A Project of The Annenberg Public Policy Center

Bush’s False Claims About Children’s Health Insurance

The president mischaracterizes congressional efforts to expand the SCHIP program.


Summary

President Bush gave a false description of proposed legislation to expand the 10-year-old federal program to provide health insurance for children in low-income working families.

He said it "would result" in covering children in families with incomes up to $83,000 per year, which isn’t true. The Urban Institute estimated that 70 percent of children who would gain coverage are in families earning half that amount, and the bill contains no requirement for setting income eligibility caps any higher than what’s in the current law. (The compromise bill that was released a few days after Bush’s press conference does rescind an administration effort to block New York state from increasing its eligibility cap to that level.)

He also said the program was "meant to help poor children," when in fact Congress stated that it was meant to expand insurance coverage beyond the poor and to cover millions of "low-income" children who were well above the poverty line. Under current law most states cover children at twice or even three times the official poverty level.

The president also says Congress’ expansion is a step toward government-run health care for all. It’s true that some children and families with private insurance are expected to shift to the government program. But the Congressional Budget Office estimates that such a shift is relatively low considering the number of uninsured these bills would reach.

Analysis

In President Bush’s Sept. 20 news conference, he expressed his displeasure with Congress’ bill to expand the State Children’s Health Insurance Program (SCHIP). Bush said he supported the program and had called for an increase in funding for SCHIP of $5 billion over five years. But both the House and the Senate have called for a much larger expansion, one that would cost an additional $35 or $50 billion, with the House calling for the larger upgrade. Bush has a threatened a veto. In explaining his opposition to Congress’ plans, however, he falsely characterized the bill in one instance and was misleading in others. (Today, congressional leaders agreed on compromise legislation that would call for the $35 billion increase. The full legislation will be available Monday.)

Covering those making $83k?

The president repeated a false charge that has been bandied about by the administration and other Republicans:

Bush: Their proposal would result in taking a program meant to help poor children and turning it into one that covers children in households with incomes of up to $83,000 a year.

In fact, nothing in either the House or Senate bill would force coverage for families earning $83,000 a year. That’s already possible under current law, but no state sets its cut-off that high for a family of four and the bill contains no requirement for any such increase. The Bush administration, in fact, just denied a request by New York to set its income cut-off at $82,600 for a family of four, a move New York Gov. Eliot Spitzer and members of Congress from the state have vigorously protested. And Bush would retain the authority to deny similar applications under the proposed legislation. An Aug. 17 letter to state health officials from the Center on Medicare and Medicaid Services outlined new guidelines for states that would make it quite difficult for states to raise eligibility above 250 percent of the federal poverty level ($51,625 for a family of four). So Bush is simply wrong to say that the legislation "would" result in families making $83,000 a year to be eligible. It might happen in a future administration, but that would be possible without the new legislation.

In fact, the vast majority of the children who stand to gain coverage under the proposed legislation are in families making half of the figure Bush gave. A study just released by the Urban Institute estimates that 70 percent of children who are projected to benefit from either the Senate or House bills are in families with incomes below 200 percent of the federal poverty level (currently $41,300 for a family of four). Our several calls to the White House press office to pinpoint exactly what the president meant by the $83k remark were not returned.

SCHIP: Who’s Eligible Now? 
 StateIncome Ceiling 
 % of Federal Poverty LevelIn dollars: Family of 4, 2007 
1New Jersey350%$72,275 
2Hawaii*300%$71,250 
3Connecticut300%$61,950 
4D.C.300%$61,950 
5Maryland300%$61,950 
6Massachusetts300%$61,950 
7Missouri300%$61,950 
8New Hampshire300%$61,950 
9Vermont300%$61,950 
10Pennsylvania300%$61,950 
11Minnesota275%$56,788 
12California250%$51,625 
13New York250%$51,625 
14Rhode Island250%$51,625 
15Tennessee250%$51,625 
16Washington250%$51,625 
17Georgia235%$48,528 
18New Mexico235%$48,528 
19West Virginia220%$45,430 
20Alaska*175%$45,185 
21Alabama200%$41,300 
22Arizona200%$41,300 
23Arkansas200%$41,300 
24Colorado200%$41,300 
25Delaware200%$41,300 
26Florida200%$41,300 
27Illinois200%$41,300 
28Indiana200%$41,300 
29Iowa200%$41,300 
30Kansas200%$41,300 
31Kentucky200%$41,300 
32Louisiana200%$41,300 
33Maine200%$41,300 
34Michigan200%$41,300 
35Mississippi200%$41,300 
36Nevada200%$41,300 
37North Carolina200%$41,300 
38Ohio200%$41,300 
39South Dakota200%$41,300 
40Texas200%$41,300 
41Utah200%$41,300 
42Virginia200%$41,300 
43Wyoming200%$41,300 
44Idaho185%$38,203 
45Nebraska185%$38,203 
46Oklahoma185%$38,203 
47Oregon185%$38,203 
48Wisconsin185%$38,203 
49Montana150%$30,975 
50South Carolina150%$30,975 
51North Dakota140%$28,910 
*Hawaii and Alaska have higher official Federal Poverty Levels than the rest of the U.S. 
Note: States that cover children through regular Medicaid in italics; Others have separate SCHIP programs 
Source: Kaiser Family Foundation

The Poor?

