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Get health care insurance for you and your kids – the new CHIP is here!

Speaker of the House Nancy Pelosi – that power hungry moron from the Peoples Republic of San Francisco – and her minions started off the 111^th Congress with a bang this week.

In a victory of rhetoric over reality, and as a way to start the ball rolling toward universal health care, our wonderful House of Representatives (motto: Doing Whatever it Takes to Stay in Washington) passed an expansion of the Children’s Health Insurance Program (CHIP) (see the text of the new bill here). A similar bill will now go before the Senate, and a combination of the two bills will be presented to incoming President Barrack Hussein Obama in the coming weeks for his signature.

For those of you who don’t know, CHIP is a law the supposedly provides health insurance for children from families who earn too much to be covered under Medicaid. A great thing, right? Who could possibly deny health care to poor children? What kind of person could fight against a law like this? An opponent of this law must be heartless.

Now, I have nothing against providing health care to children, assuming their parents cannot provide for them through their work or other means. Although well-meaning (save us all from well-meaning politicians!), the original law was not well conceived, well crafted, or well thought through. And this expanded version is even worse.

Ostensibly, this new bill provides over $32 billion to expand the program to 4 million more children, 600,000 of them non-citizens. As I read the text of the law, I saw no provision that non-citizens need to be legal residents of this country. I also saw provisions that put the lie to covering only “poor children”.

If made into law, this expansion of CHIP will cover families (not just the kids) who make $42,400 per year (that is twice the federally-defined poverty level), and in some states the coverage would be for families making $63,600 per year (three times the poverty level). I don’t know how you define poverty, but making over $63,000 per year is most definitely NOT poor.

Oh – and they will pay for this massive expansion of another government program by raising the taxes on cigarettes to $1 per pack, with a similar tax hike on other tobacco products.

Sounds great huh? Give more poor children health insurance and pay for it by taxing those horrible smokers. What could possibly be bad about that?

So, let’s take a look at how this will probably play out. It does not take much thinking about this whole pile of crappola to see the following (bad) results.

First, it will cost A LOT MORE THAN $32 BILLION. Why, you ask? Well, everything the government does always costs more than they say it will. You can take that as an article of faith. Those 4 million new “kids” to be covered? My guess is that the number will be at least double that. Most parents whose income makes them eligible will opt to drop their current coverage to get the “free” coverage. Why? Every pay check has that deduction for health coverage. If you switch to the CHIP program, that deduction goes away and you bring home more money each payday.

Employers will encourage their employees to change. Why should an employer pay their part of coverage for their employees if they can get them to change over to the free coverage? Saves the company thousands of dollars each year in insurance premiums, not to mention the jobs that can be cut when the company no longer needs all the human resources employees to administer the company’s health insurance programs.

And, as there seems to be no provision for proving legal residency status for non-citizens to enroll in the program, this just is another huge incentive for poor downtrodden citizens of other countries to ‘swim the river’ to take advantage aof nother massive government giveaway.

Next – what type of health care will the “poor kids” actually get? You can bet it will not be the care they get now from private insurance. Either the care each person needs will be determined by what the government will pay, or bureaucrats will decide what care is covered (health care rationing anyone?). This means that the care provided under this program will be less extensive and less effective than the care provided today. Think I am wrong? People who have no coverage today go to emergency rooms for their care. Emergency rooms by and large provide excellent care with no immediate thought to costs.

Lastly, this new coverage will be paid for by an increase in tobacco taxes? Even a cursory look at the history of tax increases shows that when you raise the taxes on a thing or activity, you get less of that thing or activity. Tobaccos use is declining in this country every day. Tobacco users are already second class citizens, and every time you turn around, smoking is being banned somewhere. Raise the taxes on tobacco and you will get less tobacco use, and thus less tax revenue. So, either Speaker Pelosi and her ilk know this and are using it to provide cover for their expansion of government power – making them liars, or they don’t know this – making them stupid. My bet is on a combination of both. I doubt they care at all about where the money will come from to pay for this. If they have thought about it at all, they probably assume they can raise the taxes on “the rich” and/or blame the whole thing on soon-to-be-ex President Bush and his administration.

What does all this have to do with personal finance? After all, I am supposed to be writing about personal finance. This affects you and your personal finances in two ways.  If you currently are in the relatively small group of people who have no health insurance and cannot qualify for Medicaid, you may get covered, saving money in case you have health issues. If you fall into the category of people who can enroll for this program and currently have employer-provided coverage, you may well save money in the short run by switching.  

Everyone will eventually have to pay for this plan with tax increases. There is no other way to pay for it. Deficit spending by the government may pay for this in the short term (at the expense of future generations), but deficit spending cannot pay for this and all the other government “entitlement programs” and “stimulus packages” and “bail-outs” forever. Deficit spending is financed by government debt – government-issued bonds that other countries and large institutional investors (pension funds, etc.) buy – bonds with very low returns. Eventually, no one will buy those bonds and there will be no more money to finance the deficits. Then the government will have to get the money from the only other source available, US tax payers. There will be no other place to go for the money.