White House renews call for health insurance tax credits

The Bush administration has refined its proposal, making the tax credits larger and linking them to purchasing pools.

By Amy Snow Landa, amednews staff. Feb. 18, 2002.

Washington -- President Bush is again trying to make good on his campaign promise to reduce the number of Americans without health coverage by providing tax credits to help them buy insurance.

Bush's fiscal year 2003 budget proposal calls for devoting $89 billion over the next decade to provide health insurance tax credits to families and individuals who lack employer-sponsored coverage and are not covered under public insurance programs.

Eye on access
Tax credit totals

The administration estimates the tax credits would provide access to health insurance for up to 6 million Americans who would otherwise be uninsured for one or more months of the year, and help many more low-income working families who currently pay for their private health insurance with little or no government assistance.

The proposal got good reviews from physician organizations.

"This clearly is a big step in the right direction, and we're pleased to see it," said AMA President Richard F. Corlin, MD. "We think it will help significantly with the uninsured, and it validates the concept of the tax credit, which we've been talking about for a long time."

Last year, the Bush administration sent a tax-credit proposal to Capitol Hill that fizzled and died amid bitter disagreement between the two parties over how best to expand health coverage.

Families with two or more children could get a tax credit of $3,000.

But this year, the administration has put tax credits back on the legislative table -- and with a few changes that could make them more palatable to Democratic lawmakers, said Bob Doherty, director of public policy and government relations for the American College of Physicians--American Society of Internal Medicine. "I think that the movement we're seeing on the administration's side -- if the Democrats are really willing to reciprocate -- could get us to the point where we are able to get something done."

The Bush administration has tried to address a criticism often leveled against tax-credit proposals -- that the amounts are too small -- by raising its maximum credit for families with two or more children.

The AMA and other physician groups have emphasized that the credit should be high enough to pay for nearly all of the premium cost if it is to be of much use to people with low and moderate incomes.

In this year's proposal, the administration has raised the maximum credit for families with two or more children from $2,000 to $3,000.

The administration has said that the credit could cover as much as 90% of the cost of health care coverage.

"The proposal for $3,000 may or may not eventually turn out to be fully adequate," but it's a positive move, said Dr. Corlin.

The proposal is intended to cover 90% of health insurance costs.

The plan would offer the $3,000 credit to two-child families with adjusted gross incomes up to $25,000; $1,714 to families with income of $40,000; and phase out the credit to zero for families with income of $60,000 or more.

Some physicians question whether that amount is enough.

"It's a good start," said Warren Jones, MD, president of the American Academy of Family Physicians and a clinical professor of family medicine at the University of Mississippi Medical Center in Jackson. "The intention is positive. But this tax credit really does not fit the bill."

For individuals, the Bush administration kept the maximum credit amount at $1,000 for those earning up to $15,000, with the amount phasing down to zero for those earning $30,000 or more.

"It's just a drop in the bucket," said Krishna Sawhney, MD, a Michigan AMA delegate and general surgeon at Henry Ford Health System in Detroit. Even if the proposal is approved by Congress, which Dr. Sawhney considers unlikely, "it doesn't help very much at all" because the credits would be too small.

Refunds and insurance pools

The proposed credits are refundable -- so that even those who pay no income taxes would qualify -- and income-related -- so that the higher the income for a family or individual, the lower the credit. Both are features that the AMA and other physician groups strongly support.

In addition to the higher maximum credit for families, this year's proposal links the credits to helping states establish purchasing pools to reduce the cost of health insurance premiums for low-income residents who use the tax credits to buy coverage.

The budget proposes $1.5 billion for community health centers.

"We think that that will help as well," said Dr. Corlin. "There's no question about it."

Under the plan, the details of which have yet to be fleshed out, states could establish the new purchasing pools through their existing purchasing groups for state employees or the State Children's Health Insurance Program.

The tax credits could also be used in privately sponsored health insurance purchasing groups.

Other paths to access

The president's 2003 budget also includes other items to improve access to health insurance, such as loosening current restrictions on medical savings accounts, which has the AMA's support. Under the plan, MSAs could be made available by all employers, not just small businesses, and the accounts would be made permanently available.

"It seems as if in the past there have been a lot of people who have been trying to demonstrate MSAs with such tight rules as to guarantee that they can't work," said Dr. Corlin. "We think that loosening the rules and making them more available is something that will work and will be helpful."

The administration is also proposing to return to the states an estimated $3.2 billion in SCHIP funds that have gone unused and would otherwise return to the federal treasury under current law.

In addition, the administration is proposing a $1.5 billion budget in fiscal year 2003 for community health centers, which care for people who are uninsured and underinsured. That would be a $114 million increase over this year's budget. The Bush administration has said it is committed to the goal of adding 1,200 new and expanded health center sites over five years and ultimately doubling the number of patients who are treated.

The administration has laid a "significant amount of money" on the table in the 2003 budget proposal to try to reduce the number of uninsured, Dr. Corlin said.

"It may not be enough to do the entire job all at once, but we'll do the best we can with it and come back and try to get more," he said.

ADDITIONAL INFORMATION:

Eye on access

President Bush's fiscal year 2003 budget proposal calls for increasing health care access by:

Offering refundable health insurance tax credits of up to $1,000 for individuals and $3,000 for families.
Loosening restrictions on medical savings accounts.
Allowing states to keep their unspent State Children's Health Insurance Program funds to expand coverage to the uninsured.
Increasing the community health center budget by $114 million, to $1.5 billion.
Boosting the National Health Service Corps budget by $44 million, to $191.5 million.

Tax credit totals

President Bush is proposing refundable tax credits that would vary according to income and the number of family members covered by a policy.

Up to $1,000 for an individual with no dependents. The credit would phase out completely for individuals making $30,000 or more annually.
Up to $2,000 for two adults, with the credit phasing out completely for couples earning $60,000 or more annually.
Up to $3,000 for two adults and two or more children, with the credit phasing out completely for families with $60,000 or more in annual income.