Restoring KidsCare: Annual and Long-Term Benefits Far Exceed Cost to the State

April 13, 2016

Restoring KidsCare: Annual and Long-Term Benefits Far Exceed Cost to the State


By Dave Wells, Ph.D.

Research Director, Grand Canyon Institute


Executive Summary

Arizona is the only state in the country with an inactive Children’s Health Insurance Program (CHIP). A bill to reinstate the program, HB2309, has stalled in the Senate.  Arizona would be wise to revive its KidsCare program.  The state for FY2017 would actually come out ahead fiscally by reviving it.  Reinstating the program would yield approximately $40 million in direct economic benefits in FY2017 and total economic benefits of approximately $75 million, as the initial $40 million recirculates in the economy.  This added economic activity should bring in nearly $3 million in added state and local revenue, while the federal government would pay 100 percent of the cost of a program estimated to reach more than 30,000 children.

In addition, economic research estimates that KidsCare, besides improving health outcomes for children, leads to longer term benefits.  Longitudinal research has found expanded health insurance services for children including Medicaid and CHIP modestly reduce the high school dropout rate and increase the number of students graduating from college.  These future benefits, while realized over the working lifetimes of enrollees, amount in current dollars to more than $30 million annually in net fiscal benefits to the state, national and federal government.  As their earnings are higher, their taxes paid rise, and their use of assistance programs and criminal activity diminishes.

In addition, should the federal government draw back on its support for the CHIP program in FY2018, the state would have full budgetary control to limits its immediate fiscal impact and freeze enrollment.

Consequently, no reason exists to continue the freeze on KidsCare in Arizona.  The program should be restored immediately with whichever budgetary controls the legislature feels would be necessary.