S-CHIP Comes to Bankruptcy Court (Please)

A month ago, a debate raged around S-CHIP, the State Children's Health Insurance Program (see here for background from the NYT). In the end, President Bush vetoed a bill that would have expanded the program to make health insurance more widely available to millions of uninsured children (but I digress). Putting aside the political back-and-forth over expanding S-CHIP, there are two empirical points that would seem relatively uncontroversial. First, many families who are eligible for S-CHIP fail to enroll. Second, many individuals arrive in bankruptcy court without health insurance or with gaps in health insurance coverage.

The bankruptcy system has an opportunity here to make the world a little bit better place. Eligibility for S-CHIP programs varies from state to state, but it is generally stated as a matter of annual income (relative to the federal poverty line) and size of household. Income and size of household also are two facts that debtors must disclose when filing for bankruptcy. When individual debtors arrive for their meeting of creditors, why can't bankruptcy trustees make two simple inquiries of debtors who fall within their state's guidelines. Do you have dependents under the age of 18? Do you have health insurance that covers these dependents? For those debtors who answer they do not have health insurance for these dependents, the trustee simply could hand them a form for enrollment in the state's S-CHIP program and refer any further questions about eligibility to the appropriate state agency.

Simply by issuing a directive as part of its oversight responsibilities for the standing bankruptcy trustees, the Executive Office of U.S. Trustee could implement this proposal in a heartbeat. Moreover, as participants charged with promoting the effectiveness of the bankruptcy system, the U.S. Trustee and the bankruptcy trustees should want to help direct eligible persons into state S-CHIP programs. Individuals who risk uninsured medical bills for their dependent children will be less likely to complete a chapter 13 plan and less likely to recognize the full benefits of a fresh start that the bankruptcy discharge gives them in either chapter 7 or 13. In the absence of action from the U.S. Trustee, I know of nothing that would stop bankruptcy trustees from implementing these suggestions on their own, and I hear that some bankruptcy trustees may already be giving debtors information about the S-CHIP program. That is a good idea that should spread around the nation.