FACT SHEET | November 14, 2007

President Bush Threatens to Veto Kids' Health Care...Again

The Children’s Health Insurance Program (CHIP)_[1]has played a crucial role in helping to reduce the rate of uninsured low-income children over the past ten years. By every measure, CHIP is cost-effective, and has been shown to work well in meeting the basic health care needs of our nation’s children. Although the President’s arguments against the legislation to renew CHIP are unfounded, Democrats and Republicans have worked together to produce a revised CHIP reauthorization bill to address the concerns of the President and those Republicans who opposed the original reauthorization bill. Congress has overwhelmingly approved this updated CHIP legislation, which would invest significant new federal resources into the program and cover millions more low-income uninsured children who are eligible for CHIP and Medicaid, but whose families cannot afford private insurance. 

Despite the overwhelming support for this legislation and the promise it offers to our nation’s children, President Bush has threatened to veto it. This latest veto threat, along with the President’s continually-shifting veto rationale, make it clear that the President has no intention of signing legislation to strengthen CHIP. As a result, millions of children stand to lose access to doctors, life-saving prescription drugs, immunizations, preventive screenings and the basic medical care necessary to start life healthy. 

Because of CHIP, millions of children who would otherwise be uninsured now have coverage. CHIP was created in 1997 to provide health insurance coverage to children who would otherwise be uninsured. The program is targeted to low-income families who do not qualify for Medicaid, but are unable to afford private insurance. Most newly-enrolled children were previously uninsured or recently lost their Medicaid or private health coverage._[2]The program has made great strides in covering uninsured children. While the number of uninsured adults has increased, the percentage of low-income children without health insurance dropped by more than one-third from 1997 to 2005 (from 23 to 4 percent)._[3]It is clear that without CHIP, the number of uninsured children would be far greater. 

CHIP has been effective at providing children with better access to quality medical care and improved outcomes. Since its inception, CHIP has been an important health care safety net for children.A report published in May by the Kaiser Commission on Medicaid and the Uninsured discusses the benefits to children of having CHIP coverage: Children covered by CHIP and Medicaid have far better access to preventive and primary health care than uninsured children; they are much more likely than uninsured children to have a usual source of care, thereby increasing the quality and continuity of their care. Enrollment in public coverage is associated with improvements in quality of care, and improved health outcomes. Studies have also found an association between enrollment in CHIP and improved school performance, including increased school attendance, greater ability to pay attention in class, and increased ability to participate in school and normal childhood activities. 

CHIP combines the best of public and private approaches to provide health coverage to children. CHIP is not an entitlement program, but rather, a capped block grant program for states. The program also affords states great flexibility to offer coverage as they choose. In fact, the great majority of CHIP programs are modeled after private insurance and use private plans to deliver benefits._[4]CHIP’s structure in most states is similar to the Medicare prescription drug benefit, in which federal benchmarks and funds guide a program administered largely through private insurers. 

The program is helping the lower-income families it is meant to serve. A May 2007 study by the Congressional Budget Office (CBO) found that CHIP has reduced by 25 percent the number of uninsured children in lower-income families (i.e., those with family income between 100 and 200 percent of the federal poverty level),the very population the program is meant to target. A recently released status report of the program prepared for the Centers for Medicare and Medicaid Services (CMS) by Mathemematica Policy Research, Inc. has, again, affirmed that millions of uninsured children have become insured through CHIP, and that by far the greatest gains in insuring children have been made among children in low-income working families. Approximately 6.6 million children had coverage through CHIP last year._[5]Of those children, ninety-one percent were in families living at or below 200 percent of the federal poverty level, and nearly 70 percent of all CHIP-covered children live in families at or below 150 percent of the federal poverty level._[6]

Despite CHIP’s success, the gains in coverage achieved under the program have been offset in recent years by a decline in employer-sponsored health insurance. With the increasing decline in employer-based health care coverage, the number of uninsured children is increasing. More than half of all workers in poor families and over one third of those in near-poor families have no offer of job-based coverage in the family._[7]Moreover, working parents have been experiencing a decline in employer-sponsored health insurance. Fewer than half of parents in families earning less than $40,000 a year are offered health insurance through their employer – a nine percent drop since 1997._[8]Researchers at the Urban Institute have estimated that approximately 80 percent of the uninsured children between 200 percent and 300 percent of the federal poverty level live in families where their parent does not have access to an employer-sponsored plan that covers children._[9]As employer-sponsored health insurance coverage has eroded, the number of uninsured children has increased since 2005. Last year, the number of uninsured children grew by 710,000 to reach 9.4 million._[10]These numbers underscore the need for Congress to provide sufficient funding for CHIP to ensure that uninsured children whose parents work hard can obtain the health coverage and care they need. 

