March 22, 2002 | News Releases on Health Care
WASHINGTON, Mar. 22, 2002-They offer a fair and effective way to greatly reduce the number of Americans who lack health insurance. They would end the built-in bias toward employer-sponsored health plans. The White House likes them, and they've been approved by the House of Representatives.
But the Senate leadership refuses to let them even come up for a vote. They're health-care tax credits, and as Heritage Foundation Vice President Stuart Butler explains in a new paper, they could help many uninsured Americans finally get the coverage they need.
Many working families can't afford health insurance and face financial devastation in case of illness or accident, he says. Nearly half the firms in America with 10 or fewer employers don't offer coverage, which means their workers must buy insurance on the open market-and many can't afford to. And while government provides an unlimited tax break for workers to receive health insurance through their employers, it provides no help for those who go out on their own.
Some lawmakers suggest making those families eligible for Medicaid, the federal-state insurance program for retirees and the poor. But this would move America closer to the failed state-run health systems of Canada and Britain, Butler says, and it would throw millions of more people into a program that's already struggling financially.
Others suggest having the government subsidize the "COBRA" coverage that laid-off workers can buy through their former employers. But many laid-off workers don't qualify for COBRA, Butler says, and even with such subsidies, many Americans would find the cost of such coverage too expensive. Beyond that lies what he calls "the Enron problem"-forcing workers to depend on the company that laid them off for future coverage.
The tax-credit approach could solve much of the problem, Butler says. It would provide a credit for families to buy the coverage that suits their needs and meets their budgets. They could buy COBRA coverage if they wished, but they wouldn't be required to do so.
The credit should be available when the insurance is purchased, rather than requiring struggling families to wait until the end of the year to apply for it, he says. And some percentage of the credit should be available to workers, regardless of job status, to cover out-of-pocket expenses.
Critics charge the amount proposed in the bill that passed the House would not be sufficient, and certainly a larger credit would be better, Butler says. But studies show that most of the credit amounts that have been proposed would be sufficient to finance adequate coverage for many families, and states could augment the credits through existing programs.
Others claim tax credits may "crowd out" existing employer-sponsored coverage. If so, Butler says, this constitutes an argument against expanding Medicaid as well. Further, the credits can be designed to reduce "crowd out." One way to do this, he says, is to prohibit workers from dropping out of an employer-sponsored pool just to claim the credit.