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The story behind Bush's SCHIP veto

October 26, 2007 | Page 16

LEE SUSTAR follows the backroom deals over a children's health care program.

WHY DID George W. Bush veto an expansion of the overwhelmingly popular State Children's Health Insurance Program (SCHIP)--and why did House Republicans vote to sustain it, even though this will make their poor electoral prospects for 2008 even worse?

House Republicans, after all, had plenty of political cover to break with Bush. The main health insurance lobbying group, America's Health Insurance Plans (AHIP), backed the Democratic proposal to expand spending on SCHIP, as did PhRMA, the lobbying group for the big drug companies. Even the American Medical Association, for decades an avowed enemy of anything smacking of "socialized medicine," backed the proposed expansion.

So why are Republicans still on the attack? Because the preferred party of Corporate America is gearing up for a future fight over "universal health care" plans being floated by Democratic presidential candidates, and it wants to draw a line now over even the moderate SCHIP proposal.

In other words, SCHIP is the first live-fire exercise for the expected battle to come in 2009.

Launched in 1997, SCHIP provides health insurance for children in families whose incomes are too high to qualify them for Medicaid, the government health program for the poor.

The eligibility threshold was first set at 200 percent of the poverty line, although states could get federal waivers to increase the threshold. In New Jersey, families at 350 percent of the poverty line qualify for SCHIP, and New York state wants to raise the level to 400 percent--or $82,600 for a family of four.

That proposed figure in New York was the basis for the Bush administration's wild claim that Democrats want SCHIP to provide government insurance for families earning $83,000 across the U.S. Bush wants to impose rules virtually limiting the eligibility to 250 percent of the poverty line, which would block much of the Democrats' proposed expansion.

The other hot issue for Republicans is the fact is that statisticians estimate one-third of the children who would get coverage in an expanded SCHIP system would otherwise have been covered by private insurers. So private companies offering high-premium, low-coverage insurance plans would be "crowded out" of the market by superior plans under SCHIP.

It's this aspect of the legislation that Republicans have denounced in the most lurid terms. During the House debate on whether to override Bush's veto, Iowa Rep. Steve King declared that SCHIP stands for "Socialized Clinton-style Hillarycare for Illegals and their Parents."

King is known as one of the most viciously anti-immigrant members of Congress. He has called for electrifying the border wall being built on the U.S.-Mexico border--"not enough to kill somebody," he said, "but enough to make them think twice. We do that with livestock all the time."

Then there was Tennessee Rep. Marsha Blackburn, who denounced SCHIP as part of the Democrats' "slow motion socialism." According to the Center for Responsive Politics, Blackburn's top campaign contributor is Federal Express Corp., and her single biggest source of campaign contributions by industry are health care professionals, which have donated $142,650 since 2002.

An even more powerful opponent of SCHIP is Louisiana Rep. Jim McCrery, a member of the House Ways and Means Committee, which controls the purse strings in the House. "The Democrats' bill is a Trojan horse, cynically exploiting our desire to help needy children in a stealthy attempt to create a massively expensive government health system," he wrote in the Washington Times.

McCrery's hostility to SCHIP is to be expected. According to the Center for Responsive Politics, the top five industries contributing to his campaigns since 1989 include health professionals ($850,606), insurance ($572,182) and pharmaceuticals/health products ($280,578).

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WHAT'SNOTABLE, however, is that the health care and insurance industries didn't join McCrery and the rest of the Republican right in painting SCHIP as socialist. This isn't because CEOs have gone soft and are putting children's health above profits--but because political realities dictate an "if you can't beat it, join it," approach.

Recognizing that some version of health care reform is probably certain if the Democrats keep control of Congress and take the White House, the health care wing of Corporate America is trying to make sure any changes that do emerge are as business-friendly as possible. That means formally backing the presumed winners--the Democrats--while sitting back and enjoying the show as Republican crackpots denounce government-insured children's health care as "socialist."

To understand how the health insurance industry is now operating within the "reform" camp in order to subvert it, look at how health insurance company lobbyists snuffed out the original House version of the SCHIP legislation. That bill would have cost $50 billion and covered 5 million of the nation's 8 million uninsured children. Instead, the basis of the compromise SCHIP bill was a Senate version that would cost $34 billion and cover 3.8 million children by 2012.

It's not just industry-backed Republicans who preferred to exclude 1.2 million fewer kids in the program. The health insurance companies also opposed the House's attempt to help pay for SCHIP by cutting $3 billion in federal payments to private insurers in the Medicare Advantage program. The reason: the government typically reimburses these insurance companies 10 to 19 percent more than it pays in traditional Medicare coverage, according to studies cited by the Kaiser Family Foundation.

"Giving health insurance to more kids instead of overpaying highly profitable insurance companies seemed like a good trade," wrote Trudy Lieberman in The Nation. "But the Senate, lobbied all year by the insurance industry, didn't see it that way. The Senate bill covers only 4 million uninsured children, paying for the coverage with a 61-cent increase in the tobacco tax."

And so the insurance industry lobbying machine geared up to back the Senate's proposal over the House's. "At AHIP's urging, 25,000 seniors called their lawmakers to oppose the [Medicare Advantage] cuts," wrote Chris Frates on the Politico Web site last month. "The trade group also mobilized some of its 400,000-member coalition in key markets."

Another hot health care issue embedded in the SCHIP debate was a 9.9 percent cut in Medicare reimbursement to physicians set to take effect next year, followed by further reductions later.

Portrayed as a means to ensure a "sustainable growth rate" in Medicare, the cuts would cripple the program over time. The House version of SCHIP legislation would have blocked the Medicare reimbursement cuts; the Senate left them in place.

It's not clear whether the Bush administration is serious about seeking a compromise on SCHIP--or if Democrats would rather forego a deal and use the issue in the 2008 elections.

Tellingly, though, insurance industry campaign contributions to Democrats now approach that given the Republicans, according to the Center for Responsive Politics.

The industry's new approach helped lobbyists to weaken SCHIP before it ever reached Bush's veto pen. The Republican right played its part by trying to block substantial health care reform, while the industry's campaign donors and lobbyists pressured the Democrats to limit the pace and scope of change.

Real advances in health care will come, as always, when the grassroots pressure becomes to great to ignore.

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