Now that President Bush has vetoed a plan that would have greatly expanded the State Children's Health Insurance Program, or SCHIP, it's time to skip the recriminations and get busy crafting a compromise that actually works.

It's not a matter of being for or against children getting coverage. Everyone's for coverage. The problem is with doing that solely by expanding SCHIP to families well above the original income threshold (about $40,000 for a family of four).

The program is meant for low-income working families without insurance, not the middle class. And expanding SCHIP does nothing to help working families struggling to do the right thing and pay for coverage through their employer. To get any help, these families would have to pull their child out of their current private insurance plan and dump them into SCHIP.

But there's a better way to help parents keep their kids in the family's health plan and also aid those kids who lack insurance. And this "third way," to steal a Bill Clinton phrase, actually uses ideas from across the political spectrum.

In fact, last January a bipartisan group called the Health Coverage Coalition for the Uninsured basically promoted the kind of compromise we need. The coalition included such groups as the American Medical Association, Families USA, AARP, the Chamber of Commerce, the Catholic Health Association and top insurance and hospital associations. Sen. Mel Martinez (R-Fla.) and other lawmakers have started to design a similar balanced initiative.

Congress could do three things to craft a bipartisan compromise based on the coalition's approach.

First, reauthorize SCHIP by focusing on enrolling all the kids it was intended for. Many of these eligible kids just aren't enrolled today. That means kids in families with an income of 200 percent of the Federal Poverty Level. That's just over $40,000 for a family of four, and higher for bigger families.

Congress should concentrate on these kids, rather than expanding SCHIP to families earning $60,000 or more. Some states have gained permission to cover kids in these middle-class families, and even some adults, and that shouldn't be disrupted. But lawmakers should keep SCHIP focused on the kids it was meant to cover.

Second, give states more latitude to use existing federal programs and money in more innovative ways to expand coverage, especially for children. Bipartisan bills along these lines have already been introduced by House members Tammy Baldwin (D-Wisc.), and Tom Price (R-Ga.), as well as Sens. Jeff Bingaman, (D-N.M.), and George Voinovich, (R-Ohio).

Third, provide a tax credit of $1,200 for health insurance for each child between 200 and 300 percent of poverty level. That would be enough to enable their families to enroll them in family coverage at the workplace of the main breadwinner or in another private plan of their choice.

The same credit would go to families in this income range who have already made the financial sacrifice to enroll their kids, not just to families with uninsured children. That's only fair. So these families -- many of which are dropping coverage because they can't make ends meet -- would get the help they need to keep their kids insured.

The credit would be a dollar-for-dollar reduction in the federal income taxes the family would otherwise pay. If the credit exceeded the family's tax liability, the government would send the difference to the family's chosen plan -- making the credit "refundable."

The credit would be paid for in two ways. The refundable part would be paid for with reductions in wasteful spending, such as corporate welfare. The rest of the credit -- reducing family tax bills -- would be paid for by limiting the tax-free status of employer-paid health insurance for families with incomes above, say, $150,000. The tax-free amount for those families would be capped at the cost of an average family plan (about $12,000).

The worst thing that could happen to uninsured kids and struggling families is for the debate over SCHIP to degenerate into a vicious partisan wrangle. Lawmakers must put kids first. They can do that and allow each side to claim victory. They just need to combine a reauthorized but re-focused SCHIP program with a credit to help working families pay for private insurance that is available but unaffordable.

Stuart Butler is vice president for domestic affairs at The Heritage Foundation heritage.