06/2001: The Galen Report

Published June 1, 2001

Health Policy Consensus Group Efforts

The Bush administration continues to work on its initiative to provide tax credits for the uninsured, and members of the Health Policy Consensus Group are providing advice and data to assist them with implementation details.

Among the key questions that must be answered for any tax credit aimed at the uninsured: Who should qualify for the credit; how do you minimize the number of people who drop the job-based coverage they already have, so they can take advantage of the credit; and can the credit be delivered so as not to pose a financial burden on the poorest beneficiaries?

The Progressive Policy Institute offers an innovative solution to the insurance drop-out problem. PPI’s plan offers not only a $1,000 credit for individuals who don’t have job-based coverage, but also a $400 credit for lower and lower-middle income individuals who already have or are eligible for job-based coverage, to discourage them from dropping it or encourage them to get it.

The Galen Institute has proposed meshing federal health insurance tax credits with other subsidy programs. The resulting package could be turned into a supplementary tax credit, like the State Children’s Health Insurance Programs (S-CHIP), to provide more money to lower-income uninsured.

The U.S. Treasury is being encouraged to use the tax code’s guidelines in defining eligible insurance. A number of studies and surveys show that years of work by the market-based policy community and the Consensus Group in advancing these ideas is coming to fruition.

The Galen Institute’s proposal for a prescription drug benefit for Medicare, The Prescription Drug Security Card (PDS Card) is catching on.

Senators Introduce Tax Credit Plan
Source: Reuters Health Information 3/15/01

A bipartisan group of Senators held a news conference on March 14 to introduce a new refundable tax credit proposal, dubbed the “Relief, Equity, Access and Coverage for Health (REACH) Act.”

The bill provides for a $2,500 maximum credit for families and $1,000 for individuals who do not have employer coverage and are not covered under a public program; the amount of the credit varies by household income.

The bill also provides a $400 credit for individuals and $1,000 credit for low- to moderate-income families who have access to employer-subsidized coverage.

The REACH proposal, formally introduced on March 21, is co-sponsored by Senators James Jeffords (R-Vermont), John Breaux (D-Louisiana), Bill Frist (R-Tennessee), Olympia Snowe (R-Maine), Blanche Lincoln (D-Arkansas), John Chafee (R-Rhode Island), and Thomas Carper (D-Delaware).

The full text of the REACH Act, S. 590, can be found on Thomas at http://thomas.loc.gov.

Tax Credit for Uninsured Discussed at Hearing
Source: Reuters Health Information 3/15/01

The Senate Finance Committee held a hearing to discuss solutions to the problem of the uninsured. Implementation details for a refundable tax credit proposal were among the many topics addressed.

William Scanlon, managing director of health care issues at the General Accounting Office said, “. . . because 90 percent of those without insurance either owe no income taxes or are in the 15 percent bracket, the tax credit must be large, or the take up rate will be small.”

Janet Trautwein of the National Association of Health Underwriters warned, however, that the credits cannot be so large that they encourage employers and employees to discontinue their current coverage. Jack Meyer of the Economic and Social Research Institute recommended the credit cover at least half the cost of a decent insurance policy, citing research by Mark Pauly suggesting a 50 percent credit would be the minimum necessary to ensure a meaningful level of participation in the program.

A Flexible Benefits Tax Credit for Health Insurance and More
Source: Lynn Etheredge, Health Affairs.org

Health Affairs magazine, “the policy journal of the health sphere,” recently debuted its first Web-only publication: a 10-page report titled “A Flexible Benefits Tax Credit for Health Insurance and More.”

In the report’s abstract, author Lynn Etheredge explains a new tax credit proposal: “This essay outlines a concept for a flexible benefits tax credit for expanding health insurance coverage and other purposes such as retirement savings plans (with potential withdrawals for higher education, first-home ownership, and catastrophic medical expenses).”

Etheredge presents the advantages of a flexible benefits tax credit: for example, efficient use of the budget surplus to help meet the varied (and changing) needs of American families, and elimination of major gaps in health insurance and pension coverage nationwide. If the budget surplus is used wisely, Etheredge notes, “political decision makers could achieve health insurance coverage for most uninsured workers and children and assure a future with real economic security for American families.”

The full text of Lynn Etheredge’s report is available on the Health Affairs Web site at www.healthaffairs.org.

Hispanic Coalition Pushes Health Care Plan
Source: Scott Hogenson, CNSNews.com 3/16/01

The Hispanic Business Roundtable, a leading national Hispanic advocacy group, is asking Congress to pass tax credit legislation. The group supports the “Fair Care” proposal, one of the tax credit options being considered by the Senate Finance Committee.

The Fair Care proposal would provide a $1,000 refundable tax credit for individuals and a $3,000 credit for families. The proposal would also permit the formation of health associations, similar to group insurance plans, to offer lower premiums.

The Galen Report is a monthly review of health policy matters provided by The Galen Institute, P.O. Box 19080, Alexandria, VA, 22320. Grace-Marie Arnett is president of The Galen Institute; this report is compiled by editor Liz Turner. Turner can be contacted at 703/299-9550, or visit The Galen Institute’s Web site at http://www.galen.org.