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What is SCHIP?

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10/09/2007

The State Children's Health Insurance Program (SCHIP) is a national program in the United States which was founded by Senator Ted Kennedy and First Lady (now a senator from New York) Hillary Rodham Clinton. The program provides health insurance for families who earn too much money to qualify for Medicaid, yet cannot afford to buy private insurance. The program was created to address the growing number of children in the United States without health insurance. When it was created in 1997, SCHIP was the largest expansion of health insurance coverage for children in the US since Medicaid began in the 1960s. The statutory authority for SCHIP is under title XXI of the Social Security Act. A proposal recently passed in the Congress to expand SCHIP from $5 billion yearly by $35 billion over five years was vetoed by George W. Bush. The veto follows changes of program administrative rules in August which make it more difficult for states to expand eligibility. SCHIP covered 6.9 million children at some point during Federal fiscal year 2006, and every state has an approved plan. States are given flexibility, and an enhanced match is paid to states. Some states have received Section 1115 demonstration authority to use SCHIP funds to cover the parents of children receiving benefits from both SCHIP and Medicaid, pregnant women, and other adults. However, the program already faces funding shortfalls in several states. In 2007, researchers from Brigham Young University and Arizona State found that children who drop out of SCHIP cost states more money because they shift away from routine care to more frequent emergency care situations. The conclusion of the study is that an attempt to cut the costs of a state program could create a false savings because other government organizations pick up the tab for the children who leave SCHIP and later need care. In a 2007 analysis by the Congessional Budget Office, researchers determined that "for every 100 children who gain coverage as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children." The CBO speculates this is because the state programs offer better benefits and lower cost than the private alternatives. A Cato Institute briefing paper estimated the "crowding out" of private insurers by the public program could be as much as 60%. The program cost $40 billion federal dollars over 10 years.