There is a notion in social insurance that if we are going to create safety nets for people, then somebody has to pay. There is a notion of equal justice or horizontal equity, which argues that if you and I both make $30,000 a year and you buy insurance but I don't, then I rely on the safety net, and you end up paying for me. This is the argument we use in requiring everyone to pay some Social Security tax. We say that people making $20,000 or $25,000 a year can't afford to buy insurance, but most of them are paying for health insurance in the form of lower cash wages. To say then that other people who don't pay for insurance through lower cash wages cannot afford it is part of the dilemma. If we say they can't afford it and we resubsidize them, that causes substitution, and we end up in a netherworld. There is still a gap between the tax system and the welfare system.
The Urban Institute, Washington, DC
Public Workshop, June 2, 1997
Questions about the scope of benefits are more often about how generous a benefit package the state can afford than about what kinds of benefits are recommended by experts in children's health. Given a limited amount of resources, does a state choose to cover more uninsured children with a minimal set of benefits, or does the state choose to provide more comprehensive services, in which case fewer children will be covered? Most states have decided on a comprehensive benefit package rather than catastrophic coverage (see Table 6.3), but there often are limitations or restrictions on coverage for mental health, dental care, inpatient hospitalization, disabilities, or chronic conditions.
Some states believe that offering a generous benefit package will encourage employers and families to drop employer-based coverage, particularly when the existing scope of private coverage is limited, as is typically the case with small employers. States with benefits exclusions have been motivated primarily by budget constraints and less by concerns about crowd-out, although the limited packages do seem less likely to attract working families who already have coverage (Chollet et al., 1997).
State programs derive their funding through a variety of financing streams. These may include state general funds, special taxes on tobacco or alcohol, taxes on providers or employers, funds generated from the sale or conversion of not-for-profit hospitals, contributions from employers or insurers, and donations from philanthropic organizations. Some states, such as Florida, are considering using funds from a tobacco settlement for their SCHIP, and other states with budget surpluses may use some of those funds for expansion of children's health insurance coverage (NGA, 1998). Successful competition for funding depends on the prominence of support for children's health insurance in the state, the proportion of uninsured children in the state, the nature of the provider networks, the involvement of children's health advocates, the views of the governors and legislatures about public insurance, and many other factors (Dorn et al., 1998).
One of the major financing questions is whether the families will pay premiums and copayments and, if so, what the amounts will be. Many state-subsidized health insurance programs require that participants share in the cost of their insurance, which not only reduces the public costs of the program