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Kids' Health Gets Political

By Rebecca Adams, CQ Staff

July 23 - On June 27, President Bush summoned six health care experts reflecting conservative and liberal views to the Oval Office to discuss a popular program that provides health coverage to children from poor families and to think out loud about how to cover more uninsured people.

Conservatives have long been uncomfortable with the way the initiative called the State Children's Health Insurance Program, or SCHIP, puts the government on the hook for billions of dollars of health care spending, though they have been careful not to criticize its intent. The discomfort has become especially acute since Democrats took control of Congress and proposed an ambitious expansion calling for as much as $50 billion more spending to cover more kids.

For more than an hour, four think tank analysts who were among the visitors said, the president—flanked by his top political adviser, Karl Rove, Chief of Staff Joshua B. Bolten, Health and Human Services Secretary Michael O. Leavitt, and other aides—quizzed them about how the program could be paired with efforts to provide tax breaks for Americans who buy private medical insurance coverage. The line of questioning reflected Bush's belief that the market is better equipped than the government to address the needs of uninsured families. The experts and the president engaged in civil back-and-forth, gently parsing the merits of deductions, tax credits, and mandates to buy coverage. One visitor, lobbyist and former Democratic Sen. John B. Breaux of Louisiana, offered tips on how to frame political arguments on health care.

The gathering might have been the last high-level consultation on health care between the White House and Democrats for some time.

Immediately afterward, Bush gave a previously scheduled health care speech during which he depicted the future of children's health coverage in starkly partisan terms: as a choice between government-run health care and a market-driven system that empowers consumers. Abandoning the genial tone of the just-concluded discussion, he then accused Democrats of using the program to advance their goals of creating a government-run health system.

The brittle address—reminiscent of past rhetoric in debates about Medicare, Medicaid, and the Clinton administration's effort in the 1990s to establish a government-run system—surprised some of the meeting attendees. It also crystallized how SCHIP has become an unlikely crucible for a huge political fight that poses major implications for the 2008 election.

Democrats triggered the battle soon after they took control of Congress six months ago. Eager to address the growing population of the uninsured and egged on by liberal-leaning interest groups, party leaders chose to try to more than double the size of SCHIP in the hope of enrolling millions more children.

It came as little surprise that Democrats would put doing more for uninsured children high on their domestic agenda. What has been surprising is the way the White House and many of its conservative allies in Congress haven't given in, despite the urging of some within the GOP. Although SCHIP is a relatively small anti-poverty program with annual spending that is capped, many right-leaning politicians are eager to demonstrate fiscal discipline and derail any Democratic efforts to expand government health spending. Conservatives reason that a well-choreographed display of toughness will energize a political base that Bush needs to support his policy on the war in Iraq. The party loyalists have been increasingly disenchanted with Bush's stands on immigration and with his spending decisions.

"It really has become the vehicle for a referendum on the future of health care," Matthew Salo, health policy director for the National Governors Association, said of the SCHIP fight. "Everyone's playing political football with this program."

The risk for the Republican Party is that its members of Congress who support Bush in this battle could be portrayed as putting politics ahead of efforts to improve the lives of some of society's most vulnerable. Should Democrats manage to expand the program, Bush would probably veto the legislation, forcing Republicans either to back an unpopular decision or to break ranks with their party leader. The fallout would carry over to the 2008 campaign, complicating GOP efforts to hold on to the White House and gain back seats in both the House and Senate.

"You can't construct a question on children and health without getting an overwhelming majority in favor of giving health insurance to children," said Republican pollster Whit Ayres, who added that voting against an SCHIP expansion is "politically stupid" and could make politicians who do so appear shortsighted or stingy.

But the showdown also poses some risks for Democrats. Because SCHIP is only one of a variety of programs capable of addressing children's medical needs, a large-scale expansion could be depicted as a wasteful example of big government run amok. And the way Democrats are proposing to pay for an enlarged SCHIP risks alienating seniors and key voting blocks in some swing states. Plans under discussion include raising tobacco taxes or cutting some Medicare payments to insurers.

"Seniors in particular, while supportive of SCHIP, do not think Medicare ought to be cut for this or any other purpose," said Democratic pollster Mark Mellman. "There is a potential political price for cutting Medicare."

