Congress battles White House over SCHIP expansion

September 1, 2007

The need to reauthorize the State Children's Health Insurance Program (SCHIP) by September 30, has evolved into a broader debate about the role of government in providing healthcare to Americans. The Bush administration wants to maintain a limited program for low-income children, while Democrats envision more open-ended coverage for more children and families.

SCHIP was established in 1997; about 6 million children are enrolled in the program, and some 2 million more are eligible. As with Medicaid, SCHIP is financed jointly by federal and state governments, but administered by states within broad federal guidelines. Since its establishment, the federal government has provided nearly $40 billion for the program, starting fairly low in its initial years and ramping up as states expanded coverage.

Plans have joined with providers, pharmaceutical companies and patient advocates in backing SCHIP reauthorization-with funding coming from a higher federal tax on tobacco. MCOs seek to avoid cuts in rates for Medicare Advantage (MA) plans, while physicians want to reverse scheduled Medicare fee reductions.

After extensive negotiating, the Senate Finance Committee approved a bipartisan plan in July to increase SCHIP funding by $35 billion over five years, which adds up to $60 billion for that period. The bill proposes providing benefits for 10 million children, while also reducing coverage for adults. Funding would come from a hike in the federal cigarette tax by 61 cents to $1 per pack.

At the same time, House Democrats proposed broader SCHIP expansion along with important changes in the Medicare program. The legislators want to boost SCHIP funding by $50 billion over five years for a $75 billion program that would cover up to 12 million children. The Children's Health and Medicare Protection (CHAMP) Act also reverses a scheduled 10% cut in Medicare payments for physicians, expands benefits for seniors, and makes changes in Part D benefits-boosting costs to about $90 billion over five years.

Funding would come from a 45-cent-per-pack increase in the federal cigarette tax, plus significant cuts in Medicare payments to managed care plans and other providers. The lower rates to MA plans would reduce enrollment from more than 8 million beneficiaries today to 5.5 million in 2012, according to the Congressional Budget Office.

VETO THREAT

Meanwhile, President Bush says he will veto legislation that expands SCHIP so extensively. The administration budget proposal for 2008 seeks to increase federal SCHIP spending by only $5 billion, to support a $30 billion program over five years. Administration officials acknowledge that enrollment would fall by 1.4 million, but that this reflects the program's original goal of targeting children in families with annual incomes less than 200% of the federal poverty level (about $33,000 for a family of three). Many states already have expanded the program to cover more children and parents, moves that the administration says "crowd out" private coverage and extend the program beyond its basic intent.

If the House and Senate can't agree on a workable compromise that avoids a White Houses veto, the legislators are expected to approve a one-year extension of the program this fall. But such a stalemate would generate accusations on all sides about abandoning healthcare for children for political purposes.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.