Tax Credits:
A Cure for Health Care
Fort Lauderdale Sun-Sentinel
June
20, 1999
By Stacey Singer, Health
Writer
Eight hours a day, Darda Baskin stoops
over a low counter, folding other people's clothes in the back of a Fort
Lauderdale laundry.
At 33, Baskin earns just above the
minimum wage and receives no health benefits. It's been four years since
Baskin saw a doctor. "It costs too much," Baskin said, pulling a load
from a dryer. "They just keep billing you and billing you, but if you
don't have it, you can't pay. You can't get blood from a
turnip."
After health-care reform efforts failed spectacularly in
1994, Washington policy makers have avoided the topic like some sort of
infectious disease. Meanwhile, the ranks of people like Baskin have
swelled. From 1987 to 1997, the number of uninsured people rose from
31.8 million to 43.1 million. Most of them -- like Baskin -- work full
time.
Today, one in six Americans, and one in five
Floridians, has no health insurance.
If the strong economy
falters, policy analysts warn, the ranks of the uninsured will quickly
rise to one in four Americans, which could send overall health-care
costs soaring.
With another federal election cycle looming,
Congress and candidates have an incentive to take a fresh look at
health-care reform. The issue promises to become a flash point in the
campaigns, as Republicans accuse the Clinton administration of a failure
of leadership in the 1994 health-care debates.
During that
round, discussion centered on whether the country should have a national
health system, like Great Britain or Canada.
Today, with
such radical proposals in political purgatory, attention has turned to
something more palatable to both the left and right: refundable tax
credits.
The concept has attracted a variety of strange
bedfellows, including liberal Rep. Pete Stark, D-Calif., and
conservative House Speaker Dick Armey, R-Ill. In the emerging debate,
many conservatives sound like latter-day Robin Hoods, urging that
Congress take tax benefits from the rich and give them to the
poor.
In a hearing before the House Ways and Means
Committee on Wednesday, John Goodman, a policy adviser to presidential
candidate and Texas Gov. George W. Bush, testified that the cause of the
insurance crisis -- and ultimately its cure -- lies with the existing
tax code.
"The current system of tax subsidies gives the
most relief to people who least need encouragement," said Goodman, who
is director of the National Center for Policy Analysis in
Dallas.
Under current tax policy, the money employers spend
on their employees' health insurance is not counted as income on the
employees' tax statements. That means that higher-wage earners, who are
in higher tax brackets, receive greater tax relief.
The
Heritage Foundation's Stuart Butler, also an advocate of tax credits,
said that the average tax break for employer-insured people today is
$1,000. But under the current tax structure, people earning more than
$100,000 receive about $2,500 in benefits, while people earning about
$14,000 receive just $300. Yet they both must pay the same for health
insurance.
"The system isn't working," Butler
said.
Many people agree. About 10 tax credit plans are
circulating around Capitol Hill. Butler and Goodman have each written
one. So have the American Medical Association, the Health Insurance
Association of America, the American College of Physicians, Blue
Cross/Blue Shield, and at least four Congressional
representatives.
All of the plans have one common element:
They would try to redistribute part or all of the estimated $100 billion
in health-related tax relief now going to employers and people who
receive employer-sponsored health benefits.
The plans
designed by Goodman and Butler would make health-care tax credits
available only to people ineligible for employer-based coverage. A
broader plan designed by the American Medical Association would shift
the tax credit to all individuals purchasing health insurance. Both the
AMA's plan and one introduced by Rep. James McDermott, D-Washington,
would graduate the amount of the tax credit according to
income.
Depending on the version, consumers would receive a
credit of between $250 and $3,600 to go toward health
insurance.
The problem, Butler acknowledged, is that many
employer-sponsored health plans put the cost of their benefit at between
$5,000 and $7,500 per family per year.
If states or
employers do not make up the difference, individual consumers might have
to, although Butler thinks that many firms overinsure their
workers.
Consumers Union, publisher of Consumer Reports,
urged caution: If not designed carefully, these new proposals could
create an incentive for employers to stop offering health benefits, and
leave middle-class families paying much more.
Worse, people
with existing medical conditions could be left out completely if there
is a wholesale shift from employer-sponsored health plans to
individually purchased plans. Therefore, insurance reform would have to
take place at the same time.
Some have suggested creating
state-managed high-risk pools, much like Florida's windstorm insurance
pool.
Butler thinks the way out of the crisis is not to
force individuals to purchase their own insurance directly, but to
create financial incentives for groups other than employers -- such as
synagogues, churches, alumni associations or other community groups --
to organize health plans. That would allow people to stay with a health
plan even if they changed jobs.
It's a solution the Greater
Fort Lauderdale Chamber of Commerce endorses. For the past five years,
the chamber has offered access to its health plan as part of a
membership benefit.
More than 400 small and medium-sized
companies insure their employees through the Chamber
plan.
Ron Ploutz, owner of Animal House Pet Supplies in
Fort Lauderdale, is one of them. He pays about $250 a month per
employee.
"I just bought the store in October, and we needed
something for two of our employees here," Ploutz said "It works out
pretty well."
The problem is, if the employee changes jobs,
their insurance does not move with them. Pinning health-related benefits
to individuals instead of employers could change that, making the
individual the insurance customer, tax-credit advocates
argue.
The debate is still in its early stages, Goodman
said. What's most remarkable, though, is such a wide ideological
spectrum is turning toward the same solutions.
"It's clear
to me that everyone agrees that a tax credit plan is the way to go," he
said. "There are no other proposals."
Copyright 1999 Sun-Sentinel Company