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COPYRIGHT 2002 Thomson Financial Inc.
This is the fourth in a series of Perspectives on tax credits for health care coverage.
Other design issues aside, the biggest determinant of how successful a tax credit would be in expanding health care coverage is the credit's size, according to many observers.
With a budget largely committed to other priorities, including other tax cuts, the Bush administration has pushed a very modest tax credit for health insurance, one that critics from across the political spectrum say is too small to accomplish much, if anything, in the way of coverage expansion.
"The credit would provide a subsidy of up to 90 percent of a capped amount of health insurance premiums," White House health and economic adviser Mark McClellan, MD, explained to the House Ways and Means Committee Feb. 13. The maximum credit would be $1,000 per adult and $500 per child for up to two children. The maximum subsidy percentage of 90 percent would apply for low-income taxpayers and would be phased down at higher incomes.
The administration argues that the credit must be kept low to avoid "crowding out" employer-sponsored insurance coverage. Since the tax credit could only be used to buy coverage in the individual market, a more generous credit could tempt too many healthy people to leave their employer groups and buy individual coverage, thus damaging the risk-sharing capabilities of employer-sponsored coverage, officials say.
But many don't buy that reasoning.
Ways and Means Chair Rep. Bill Thomas (R-CA), for example, was disdainful Feb. 13 of the administration's avowed attempt to protect the employer-sponsored system of health coverage at what he said was the expense of people outside that system who are starved of coverage options at present. Thomas wants to dismantle the...
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