Despite Hatch’s assurances that “this legislation clearly represents a free market approach at solving an important national problem,” it is nothing of the kind. Responding to incentives provided by SCHIP, many Americans have shifted from private health-care plans to government-run programs. States could afford to spend increasing amounts on children’s health insurance because the states paid only 31 percent of the bill. The federal government paid the rest. And when states exceeded the federal government’s cap on spending, which they routinely did, they were rewarded with extra funds, lest Washington be accused of allowing children to suffer.
Not surprisingly, states have abused the system, expanding insurance programs beyond the original intent of the bill. New York, for example, has extended insurance to families of four earning up to $92,200 a year. The federal government and, indirectly, the other 49 states were required to fund Albany’s largesse. Government’s increasing involvement in health insurance increases the cost of medical care when there is no incentive to contain costs. Private health insurers can’t compete with government programs, whose fees are hidden in higher taxes, and which seem to pay for everything no cost.