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226 IRET Congressional Advisory 1 (2007)

handle is hein.taxfoundation/iretcgadv0223 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. August 1, 2007 Advisory No. 226 SCHIP REAUTHORIZATION: RENEW OR EXPAND? The State Children's Health Insurance Program (SCHIP) requires Congressional reauthorization by the end of September. Will it be renewed in its current form, or expanded to cover a much larger population? Reauthorization, expansion, two different thinms SCHIP is a popular program with the public and the Congress. No one is talking about eliminating it, or denying coverage assistance for low income children. However, one side in the SCHIP debate would reauthorize SCHIP with a moderate increase in its funding to reach more of the existing eligible population of low income children. The other side supports a large expansion of the program to bring children of higher income families under its umbrella, and extend eligibility to young adults. Oriiinal intent SCHIP was originally designed to provide insurance for children in families with incomes up to twice the poverty level. The targeted families had income too high to qualify for Medicaid, but not high enough to make insurance readily affordable. Many states requested and were granted waivers to expand coverage to children in families with incomes up to 300 percent or 350 percent of poverty. Some states included large numbers of adults in their programs. These states have covered additional populations even though they have not fully enrolled the children in the original target group of poorer families. A number of states overspent their allotments due to their more generous eligibility rules, and have received matching funds from Congress to help cover the over-runs. Expansion of SCHIP in the Senate and House bills A simple extension of SCHIP would cost about $5 billion a year, or about $25 billion over five years in the baseline outlays. The Administration has recommended an increase to a bit over $30 billion. The Senate Finance Committee SCHIP bill would increase coverage to families with incomes up to three times the poverty level. The SCHIP expansion provisions of the bill would require an increase in outlays beyond the baseline of $28.1 billion over five years, and $26.5 billion over ten years. The ten year increase is less than the five year increase because the bill assumes, unrealistically, that the expanded eligibility will sunset at the end of the five years. Counting Medicaid interactions, the additional cost would be $32.8 billion over five years, and $64.9 billion over ten years. The Congressional Budget Office (CBO) scores the Senate bill as being fully funded over the ten year budget window (2008-2017), but that budget neutrality is achieved by a gimmick in the bill. The tobacco tax increase that is the main source of funding for the bill (see below) is assumed to be permanent, but the expanded income limits on g~*m 6 I 86~ 6 ~e

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