With the expansion of the State Children’s Health Insurance Program (SCHIP), more children were covered by health insurance—some $7.4 million in 2008 (compared with 6.6 million in 2006.) But not all the newly covered children were formerly uninsured. Some 60 percent of them were likely covered by private insurance, switching to less expensive public coverage when eligibility allowed them, a phenomenon known as crowd-out.
This high rate of crowd-out means that the program is not as effective as it could be in reducing the number of children without health insurance. But it also has other consequences for the families and their well-being. Becoming eligible for public coverage has three effects on the newly eligible families:
The SCHIP expansion (and the move from private to public coverage) improved the overall well-being of near-poor households, providing them with a “windfall” when they shifted resources away from medical care and insurance. They used the money to increase their total consumption, spending more for transportation and retirement savings, “clearly a positive effect of the program, and one that potentially offsets some of the inefficiency associated with crowd-out,” the researchers write. “This evidence should allow a better accounting of the benefits and not just the costs of recent expansions in public health insurance programs.”