Republicans Hit Healthcare Rift

The Wall Street Journal © 5/3/07
By David Rogers

Providing health insurance for poor children is an issue that has dogged President Bush from his days as Texas governor to these years late in his White House term, when he is facing a Democratic Congress eager to expand coverage to more families who can't afford it.

The issue will come to the fore again this summer in a tug of war over the future of the State Children's Health Insurance Program, a federal block-grant program that complements Medicaid coverage of the very poor. Created in the wake of overhauling welfare in the late 1990s, "S-chip" targets the children of working families just above the poverty line and has grown to be immensely popular -- and more costly as well.

After being pummeled with criticism during his 2000 White House run that he had been slow to help to uninsured children in Texas, Mr. Bush set about as president to make his mark on S-chip early. The new administration aggressively encouraged states to experiment, and even to cover parents if that helped sign up children. Enrollment rose by almost a third under then-Health and Human Services Secretary Tommy Thompson, another former governor -- from Wisconsin. Records indicate that in its first six years, the Bush administration approved close to two-dozen waivers giving states greater flexibility, such as expanding eligibility, with the federal funds.

But now, with S-chip up for extension in October, Mr. Bush has changed course. Most independent analysts agree that his fiscal 2008 budget won't cover the cost of S-chip's current enrollment, and program coverage for adults would be rolled back in about a dozen states. Administration officials concede the budget is also an ideological statement: that too much government support risks crowding out private-sector insurance alternatives Mr. Bush wants to promote. But by not providing greater funding for S-chip, the White House risks sacrificing credibility in one of the biggest health-care policy debates this year.

Most striking is the juxtaposition between Mr. Bush's latest stance and the Republican presidential field, which includes several former governors. Former Arkansas Gov. Mike Huckabee won a waiver for his state to begin a still-fledgling program covering adults. "I think it's a terrible idea to do that," he says of efforts to tighten the rules to exclude parents. "If you stabilize that child's family, you are helping the child. We're not exactly doing anything good for kids where their parents can't get coverage."

"I support the program," says Mr. Thompson, the former HHS secretary now trying to mount an underdog presidential campaign in Iowa. "We approved a lot of waivers," he recalls.

One went to Massachusetts when yet another 2008 presidential contender, Mitt Romney, was governor there. "Current funding issues with the S-chip program, including any changes in the formula, should be dealt with by Congress," Mr. Romney says.

And Arizona, home to Sen. John McCain, already covers about 14,000 parents under an S-chip waiver. The McCain presidential campaign is considering a proposal to greatly expand S-chip nationally by allowing automatic enrollment for any child who meets the same income tests applied in the federal school-lunch program.

Medicaid Director Dennis Smith sees no contradiction between the president's budget and earlier waivers. He said states were warned that they could expand aid eligibility only as far as their annual federal allotment would carry them. HHS also notes that there is more money in the system than it now appears because some states haven't spent all their grants.

At the heart of the fight is, not surprisingly, money: Washington actually provides a more generous federal match than it does for Medicaid, the state-federal entitlement program for the poor. The percentages vary, but a state paying a 50-50 share under Medicaid might only pay 35% under S-chip.

The second reality is that covering children has become ever more attractive politically as the number of uninsured Americans rises. Major business lobbies have joined coalitions with labor groups this year to run ads supporting more funding for S-chip; virtually every Democratic health plan offered in Congress begins with some expansion of the program.

The danger is that the two sides will fail to engage and be unable to deal effectively with a program that will always need fine tuning. Just as the president's budget appears to underfund S-chip, Democrats are accused of overreaching in wanting to add as much as $50 billion to the program over the next five years.

S-chip's initial slow growth hid its financial problems for a time. States that outspent their allotment could tap into unused funds. But aggregate spending now exceeds available federal funds, leading some states with shortfalls to ask Washington to make up the difference.

With Republicans controlling Congress, lawmakers provided an additional $283 million to cover S-chip's shortfall last year. This fiscal year, with Democrats in the majority, Congress is proposing to cover an estimated $650 million shortfall.

Part of the confusion about S-chip spending results from enrollment estimates that fluctuate widely, depending on how the numbers are counted. If enrollment is measured for a fixed month -- from year to year -- the number is close to four million. But if all participants are counted, including everyone who goes in and out of the program in the course of a year, the cumulative total in 2005 was 6.1 million, according to the Government Accountability Office.

The House Energy and Commerce Committee expects to take up the issue in June, and Democrats have set their sights on covering as many as six million more children and teenagers who qualify but aren't yet covered. It will be a major test of new "pay-go" rules requiring that any new spending be matched by new revenue or cost savings to keep the package deficit-neutral. Given the president's posture, Democrats fear it will be that much harder to get the bipartisan cooperation needed to make these tough budget decisions.

Watching from Wisconsin is the state's Medicaid director, Jason Helgerson. "States that cover adults have higher success rates in signing up their kids," he says. But without the extra S-chip funds to help cover his state's adults, Wisconsin would face $6.7 million more in annual costs. "We're concerned about anything done at the federal level that impacts our ability to cover uninsured families," he said.

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