Expanding Access And Choice For Health Care Consumers Through Tax Reform

PROLOGUE: Americans outside the employer-based system of health insurance often find it difficult, if not impossible, to find affordable coverage. Proposals to help the situation by providing tax credits to help offset the cost of health insurance have found supporters at both ends of the political spectrum. In this paper an influential conservative and a long-time Democratic Hill staffer join forces to evaluate types of tax credits and promote them as “one element of a national strategy to expand choice and coverage.” Advocating what they call an evolutionary, not revolutionary, approach, the authors propose that some form of federal tax credit be enacted in conjunction with states' efforts to broaden health insurance coverage. Stuart Butler is a vice-president for domestic and economic policy studies at the Heritage Foundation in Washington, D.C., where he plans and oversees the foundation's research and publications on all domestic issues. A native of England, Butler is a naturalized American citizen. He holds a master's degree in economics and a doctorate in American economic history, both from the University of St. Andrews in Scotland. David Kendall is the senior fellow for health policy at the Progressive Policy Institute (PPI). Prior to joining PPI, he served for seven years on the staff of Rep. Michael A. Andrews (D-TX), where he held several positions, including legislative director and senior policy director. He attended the University of Chicago. ABSTRACT: A refundable tax credit for the uninsured would complement the existing job-based health insurance system while letting people keep their job-based coverage if they wish. Among the wide variety of design options for a tax credit, policy and political analysis does not reveal an obvious choice, but a tax credit based on a percentage of spending may have a slight advantage. Congress should give states maximum flexibility to use existing funding sources to supplement the value of a federal tax credit and encourage the use of techniques to create stable insurance pools.