When employer-sponsored coverage is offered, it is becoming increasingly unaffordable for many families. Since 2001, premiums for family coverage have increased 78 percent, compared to a 19 percent increase in wages and a 17 percent increase in overall inflation._[11]When premium growth outpaces increases in wages and inflation, workers typically have to spend a greater portion of their income each year in order to maintain coverage._[12]The widening affordability gap is also apparent when insurance costs are compared to changes in the federal poverty level, which is the measure states use to set eligibility levels for CHIP. The federal poverty level is adjusted each year to account for inflation; since 1997, it has grown by 24 percent. During this same period, however, premiums for family coverage grew by more than 100 percent._[13]The average premium for a family of four topped $12,000 in 2007, with the average family contribution of over $3,200. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by approximately $1,500 dollars._[14]All of this underscores the fact that there is a very real need to invest more resources in CHIP, as more and more families are unable to afford coverage on their own. 

That is why CHIP reauthorization legislation would invest $35 billion in new funding for CHIP, extending coverage to 3.9 million children. The updated bipartisan CHIP bill would invest $35 billion over five years to strengthen CHIP’s financing, increase health insurance coverage for low-income children, and improve the quality of health care children receive. According to CBO estimates, the updated bill would extend coverage to 3.9 million children who would otherwise be uninsured. The updated bill would also do even more of what opponents to the original bill say it should: 

• Targeting low-income children. The legislation would do even more than the original bill to target low-income uninsured children for outreach and enrollment. The new bill would provide incentives and tools to states to enroll the lowest income children, providing bonus payments to states only for identifying and enrolling the poorest children (those in the Medicaid program). 
   
• Phasing out coverage of adults. The new CHIP bill would prioritize children’s coverage by transitioning childless adults -- currently covered through Bush Administration waivers -- off of CHIP more quickly. Specifically, the bill would require states to transition childless adults out of CHIP coverage within one year. As in the original bill, the new bill would still prohibit any new program waivers to cover parents. States that have already received waivers from the Administration to cover parents would be allowed to transition them into a separate block grant with a reduced federal matching rate. The new bill would also retain the existing prohibition of program waivers to allow coverage of childless adults. 
   
• More strictly limiting coverage to low-income Americans.The new CHIP bill would prohibit states from receiving CHIP funding for children in families above 300 percent of the federal poverty level (approximately $63,000 for a family of four). As in the original CHIP bill, for children between 200 and 300 percent of the federal poverty level, the bill would maintain current law regarding children’s eligibility for the program, where interpretation and approval of appropriate income levels for eligibility remains an Administration decision.
   
• Implementing stronger measures to preclude CHIP coverage from replacing private coverage that may be available. The new legislation would require every state to develop a plan to cover the lowest-income children first, and take steps to prevent substitution of CHIP coverage for private coverage. The bill also includes new provisions to encourage states to help parents enroll children in employer-sponsored coverage when it is available. 

President Bush’s approach would do nothing to combat the rising number of uninsured children and would cause over a million children to lose their existing coverage. The President’s budget would have Congress ratchet back CHIP coverage, limiting it to children in families earning no more than twice the federal poverty level. The President has also called for a reduction in the federal matching rate for children in families with incomes above 200 percent of the federal poverty line. If adopted, not only would the President’s proposals fail to make any headway towards covering the nation’s nine million uninsured children, but his approach would also effectively cut off health coverage for 1.4 million children and pregnant women._[15]

Proposals to extend CHIP at current funding levels would result in significant state funding shortfalls and cause hundreds of thousands of children to lose their existing coverage. CBO estimates that an additional $13.4 billion is required just to maintain coverage for children currently enrolled in CHIP._[16]According to a recent report by the Congressional Research Service, if the program were to be extended at its current funding levels, 21 states would face funding shortfalls this Fiscal Year, with eight states running out of CHIP funds as early as March of next year._[17]According to CBO estimates, 700,000 children stand to lose their existing coverage if CHIP were to continue at its current funding level._[18]

The President’s claims about the CHIP legislation are inaccurate. President Bush’s main criticisms of the new CHIP legislation are that it allegedly does not focus on poor children; would move children from private health insurance into government coverage; and would allow, even encourage, CHIP to cover undocumented immigrants. These allegations are simply false. 

• The new CHIP legislation would further increase the program’s focus on the very low-income children the President says he wants to target. As described above, the new CHIP bill would provide incentives to states to enroll the lowest income children, and would prohibit any CHIP coverage above 300 percent of the federal poverty level (except for the one state that already covers children above that income level). The bill also explicitly prohibits coverage of any childless adults under the program after one year. Republican Senator, Charles Grassley, a key architect of the bill, specifically refuted the President’s mischaracterization of the new CHIP bill in an October 25, 2007 press release. According to Senator Grassley, the new CHIP bill: 

“…made improvements to the previous compromise legislation by providing health coverage for an additional 4 million low-income uninsured children, accelerating the phase-out period for childless adults who were added to the program through administration-approved waivers, placing a hard cap of 300 percent of the federal poverty level for program eligibility, and providing states with bonus payments only for covering the poorest of the poor children who are eligible for Medicaid.”

