GOVERNMENT & MEDICINE

AMA votes for insurance tax credits for the poorest

Giving people with the lowest incomes the largest tax breaks is the best way to cut the number of uninsured Americans, doctors say.

By Susan J. Landers, AMNews staff. July 10/17, 2000.

Chicago -- The AMA policy favoring the targeting of any federal health insurance tax credit to the poor came under fire at the Association's recent annual meeting.

At issue was a provision in a Council on Medical Service report that advocates the establishment of tax credits inversely related to income.

Some delegates fear that replacing the employment-based tax deduction system with one of individual credits tied to income would endanger many practices' tax breaks. Others said tax advantages should go to those who need them the most.

Ultimately, delegates at the AMA's policy-setting meeting voted in favor of retaining the provision that supports giving individuals and families with the lowest incomes the largest tax breaks.

"Inversely relating tax credits to income targets the tax subsidy toward those who would otherwise be most likely to be uninsured, and conserves budgetary resources," said the report.

Robert Burnett, MD, a California delegate, called the income-related tax credit the "lynchpin" of the council report. "A family with a $30,000-a-year income needs a tax credit," he said. "We can't give this tax credit to everyone. It's only logical to have it be income related."

Susan Wynn, MD, chair of the AMA committee that first heard the report, recommended that the provision be referred to the AMA's trustees, who could provide additional explanation of the complex issue.

However, members of the council urged that the provision not be referred. They argued that one of the AMA's top priorities is making health insurance more affordable to those currently without coverage. The council noted that the Association adopted a policy favoring income-related tax credits two years ago.

As an alternative to the council's recommendation, some delegates supported the concept of a tax deduction for individuals with higher incomes that would work in combination with tax credits.

Robert Tucker, MD, American Academy of Ophthalmology delegate, cautioned against adoption of the strictly income-related credit, stating that the small business community would not favor the measure.

Michael Greene, MD, a Georgia alternate delegate, also asked that the provision be referred to trustees. Many doctors' offices are small businesses and would suffer from loss of a tax deduction for health insurance. "I don't know how we can explain this to the membership," he added.

Providing a road map

The report was issued to establish guidelines for the AMA to follow in assessing tax credit proposals, many of which have already been introduced by federal lawmakers and presidential contenders.

However, the guidelines are just that and are not intended to lock the AMA into specific parameters governing tax credits, explained council Chair Eugene Ogrod, MD.

The council investigated the effectiveness of tax credits, coupled with wider use of the Medicaid program, at reducing the number of uninsured people. It found that 95% of the 44 million uninsured Americans could gain coverage if an extensive program of tax credits was instituted and those eligible for Medicaid were enrolled.

The AMA's Tax Credit Simulation Project examined five scenarios involving the amount of the credit. It found that by providing a tax credit of $1,800 to $2,000 for individuals or $3,600 to $4,000 for families, approximately 25 million uninsured people could gain coverage at a cost to the federal government of $40 billion to $65 billion.

Additional AMA policy adopted at the meeting recommends that:

• Tax credits should be offered only for health insurance purchases.
• Tax credits should be refundable to enable low-income people who owe no taxes to share in the benefit.
• The size of the credits should be large enough to ensure that health insurance is affordable for most people.
• The tax credits should be capped to discourage the purchase of more insurance than is needed.
• The size of the tax credits should vary with family size and be contingent upon each member of the family having health insurance.

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