Democrats are using the skills of a consummate con man in the debate over extending the State Children’s Health Insurance program (SCHIP). You rarely see shell games being played anymore on the streets of American cities, but Democrats have kept the concept alive by focusing attention on the authorized cost of the program over the next five years, while ignoring the long-term shortfall — a classic bait and switch.
It seems likely that the House Democrats, who passed a bill on Aug. 1 that coupled an enormous SCHIP expansion with a series of Medicare cuts, will pass something very much like the Senate’s ostensibly smaller bill. But the Senate bill has a catch. While the Congressional Budget Office scores its $35 billion SCHIP expansion, paid for with a 61-cent-a-pack increase in federal tobacco taxes, as revenue-neutral over five years, Democrats are forced to use a transparent budget gimmick — an absurd “cliff” in the funding level — to make the legislation look fiscally sound past the five-year mark.
In order for the Democrats’ math to work, the SCHIP program will spend more than $8.4 billion in 2012, and then drop to only $600 million in 2013. Their plan essentially puts a gun to the head of a future Congress, which will face a simple choice: radically increase SCHIP funding or let millions of American children lose their health coverage.
For the next five years, under the Democrats’ scheme, states will have an inducement (in the form of a rich pot of federal dollars) to sign up as many people as possible for SCHIP. Some of those people will be the needy children the program was initially designed to help, but many will also be middle-class families — families that already have private health insurance, or could afford to buy it, but prefer the subsidized government coverage. Remember, the Bush administration and House Republicans have tried to make sure SCHIP covers poor children first by requiring that states focus their efforts on children in families with incomes of up to 200 percent of the federal poverty line (about $42,000 a year). Democrats have rejected those efforts. Democrats seem determined to use tax dollars to lure middle-class families into government-run health care.
What happens in the sixth year, 2013, under the Democrats’ plan? The projected SCHIP spending will drop by 92 percent. After five years of federal spending distorting the private health-insurance market, it will likely be impossible for families who will lose the SCHIP money to find affordable private coverage. When Republicans and Democrats — working together — created the SCHIP program in 1997, we made sure it had 10 years of stable funding. Democrats should follow that example, instead of endangering health coverage for millions of children.
Finally, paying for an expanding government program with a declining revenue stream is simply bad policy. The number of smokers in this country has been declining for decades, and a tobacco tax increase will cause tobacco consumption and the resulting tax revenue to decrease even more sharply. In fact, a study by the Heritage Foundation estimates that funding the SCHIP expansion with tobacco taxes would require 22 million new smokers over the next 10 years.
Tobacco taxes fall hardest on the working poor — the very people who SCHIP was originally designed to help. According to the Campaign for Tobacco-Free Kids, 32.9 percent of adults who are below the poverty level smoke, compared to 22.2 percent of adults who are at or above the poverty level. Under the Democrats’ proposal, a working family in which both parents smoke two packs a day (which is not uncommon in a country where one in five adults smoke) would face more than $1,460 a year in total federal tobacco taxes — double what they now pay, and $234 more annually than under the original House-passed SCHIP bill. And that cost is on top of state and local tobacco taxes, which total $3.66 per pack, for example, in Chicago. That adds up to $5,343 a year for that theoretical working family.
There is a better way. House Republicans, led by Energy and Commerce Chairman Joe Barton of Texas, have introduced an SCHIP reauthorization bill that will increase the programs’ funding and keep the focus where it belongs, on helping low-income kids. The Democrats’ bill is a Trojan horse, cynically exploiting our desire to help needy children in a stealthy attempt to create a massively expensive government health system.
Rep. Jim McCrery of Louisiana is the senior Republican on the House Ways and Means Committee.