I was writing a comment, replying to someone complaining that Bush was right because families earning $80k a year shouldn't benefit from SCHIP, when I realized something really profound.
Thanks to tax policy, SCHIP costs the government less per child than private health insurance for high-tax bracket individuals.
cmj1981 wrote:
Bush is going to veto the SCHIP bill, because Democrats made it so families making all the way to $80,000 per year qualify.
90% of families who make $80,000 per year already have health insurance.
The SCHIP program was intended for poor families who cannot afford health insurance
People who make $80,000 per year are not poor and the Government should not have to pay there medical insurance.
As I was writing my reply, I started with the basics - that in fact Bush has threatened states with administrative penalties if they cover too many "rich" children, that his veto was not about that, that kids with preexisting conditions are currently left out in the cold, when I realized his premise was flat wrong. People who make large incomes get a much larger subsidy for their insurance than SCHIP provides.
What?? Don't be silly. With SCHIP the government pays most if not all of the cost. For private health insurance, which is generally tax-deductible, the government pays only about a third, depending on tax bracket and various other tax status issues.
Now add this fact: SCHIP serves 6.6 million children for $5 billion a year. It sounds like a lot, but when you do the math, that's only $758 per child per year. (The actual total cost per child is slightly larger, because some families pay a small premium, while others pay nothing.) If you've done any shopping for individual health insurance, you'll know that for a bargain, largely possible because the state can bargain very hard with the private companies who run it (in California, the most popular plan is Blue Cross), and because it's a large risk pool of mostly healthy individuals.
Great.
But, we wouldn't want to provide this subsidy to richer children. They'd leave private health insurance, sending the government's burden up... right? Make the rich pay their own way!
Well, for the SCHIP money pool, maybe.
But here's a fun fact. Health insurance is tax deductible if it is purchased by the employer or by a self-employed individual, which is the majority of American health insurance. If we say my daughter's portion of my health insurance policy is $2400, and I'm in the 25% tax bracket + 15% for social security/payroll/self employment tax, then the Federal Government is picking up $960 of her annual premiums.
That's right. My private health insurance costs the government more than if we were to enroll her in SCHIP. (Not to mention how much more it costs out of my pocket.)
If I made more money, and popped into the 35% bracket, the government would pay even more, and I'd pay less. (I guess that's because if I made enough for the 35% bracket, money would be tight with the high price of yacht fuel.)
But thank goodness we're not benefitting from that large state risk pool!