Covering Uninsured Children in the State Children’s Health Insurance Program

Source: Congressional Budget Office

SCHIP has significantly reduced the number of low-income children who lack health insurance. According to the Congressional Budget Office’s (CBO’s) estimates, the portion of children in families with income between 100 percent and 200 percent of the poverty level who were uninsured fell by about 25 percent between 1996 (the year before SCHIP was enacted) and 2006. In contrast, the uninsurance rate among higher-income children remained relatively stable during that period. The difference probably reflects the impact of the SCHIP program.

The states’ outreach efforts and simplified enrollment processes for SCHIP appear to have also increased the share of eligible children who participate in Medicaid–and contributed to a decline in the percentage of children below the poverty level who are uninsured.

The enrollment of children in public coverage as a result of SCHIP has not led to a one-for-one reduction in the number of low-income children who are uninsured, however. Almost any increase in government spending or tax expenditures intended to expand health insurance coverage will displace private coverage to some degree. In the specific case of SCHIP, the program provides a source of coverage that is less expensive to enrollees and often provides a broader range of benefits than alternative coverage. As a result, the program displaces–or “crowds out”–private coverage to some extent. On the basis of a review of the research literature, CBO has concluded that for every 100 children who gain public coverage as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children.

CBO’s analysis of the Children’s Health Insurance Reauthorization Act of 2007, as passed by the House of Representatives, suggested that the legislation would result in 5.8 million children gaining coverage under Medicaid or SCHIP in 2012. Of that increase, CBO estimated, 3.8 million children would otherwise have been uninsured, and 2.0 million children would otherwise have had private coverage. In other words, about one-third of the children who would be newly covered under SCHIP and Medicaid would otherwise have had private coverage. That crowd-out rate is probably about as low as feasible for a voluntary program to increase coverage among children, given the size of the proposed expansion. (Policies to reduce the rate below that level would most likely also reduce the number of children enrolled in the program who would otherwise be uninsured.)

On August 17, 2007, the Administration issued a directive to state health officials that imposes certain minimum requirements on states seeking to enroll children in SCHIP whose families have income above 250 percent of the poverty level. CBO’s analysis suggests that the directive’s impact on enrollment is likely to be modest under current law, given the way the Administration appears to be implementing it and, more important, given the funding levels assumed in the baseline. The directive could have a substantially larger impact on enrollment in SCHIP if the Congress expanded the program significantly.

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