NCPA - National Center for Policy Analysis

The Gore Health Proposal

December 6, 1999

Vice President Al Gore's new health care reform plan proposes a major step toward eliminating inequities in the tax law and giving relief to millions of people who must buy their own health insurance. Unfortunately, he would also expand three major government health programs -- using money better spent helping people acquire private insurance.

The federal tax system subsidizes the health insurance of some families while giving no relief to others:

  • Tax breaks for employer-provided health insurance cost the federal government more than $125 billion a year -- and can cut the cost of health insurance in half for many middle-income families.
  • By contrast, individuals who purchase their own health insurance must use aftertax dollars, forcing many to earn twice as much income before taxes to purchase the same insurance.
  • Gore would offer a 25 percent tax credit for those who purchase their own insurance; the tax credit would be refundable, meaning those who owe no taxes would get a check instead.

However, it is far less generous than tax credit proposals offered by Rep. Dick Armey (R-Texas) and Rep. Pete Stark (D-Calif.) (see figure). Their proposals are also more efficient: Armey and Stark would subsidize basic insurance coverage, whereas the Gore subsidy is unlimited: 25 percent of spending, no matter how wasteful.

Gore would expand Medicare by allowing people between the ages of 55 and 65 to buy in, overburdening the already financially troubled program.

Also, he would expand the Children's Health Insurance Program (CHIP) and Medicaid. CHIP has attracted few takers, and costs several times more for each child insured than a comparable policy purchased in the private sector.

Medicaid's low reimbursement rates ensure it will always have problems attracting the best doctors. Instead, we should be trying to figure out how to get people into private insurance.

Source: Devon Herrick, "The Gore Health Proposal: One Step Forward, Three Steps Back," Brief Analysis No. 308, December 3, 1999, National Center for Policy Analysis.

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