Tax Cuts Before Tots

By MICHAEL WEISSKOPF

George W. Bush had a simple fiscal policy as Texas Governor: he called for meeting the people's "basic needs" and returning what's left to "the hands who earned it." But it didn't work that way for Ray Haros, a poor kid from Austin's barrio in need of health insurance. While Bush delivered $2.7 billion in tax relief, Ray got left out of the equation.

Ray, 6, a slender boy with large brown eyes, who has been diagnosed with depression and attention-deficit disorder, should be under regular care by a doctor. The Haros family income, which rests on the mother's $5.35-an-hour job at a local candy plant, is low enough to qualify him for Medicaid. But for reasons all too common in Bush's state, Ray receives nothing from the federal and state insurer of the poor. Like 734,000 other uninsured Texas youngsters who live in poverty, he relies on the uncertain charity of free clinics and social workers who scrounge for medicine to help him. Of all Texas kids who are eligible for Medicaid, nearly 40% do not participate, putting Texas last among the 10 largest states, according to Census Bureau projections for 2000 compiled by the American Academy of Pediatrics.

Uninsured kids have become campaign props in this year's presidential contest. So far, most of the political debate on the issue has focused on the Governor's handling of the federal Children's Health Insurance Program, with Bush taking credit for extending this benefit to 423,000 low-income children, and Democrats slamming him for a slow and halfhearted start-up of the plan. But citing CHIP's performance as evidence that Bush is ignoring child health is not really convincing, since 39 other states have done just as badly as Texas in using federal funds allotted to them. The real failure in Texas, the one for which the state stands out, is its poor record of reaching the much larger pool of kids who are too poor for CHIP but eligible for Medicaid. These are families of four with incomes at or below the poverty line of $17,000.

To be sure, Bush inherited a huge gap in Medicaid enrollment from his Democratic predecessor. When Bush took over in 1995, Medicaid officials failed to reach about 30% of eligible children, according to the Center for Budget and Policy Priorities, a nonpartisan Washington group. The percentage grew as Texas families, forced off cash assistance by new welfare laws, were not told that their children still qualified for Medicaid. Nevertheless, Bush put an emphasis on tax cuts rather than spending to expand eligibility and break down barriers to enrollment. Democrats contend that the Governor showed his priorities when he opened the 1999 legislative session by declaring a $45 million tax-relief bill for oil-stripper wells to be an "emergency."

It was the legislature, not the Governor's office, that pushed to extend Medicaid's reach. In 1995 lawmakers sought to widen the net to an additional 303,000 kids by expanding eligibility to families at 133% of the poverty level. First, the state had to obtain approval from Washington. It sent its plan within the statutory deadline and received a response from federal officials, who asked the usual large number of questions. But instead of a prompt follow-up, Bush's regulators waited nearly a year to submit a revised version. Another volley of paperwork continued until August 1997, when Congress passed the CHIP program, overtaking the state plan. But even then, Bush took his time to start up CHIP, although the program requires less of a state contribution than Medicaid (25% versus 40%). When CHIP finally did start, last May, a total of five years had passed since the legislature first attempted to cover many of the same youngsters.

The delay freed Texas from having to spend billions of dollars in matching state grants, leaving enough money for Bush to pass $1 billion in tax relief in the 1997 legislative session. Two years later, he set his sights on even bigger tax cuts. To make the numbers work, Medicaid spending had to be contained. The Governor's office fought a bill to require automatic re-enrollment in Medicaid of kids still eligible after their parents were dropped from welfare rolls. And under pressure from Bush allies running the appropriations committees, Texas legislators accepted projections of a steep decline in patient demand for Medicaid. Bush succeeded in passing another tax cut, this one amounting to $1.7 billion. But the Medicaid forecasts proved overly rosy, leaving the program with a $400 million deficit. The state health department is looking for ways to offset it. One idea is to take more than $17 million from hard-pressed programs for disabled children.

To insure kids like Ray Haros, advocates for the poor say, will take more than money. Ray had Medicaid until his mother got a job three months ago and stopped receiving cash aid. Rene Haros' income was low enough for her five children to remain eligible for Medicaid. But no one told her that unless she asked for it, they'd be cut off. To re-apply, she has to navigate a complex and intrusive process. She must go to an interview, fill out as many as 19 forms, reveal family assets and document everything from children's births to job histories of adult household members. Once approved, Ray's mother will have to return to the state office every six months to update her children's eligibility.

Federal law does not impose such tough entry requirements, nor do most states--38 have stopped in-person interviews, 40 have given up scrutiny of family assets, and 15 offer year-round coverage without eligibility updates. "[In Texas], we're literally discriminating against the poorest of the poor," said Democratic state representative Garnet Coleman.

Bush campaign spokesman Dan Bartlett said the Governor places a "high priority" on child health, as seen in his support of CHIP, and that the state is considering, among other things, making it easier to stay on Medicaid by eliminating in-person interviews every six months. But when the public health committee of the Texas house began discussing simpler rules last January, Bush's point man on fiscal issues tried to nip it in the bud. Appropriations committee chairman Robert Junell had legislative budget analysts project the costs to the state and made sure each legislator saw the eye-popping numbers: $600 million over two years. Democratic representative Glen Maxey saw the unsolicited analysis as an end run to scare off undecided members. "It's a higher mountain to climb," Maxey told TIME. And he, for one, has little hope of climbing it.

--With reporting by Hilary Hylton/Austin

With reporting by Hilary Hylton/Austin