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RALEIGH — The compromise children health insurance bill passed by Congress last week is a good deal for North Carolina financially. It would fix a historical funding shortfall peculiar to the state by boosting the federal tax money sent here under the SCHIP program.
But President Bush reiterated Friday that he plans to veto the bill. The resulting political morass could force state officials to freeze new enrollments for children, even those who qualify under current guidelines. It also would complicate efforts to expand health insurance for children spelled out in this year's state budget.
"This bill is kind of the high-water mark for us," said Dan Gerlach, a senior policy adviser to Gov. Mike Easley. "It acknowledges how we have been treated unfairly in the past. If you say no to this deal, then what happens next becomes problematic for us."
The SCHIP program — called N.C. Health Choice for Children in this state — was created in 1997 and is scheduled to expire this weekend. It provides health coverage for children whose families make too much money to qualify for Medicaid but who do not have private health insurance.
The U.S. House and Senate last week passed a measure that not only reauthorized federal funding for the program but expanded it by $35 billion. Backers say that's enough to cover 10 million additional children across the United States.
Bush has vowed to veto the bill, which he says spends too much money and would take the nation down the first steps of a nationally run health care program for all.
The Senate voted 67-29 in favor of the bill, enough to override a veto. Sens. Richard Burr and Elizabeth Dole, both Republicans from North Carolina, voted against the measure.
In the House, however, the vote was 265-159, more than enough to pass but short of the number needed to override a veto.
"I think we've just clearly created another entitlement program," said Rep. Howard Coble, a Greensboro Republican who voted against the measure. Coble said he shares Bush's concerns about the cost of the program and expanding it to middle-income families.
"It's also a slap in the face to tobacco farmers and those who smoke," Coble said.
Congress would pay for the expansion of the children's insurance program with a 61-cent increase in the federal cigarette tax and by raising taxes on other tobacco products. That has drawn criticism from some state officials, who say it would hurt what remains of a battered industry.
Brian Long, a spokesman for N.C. Commissioner of Agriculture Steve Troxler, said the number of acres being cultivated for tobacco production has rebounded since 2005 and the end of federal quota regulations.
"This is going to come and sort of pull the rug out from under that," he said.
Long also argued that raising tobacco taxes would drive down cigarette consumption and hurt state and federal cigarette tax collections.
"If this program is worth expansion, then Congress should look for a more stable foundation to build it on," Long said.
Should Bush deliver the veto he has promised, that mix of protobacco and small-government sentiment is likely to carry the day, with House Democrats unlikely to find the votes necessary to override it.
Congress is already working on a temporary spending bill that would continue a number of federal programs, including SCHIP, through November. That would give Congress and the White House time to work out a new bill, but state officials say there is no guarantee that it would be as favorable to North Carolina.
Such stop-gap spending measures don't provide the kind of stability the state would need to continue enrolling new families.
"We have to know how much money we have to work with," Gerlach said. Should federal funding run out, the state would go from paying 30 percent of the program's cost to all of it.
"We would have to start freezing enrollment, which we hate to do," Gerlach said.
North Carolina was forced to freeze enrollment once before in 2001, when federal funding began to run out at the same time as the state began to run out of its own tax dollars.
In 2005, the state was forced to shift some children out of the SCHIP program and into Medicaid as a cost-saving measure.
In Washington, much of the debate of the bill surrounds an effort to enroll more children in the program who would not qualify under current guidelines. An oft-cited figure is that the new bill would allow families with incomes up to $80,000 to enroll, but that has been proposed by just one state — New York — and is subject to being overruled federal health officials.
North Carolina is considering its own expansion of children's health insurance, and SCHIP could play a role.
State legislators set aside $7 million to start a program to be called N.C. Kids Care, which as outlined in this year's budget would be separate from Health Choice for Children. It would be a health insurance program for children whose families make 200 percent to 300 percent of the federal poverty level — up to $61,950 a year for a family of four.
The General Assembly ordered the state Department of Health and Human services to design a program and report back early next year.
Although the law doesn't require the new program use SCHIP funding, it clearly contemplates having more of those federal funds available to North Carolina.
"That's what we had in mind," said Sen. Kay Hagan, a Greensboro Democrat and appropriations chairwoman.
Hagan said that she was confident the federal government would do some sort of SCHIP expansion — Bush has called for increasing funding just not as much as the congressional proposal would.
"The question is, how much," she said. A smaller bump in federal funding would mean a smaller expansion of the state's coverage, she said.

Contact Mark Binker at (919) 832-5549 or mbinker@news-record.com