Legislative Battles
The confrontation could evolve into one of the final big domestic policy debates of the Bush era. Because the law authorizing the children's health program is set to expire at the end of September, interest groups are spending millions of dollars to influence the shape of the program and, in some cases, weigh in on other health care issues at the same time. To the annoyance of the administration, the Pharmaceutical Research and Manufacturers of America is calling for a renewal of the program in a widely aired series of television and print ads.

The seniors' advocacy group AARP, the Federation of American Hospitals, health insurers, and the American Medical Association are also voicing support, joining liberal-leaning advocacy groups such as Families USA, which first encouraged Democrats to pursue a major expansion of the program.

Until now, Democrats and Republicans confined most of their discussions about children's medical coverage to keeping SCHIP adequately funded in the face of rising health costs and growing numbers of uninsured Americans. That is partly because the program is a small component of government-sponsored health care, serving just over 6.6 million children from low-income families at an annual cost of about $5 billion. In contrast, Medicaid, the federal-state health program for the poor, serves about 52 million people at a cost of more than $200 billion annually.

Enacted as part of the 1997 law that put the federal government on course to a balanced budget, SCHIP is aimed at children in families that aren't poor enough to qualify for Medicaid. It provides grants to states to expand their Medicaid programs, or to create new child health insurance programs. Congress has made three rounds of legislative changes since the program's inception, mostly to liberalize rules for the use of unspent funds and tweak grant formulas based on populations of low-income children.

The changes currently under consideration would go much further. A plan approved by the Senate Finance Committee last week would more than double the cost of the program—to $60 billion during the next five years, up from the current $25 billion that's allowed. The expansion would be funded by an increase of 61 cents a pack in the federal tax on cigarettes, as well as increased taxes on other tobacco products. The increase would bring the federal cigarette tax to $1 per pack.

Supporters contend that the expansion would help cover children in families who have lost medical coverage because of economic downturns and the gradual decline in employer-sponsored health insurance. Their arguments persuaded six Republicans—including the most senior on the panel, Charles E. Grassley of Iowa and Orrin G. Hatch of Utah—to join with Democrats to produce a 17–4 committee vote.

The House could follow suit as soon as this week, when the Energy and Commerce and Ways and Means committees are expected to mark up plans that call for an even more generous, $50 billion expansion. The bill is expected on the House floor before the summer recess. Democrats in the chamber say one way to pay for an expansion would be to cut Medicare payments to private health plans.

However, the administration contends that a major expansion is unnecessary and that SCHIP can be sustained with a $5 billion increase over five years, to $30 billion. Bush has threatened to veto the Senate bill, while Cabinet officials depict Democratic efforts as a prelude to a broader government takeover of the health care system.

Democrats' plans are "very clearly a major step toward having all Americans insured by the federal government," Leavitt, the HHS secretary, told reporters. "We know that what happens when that occurs is you get long waiting lines, you get unhappy consumers, and you get government price-setting, and that's not good for the system."

Sound Bites for 2008
Such remarks are likely to serve as a template for conservative talking points during next year's campaign—and reflect the viewpoint of a brain trust culled from such right-leaning think tanks as the Heritage Foundation and the Galen Institute. Conservative health policy analysts are convinced that Democrats want to assemble a government-financed health system one step at a time, beginning with SCHIP because it's viewed as less controversial than Medicaid. In a not-too-subtle nod to one of the Democrats' 2008 presidential front-runners, many conservatives are calling the proposed SCHIP expansion step one in "Hillarycare on the installment plan," referring to New York Sen. Hillary Rodham Clinton's failed 1993 attempt as first lady to add federal regulation to American health care.

To conservatives, the Democrats' plans epitomize big government interference with the private market. They theorize that an offer of government-subsidized care to the working poor could inspire millions of families who now have private insurance to drop that coverage and instead rely on taxpayer-funded care.

'The tone of the debate has changed because the motivations of Democrats in Congress are becoming very clear," said Robert Moffitt, a health policy expert at the Heritage Foundation. "It brings back the bad memories of Hillary trying to put everyone on a government health care program, because that's what this is really about."

Particularly galling to many conservatives is the notion that the Senate Finance plan could make SCHIP coverage available to some middle-class families, by making it easier for states to enroll children from families that earn 300 percent of the federal poverty line. (This year, the poverty line is $20,650 for a family of four.)

