What Republicans Don't Understand About Health Insurance, Taxes and Children
One of the little-reported provisions in this week’s budget agreement was not short term at all. It was a 6-year extension of the Children’s Health Insurance Program (CHIP), without any major reform whatsoever. Here’s why that’s important.
CHIP, which covers roughly 9 million children, is not family friendly. One parent could be in an employer plan; the other could be in Medicaid; while the children are in CHIP. It is completely government-run. State governments choose the benefits and dictate the prices paid to providers. It is also completely inflexible. For example, parents can’t use CHIP money to buy private insurance or enroll their children in an employer plan. You can think of it as single-payer health insurance for kids.
Public opinion polls show widespread support for universal health insurance coverage, especially for children. That goal was largely achieved – even before the creation of the Obamacare exchanges. In 2012, for example, only 7% of children in the United States were uninsured, and many of those were probably non-citizens. The adult uninsured rate was three time that figure. Part of the reason is the CHIP program. But there was a better way of achieving the same goal.
There are essentially two ways to insure children in low- and moderate-income families:
- Offer a tax break to parents who provide insurance for the children but leave the parents free to choose the type of insurance: employer provision, a public program (such as Medicaid), or private insurance purchased in a competitive marketplace. Or,
- Offer a public plan, directly funded by government.
Now here is something that may come as a surprise to many readers.
It was a Republican-controlled Congress that actually created the child tax credit, in 1997 – although the effort was bipartisan and Bill Clinton was president. Interestingly, the credit amount was set roughly equal to the premium the market was charging for health insurance for children. But parents were not required to insure their children in order to claim the credit.
The very same Republican Congress that gave us the child credit also created the CHIP program, mainly for low- and moderate-income families who earned too much income to qualify for Medicaid.
At the time, Eugene Steuerle (at the liberal Urban institute) and I argued that this was a huge policy mistake. Child tax credits do nothing to spur economic growth. They have no purpose other than to expand the consumption opportunities of the parents. But why, we asked, are we giving the money to parents and leaving them free to not insure their children -- even when the insurance is free or almost free under Medicaid or an employer plan!
The credits make the parents privately better off (and they do return money to its rightful earners). But they achieve no social objective. They don’t make the economy larger and they don’t necessarily get more people insured.
Moreover, Steuerle and I argued that the health insurance problem wasn’t going to go away. If we didn’t insist that parents (who have the money) insure their children, there would be great pressure to create government provision.
And that is exactly what happened.
Fast forward to the current era – with a Republican Congress and a Republican president. And what do we have? De ja vu all over again, as Yogi Berra might say.
- In the tax reform measure passed last month, the Republicans doubled the child tax credit to $2,000, made up to $1,400 refundable – meaning that parents get the money even if they don’t owe any income taxes – and yet again made none of this conditional on the children having health insurance.
- Then in the budget agreement made this week, Republicans agreed to spend another $1,400 per year per child (or roughly that) for single-payer health insurance for children.
And all this was done with no reform. That is, CHIP isn’t required to compete with private insurance. Parents aren’t able to use their CHIP funds to enroll in a private plan. There is no expansion of Health Savings Accounts. No opportunity for low-cost, very efficient concierge (direct pay) care.
As far as health care taxes and children were concerned, it was business as usual.