• The great majority of the uninsured children covered under the new CHIP legislation would have family incomes below the current eligibility limits that states have set. According to CBO, about 3.4 of the 3.9 million uninsured children (approximately 87 percent) who stand to gain coverage under the new CHIP reauthorization legislation would have family incomes below the current eligibility limits that states have set._[19]
   
• CBO has affirmed the effectiveness of the citizenship verification requirements in the new CHIP legislation.CBO Director, Peter Orszag, said the following about the new CHIP bill in an October 30, 2007 interview with Congress Daily, 

“Virtually all of the people who will be picked up are citizens. Any verification system will not be absolutely airtight perfect…. Our analysts believe there wasn’t a problem to begin with.”

Dr. Orszag further commented that the citizenship verification requirements in the most recent version of the CHIP bill, “are probably as good as you’re going to get.”

• The CHIP legislation’s approach is the most cost-effective and efficient mechanism to reduce the number of uninsured children.CBO director Peter Orszag and leading health policy experts have explained that virtually any effort to cover more of the uninsured would result in some “crowd out” (that is, the substitution of one type of health insurance for another). In testimony before the Senate Finance Committee on July 19, 2007 regarding the Senate’s CHIP bill (the same approach adopted by the latest CHIP legislation), Dr. Orszag remarked: 

“In the absence of a mandate, a mandatory system on employers, individuals, or states -- so in a voluntary system where you are trying to provide an incentive to reduce the number of uninsured children, I think this approach is pretty much as efficient as you can possibly get per new dollars spent to get a reduction of roughly 4 million uninsured children.”

• Under approaches promoted by the Bush Administration, the large majority of benefits would generally go to people who already have insurance.A recent analysis by Professor Jonathan Gruber of MIT of the health insurance tax proposals included in the Bush Administration’s budget last year found that 77 percent of the benefits would go to people who were already insured._[20]That is more than double CBO’s estimates of the crowd out percentage under the bipartisan CHIP reauthorization legislation._[21]In a February 28, 2007 letter to Representative Dingell, Professor Gruber further noted: 

“I have undertaken a number of analyses to compare the public sector costs of public sector expansions such as SCHIP to alternatives such as tax credits. I find that the public sector provides much more insurance coverage at a much lower cost under SCHIP than these alternatives. Tax subsidies mostly operate to “buy out the base” of insured without providing much new coverage.”

The Bush Administration has previously supported the very efforts it now strives to undermine.The Bush Administration has previously supported investing in CHIP and increasing enrollment of children into the program:

• During the 2004 presidential campaign, the President promised a major outreach campaign to enroll children in CHIP and Medicaid – exactly what the bill he is now threatening to veto seeks to accomplish:

“America’s children must have a healthy start in life…. In a new term, we will lead an aggressive effort to enroll millions of poor children who are eligible, but not signed up for the government’s health insurance programs. We will not allow a lack of attention or information to stand between these children and the health care they need.”

·Touting the benefits of state flexibility to set eligibility standards, the Bush Administration has also supported states’ efforts to cover additional children above 200 percent of the federal poverty level – continuing even this year to approve waivers of CHIP rules to allow states to expand coverage up to 300 percent of the federal poverty level._[22] In July 25, 2006 written testimony before the Senate Finance Committee, then CMS Administrator, Mark McClellan explained: 

“The program provides each state with the flexibility to design its program within broad federal guidelines in order to best meet the unique needs of the children and families it serves, and the circumstances of health insurance in the State. This flexibility has helped make SCHIP a clear success…. SCHIP gives states the ability to adjust the program’s coverage to reflect the particular needs and economic circumstances of the populations served, and to use new and creative approaches to provide health insurance coverage effectively.” 

President Bush is constantly changing his rationale for opposing CHIP legislation. The President continues to change his reasons for opposing CHIP legislation. Most recently, the President said he would veto any CHIP measure that includes a tobacco tax. Not only is this position –protecting big tobacco instead of covering America’s children – morally reprehensible, it virtually ensures that the President will not support any CHIP bill that will cover additional uninsured children, as Congress overwhelming supports a tobacco tax as the mechanism to fund additional coverage. 

By constantly changing his rationale for opposing CHIP, and making unsubstantiated claims about the bill, the President has made it clear that his goal is not to provide America’s uninsured children with the health care they need, but to stand in the way. The 69 senators, 43 governors, hundreds of organizations, and the vast majority of the American people who support the bipartisan CHIP reauthorization legislation will continue to oppose President Bush’s misguided approach – and strive to give our nation’s uninsured children the promise of a healthy start in life. 

DPC