Baby Steps Toward Universal Healthcare . . . NC Health Choice and NC Kids’ Care

The good news in both the Senate and House budgets is that the expansion of NC Health Choice is again limited to 6 percent a year. The bad news is that legislators want to create a new program – NC Kids’ Care – that would expand taxpayer-subsidized insurance for kids from families earning up to either 225 percent or 300 percent of the federal poverty level (FPL). Currently, 225 percent of FPL for a family of four is $46,463; while 300 percent is $61,950.

NC Health Choice

NC Health Choice is North Carolina’s version of the State Children’s Health Insurance Program (SCHIP), a federal program passed under the Clinton administration that provides health insurance for children from low-income families. The program covers children whose families make too much to qualify for Health Check/Medicaid, but whose income does not exceed 200 percent of FPL. Because the funds for NC Health Choice are set prospectively, i.e., prior to the start of each budget year, the number of children eligible for the program is capped for each fiscal year. When the number of eligible children exceeds the enrollment cap, children are put on a waiting list.

Both the Senate budget and the House budget allocate $59.4 million for NC Health Choice, an increase in funding of $7.5 million over FY2007. The Senate budget would cap annual enrollment growth for NC Health Choice at 6 percent for the next two years. This increase is to be based on the month of highest program enrollment. Alternatively, the House budget (HB 1473) permits a 3 percent enrollment increase every six months. (The House budget does not say how this increase is to be calculated.) 

The 6 percent enrollment cap, which was first implemented in the FY2006-2007 budget (S.L. 2005-276), represents what seems to be a legitimate attempt to reign in enrollment growth for NC Health Choice. A 6 percent increase in enrollment would result in 4,430 new clients. This number is less than the average enrollment increase in those years that did not have a specific eligibility cap.

Nevertheless, a 6 percent expansion in enrollment far exceeds the state’s population growth for all children aged 18 and under.

• Between 2000 and 2006 the number of children aged 18 and under grew by 9.5 percent.
• Between 2000 and 2006, the overall number of children eligible for NC Health Choice increased by 54 percent (38,370).
• Between 2000 and 2006, the number of children on the state’s waiting list for Health Choice rose by 13,152: also a 54 percent increase.
• During the same period, funding for NC Health Choice increased by 209 percent, going from $22.1 million in FY2000 to a recent high of $68.2 million for FY2006.

Clearly, Health Choice spending is expanding much more rapidly than the population, in part because N.C. Health Choice is increasing its overall enrollment both in absolute numbers – and more important – relative to the number of children in North Carolina.

Skyrocketing enrollment for NC Health Choice cannot be blamed on a proportionate increase in the number of poor families in North Carolina. To begin with, the percentage of persons aged 18 and under living below FPL declined between 1999 and 2005. Similarly, according to data from the U.S. Census Bureau, the proportion of low-, and even middle-income, households in North Carolina also decreased:

• 1999: Households earning up to $34,999: 44.6 percent
• 2007 (projected): Households earning up to $34,999: 34.2 percent
• 1999: Households earning up to $49,999: 62.3 percent
• 2007 (projected): Households earning up to $49,999: 50.3 percent

Given that family incomes are increasing, with just under half of all households now making more than $50,000 a year, expanded enrollment in NC Health Choice cannot be attributed to an increase in the number of poor households. Rather, NC Health Choice is encouraging many families to drop private insurance in exchange for taxpayer-subsidized coverage.

NC Kids’ Care

Even as the General Assembly is limiting new spending for NC Health Choice, it is allocating whatever it might have saved to fund a new initiative aimed at extending health insurance to children from families with income between 200 percent and 300 percent of FPL. In order to enroll in NC Kids’ Care, families must be ineligible for Medicaid, Medicare and other government- sponsored insurance. The original version of this bill (HB 1476) clarifies that the program is not an expansion of the State Children’s Health Insurance Program (SCHIP), but is an entirely new program aimed at providing health insurance for children not eligible for SCHIP.

Whereas the House budget allocates $4.7 million in recurring and nonrecurring funding for Kids’ Care for FY2008 (and then $7.0 million in recurring funds for FY2009), the Senate budget (§ 10.48) does not fund Kids’ Care at all for 2008. Instead, the Senate calls for DHHS to conduct a study aimed at determining “the most cost-efficient and cost-effective method for implementing” the program. As such, the initiative is to be limited to kids from families who earn between 200 percent and 225 percent of FPL. DHHS is to report the findings of its study to the General Assembly no later than April 1, 2008. Apparently, the Senate presumes these findings will be positive insofar as the budget appropriates $1.6 million in recurring spending and $800,000 in nonrecurring funds for Kids’ Care, beginning in FY2009.

Regardless of the money involved – whether it be $10 million or $2 million – the Senate is signaling that it will move forward, however slowly, with expanding taxpayer-subsidized insurance to middle-class families. That this step has more to do with a particular social agenda – i.e., implementing universal healthcare – than with helping the poor is indicated by the fact that NC Health Choice is not being funded to capacity. After all, NC Health Choice has a waiting list of some 38,000 kids from families who earn up to 200 percent of FPL. Assuming for a moment that NC Health Choice is actually working, wouldn’t the state’s money be better used to provide insurance to these kids, rather than to children from families earning between $46,463 and $61,950?

In short, the new Kids’ Care program would provide health insurance to middle-class children at the expense of lower-income kids, as well as other state-funded priorities. Thus while kids whose families earn less than 200 percent of FPL are waiting for coverage through NC Health Choice, families who earn up to 300 percent FPL (if the House budget passes) would receive government-sponsored health insurance.

Again, the goal here seems to be not so much to help the poor as to eventually remove the income cap for taxpayer-subsidized insurance for kids. In so doing, the Senate is following the script crafted by Representatives Hugh Holliman (D-Davidson), Verla Insko (D-Orange) and others who want to use a piecemeal approach to impose a universal healthcare system on North Carolina. Along with expanding NC Health Choice (under the guise of NC Kids’ Care or some other program) to all children, look for the General Assembly to pass legislation creating a high-risk pool (cf. HB 265). Thereafter, the plan will be to expand state-subsidized insurance to the parents of low-income children. In the meantime, though, we can hope that someone at DHHS realizes that even as the state keeps expanding insurance coverage for children, the number of uninsured kids keeps rising. Taxpayer-funded insurance, in other words, seems to be crowding out private insurance coverage. With the creation of NC Kids’ Care, this trend will accelerate.