NCPA - National Center for Policy Analysis

Gore Health Plan: One Step Forward, Three Steps Back

October 8, 1999

Vice President Al Gore's new health care reform plan proposes a major step toward eliminating severe inequities in the tax law and relieving the financial burden on people who must buy their own health insurance, says economist John C. Goodman.

The number of uninsured has reached 43 million and continues to grow because there is an annual tax subsidy of more than $125 billion for employer-provided health insurance. Yet other Americans get no tax relief, even when they buy bare bones coverage.

  • Under the current system, employer payments for health insurance are excluded from the employee's taxable income -- which can cut the cost of health insurance in half for many middle-income families.
  • By contrast, individuals who purchase their own health insurance must do so with aftertax dollars, forcing many to earn twice as much before taxes to purchase the same insurance.
  • The self-employed get a partial tax deduction, but not as generous as the tax benefit for those in an employer plan.

Gore would rectify this imbalance by offering a 25 percent refundable tax credit for private insurance purchasers. Unfortunately, he wants to expand three government health programs:

  • First, he proposes to allow 55-to-65 year olds to buy into Medicare, which is going broke faster than Social Security and exposes seniors to thousands of dollars of personal expenses.
  • Last year, for example, 360,000 Medicare beneficiaries faced $5,000 or more in out-of-pocket costs.
  • Another mistake is to expand the Children's Health Insurance Program (CHIP), which insures many children who would be insured through an employer or Medicaid.
  • He would also expand Medicaid, which at the margin replaces private coverage that would otherwise come from an employer.

The money spend on these programs could be more efficiently and more effectively spent helping people acquire private insurance.

Source: John C. Goodman (president, National Center for Policy Analysis), "Health Care...Through the Political Prism," Washington Times, October 8, 1999.


Browse more articles on Health Issues