for a family of four.)

SCHIP has been generous to middle-class families, but its chief benefit has gone to poor families. According tothe Congressional Budget Office, SCHIP brought the percentage of children who lack health insurance in families earning up to twice the poverty level (set this year at $ 17,170 for a family of three; below that, you’re usually eligible for Medicaid) from 26 percent down to 17 percent.

What distresses President Bush about the SCHIP program is that, even before the Democratic Congress voted in its reauthorization to extend eligibility to families with higher incomes, SCHIP was already displacing private plans for somewhere between one-quarter and one-half of all enrollees. That’s because SCHIP was less expensive and provided broader coverage than private plans. Is this a scandal? Only if you think that private health-care plans today are priced reasonably and offer adequate coverage.

Bush segued into a discussion of his SCHIP veto at an Oct. 3 eventin Lancaster, Pa., after touting the tax benefits of turning a family business into an S corporation, which is something entirely unrelated; some news accountssuggested Bush didn’t seem entirely clear about the difference. (There is, in fact, an ironic connection. S corporations are often created as a dodge to avoid paying the federal payroll tax, which funds a little health care program called Medicare. That’s why presidential candidate John Edwardshas taken some heat for having one, though the arrangement was apparently legal.)

Anyway, here is what Bush said about the veto:

I happen to believe that what you’re seeing when you expand eligibility for federal programs is the desire by some in Washington, D.C. to federalize health care. I don’t think that’s good for the country. I believe in private medicine. I believe in helping poor people—which was the intent of SCHIP, now being expanded beyond its initial intent. I also believe that the federal government should make it easier for people to afford private insurance. I don’t want the federal government making decisions for doctors and customers.

Bush says he’s vetoing SCHIP because “I believe in private medicine,” but if the SCHIP bill set doctors down the road to serfdom it’s doubtful the American Medical Association would support its passage. What Bush really means is “I believe in private health insurance,” but that’s not much of an applause line (unless you’re addressing a roomful of insurance-industry lobbyists). Even market fundamentalistsare leery of the private health insurance industry these days, because they believe it has caused medical costs to spiral out of control by severing the financial relationship between the people who consume medical services and the people who provide them. I don’t mean to suggest that Milton Friedman  groupies now think that substituting government would be an improvement. But when Bush says “I don’t want the federal government making decisions for doctors and customers,” he neglects to point out that currently, private insurers are making decisions for doctors and customers, to the serious detriment of both.

The SCHIP bill isn’t perfect. Its reliance on the tobacco tax, rather than the progressive income tax, is a dumb gimmick that gives the health-care system a financial stake in smokers’ continuing addiction to nicotine, and conservative critics may be right that taxing cancer sticks won’t raise enough revenue. The principle that poor children “deserve” subsidized medical care while poor adults do not is based more on sentimentality and political expediency than on logic or genuine compassion. (In practice, some adults receive SCHIP benefits, too, but the program’s main thrust is to insure children.) Still, Bush was insane to veto SCHIP, not only because it’s become a necessary program, but also because the outrage the veto causes should help grease the skids for universal health care. What a lucky break that Bush doesn’t seem to get that.