What is Crowd Out?
Crowd out refers to a phenomenon in which government expenditures or programs crowd out private initiatives. In the case of healthcare, we find that the expansion of government health insurance acts as an incentive for families to drop their private insurance. For this reason, the expansion of SCHIP is an inefficient means of lowering the rate of uninsured children and adults.
What is SCHIP?
Created by the U.S. Congress in 1997 as a supplement to traditional Medicaid (§ XXI of the Social Security Act), SCHIP was initially conceived of as a health insurance program for children in low income families. The program is jointly funded by the federal government and the states. Each state is operationally responsible for the program and may set its own eligibility rules at or above federal minimums. North Carolina created its SCHIP program – NC Health Choice – in 1998 (S.L. 1998-1es).
Health Choice covers children from families who earn too much to qualify for Health Check/Medicaid. While federal guidelines recommend limiting SCHIP enrollment to families who earn up to 133 percent of the federal poverty level, North Carolina exceeds these rules by allowing families who earn up to 200 percent – $41,300 for a family of four – to qualify. Over the past five years, enrollment in North Carolina’s SCHIP programs has rapidly expanded, going from 104,000 children in 2000 to 196,000 in 2005. The N.C. Department of Health and Human Services acknowledges, however, that the number of children on SCHIP is generally underestimated.
This past legislative session, the General Assembly created a new SCHIP program – NC Kids Care – that will extend government health insurance to children from families who earn up to 300 percent of the federal poverty level: $61,950 for a family of four. Currently, the U.S. Congress is considering expanding SCHIP funding by $35 billion, thus enabling states like North Carolina to continue to expand SCHIP enrollment to include middle class families.