Tax credits no quick fix for the uninsured

Capitol Hill proposals are inadequate to address the complexities of the private insurance marketplace, some analysts say.

By Joel B. Finkelstein, AMNews staff. Jan. 13, 2003.

Washington -- The new Republican majority in Congress favors health insurance tax credits to address the problem of the uninsured, but fashioning a workable subsidy could prove difficult, several health system experts say.

Individual tax credits of up to $1,000, proposed last year by the Bush administration, are not enough to encourage lower-middle-income Americans to purchase insurance if they have not already done so, said Mark V. Pauly, PhD, professor of health care systems, insurance and risk management at the Wharton School of the University of Pennsylvania, Philadelphia.

Many of these "betweeners," as Dr. Pauly calls them, very likely could afford some form of health insurance if they wanted, but seem to mistakenly think that it is too expensive or that they don't need it.

Tax credits would need to reduce premiums to 5% to 7% of an individual's income before the person would buy insurance, said Joseph M. Heyman, MD, member of the AMA Board of Trustees.

The Association "would support any move toward tax credits," said Dr. Heyman, but is seeking a broader approach that would create more vehicles for making insurance available and affordable to individuals. These include local purchasing marts, health pools and defined-contribution plans.

There are several pitfalls to offering tax credits as a stand-alone policy, said Linda J. Blumberg, PhD, senior research associate at the Urban Institute in Washington, D.C. Tax credits might help young, healthy people afford health insurance, but older people and those with preexisting conditions may still be left out in the cold.