Howard Rich's Blog

January 19, 2009

SCHIP & The States: Another Bailout Boondoggle


By Howard Rich
Chairman of Americans for Limited Government

It’s a typical Washington elixir.

When bad press for multi-billion dollar bailouts has got you down, there’s nothing quite like a government program “for the children” to put things right again – particularly when the new President needs a quick victory to get his “Era of Bigger Government” off to a successful start.

Such is the drama surrounding the “reauthorization” of SCHIP, the State Children’s Health Insurance Program, which passed in 1997 ostensibly in lieu of socialized national health care and will be “re-upped” after President-elect Barack Obama takes office this month.

Never mind that the program is unsustainable. And bankrupting the states. And not insuring who it claims to be insuring – all those are things that can be worked out later, right?

After all, we’re only $10 trillion dollars in the hole, with another $10 trillion pledged over the last four months alone to help us avoid an “economic Pearl Harbor.”

If money grows on trees, as our leaders evidently believe that it does, why not blow billions more of it on a program that’s not only failing its mission, but doing something government shouldn’t even be doing in the first place.

Since its inception, SCHIP has been a case study in everything that’s wrong with government – another example of feel-good rhetoric and lofty promises paid for with your money, except the rhetoric never matches the reality and the promises are always too good to be true.

Although its proponents are quick to throw up pictures of starving inner city children, the fact is that SCHIP has insured millions of adults, and middle class families over the past decade.

In some cases, SCHIP recipients were earning 300% of the poverty level.

This was famously exposed in 2007, when Democrats selected a middle school student named Graeme Frost to deliver the rebuttal to President George W. Bush’s veto of SCHIP reauthorization, only to discover later that the boy attended a $20,000 a year school and his family lived in a 3,000 square foot home valued at over $400,000.

And who pays the most for SCHIP? A disproportionately high number of poor smokers – the very people the program is supposed to be serving.

And on top of that, a recent Heritage Foundation report recently showed that 22 million people will have to take up smoking in America over the next decade or else the program will go bankrupt.

How many of those people will be classified as low-income?

Then there’s the biggest fraud of them all – the fact that SCHIP is cannibalizing the private sector to the tune of 6 out of 10 beneficiary recipients. That’s right, evidence shows that only 40% of SCHIP recipients are actually uninsured – a pretty amazing number when you stop and think about it.

Frankly, this defeats the whole purpose of the program, unless of course we want to start subsidizing this expense for people who can already afford it.

Not surprisingly, the 60% figure is higher than the government will admit, but not by much.

Even the Congressional Budget Office acknowledges that “for every 100 children who gain coverage as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children.”

Why is this relevant now?

Well, government simply can’t afford to continue unsustainably spending money on non-core functions, like providing health insurance to people who already have it.

Nor can it afford to bail out the states on SCHIP to the tune of tens of billions of dollars, which is what numerous governors are currently asking for.

Government must return to its core functions and get out of the business of subsidizing everything that comes along with a “for the children” sign on it.

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