Haze on the road toward better health care for kids

by Craig Westover
I don’t know Lynn Blewett, director of the State Health Access Data Assistance Center, but after reading her Nov. 23 column, “Ideology fogs up the debate about how to insure kids,” I know a little about her; Blewett is intelligent, compassionate and well-intentioned – and very wrong about the State Children’s Health Insurance Program (SCHIP).

Political ideology does tend to “fog up” the debate over SCHIP, but it’s the hot air of good intentions mixing with cold economic reality that creates the haze. Blewett’s column is a case in point; if the problem is better health care for children, then why extend a program that doesn’t really address that problem?

Health insurance is expensive, Blewett says – even employer-sponsored health care. She’s right. However, Blewett seems to accept the high cost of health insurance as inevitable and government subsidies as the only possible solution. Attacking insurance prices by asking why they have risen so dramatically as more people acquired subsidized (tax-deductible) insurance is not even considered. We’ll come back to that.

“Health insurance in-creases access to care and leads to improved health status,” Blewett writes. “The evidence is clear – children with health insurance are more likely to get the care they need.”

The evidence or the inference? To us educated folks who take advantage of first-dollar coverage (provided by our employers) whenever our children sneeze, it makes sense to connect insurance with actual health care. But they are not the same thing. Studies of health care systems in the United States, the U.K. and Sweden have found that cultural, socio-economic factors and household income and education (even civil service status) have more to do with health outcomes than does the simple availability of insurance.

Don’t get me wrong – insuring every child would be a good thing, but if improved children’s health (not just more government SCHIP) is the goal, then there are better ways to get there than providing more subsidized insurance.

Blewett writes, “Many families with uninsured children don’t know about the program (SCHIP), don’t know how to sign up, find the forms, find the forms simply too complicated to fill out, or worry about the stigma associated with public programs.”

Now we’re getting at the crux of the problem – to reach everyone whom SCHIP might help requires more bureaucracy and the associated costs. However, the inability to sign up everyone eligible for SCHIP is not strictly a problem of government inefficiency or a lack of funding; it’s a virtually impossible task to reach 100 percent of any market – every market has characteristics that limit a supplier’s economic ability to reach it. Again, we have an example of a “universal” (government) approach fogging the economic and social realities of the market – even the “market” for government subsidies.

Nonetheless, Blewett desires to expand SCHIP, making the program available to families with higher incomes (77 percent of whom already have private insurance). Her rationale: SCHIP is indexed to the federal poverty level, which is “applied equally across all states – there is no adjustment for cost-of-living.”

Blewett is correct – not about expanding SCHIP but about SCHIP eligibility not being adjusted for cost-of-living variance in different parts of the country. That carries a significance that Blewett doesn’t acknowledge.

Government programs aren’t designed to read or respond to market signals. That’s why they are less effective in distributing resources. That’s why health care managed and paid for by one party – private insurer or the government – but supplied to another is neither effective nor efficient. Subsidized government health care drives up costs in the “private” market when providers and insurers must compensate for low-ball government reimbursements.

Which brings us to Blewett’s final point: “The problem with private health insurance coverage is not SCHIP. Rather, the problem is that costs continue to grow beyond the reach of many families.”

“Private” insurance and “market-driven” insurance are two different things. At some point when the legitimate government function of regulation to protect people from fraud spills over into regulation intended to achieve a collective social good, a free market in any realistic sense ceases to exist. What we have today is a government regulated “private” insurance market in which government mandates coverage, who must be covered and how coverage is provided.

The bottom line, as well-intentioned as Blewett is, is that SCHIP legislation is an ineffective way to drive actual health improvement. It is more of the same managed system that both left and right agree is not working. Until the ideological fog of “government is the solution” burns off in the sunshine of a free-market approach to health care, government will grow, not for the benefit, but at the expense of children.

Craig Westover is a contributing columnist to the Pioneer Press Opinion page and a senior policy fellow at the Minnesota Free Market Institute (www.mnfreemarketinstitute.com). His e-mail address is westover4@yahoo.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This Commentary originally appeared in the St. Paul Pioneer Press, December 7, 2007.