Today, during a Senate Finance Committee hearing about SCHIP expansion, Sen. Jon Kyl (R-TX), like his Republican colleagues in the House, argued that expanding SCHIP would force millions of children with private coverage into a public program.

During last year’s SCHIP debate, Republicans similarly used this “crowd out” argument — the idea that expanding a public program would motivate families of children who currently have private coverage to voluntarily “drop that coverage for their children and enroll the children in SCHIP or Medicaid instead” — to keep from expanding the program.

Kyl cited the Congressional Budget Office’s (CBO) estimate that 2.2 to 2.4 million children who would gain SCHIP or Medicaid coverage would have otherwise had private coverage. But as the Center for Budget and Policy Priorities explains, “crowd-out is not the same as voluntarily dropping private health insurance for public program coverage”:

In other words, a large share of the SCHIP “crowd-out,” as estimated by CBO, involves children who are uninsured now but who would obtain private coverage at some later point if SCHIP (or Medicaid) coverage were not available to them. These are not children who had private insurance that their families voluntarily dropped for public program coverage.

In fact, as the center points out, “only a small share of children had private health insurance before enrolling in SCHIP or Medicaid.” An Urban Institute study that examined how 18 states are addressing crowd out concluded, “among the 18 study states, SCHIP and Medicaid officials, as well as other key informants, consistently reported little to no concern over crowd out; many believed it was a non-issue.”

Moreover, “the Congressionally-mandated 10-state evaluation of SCHIP found that while 28 percent of newly enrolled children had private coverage before joining SCHIP, half of them — or 14 percent —lost their private insurance for involuntary reasons before enrolling in SCHIP, such as when parents lost their jobs or became divorced or employers stopped offering health insurance for dependents.”

Indeed, the harsh economic climate has certainly made insurance less affordable and has led many Americans to lose their employer-sponsored coverage. As Sen. Olympia Snowe (R-ME) pointed out during the hearing, “it’s the cost of private insurance that excludes them from having coverage. More and more Americans are losing coverage becay they can’t afford it. Small businesses can’t afford to provide it.”

Today on CNN’s American Morning, host John Roberts asked former Senate Majority Leader Bill Frist (R-TN) why Republicans didn’t “allow the government to negotiate with drug companies” when they passed Medicare Part D. Frist argued that “having competition and competition for prescription drugs” saves more money than “having the government come in and having a mandated price:

Well initially it was because the Congressional Budget Office said there’s absolutely no savings because what you want to have are people who are competing- 2 million against 5 million against 4 million against 3 million people- get them around the table and that would bring the cost down. And indeed they were right. Right now there’s about 30 percent savings this year, 20 percent savings last year, by having competition in competing for prescription drugs instead of having government coming in and having a mandated price undercut—that no one’s going to come to the table.

Watch it:

But as Dr. Bernadine Healy, the Health Editor for US News & World Report, explained, the debate isn’t about “mandating prices,” but allowing for fair competition. Permitting Medicare to use its market power to negotiate drug prices on behalf of its 46 million enrollees could have a great impact on drug prices. According to a report by economist Dean Baker, “if Medicare were to negotiate on behalf of its beneficiaries, it would be able to substantially reduce” the growth rate in drug prices and “negotiate prices that reflected actual production costs“:

Such negotiations should in principle allow for very substantial reductions in price, because the pharmaceutical industry sells prescription drugs fro prices that are typically more than 200 percent above their cost of production. This means that if a large buyer, like Medicare, were to demand substantial discounts, then the industry could still make a profit on its sales, even if it charged much lower prices than it does at present.

In fact, “in surveying the prices that various countries pay for drugs, the CBO found costs ranged from 35 to 55 percent less than the prices paid in the United States,” suggesting that a single buyer can use its market clout to significantly lower costs. Baker concluded that direct negotiation could reduce drug prices by as much as 70 percent.

Frist, of course, has a long history of defending Big Pharma’s profits. In December of 2005, First and House Speaker Dennis Hastert inserted a provision in the Defense Appropriations bill that granted vaccine manufactures near-total immunity for injuries or deaths. The provision, which was essentially written by vaccine-industry lobbyists, was inserted in the dead of the night, after House and Senate conferees had agreed the provision would not be included in the bill.