Analysts at Heritage have observed that if the program were expanded a bit more, some families might simultaneously qualify for SCHIP and also be subject to the alternative minimum tax, which was created to limit deductions taken by the richest taxpayers.

Bush and like-minded politicians believe the program should be reserved for families with earnings below 200 percent of the poverty line, or $41,300 for a family of four.

"People really are taking two very different philosophies of what the future of health care in this country should be," said Grace-Marie Turner, founder and president of the Galen Institute in Alexandria, Va.

Ignoring Reality?
But the hard-nosed fiscal arguments could collide with political realities. Democrats and even Republicans such as Grassley have publicly criticized the administration for downplaying the needs of some of the most vulnerable Americans. The Congressional Budget Office notes that many children eligible for the program have not been enrolled, and that covering them would require an expansion of at least $14 billion over five years.

Administration foes also note that almost all states contract with private insurers to offer SCHIP benefits, meaning the program embraces most Republicans' vision of a market-driven medical system. Moreover, states have the ability to limit coverage and stop enrolling more children.

Congressional Democrats acknowledge that expanding children's health insurance would push some families to abandon private coverage, but they say that any health care proposal would have that effect, including Bush's proposals to revise the tax code.

Robert Greenstein, executive director of the liberal-leaning Center on Budget Policy and Priorities, predicts that the Senate plan would only modestly replace private insurance with public coverage, by expanding coverage for about 4.1 million children. About 3.5 million either are eligible for aid but are not enrolled or are currently enrolled but in danger of losing coverage if states don't get more SCHIP funds, he said.

"Most health care experts would concur that it's actually good to keep it that low," said Greenstein. "It's virtually impossible to provide resources to shrink the number of uninsured people without resources going to people who otherwise would be covered . . . and expanding SCHIP is the most cost-effective way" to increase coverage.

Such arguments are unlikely to sway Bush, who is not running for re-election and no longer needs to appeal to the electorate. Sympathetic members of Congress and others familiar with the president's thinking say one of his top priorities for the rest of his tenure is firming up support among fiscal conservatives, many of whom opposed Bush's efforts to change immigration policy and have been dismayed by costly administration initiatives, including the Medicare prescription drug benefit. A high-profile campaign stressing fiscal conservatism, his allies say, could help convince the party faithful that the lame-duck president still wields clout and is capable of accomplishing things in health care.

"A lot of analysts are well aware of the degree of disaffection by conservatives with Washington and the Republican leadership over spending and the inability to get things done," said Heritage's Moffitt. "It's time to make a decision about ultimately whose side are you on in this fight. If you believe in the private market, in individual freedom, if you really are serious about these things, well, the bill is coming due, and you have to stand up and be counted."

If Bush were able to restrain Democratic attempts to broaden the children's health program spending, Moffitt said, "the political effect is it would resolidify the conservative base, which is the foundation of the Republican establishment," in time to help the GOP in the 2008 campaign.

Leavitt at the Center
Leavitt played an important role in persuading Bush to take a more aggressive stance in the children's coverage debate, according to administration allies. As governor of Utah, he was one of a handful of top state officials who came to Washington in 1997 to express concerns about the design of the program at SCHIP's creation. In the Cabinet, he is now talking with conservative senators including Judd Gregg of New Hampshire, Robert F. Bennett of Utah, Tom Coburn of Oklahoma and Jim DeMint of South Carolina about developing alternatives to the Finance Committee proposal.

The HHS secretary turned up the rhetoric in a letter last week to Finance Chairman Max Baucus of Montana, chiding him for dramatically shifting health care costs to the government. Leavitt also complained about a budget "gimmick" he said downplays the costs of adding coverage and insisted that the package include tax incentives for buying private insurance.

Baucus' response was uncharacteristically tart: "I regret that you seem to object to more children getting help from a government-sponsored" program, he said, and noted that the administration has regularly granted states waivers to expand SCHIP coverage, in some cases to low-income parents of even adults without children. "You should be happy that our bill would prevent you from promulgating further waivers to expand coverage to adults," Baucus wrote.

Baucus also warned that administration efforts to attach tax breaks for health insurance would be rejected.