Bush also misstated the intent of the SCHIP program by claiming it "was meant to help poor children." That’s false as well. Poor children, defined as those in families below the official federal poverty level, were already covered by Medicaid. The stated intent of Congress when it established the program in 1997 was to expand coverage beyond those who were poor to "uninsured low-income" children. And in Washington-speak, there’s a significant difference between "poor" and "low-income."

Congress didn’t specify exactly what it meant by "low-income" in the bill that became law or the conference report that accompanied it on final passage, and reasonable people can certainly come up with different definitions. However, if one defines "low" as meaning "lower than most families make," then there is plenty of room to expand the current SCHIP program without violating the original aim stated by Congress in 1997.

Currently, the state with the highest income cap is New Jersey, where a family of four making up to $72,275 is eligible. (See chart at left for current cut-offs for all 50 states and the District of Columbia.) That’s well below the median income for a family of four in that state, which was $94,441 in 2006 according to the U.S. Census Bureau. The median means half of all families made less than that, and half made more. So even New Jersey’s ceiling for SCHIP is significantly lower than what most families in that state bring in.

The same is true for all 10 of the jurisdictions with the highest ceilings. The median income for families of four last year was $84,472 in Hawaii, $93,821 in Connecticut, $94,017 in Maryland, $71,571 in D.C., $89,347 in Massachusetts, $63,274 in Missouri, $87,396 in New Hampshire, $74,072 in Pennsylvania, and $67,884 in Vermont. So under current law even the top 10 cover only families with income that is "low" compared to most others there.

The Crowd-out Effect
 
In the news conference, the president also described Congress’ SCHIP expansion as a step toward government-run health coverage.

Bush: The proposal would move millions of American children who now have private health insurance into government-run health care. Our goals should be for children who have no health insurance to be able to get private coverage, not for children who already have private health insurance to be able to get government coverage…. Their S-CHIP plan is an incremental step toward the goal of government-run health care for every American.

It is true that the Congressional Budget Office has projected that the House and Senate bills will cause some who recently had private coverage to sign up for SCHIP or Medicaid coverage, depending on how the state administers those programs. However, Bush is being misleading by leaving out additional details about this shift. The Congressional Budget Office director said he hasn’t seen another policy proposal that would reach as great a level of the uninsured with as low of an effect on those who had private insurance.

Health care and government experts, including CBO Director Peter R. Orszag and MIT economics professor Jonathan Gruber, have said that when the government offers programs that target the uninsured, those programs will inevitably be used by some who already have or could have private insurance. Experts call this effect "crowd-out."

The House bill would extend coverage to a total of 7.5 million people, 5 million of whom are uninsured, while the Senate bill would reach 6.1 million, 4 million of whom are uninsured, according to CBO reports. The rest of those affected by the expansions would have private or other coverage. Those numbers give crowd-out rates of 32 percent for the House bill and 34 percent for Senate’s. Orszag said of the House crowd-out effect, "given the scale of the net reduction in the uninsured, it’s pretty much as good as you’re going to get. In other words, I have not seen any other proposals to reduce the number of uninsured children by 5 million with crowd-out rates that are lower than 33 percent. Again, in the absence of a mandate on an employer, or a mandate on an individual, or a mandate on state governments, CBO does not believe you’re going to do much better than these kinds of crowd-out rates."  (Our calculations show 32 percent from the CBO charts, which include numbers rounded to one decimal point.)

Orszag made those remarks at an Aug. 29 conference by The Alliance for Health Reform, where he also said that the bills included measures to minimize the crowd-out effect and that the Senate bill gave states incentives to target lower-income families. Gruber, who worked on the initial development of SCHIP, wrote in a letter to Rep. John Dingell, chairman of the energy and commerce committee, that "no public policy can perfectly target the uninsured," but that expansions like SCHIP are the most cost-effective ways of increasing health coverage.

Gruber: 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. 

As for SCHIP’s current crowd-out rate, a May 2007 CBO report said that estimates vary but that the figure is “most probably” between 25 percent and 50 percent.

The president says movement of people from private to public insurance under these bills is unacceptable, which is a matter of opinion. We feel this additional information is necessary to give a full picture of the bills’ effects.

A Better Way to Reach the Uninsured?

