Senate Looks to Expand Children's Health Insurance Program

Susan, we ended there by talking about the veto threat that the president or his aides have lodged. How serious is that?

SUSAN DENTZER, NewsHour Health Correspondent: Very serious, Gwen. And, indeed, just this afternoon, the secretary of health and human services, Mike Leavitt, sent a letter to the head of the Finance Committee, Max Baucus, and the ranking Republican member, Chuck Grassley, spelling out once again that, if the package that the Senate is going to begin marking up very shortly here moves forward as it has been sketched so far, that the president will veto it.

GWEN IFILL: Why such a big gap between what the Senate, a bipartisan committee in the Senate, led by Republican senators, in this effort, anyhow, is proposing and what the president is willing to agree to?

SUSAN DENTZER: Well, there is the gap over the dollars to be expended, clearly. And there's also the resistance on the part of the administration to the federal cigarette tax hike. They're strongly opposed to that.

But the biggest differences really are philosophical. And it goes to the question of what you do about 45 million uninsured Americans, about nine million of whom are kids. The supporters of SCHIP, the bipartisan supporters, most of whom were involved in framing the program, setting it up in 1997, same cast of characters, think that the SCHIP program has been very successful and would have been even more successful if more federal dollars had been available over the last several years to enroll more kids.

There are roughly two million uninsured kids who are eligible for SCHIP but haven't been able to be enrolled. The idea on the part of this bipartisan group is, "Let's sweep those kids into SCHIP. Let's put enough money in the program, enough money in the hands of the federal government, bring forward enough money from states to sign those kids up."

The administration by contrast worries that, if you expand this publicly paid health insurance program, inevitably you will end up also pulling in kids who now have private coverage. This is a phenomenon known as crowd-out.

And basically the administration looks at the plan and says, in 2012, there would be four million new kids involved at SCHIP and Medicaid because of this legislation, but there would also be two million kids enrolled in those programs who previously had private coverage. And the administration says this is taking us down the path of a much more public system than it is comfortable with, and it wants instead to shore up private coverage through various mechanisms.

SUSAN DENTZER: The states were, indeed, given leeway about how they set up the program. And particularly on the issue of adults, states were given the option of applying for so-called waivers to bring either parents of kids enrolled in SCHIP or, in some cases, even childless adults were able to be brought into SCHIP. The administration just last month granted a waiver to Wisconsin to do precisely this.

But somehow along the way, the administration changed course and said, nope, we're going to get adults out of the program. In fact, the Senate bill pretty much goes along with that. It closes the door to any new waivers. However, it does create some interim mechanisms, and even the administration has a problem with those.

GWEN IFILL: So this is one of those standoffs that happen periodically in Washington that is not just all on Washington. There's a lot of pressure being brought to bear to save this program, to expand this program by the states.

SUSAN DENTZER: Absolutely. And the important thing to keep in mind is, in contradistinction to Medicaid, where the states put up about 40 percent of the money and the feds put up 60 percent, in SCHIP, the feds put up 70 percent of the dollars, and the states only have to put up 30 percent. So they have a lot of incentive to enroll kids in this program. They get a lot of bang for a state buck in terms of putting money into SCHIP.

SUSAN DENTZER: Yes. It's clear that private coverage is eroding slowly anyway. What the administration has proposed by contrast and, indeed, came out with earlier this year were mechanisms to basically shore up the private market. One aspect was to take the tax deductibility or the tax exclusion of health insurance and redirect that benefit in such a way that more people can benefit through a new standard deduction for health insurance.

The administration is mad that that proposal did not get incorporated into this bill, and it really wants to force the issue now and see if it can't force this broader attack on expanding private coverage and working with states to expand coverage.

By contrast, though, the Democrats and even the Republican supporters point out that this is sort of a false dichotomy between private and public. They point out that, in SCHIP, most all the private providers who provide coverage, all the doctors and nurses, they're all privately employed, for starters. And, secondly, mostly it is the case that managed care companies, private companies are organizing and delivering these benefits that are SCHIP. So they resent this notion that we're creating some kind of, again, a false dichotomy, they say, between what's public and what's private.

GWEN IFILL: And the markup starts tonight even as we speak behind closed doors. What's the timing like?

SUSAN DENTZER: The hope is to get the bill onto the Senate floor within the coming weeks. And we haven't mentioned an even bigger fight that looms in the House, where there will be a larger package. It will be much more expansive than the administration wants and cost much more. And, clearly, if the administration is vowing to veto the Senate package, it will surely say much more along the same vein about the House package, as well.

GWEN IFILL: OK. Susan Dentzer of our Health Unit, thanks again.

SUSAN DENTZER: Thanks, Gwen.