Grassley statement on SCHIP during Finance subcommittee hearing
Opening Statement of U.S. Senator Chuck Grassley of Iowa
Ranking Member of the Committee on Finance
Hearing of the Subcommittee on Health Care
Wednesday, April 9, 2008
Thank you, Mr. Chairman. As you know, last year's effort on the reauthorization of the State Children's Health Insurance Program was a very difficult process, but it was a bipartisan process. Members from both sides of the aisle made compromises and we ended up with a bill that passed the Senate with 67 votes.
I’m surprised and disappointed that the first effort in the second half of the 110thCongress was to abandon that bipartisan approach. This is the first partisan hearing on a healthissue during my tenure on the Senate Finance Committee. That is very disappointing. TheSenate Finance Committee has a reputation for being a very functional and bipartisan committee.So I hope this will also be the last partisan hearing that we have.
That being said, I am certainly supportive of efforts to have Member's questionsanswered. I am hopeful that this hearing will result in Members getting answers to questionsthey have about the State Health Official Letter sent by the Center for Medicare and MedicaidServices (CMS) on August 17 of last year.
I don't have a fundamental disagreement with the goal of the August 17 directive. WhileI do have some questions about how the policy would work, I think the intent is laudable.Before a state can expand to cover kids with higher incomes, they have to cover their poor kidsfirst. It makes absolutely no sense to me that a state that's not covering poorer kids shouldexpand their programs to cover higher income kids.
States should be covering their lower income kids first. It's just common sense. Andbeyond just being common sense, we also know that coverage of higher income kids leads towhat we call crowd-out for kids with private insurance.
Think about it for a second: if we don't require states to cover their low income kids first,a state can cover a higher income kid while lower income kids still go without coverage. Andsuch a state would be devoting resources to finding and covering that higher income kid and thenanother higher income kid could lose private coverage to the crowd-out effect. And when taxdollars are spent to provide coverage to someone who was already covered, that doesn't makeany sense either. It is not an effective use of scarce federal dollars. Letting that continue makesno sense whatsoever.
I am pleased that this hearing includes witnesses who will testify on the underlying issueat the core of the August 17 directive. That is the issue of "crowd out." Crowd out occurs whenfamilies give up or do not take private health insurance in lieu of enrolling in public coverage.
As we learned from the excellent report from the Congressional Budget Office, crowdout is a particularly acute problem in SCHIP because crowd out occurs more frequently at higherincome levels. The report also concludes that "in general, expanding the program to children inhigher-income families is likely to generate more of an offsetting reduction in privatecoverage…than expanding the program to more children in low-income families."
CBO estimates that "the reduction in private coverage among children is between aquarter and a half of the increase in public coverage resulting from SCHIP. In other words, forevery 100 children who enroll as a result of SCHIP, there is a corresponding reduction in privatecoverage of between 20 and 50 children."
This high incidence of crowd out is problematic for many reasons, it makes it moredifficult for employers to offer health insurance coverage and it inappropriately uses tax payerdollars to fund coverage that could have been provided by an employer.
Concern over crowd out is not a new issue and it is certainly not a new subject of adirective letter from an Administration. I would like to put into the record, a "Dear State HealthOfficial" letter sent out on February 13, 1998, during the Clinton Administration. I would like toread some excerpts from this letter.
The purpose of the letter is, and I quote, "To provide guidance on the standards theDepartment of Health and Human Services will use to evaluate State strategies to prevent thistype of substitution of coverage."
The letter also states that, and quoting again from the 1998 letter, "The crowd outconcerns increase at higher levels of poverty and the Department will be applying greaterscrutiny in these cases." Still quoting, "After a reasonable period of time, the Department willreview State's procedures to limit substitution. If this review shows that they have notadequately addressed substitution, the Department may require States to alter their plans." Endquote.
Therefore, under the criteria established during the Clinton Administration, it isappropriate for issues of crowd out to be addressed by the Administration and states were put onnotice that they could expect further efforts to address crowd-out, should current policies andprocedures prove inadequate.
Mr. Chairman, I hope this will be a constructive and informative hearing. I hope thatMembers will not be drawn into a protracted discussion about what did or did not happen lastyear during consideration of SCHIP. That would not be productive. I hope that Members willfocus on moving forward in a positive bipartisan manner to cover eligible but uninsuredchildren.
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