NCPA - National Center for Policy Analysis

Gephardt Health Plan Has Major Flaws

May 29, 2003

Rep. Richard Gephardt (D-Mo.) recently unveiled the centerpiece of his presidential campaign: a plan to encourage near-universal health coverage.

  • The plan calls for replacing the existing system of federal income tax subsidies for health insurance with a much more expensive system.
  • Employers would receive refundable tax credits for 60 percent of the cost of employee health insurance, leaving employees to pay, at most, the remaining 40 percent.
  • Such government programs as Medicare, Medicaid and the children's health insurance program (CHIPs) would be expanded.

Gephardt would pay for his plan by rescinding virtually all of President Bush's tax cuts.

John C. Goodman of the National Center for Policy Analysis says this is the wrong solution to the problem of the uninsured in America.

Gephardt's Democratic rivals have complained that his plan costs too much. But its cost is not the only problem. The design of his plan is fundamentally flawed.

  • Each of the newly insured 30 million people would cost taxpayers about $3,710 or almost $15,000 for a family of four.
  • It would give individuals the incentive to increase their insurance coverage until it is worth only 40 cents on the dollar.
  • The plan would offer unfair subsidies, rewarding fast food workers with a subsidy of $210 and the top brass with a subsidy of $6,000.
  • Because the plan bestows more subsidies on people with richer insurance plans, it could be even more regressive than the current system.

Many health economists have recommended replacing the current system with tax credits to encourage private health insurance. President Bush has proposed using a tax credit for low-income workers.

Source: John C. Goodman and Devon M. Herrick, "Gephardt's Health Plan: Four Flaws," Brief Analysis No. 441, May 29, 2003, National Center for Policy Analysis.

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