It's for the children!

I've been fairly mystified by the Bush administration's decision to push so hard against the SCHIP bill wending its way through Congress. To be sure, it's not a good bill. The main idea seems to be that we should expand a program aimed at poor children to cover more adults and middle class kids--and pay for it with a highly regressive tobacco tax. It's especially awful from a party trying to reclaim the mantle of fiscal responsibility, since one of the prime effects of tobacco taxes is to reduce smoking, which means that this program's funding stream is self-defeating, and will undoubtedly require more money from general revenues. But is this the hill the Bush administration really wants to die on? Regardless of the underlying merits of the case, it is squandering what little political capital it had left, and positioning Republicans as the party that hates poor kids.

Now Greg Mankiw posts a defense of the veto from inside the White House--and I still don't get it. The administration seems to feel that this is the camel's nose under the tent for some sort of universal government run program, a fear to which I am sympathetic. If poor kids lose their coverage, won't this give the pro-single-payer forces a lot of photogenically unhealthy kids to campaign with next year? That seems like a bigger danger than having New York State cover some portion of health expenses for families up to 400% of the poverty line--particularly since the problems in the financial markets may well damage New York State's revenue stream, and thus its appetite for expensive experiments.

Comments

The following article discusses the 1993 White House memo where the "Kids First" policy was spelled out. The plan was to start out by insuring children and then slowly expand the coverage until everyone was covered. This is a dishonest way to implement universal health care.

http://www.politico.com/news/stories/1007/6111.html

Also, the current bill expands coverage (at the cost of tax dollars) to kids of families who can afford health insurance. Why is this okay?

If we must include non-poor kids who could afford insurance, we should make sure that the poor kids are covered first. This bill doesn't do that, either.

This bill underfunds the program in order to misrepresent the cost.

I'm glad he vetoed it. Let Congress put together a better bill.

EI

Posted by Earnest Iconoclast | October 3, 2007 2:15 PM

Apart from Dennis Kucinch, are any of the presidential candidates in favor of a single-payer health system? And since there aren't any, why is Megan posting about the horrors of a single-payer system?

Posted by Stan | October 3, 2007 2:44 PM

I agree with EI. It is deeply misleading to say that Bush's veto reveals Republican positioning as "the party that hates poor kids." Rather, the veto reveals Republican opposition to expanding a program for poor kids to middle-class Americans.

Posted by Gabriel Malor | October 3, 2007 2:45 PM

Y'all are arguing a normative judgement. I'm making a positive claim that the public will take it this way, regardless of the truth of the matter.

Posted by Megan McArdle | October 3, 2007 2:58 PM

The problem with casting this veto as motivated by fiscal responsibility is that Bush has spent nearly seven years showing that he is entirely fiscally irresponsible. Thus, it's an obvious lie. It is therefore more convincing when SCHIP proponents say "He's lying! He's really doing it because he hates kids!" Because he really is lying, even though I don't think he hates kids.

I think SCHIP is bad policy, and I don't think the federal government should have a damn thing to do with healthcare. (Plus Megan's comments on the tobacco side of it.) But vetoing it in this way is really stupid politics. Given that it's Bush, that's somewhat surprising, though Karl Rove's absence has some explanatory power.

Posted by Lorenzo | October 3, 2007 3:01 PM

It may be an unwise political decision for the Republicans to stand on principle against a policy that has already been accepted as "for the children." The Democrats have been brilliant in exploiting children in their press events to generate great public sympathy and opposition to Bush's veto threat.

But it's ridiculous to view this as solely a matter of covering children when states have systematically used federal SCHIP funds on folks who aren't children. In 2005, 47% of Rhode Island's SCHIP enrollees were adults. 56% of Arizona's were adults. And 87% of Minnesota's enrollees were adults. http://www.gao.gov/new.items/d07558t.pdf.

Posted by rrschrumjr | October 3, 2007 3:03 PM

Didn't I read in several places that studies have shown (sorry, no links off the top of my head) that for coverage at 200% of the poverty level 6 children are displaced from private insurance and placed on SCHIP for every 4 children who are added to the roles and previously were without health insurance? Didn't I also read that some 40% of eligible children below 200% of the poverty level are still UNCOVERED in New Jersey, and yet New Jersey proposes to expand their program to include individuals (not specifically children, by the by) up to 400% of the poverty level, without any requirement to first cover those under 200% of the poverty level?

This is cynical, manipulative politics of the worst kind.