After the president spoke, Secretary of Health and Human Services Mike Leavitt continued to field press questions. He spoke highly of the president’s proposal to help the uninsured:

Leavitt: He made a proposal at the State of the Union that, ironically, would have — according to the Lewin Group, would have provided insurance to 4.25 million children, children who currently do not have coverage. The bill that the President will veto will — is represented to offer 2.6 million insurance. However, 1.2 million of those already have private insurance, and 900,000 of them already qualify.

We’re not sure where the 2.6 million or 1.2 million numbers come from. As we’ve said, according to the CBO analyses, the House bill would reach 7.5 million people, 2.4 million of whom had private or other coverage. The Senate bill would cover 6.1 million, 2.1 million of whom had private insurance.

We do know where the 4.25 million figure comes from: According to John Sheils at the Lewin Group, the secretary simply misspoke. The Lewin Group did not analyze the effect Bush’s proposed tax refund program would have on children in particular; all Sheils could tell us with total confidence was that “more than a dozen” children would gain insurance under the plan. The group did find that Bush’s initial proposal would reduce the uninsured by 9.2 million, a disproportionate number of whom would be well above the poverty level. For instance, 38.6 percent of the uninsured with a family income of $100,000 or more per year would become newly insured, but only 3.8 percent of those making less than $10,000 would. (Lewin uses the Census’ definition of a family, which doesn’t differentiate based on family size.) The Congressional Budget Office, meanwhile, has estimated that Bush’s proposal would lead to a net decrease of fewer than 0.5 million uninsured children.

Butt Out the Truth

Finally, the president’s interpretation of the SCHIP program’s effect on taxes needs some context. Bush said, “The legislation would raise taxes on working people.” Actually, what SCHIP would do is increase the federal tobacco excise tax on all tobacco products. The federal government puts a tax of 39 cents a pack on cigarettes, with all revenue going into the general treasury fund. The House bill would increase that tax by 45 cents, while the Senate would tack on 61 cents, with the revenue specifically funding the SCHIP expansion.

It is unclear what the president means by “working people.” But as the Congressional Research Service pointed out, an increased cigarette tax means the “burden falls heavily on lower income people.” Statistics reported by the American Heart Association showed that smoking is “highest among persons living below the poverty level.” Forty-six million adults in the country are smokers.

– by Lori Robertson and Jess Henig, with Brooks Jackson and Justin Bank

Update: On September 24, the Senate Finance Committee released the text of the compromise legislation, which went on to pass both houses of Congress that week. The CBO determined that the bill would expand coverage to 5.8 million children, 3.8 million of whom are uninsured and 2 million of whom have or have access to private health insurance. That’s a crowd-out rate of 34 percent. About 79 percent of the new enrollees qualify under the existing eligibility guidelines, the CBO report said.

Here’s what would happen to New York’s request to increase its eligibility cap to 400 percent of the poverty level: The new legislation would rescind the Aug. 17 letter from HHS that required states to meet certain requirements before they could raise eligibility above 250 percent of the poverty level. Instead, HHS would issue new requirements for states seeking to increase their caps above 300 percent. After Oct. 1, 2010, states failing to meet those requirements wouldn’t get federal funds for children above that 300 percent mark (see Sec. 116 of the bill).

Also, states that meet the requirements and extend eligibility above 300 percent of the poverty level would get a reduced federal matching rate for children in families above that 300 percent threshold. States that already have a higher cap (only New Jersey) and those that were about to put one in place (only New York) would be exempt from that federal match restriction. So, New York could increase its income eligibility cap to $82,600 for a family of four for at least two years, until late 2010, as long as the state’s plan is approved by HHS. After that, to continue getting funds for children above the 300 percent level, the state would have to meet the federal government’s new guidelines. The president has a point in that the bill allows New York to increase its eligibility cap beyond what his administration was willing to permit. But with the eligibility restrictions and incentives the new legislation puts in place, it’s misleading for the president to say the bill is “turning [the program] into one that covers children in households with incomes of up to $83,000 a year.”

Sources

United States, Congressional Budget Office. "H.R. 976, the Children’s Health Insurance Program Reauthorization Act of 2007." 24 Aug. 2007.

United States, Congressional Budget Office. "H.R. 3162, the Children’s Health and Medicare Protection Act." 1 Aug. 2007.

Alliance for Health Reform. "Who’s Counting? What is crowd-out, how big is it and does it matter for SCHIP?" Conference transcript. 29 Aug. 2007.

Kenney, Genevieve M.; Cook, Allison; and Pelletier, Jennifer. "SCHIP Reauthorization: How Will Low-Income Kids Benefit under House and Senate Bills?" Urban Institute. 17 Sept. 2007.

Baumrucker, Evelyne P.; Fernandez, Bernadette; et al. "Medicaid and SCHIP Provisions in H.R. 3162 and S. 1893/H.R. 976," Congressional Research Service. 15 Aug. 2007.

Sheils, John, and Randy Haught. "President Bush’s Health Care Tax Deduction Proposal: Coverage, Costs and Distributional Impacts." The Lewin Group. 29 Jan. 2007.