Bipartisan Consensus Builds For Health Care Tax Credits

Major Health Reform Seen as Possible as AMA and NCPA Lead Move Towards Tax Credits

WASHINGTON (March 7, 2001) -- A bipartisan group of Hill leaders joined economists from the Dallas-based National Center for Policy Analysis (NCPA) and the American Medical Association (AMA) to discuss the growing consensus for creating a tax credit to help the millions of uninsured Americans purchase private health insurance. The briefing comes a week after President Bush announced his support for this type of health reform during his address to a joint session of Congress.

According to Rep. Nancy Johnson (R-CT), Chairwoman of the House Ways & Means Subcommittee on Health: "There are more than 44 million Americans who lack health insurance in any year. The main reason is the significant cost of health insurance."

"Regardless of political ideology, we must come together to figure out ways to decrease the ranks of the uninsured. The time has come to work together on a refundable tax-credit to purchase health insurance," said Rep. Jim McDermott (D-WA), who also serves on the Health subcommittee.

The consensus on tax credits as a solution for the rising uninsured population is being fueled by the disparity in tax treatment between employer-provided and individually purchased insurance. The tax law excludes money spent on employer-provided health benefits from the employee's taxable income, yet those who have to purchase it on their own must do so with after-tax dollars - forcing some people to earn twice as much before taxes to purchase the same insurance.

"The tax law penalizes people who purchase their own insurance," said NCPA President John Goodman, whose research helped ignite the tax credit movement. "Generous tax relief could lead to an immediate, sharp reduction in the uninsured population."

While everyone at the NCPA/AMA briefing agreed on the need for tax credits, there were differing views on what that plan should look like. According to E. Ratcliffe Anderson, Jr., MD, executive vice president and CEO of the AMA: "The tax credit needs to be large enough to guarantee that health insurance is affordable for most people." The AMA's tax credits are also refundable (available to people who owe no taxes) and more generous to lower-income families. By contrast, Goodman said that the credit should be the same for everyone, regardless of family income.

Rep. Johnson announced that she was introducing legislation that would create both a tax deduction and a credit for people who purchase their own health insurance. "This will give the uninsured greater access to quality health care," she said.

Rep. McDermott announced the details of a bipartisan proposal he has introduced with Rep. McCrery (R-LA). "We have agreed in principle to a defined benefits package, community rating and a generous, refundable tax-credit targeted to the poor," he said.