Posted by bingo | October 3, 2007 3:16 PM

I didn't think it was worth discussing the fact that people are often not very smart and that "it's for the kids!" will get people worked up regardless of whether or not it's actually for the kids. For the record, I consider that to be true and obvious. Democrats will disagree with Bush, Republicans will agree and those in the middle will probably be swayed by the aggressive marketing of this decision by the Democrats and the media as punishing poor kids.

As to why Bush vetoed the bill, it probably is because he believes it's a bad bill.

EI

Posted by Earnest Iconoclast | October 3, 2007 3:48 PM

He's a lame duck with rock bottom approval ratings. How does it hurt him to veto this bill?

Posted by Christina | October 3, 2007 4:00 PM

... one of the prime effects of tobacco taxes is to reduce smoking, which means that this program's funding stream is self-defeating, and will undoubtedly require more money from general revenues.

Are you claiming that the excise tax on tobacco is on the right-hand side of the Laffer curve? (In the long run perhaps, as the tax discourages potential future smokers from picking up the habit.)

Maybe, but I'd like to see some data to back that claim up.

Posted by Brock | October 3, 2007 5:00 PM

Megan's post and the comments contain significant misinformation I'd like to correct. See http://ccf.georgetown.edu/pdfs/0928ccfchippra.pdf.
1. The program does not cover adults, except for pregnant women, and adults where they are currently covered during a two year phase out period. It limits support to 300% of the poverty level.
2. CBO estimates 84% of newly covered children would be eligible under current rules; on the other hand, Bush's funding proposal would drop insurance for about 1M children.
3. Democrats do not have to try to reclaim the mantle of fiscal responsibility. They have it. Clinton balanced the budget. When was the last time a Republican did that (not counting the year in which a Republican takes over from a Democrat, as in 2001)- Eisenhower? Hoover? As another commenter pointed out, the claim that this is about reining in spending does not pass the laugh test. I agree a tobacco tax is not optimal, but it's better than the Republican approach on Iraq, for example - stick it to the grandkids.
4. I have to admit I find the common opinion here - that making sure poor kids have insurance and stay healthy is a dastardly way to exploit them for political gain - totally bizarre.

Posted by Peter | October 3, 2007 5:15 PM

I'll second the above comment. The bill does not allow people at 400 percent of the poverty level to be covered. And it doesn't cover adults other than pregnant women--which relates, of course--to children. The bill mandates coverage for no more than 300 percent of the poverty line and sets the guideline at up to 200 percent. 200 percent is something in the order of 40k a year for a family of four. Hardly middle class.

I thought Megan was supposed to be the "smart conservative."

Posted by Patrick | October 3, 2007 5:41 PM

Peter wrote: 3. Democrats do not have to try to reclaim the mantle of fiscal responsibility. They have it. Clinton balanced the budget.

You would do well to observe that Clinton balanced the budget during the odd combination of Cold War disarmament and an unanticipated budget surplus that arrived fast and tall on the crest of a very large economic bubble. And even then, the only reason scads of money weren't pouring out of the administration was because HillaryCare didn't make it through the metal detector.

The Democrats aren't going to get a free ride on Clinton's coat tails for this one, especially not when Congress was largely Republican dominated from the middle of Clinton's first term until well into the Bush II presidency. (Ya know, Congress, the guys who actually pass budgets -- remember the 95/96 government shutdown because Clinton wouldn't cut spending as far as Gingrich's Congressional Repbulicans wanted?)

And that kind of talk certainly won't fly when Democrats were plainly demonstrating the real value of this alleged commitment to fiscal responsibility by, for example, angling toward a medicare benefit package twice as large as the enormous Part D package that Bush II actually signed. So yes, they DO need to prove that they're the party of fiscal responsibility, and not merely the party that talks about fiscal responsibility when it's politically convenient to do so.

Incidentally, what was that swipe about misinformation?

Posted by anony-mouse | October 3, 2007 5:42 PM

anony-mouse -

We may have to differ on Democrats and fiscal responsibility. I'm sure we can all agree that the Republicans are the party of fiscal irresponsibility, though.

The misinformation swipe - Megan was misinformed when she said:

"The main idea seems to be that we should expand a program aimed at poor children to cover more adults and middle class kids"

In fact, it reduces coverage for adults, and 84% of the expansion goes to currently eligible children. I'd say the main idea is that we should expand a program aimed at poor children to cover more poor children.

Posted by Peter | October 3, 2007 6:03 PM

Neither Democrats or Republicans can claim sole possession of the mantle of fiscal responsibility. It trades hands, always going to the party out of power.

