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States that Use SCHIP to Cover Adults Face Funding Shortfalls – Pacific Research Institute

States that Use SCHIP to Cover Adults Face Funding Shortfalls

Government Accountability Office (GAO) report finds states that use the State Children’s Health Insurance Program (SCHIP) to cover adults are more prone to funding shortfalls than those that only cover children.
Health care policy analysts say the report provides more evidence the SCHIP program is in need of extensive reform.

GAO compiled data on 10 states that used SCHIP funds to cover adults in 2007 and assessed how those states structured their programs, their enrollment and expenditure levels, and how they went about attracting eligible individuals.

Six of 10 Overspent

GAO found six of 10 states using SCHIP to cover adults faced funding shortfalls in at least one of the past three years. Those shortfalls required the states to request federal matching funds for SCHIP in excess of those allotted to them for the program.

According to the report, released in November, “Illinois and New Jersey, states with above-average enrollments of both children and adults, accounted for nearly half (47 percent) of the $932 million shortfall projected for 2007 for states nationwide.”

Adults accounted for widely varying proportions of total expenditures in the states that used SCHIP to cover them. In one state those expenditures amounted to 1 percent of total SCHIP spending, but in five states they accounted for more than 50 percent of total program costs.

All told, SCHIP-funded expenditures for adults nationwide “totaled about $674 million in 2006,” the last full year included in the report.

Crowding Out Private Coverage

Analysts said the report provides more evidence the SCHIP program needs to be revised to serve its original target audience.

“The problem with SCHIP, from the outset, is that it crowded out private coverage and encouraged parents to drop their own coverage in favor of free or discounted health insurance for the kids,” said J.P. Wieske, director of state affairs for the Council for Affordable Health Insurance.

“States responded by adding parents, forgetting that this was a children’s health insurance program,” Wieske continued. “GAO also reports 25 to 50 percent of enrollees already had private coverage, so the program is providing insurance for many of the already-insured.”

Even more troubling, according to Wieske, 13 percent of the uninsured in the U.S. are children who are already eligible for SCHIP. At an average cost of $110 per month per child, the money is being wasted as states use the money to cover others whom Congress did not intend to put under the program’s auspices.

“It has become a program for the middle class at the expense of the poor,” Wieske said. “If you can’t give health insurance away for free, the government has a serious problem on its hands.”

Picking Taxpayers’ Pockets

“This report shows that President Bush has been absolutely correct to limit federal matching funds to states unless they enroll 95 percent of eligible children in SCHIP before they enroll adults,” said John R. Graham, director of health care studies at the Pacific Research Institute, a San Francisco-based think tank.

Without that discipline, Graham said, states will continue to belly up to the federal Treasury and pick the taxpayers’ pockets.

“The program should be torn down and rebuilt,” said Wieske. “It should be refocused on poor children, and allow their parents to use a subsidy to buy them private coverage or to purchase dependent coverage under a group or individual plan. Government-run insurance should be only a last resort.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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