Dallas (April 26, 1999) – The National Center for Policy Analysis is proposing a system of refundable tax credits to give every American access to health insurance. Unclaimed credits, for those who elect to remain uninsured, would be turned over to state and local governments to operate a safety net for uninsured people who cannot pay their medical bills.
The NCPA says current tax law is a major reason that the number of uninsured people is at 43 million and growing. Most people receive health insurance as a benefit of employment, and tax law excludes these benefits from the employee's taxable income. By contrast, individuals who purchase health insurance on their own must do so with aftertax dollars – forcing some people to earn twice as much before taxes to purchase the same insurance.
"The tax law penalizes people who purchase their own insurance," said NCPA President John Goodman, co-author of the proposal. "If they received just as much tax relief as is given to employer-sponsored plans, we would see an immediate, sharp reduction in the uninsured population."
"The current system is unfair," said Goodman. "Families in the top fifth of the income distribution get six times as much tax subsidy as families in the bottom fifth. We give the most help to those who least need it."
Under the NCPA plan:
- The federal government would commit a fixed sum of money for health insurance for every American (say, $800 per adult and $2,400 for a family of four) in the form of a tax credit.
- Since the credit would be fully refundable, even those who owed no income taxes would get the same financial help if they bought insurance.
- Employers who provide health insurance for their employees would be allowed to remain in the current system or switch to the new tax credit system.
- Unclaimed tax credit funds would fund state and local health care programs for those who elect to remain uninsured.
"Spending on health care for the uninsured already amounts to more than $1,000 for every uninsured person," Goodman said, "This program would not increase government spending. Rather, it would create a more rational allocation of existing spending," he said.