Posted by SG | October 3, 2007 7:27 PM

So let me get this straight: the Bush administration does something Megan agrees with, and she is upset. Why are they doing that, she asks angrily. I guess that's why the Bush administration doesn't listen to the Megan McArdles of the world.

Posted by y81 | October 3, 2007 9:44 PM

Medicaid covers poor children. The goal of SCHIP was to cover near-poor children whose parents did not have affordable health insurance available to them.

Neither Medicaid nor SCHIP covers all the kids who qualify. There are many reasons why. Researchers have found, however, that if you offer coverage to the parents they will enroll themselves and their children.

One problem in this country is that a lot of people choose to go without health coverage. They are healthy and feel that they do not need it, or that the money it costs could better be spent on other things. Poor people eligible for Medicaid choose not to enroll because they do not want the hassle of dealing with the state welfare office. As long as people have to make an effort, however minimal, to get coverage for themselves or their children, there will be some who choose not to make the effort. Not to worry though, these folks can always go to the emergency room when they get sick, and stick the rest of us with the bill.

So now the plan is to mandate that people buy health insurance or enroll in plans subsidized by taxes. This approach could get Orwellian, but it logically follows. I think Hillary now is talking about requiring proof of health insurance as part of a job application. Why not, you have to participate in Social Security to work? Republican Mitt Romney supported and enacted a Massachusetts law that mandates health insurance.

The options are to make health care a totally personal responsibility, which seems to be what Bush, with his usual articulateness, is promoting, or to make health care a utility like drinking water or police protection, paid for out of general revenues and available to all. There is no way that most American politicians or voters are going to choose either of those options, either because they cannot stomach people dying in the streets because they did not pay their bills or because they are unwilling to pay the taxes it would take to guarantee universal coverage This has been a political football since 1965 and there is no end in sight.

Posted by Jim Linnane | October 4, 2007 5:09 AM

If Bush had a record as vetoing bills to cut or hold the line on spending, then the poor politics of the issue would not be so weighty. With the profligate record Bush actually has, then, even while he is completely correct to veto this bill on principle, his party will pay full price politically.

What a pity that Bush couldn't have displayed some backbone starting 6 years ago.

Posted by Yancey Ward | October 4, 2007 12:02 PM

So now the plan is to mandate that people buy health insurance or enroll in plans subsidized by taxes. This approach could get Orwellian, but it logically follows. I think Hillary now is talking about requiring proof of health insurance as part of a job application. Why not, you have to participate in Social Security to work? Republican Mitt Romney supported and enacted a Massachusetts law that mandates health insurance.

That’s not exactly true. Massachusetts’ individual mandate doesn’t require proof of insurance in order to work or apply for a job*. People are allowed to opt out for religious beliefs and the consequence for not otherwise complying is that you lose your personal exemption on your State income taxes (and get a monthly fine equal to have the premium of the least expensive health care plan) and the money goes towards establishing a bond up to $10,000 to be held in case you have any unreimbursed medical costs.

Also Romney vetoed the employer mandate for employers with 11 or more employees which became part of the final plan. Fortunately that will probably be overturned by ERISA when the details are finalized just like the ridiculous anti-Wal-Mart legislation that was passed in Connecticut.

Romney also favored allowing people to purchase high deductible plans with lower premiums which was also vetoed by the legislature. Which is a real pity because all of the unfunded mandates which are passed by the various States make up something like 25 to 30 percent of the premium cost which is a significant bar to making health insurance for catastrophic illnesses affordable to more people.

Where I think the final proposal made sense from a State financing perspective (and I think this is where the real savings at the State level came in) was to enroll people who were already eligible for Medicaid into Medicaid rather than letting them just go to the ER and have the State and counties just pick up the tab.

Romney also IIRC got a waiver to use some funds for people who earned too much for Medicaid but couldn’t afford health insurance and subsidized their monthly premiums to get coverage that way. It’s sort of a version of the Singapore system where instead of the government paying for health care for the poor (either directly or acting as a third-party insurer), it offers means-tested subsidies so that people can afford their own insurance.

There was a provision in the Controller Authority for employees of employers with IIRC 10 or fewer employees that allowed them to purchase insurance which they would each individually own and would be portable (again similar to the Singapore model except I believe theirs isn’t limited to the size of the employer) which IMO is where I think we ought to go long-term rather than just continuing with employer-based health insurance.

* Which is frankly one of the dumber aspects of HillaryCare unless someone thinks it makes sense to prevent people from being able to work and thereby become an even greater burden on the taxpayer.

Posted by Thorley Winston | October 4, 2007 12:02 PM

So let me get this straight: the Bush administration does something Megan agrees with, and she is upset. Why are they doing that, she asks angrily. I guess that's why the Bush administration doesn't listen to the Megan McArdles of the world.