Some Democrats in Congress blame Leavitt for poisoning the atmosphere. The secretary "has been lethal in his efforts to kill this" in recent months, said senior Senate Finance member John D. Rockefeller IV of West Virginia, who acknowledges that the administration still retains considerable leverage. "As long as he can veto, as long as he can keep people on the 60-vote discipline, he's got power," Rockefeller said, alluding to the majority's need to muster 60 votes to stave off filibusters. "Unfortunately, it's all negative power."

Delivering on Promises
The Democrats are especially motivated to please advocacy groups such as Families USA, which began rallying political support behind an SCHIP expansion before the midterm election by enlisting the help of unlikely allies such as the U.S. Chamber of Commerce, which was concerned about employers paying a bigger share of uninsured Americans' care. Eventually, a coalition of 16 groups, also including hospital chains and health insurers, agreed on a plan to expand the program by $60 billion over five years. The plan was quickly endorsed by the Congressional Black Caucus.

Families USA Director Ron Pollack and other coalition executives met with Democratic leaders and sympathetic Republicans in December and won assurances that the issue would be placed near the top of the new majority's agenda. While House and Senate leaders did not immediately commit to a specific dollar figure, their resolve became apparent when budget writers in both chambers reserved $50 billion for an expansion of the program in the fiscal 2008 budget resolution.

Rockefeller said Senate Democrats have already made some concessions to reach a bipartisan deal—for example, shrinking their proposed increase from $50 billion to $35 billion—in the hope of reaching a compromise with Republicans.

"It killed me to do it, but you had to," Rockefeller said. He noted that Democrats would also continue to give states flexibility on how to design SCHIP coverage, rather than mandating benefits such as dental care, as some more liberal politicians have suggested.

Senate Finance Democrats offered more sweeteners at last week's markup, including making it easier for families who qualify for both SCHIP and employer-sponsored health insurance to use federal aid to buy coverage through their employers.

GOP in a Tight Spot
Grassley, Hatch and some other Republicans are urging the White House to back down from the veto threat and take the high road on a politically loaded issue. Some in the GOP, fearing political fallout in their re-election bids, have urged the administration to avoid making them take tough votes on children's health proposals or on overriding a veto.

"To veto a bill that does so much, that implements provisions that have bipartisan support in the Senate, that has the support of many Republican governors, at this time in his presidential career is going to be a pretty big challenge," said Lloyd Doggett of Texas, a House Ways and Means Democrat.

But fiscal conservatives are pressing Bush to stand firm. The Heritage Foundation and Galen Institute have formed a coalition with other free-market groups such as the American Enterprise Institute to point out the problems that they believe would result from an SCHIP expansion, including a greater reliance of the middle class on the government. And some lawmakers predict that Democrats might lack the votes to override a veto—unless they entertained some GOP counterproposals.

A Ways and Means Republican, Phil English of Pennsylvania, said part of the calculus required in determining if Congress could overturn Bush's veto depends on how hard Democrats push. If House Democratic leaders do not reach out to Republicans or limit the party's ability to offer alternatives, English said, "politically that could hand the administration an opportunity to sustain a veto."

English, a top official at the National Republican Campaign Committee, says time could be on the administration's side if the White House and GOP operatives make the case that those of middle income might benefit from an anti-poverty initiative.

"In my district, there is wide support for children's health insurance," English said. "But I'm not sure middle-class taxpayers want their hard-earned taxpayers' dollars going to pay for health insurance for families that are more affluent than they are."

But pollsters and analysts warn that voters won't parse the details of an SCHIP proposal if they generally agree with its goals. GOP pollster Bill McInturff estimated this spring that three out of five voters "strongly favor" reauthorizing children's health insurance, and one-quarter "somewhat favor" doing so. Republicans favored renewing the program almost as much as Democrats did, with 79 percent favoring reauthorization, compared with 88 percent of Democrats.

A New York Times poll of 1,281 adults in late February found 84 percent of those surveyed in support of expanding the current program to cover all uninsured children. A similar majority said they thought the lack of health insurance for many children was a "very serious" problem for the country.

"One party wanting to look more Scrooge on children's health doesn't make a lot of sense going into a general election," said Robert Blendon, professor of health policy and management at the Harvard School of Public Health. "If you were a political adviser, you'd be scratching your head about why this debate is going the way it is."

Mary Agnes Carey contributed to this story.

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