By Brian T. Schwartz

Would you donate to a charity that allows parents well over the poverty line to pay just $25 per year for their child’s’ medical insurance? What if many recipients previously paid for such insurance themselves, and spend hundreds of dollars a year on booze, sweets and entertainment?  If you pay Colorado taxes, you’re forced to fund such a charity – the state-run “Child Health Plan Plus” (CHP+).  Senate Bill 11-213, which is awaiting the governor’s signature, would increase CHP+ enrollment fees for the wealthiest of eligible households, and rightly so.

Families earning up to 250 percent of the Federal Poverty Level are eligible for CHP+. Annual enrollment fees for one child are just $25 per year, and $10 more for any additional kids.  For families making between 205 and 250 percent of the FPL, SB 11-213 would increase this fee to $20 per month for one child, $10 per month for each addition child, with a maximum of $50 per month.

Critics in the Denver Post claimed that the “new monthly premiums … would be more than these families can afford.”  Recent data from the Bureau of Labor Statistics’ Consumer Expenditure Survey suggests otherwise. The lowest income households, making less than $5,000 per year, spend on average $156 per month on alcohol, tobacco, sweets and entertainment.

The proposed fee increase would affect households earning more than twice the federal poverty level, or more than $30,000 for a two-person household – one parent and one child. Families in this income range spend, on average, $191 per month on the above luxury items.  Even if the childless households spent three times more on these items than those with kids, the spending by households with kids would still be $95 per month. These numbers are even higher for families eligible for CHP+ earning more than $30,000.

If parents eligible for CHP+ can spend $100 per month on beer, cigarettes, sweets, and movies, surely they can spend $20 for their child’s health plan. In fact, they do. The Congressional Budget Office found that between half and three-quarters of children in families with income between 100 percent and 300 percent of the federal poverty level had commercial health coverage in 2005.

Even more parents would buy commercial coverage if state-run child health plans didn’t unfairly compete with and crowd out commercial insurance. The CBO concludes that for every 100 children enrolled in SCHIP, “there is a corresponding reduction in private coverage of between 25 and 50 children.” A study co-authored by MIT economist Jonathan Gruber, who has consulted for the Obama administration, estimates a crowd-out rate of 60 percent. Or as policy analyst Michael Cannon puts it, SCHIP covers “four uninsured Americans for the price of 10 — a lousy deal even by government standards.”

Increasing CHP+ enrollment fees will reduce crowd-out, as some parents who forgo enrollment will buy private coverage instead. For example, in 2005 Missouri introduced monthly premiums for its version of CHP+. Enrollment fell, but “increases in other types of insurance coverage prevented an increase in the share that were uninsured,” report Urban Institute researchers.

Critics of SB 213 claim that monthly fees would burden CHP+ administration, as some parents drop coverage to avoid monthly fees, but later re-enroll.  Limited re-enrollment periods can address this.

But this misses the larger picture: It’s clear that CHP+ clients can afford higher fees. Why does CHP+ allow eligible parents to value entertainment and satisfying bodily appetites more than securing their own children’s health?

One reason is that federal matching assistance gives CHP+ perverse incentives to waste Coloradans’ tax dollars. When CHP+ spends a dollar, the feds give them a dollar taken from a taxpayer in a different state.

A second reason is that unlike private charities, CHP+ need not prove their worth to persuade people to donate. Rather, Coloradans could end up in prison for not “donating” to CHP+.  The message is that some parents are entitled to have others finance their kids’ medical care.  Both the children, and Colorado taxpayers forced to fund CHP+, deserve better.

One way is to make CHP+ compete for donations by instituting a statewide tax credit for donations to charities focusing on children’s medical care.  A taxpayer would receive a full tax credit for each dollar he donates to an eligible charity, and CHP+ loses that dollar of Colorado tax revenue. The credit would be capped according to one’s income and the portion of tax revenue that would have reached CHP+.

If CHP+ is so worthwhile, it surely can withstand some competition, especially since it would have large advantages over competitors. First, CHP+ would still receive matching federal funds. It would still receive donations from taxpayers who don’t care enough to spend the time researching worthwhile alternatives to CHP+. So if you support Colorado’s Child Health Plan Plus, how about letting it compete with private charities?

In the meantime, if the state must compel taxpayers to fund CHP+, Senate Bill 213 would increase enrollment fees so eligible parents can more sensibly weigh the costs of their kids’ health care against the costs of booze, tobacco, sweets and movies.

Brian T. Schwartz blogs at the Independence Institute’s PatientPowerNow.org website