To be fair to Megan, I don’t think she’s “angry” at the administration for vetoing the bill, I think she’s just wondering why they would do something which she thinks is going to backfire on them politically and could lead to public support for even more onerous legislation after the 2008 election.

I think her concerns are overstated because (a) most people haven’t heard of SCHIP and or likely remember the issue a year from now, (b) even fewer people are likely to change their minds about who to vote for over SCHIP, (c) Congress is going to pass continuing resolution which the President will sign to continue the program at about its current funding levels and (d) if President Bush (who has nothing to lose politically) and the principled members of Congress who vote to sustain his veto stick to his guns on this, they might just give fiscal conservatives something to rally around particularly as health care reform is going to be one of the major issues Democrats try to run on in 2008.

Posted by Thorley Winston | October 4, 2007 12:12 PM

An earlier poster incorrectly linked to this from the GAO - http://www.gao.gov/htext/d07558t.html

The most relevant sections are:

SCHIP enrollment increased rapidly during the program's early years but has stabilized over the past several years. SCHIP programs reported total enrollment of approximately 6 million individuals--including about 639,000 adults [11%] --as of fiscal year 2005, the latest year for which data were available, with about 4 million individuals enrolled in June of that year.

There are 9 states with waivers to allow SCHIP funds to be used to cover adults as well as children:

Total enrollment: Total: 1,428,576;
Total enrollment: Children: 789,922;
Total enrollment: Adults: 638,654;
Total enrollment: Adults as a percentage of total[B]: 45.

So in states that have (inexplicably) been granted the right to use funds allocated for children's health care for adults, nearly 1/2 of program recipients are adults.

Moreover, there are 18 "shortfall" states, which spent more than they were allocated under the program. 6 of these 18 were states that also covered adults. Do the math: out of 50 states in the program, 18 (36%) have shortfalls, but out of the 9 states covering adults instead of just children 6 (67%) have shortfalls. It seems very likely that overspending and "mission creep" into covering adults are related, especially when you consider that in states with waivers and shortfalls, the majority of enrollees are adults (87% in MN, 66% in WI) while in the states with waivers but no shortfall, the program still mainly covers children (76%).

State[A]: Shortfall states (6);
Total enrollment: Total: 1,112,843;
Total enrollment: Children: 588,413;
Total enrollment: Adults: 524,430;
Total enrollment: Adults as a percentage of total[B]: 55.

State[A]: Nonshortfall states (3);
Total enrollment: Total: 315,733;
Total enrollment: Children: 201,509;
Total enrollment: Adults: 114,224;
Total enrollment: Adults as a percentage of total[B]: 24.

Posted by GDM | October 4, 2007 12:54 PM

Let me see if I have this straight. This bill was vetoed because it would cause federal government paid health care. It was vetoed by a man who has federal government paid health care guaranteed for the rest of his life - no matter that he financially has no need of it. Right?

As a political move, it is hard to think of something more similar to shooting oneself in the foot. Although, admittedly, the splash will likely hit the rest of his party, not just him.

Posted by wj | October 4, 2007 3:00 PM

Apart from Dennis Kucinch, are any of the presidential candidates in favor of a single-payer health system?

Edwards.

Posted by Steve | October 4, 2007 4:07 PM

Edwards is not in favor of a single-payer health system. His plan is similar to those proposed by Clinton and Obama. Under these plans people who get medical benefits at work keep them, and people who don't get medical benefits at work receive subsidies based on their income to buy private insurance. Similar plans are used in Massachusetts, the Netherlands, and Singapore. If Governor Schwarznegger and the local Democrats can work things out, a similar plan will take effect in California in a few years. Single-payer is a straw man Megan resurrects from time to time for polemical purposes.

Posted by Stan | October 4, 2007 9:55 PM

The comments to this post (as well as the past 13 years of governance) prove something; the Republican party HATES the middle class. This was also evidenced by the way President Bush angrily utters the phrase "middle class children" with palpable vehemence in his public statements about the matter. The middle class is paying attention this time, though, so this could finally backfire.

Posted by Michigander | October 5, 2007 2:39 PM

The effect on quantity demand argument - OK, I'll bite on this point. What is your view on the elasticity of demand (the average Joe likely says this is low but some empirical research suggests Joe underestimates this) for cigarettes? And what will be the revenue shortfall? I'd be shocked if the debate over this bill didn't have some respectable economist (OK, I just excluded Art Laffer) take a guess at this?

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