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Obama Signs Children’s Health Bill Vetoed by Bush

President Obama signed into law this afternoon a bill that is projected to extend health insurance to 4.1 uninsured children by 2013.  Obama’s signature came hours after final passage by the House and gave him a major legislative victory in the health arena.

“Since it was created more than 10 years ago, the Children’s Health Insurance Program has been a lifeline for millions of children whose parents work full-time and don’t qualify for Medicaid, but, through no fault of their own, don’t have and can’t afford private insurance,” Obama said at the signing.

“For millions of children who fall into that gap, CHIP has provided care when they’re sick and preventive services to help them stay well. This legislation will allow us to continue and build on these successes.

“But, as I think everybody here will agree, this is only the first step. Because the way I see it, providing coverage to 11 million children through CHIP is a down payment on my commitment to cover every single American.”

The signing came about 18 months after former President George W. Bush twice vetoed similar bills to reauthorize and expand the State Children’s Health Insurance Program (SCHIP). The initiative began in 1997.

The Children’s Health Insurance Program Reauthorization Act of 2009 adds $32.8 billion to the current $25 billion ongoing cost of SCHIP and Medicaid for children over the next 4½ years. Costs are expected be offset by a nearly 62-cent increase in tobacco taxes – to a bit more than $1 per pack – and by eliminating the Health Opportunity Account program under Medicaid. Health Opportunity Accounts are similar to private health savings accounts. The bill also provides financial incentives to states to enroll more uninsured children who already are eligible for Medicaid into that program. 

SCHIP is administered by states, which, on average, pay 30 percent of the costs. States also design their programs, determining eligibility, benefit packages, payment levels for coverage and administrative and operating procedures.

The Details

There has been considerable confusion in reports about details and impact of the legislation.

The legislation is projected to result in about 4.1 million more uninsured children having health coverage under either SCHIP or Medicaid by 2013. The legislation would also insure another 2.4 million children who the Congressional Budget Office estimates may have eventual access to private coverage. This, in part, fueled an argument made by some conservatives that the bill creates incentives for certain families to insure children with government programs even when they don’t necessarily need them.

The bill would also preserve coverage for the existing 7 million SCHIP enrollees. In addition, 28 million children are currently insured by Medicaid. Even after the expansion of SCHIP is completed,  between four and five million children will remain uninsured.

House Speaker Nancy Pelosi (D-Calif.), in praising the bill, along with Obama, said it will help “11 million children,” but that figure is somewhat misleading: It takes the 4.1 million uninsured children that will be covered by either SCHIP or Medicaid and adds it to the current SCHIP enrollment figure of 7 million. In reality, the bill is expected to cover 6.5 million more children on either Medicaid or SCHIP, two-thirds of whom – 4.1 million – would have been otherwise uninsured.

The Political Rift

Although the bills vetoed by Bush had enjoyed widespread bipartisan support, the Senate vote on SCHIP last week was primarily along party lines; just nine Republicans joined all 57 Democrats to support the bill. Many Republican lawmakers opposed a provision in the legislation that allows states to cover legal immigrant children and low-income pregnant women. Previously, legal immigrant children had to wait until they had lived in the U.S. five years before being eligible for SCHIP. The Bush-vetoed bills did not contain the provision, but previous House- and Senate-passed versions did. At the same time, the new legislation phases out coverage of low-income parents of children who are enrolled in SCHIP or Medicaid.  

Because the Senate-approved bill included small changes from a version that passed the House Jan. 14 – including a dental package that added small extra costs to the overall measure – the House had to vote to approve the revised legislation without amendment. The vote was 290 to 135 in favor of sending the bill to the president.

Under the new law, coverage under SCHIP will continue to be permitted for children whose families earn more than three times the federal poverty level, which currently would be $66,150 for a family of four, but at a lower matching rate to create a disincentive for states to expand coverage above that level.

Republicans, however, wanted more income restrictions. “There is no reason on Earth that a family making $63,000 per year should be covered by [S]CHIP and that a state should be rewarded with any federal matching dollars for covering these high-income children,” Sen. Orrin Hatch said in a statement about the bill.  

But Edwin Park, senior fellow at the Center on Budget and Policy Priorities (CBPP), said the issue of children from higher income families joining SCHIP has been “exaggerated.” For the most part, he said, 90 percent of states cover children at or below 200 percent of the federal poverty level.

The ‘Crowd Out’ Issue 

Some opponents said SCHIP lures too many families away from private insurance, an issue known as “crowd out.”

Robert B. Helms, a resident scholar at the conservative American Enterprise Institute who works on health policy issues, said he’s concerned that federal policies on SCHIP and Medicaid create “perverse incentives” for states to “keep gaming this any way they can … to get more federal money.” Rather than expand federal funding, Helms said he favors state reforms that cut costs through innovation so that more children can be covered by the private sector.  

Robin Rudowitz, a policy analyst with the nonpartisan Kaiser Commission on Medicaid and the Uninsured, said there’s “no way to perfectly target” the program to avoid crowd out entirely, but that the legislation tries to minimize it by simplifying eligibility rules for Medicaid and SCHIP and encouraging enrollment of the lowest income children first. Many states already have rules in place requiring SCHIP applicants to wait certain periods of time to discourage them from dropping private plans in favor of government ones, Rudowitz added.

The Campaign for Tobacco-Free Kids praised the tobacco tax increase in the SCHIP bill, saying in a statement after the Jan. 14 House vote that raising “tobacco taxes is a proven strategy to reduce smoking and other tobacco use, especially among children.” 

Contact: Read the legislation by typing “H.R. 2” into the search box at CBPP’s analyses of the two bills as introduced:


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