NCPA - National Center for Policy Analysis


October 7, 2005

Those affected by Hurricanes Katrina and Rita should be able to use federal aid money to secure private health insurance. By allowing access to catastrophic (high-deductible) insurance and by freeing such insurance from cost-increasing regulations, we could make affordable insurance available to low-income families. And with a private plan they would have access to the full range of services in the hospital marketplace, say Devon M. Herrick, a senior fellow and Pamela Villarreal is research associate with the National Center for Policy Analysis.

There are two models to follow. One is the tax credit currently made available to people who have lost their jobs due to imports of foreign goods (the Health Coverage Tax Credit). A better-designed subsidy (following NCPA recommendations) is the refundable credit proposed by President Bush in 2000, say Herrick and Villarreal:

  • That proposal would make a tax credit of $1,000 per individual (up to $3,000 per family) available to low-income families who buy their own health insurance.
  • Adjusting for inflation in the interim, the credit today should be at least $4,500 for a family of four.

Moreover, there is no need to seek additional funding sources to pay for it. As people who previously relied on Medicaid and free care programs switch to private coverage, the federal government will be able to reduce the amount it now sends to the states for the health expenses of these very same people.

For routine health services and nonspecialist care, low-income, dispossessed families need cash. This cash could be provided in the form of Medical Access Accounts (MAA), which could only be used for medical care. State and federal Medicaid funds could be combined with money state and local governments currently spend on free indigent care to fund the accounts, say Herrick and Villarreal.

Source: Devon Herrick and Pamela Villarreal, "Health Care for Hurricane Victims," National Center for Policy Analysis, Brief Analysis No. 532, October 6, 2005.

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