This vote was on an amendment by John Thune, R-S.D., that would stipulate that families that are subject to the Alternative Minimum Tax (AMT) may not be eligible for health coverage under the State Children’s Health Insurance Program (SCHIP).  The amendment was offered to a bill that would reauthorize SCHIP and expand the program’s funding by about $35 billion over the life of the bill.  To offset the cost of expansion, the bill would increase the federal tax on cigarettes by 61 cents, to $1 per pack. 

The SCHIP program – funded primarily through taxes on tobacco products -- helps low income families with children afford health insurance, and currently covers about 6 million kids.  Devised in 1969, the AMT was intended as a way to capture more tax revenues from a handful of very wealthy people so adept at using loopholes that they paid little into the federal treasury. But the program has come under scrutiny in recent years, because an increasing number of middle-class taxpayers have found themselves subject to the tax.  This is largely because the AMT’s formulas do not account for inflation or recent tax cuts.

The SCHIP program was devised as a way to ensure that the poorest of children receive health care coverage.  But Republicans have repeatedly expressed concerns that states are misusing SCHIP funds to cover adults and families who make more money than the original program envisioned allowing.  They also worry that expansions to SCHIP will continue and balloon into another large entitlement health care program, along the lines of Medicaid.  Democrats typically counter that they are interested in providing health care coverage to as many needy people as possible.

In explaining his amendment, Thune said that it would not prevent a state from continuing to tailor a program to population’s needs. 

“My amendment says that for children or adults from families with incomes so high they are going to be subject to the AMT, they cannot also be eligible for SCHIP. Families should not be considered low-income for the purpose of receiving taxpayer-funded health insurance and, at the same time, wealthy enough to have to pay the alternative minimum tax,” Thune said.

Max Baucus, D-Mont., suggested that Thune’s amendment was a poison pill and that it is inappropriate to try to meld the AMT with SCHIP.
“We will deal with the AMT at the appropriate time, not on this bill. The AMT is a huge problem,” Baucus said.  “[But] we should not try to solve the AMT problem on the backs of the low-income kids. It is wrong, dead wrong. I strongly urge Senators to keep first things first. This is a kids bill, not an AMT bill. We deal with kids today and help low-income kids and we will deal with the AMT at a later date. Believe me, we will find a solution to that.”

By a vote of 42-57, the Senate rejected Thune’s amendment.  All Democrats present voted against the amendment.  All but seven Republicans present voted for the amendment.  The end result is that the measure went forward without language that would have restricted eligibility for SCHIP health coverage to those families that are not subject to the AMT.