INTRODUCTION OF THE WORKING UNINSURED TAX EQUITY ACT -- HON. JIM
McDERMOTT (Extensions of Remarks - May 14, 1999)
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HON. JIM McDERMOTT
OF WASHINGTON
IN THE HOUSE OF REPRESENTATIVES
FRIDAY, MAY 14, 1999
Mr. McDERMOTT. Mr. Speaker, today I rise to share with you some ideas that
both Representative ROGAN and I have about how to begin addressing the
issue of the uninsured.
Many of us are stymied by the health care paradox of a booming economy.
Our economy is booming. Unfortunately, parallel to this economic growth is the
growing number of uninsured. There are now almost 44 million uninsured people
in this country--an increase of more than 5 million since 1993.
Today, we are introducing legislation to help stop the increase by
targeting a 30% health insurance tax credit to the working uninsured. To
qualify for our partially refundable credit,
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taxpayers must not currently be offered health
insurance through their employer and they must have an individual income below
$30,000/yr or a joint income of less than $50,000/yr. To ease administration,
these income limits have been designed to match those of traditional
IRAs.
When the General Accounting Office evaluated a similar proposal last June,
it found that almost 36 million individuals without employer-based
coverage--roughly 75% of the uninsured--would be eligible for the full credit
on the basis of their adjusted gross income. Additionally, under our proposal,
the self-employed would have the opportunity to choose between our proposed
credit or the 60% deduction allowed by current law.
The benefits of this proposal are not only that it provides a tax benefit
for those who need it most, it also would encourage health care consumers to
be cost-conscious when choosing their health insurance loans so that they
could maximize the value of the credit.
As you consider our proposal, keep in mind three questions: (1) who the
uninsured are, (2) how has the tax code impacted health insurance in this
country, and (3) most importantly, what can the 106th Congress realistically
do to address this important social policy issue.
First, who are the uninsured? Contrary to what many people might think,
roughly 75% of the uninsured work full or part-time. The remaining 25% are
split evenly between those who are unemployed and those who are not in the
labor force.
There isn't enough time today to talk at length about the demographics of
the working uninsured. If we did, we'd find that most of them are age 18-34,
that a disproportionate number of them are minority, that working poor parents
are twice as likely to be uninsured as poor parents who are unemployed, and
that the highest rate of uninsurance impacts pre-seniors between the age of
62-64.
Second, how has the tax code impacted health insurance in this country?
Since WW II, America has relied on employers to provide health insurance and
has rewarded them accordingly through the tax code. But, a growing number of
workers lack employer-based insurance which policy-makers once took for
granted.
Let me give a practical example of how the working uninsured fall through
the cracks of our current employer based system. It you make $6.50 an hour
your after tax income is $11,500. If you tried to purchase an average health
insurance plan it would cost you about $3000. It is obvious that if the
working poor are going to get health insurance we are going to have to come up
with a way to help them.
I think we should all find it unacceptable for a person who works full
time in this country not to be able to afford health insurance.
Third question, how do we in the 106th Congress address the issue of the
working uninsured?
As you all know, I am a strong believer in universal health insurance and
that the most efficient way of providing it is through a single payer
financing system. A system that would lift the prohibitive burden of health
insurance administration from employers and replace it with a public premium
that shares responsibility throughout society.
But, if there is a way for us to guarantee universal coverage without
single payer--through a plan based on tax credits, Clinton-care, or Medicare
for all--I am willing to look at the proposal, as long as the plan guarantees
access to quality care that's affordable. My bottom line is quality care at an
affordable price.
Unfortunately, just because something is efficient--such as a single payer
system--doesn't always mean that it will pass anytime soon. The reality is
that the political climate to have an honest debate about universal coverage
was destroyed by partisan bickering in 1994.
As a policymaker, the next question for me then becomes, what can we do in
the near term to help folks who need health insurance today.
The tax code is a good place to look. After all it is the foundation of
our employer-based health insurance system.
For a number of years now, this issue for me has been about simple tax
fairness. As many may know, Congress recently made matters worse by passing
legislation to allow the self-employed to deduct 100 percent of the cost of
health insurance from their taxes. Since 1995, I have attempted to equalize
the tax treatment of health insurance benefits by offering amendments on the
House floor and in the Ways and Means Committee, and by introducing H.R. 539
in the last Congress.
My rallying cry--which I am glad to see is starting to take hold--has been
the rhetorical question: Why should a doctor or attorney who is self-employed
be able to deduct a portion of the cost of his/her health insurance, while a
secretary, who must buy his/her own health insurance policy, not be able to
deduct one cent of the cost!
So as a simple matter of fairness, this inequity in the tax code needs to
be fixed.
According to the DC-based Lewin Group, the average federal health benefits
tax expenditure is $918 per family. That sounds pretty good until you realize
that a family whose income is below $40,000 receives an average of $766 in tax
benefits, a $30,000 family receives just $500 in tax subsidies--and the
numbers get more depressing if I continue down the income scale.
The bulk of the tax subsidy is going to those who need it the least. If
you make $100,000 or more, the tax code subsidizes your health insurance each
year by more than $2,000.
So it seems to me that if Congress wanted to address the issue of tax
fairness and assist a group of people who are in most need of health
insurance, it would look at our proposal for a 30% credit. Our proposal is a
reasonable and prudent approach to helping people who the system has forgotten
about.
We are initiating the debate with a less is more approach. Our legislation
will be less than 6 pages long.
I am hopeful that the sudden interest in tax code equalization will allow
for thoughtful discussions and critiques of the wide range of proposals that
will be offered this year.
In particular, as policymakers put forward proposals, they need to
consider what the ``take up rate'' will be (will people use the credit if they
are eligible), how does it impact existing employer health care contributions,
and how much does the proposal cost.
I don't want to leave you with the impression that our limited proposal is
the ultimate answer. I view it as a first step toward finding a solution for
the uninsured.
I am proud of the fact that it is a moderate proposal because there are so
many uncertainties about how it would work.
For example, we completely avoid the issue of market reforms because going
down that route creates more divisions among political parties that can be
realistically addressed in this Congress. By gently impacting the individual
marketplace, I am hopeful that state legislatures will take steps to
rationalize their individual markets and Congress can learn from both their
successes and mistakes.
Conversely, more costly proposals that hope to dramatically influence the
marketplace must include meaningful market reforms. Otherwise, such proposals
will just be throwing large amounts of federal tax expenditures at an
individual marketplace that is already overpriced. But there is no consensus
around market reforms to be found.
I would also be especially cautious about more ambitious tax credit
proposals because they run into serious financing problems. How do you pay for
it without running a deficit? Even in this era of expected budget surpluses, a
hefty price tag simply is prohibitive given our other national policy
priorities.
More importantly, current comprehensive tax credit proposals may not be
such a good deal for either the insured or the uninsured. If they appear too
generous, employers will drop coverage and allow for their existing costs to
be replaced with an inadequate government voucher, a voucher that would not
come close to equaling their existing coverage.
Letting employers off the hook while increasing government and beneficiary
costs would make the problem worse.
I am the first one to say that our credit should not replace the current
system. If it did, it would be inadequate. That is not to say, however, that
most of us in this room would not like to see the current system totally
overhauled.
I view our proposal as a targeted effort to stop the current health
insurance hemorrhaging, to induce some additional people to purchase health
insurance before they get sick, as an achievable goal in a very divided
Congress, and a stimulant of the necessary discussion we need to have about
how this country can create an efficient means of providing universal health
care coverage.
Chairman ARCHER has said he would like to mark-up tax legislation
later this spring. JIM and I already have written him and Mr.
THOMAS asking them to look closely at our proposal for its immediate
benefits. We have also asked the White House to look at our proposal and I
hope that they too will once again show leadership by joining us in attempting
to tackle this difficult issue of the uninsured.
By bringing people together, I am confident that we can build momentum
within the Congress to generate bipartisan support behind proposals that begin
to address the needs of the uninsured. Passage of our credit would be a first
step toward enlightening that discussion.
I urge my colleagues to join us in our bipartisan effort.
AVERAGE FEDERAL HEALTH BENEFITS TAX EXPENDITURE BY INCOME LEVEL IN
1996
Average Per Family $918: Less than $15,000 $15,000 to $19,999
$20,000 to $29,999 $30,000 to $39,999 $40,000 to $49,999
$50,000 to $74,999 $75,000 to $99,999 $100,000 or more