Lawmakers Propose Tax Credit Plan to Fund Universal Coverage

In an "unlikely" pairing, House Ways and Means health subcommittee members Jim McCrery (R-La.) and Jim McDermott (D-Wash.) have joined forces on a plan that would eliminate the current employer-based health insurance system and replace it with a system that relied on tax credits to provide universal health coverage. CongressDaily reports that the most "radical" part of the plan would require employers to "cash out" the value of insurance benefits they now provide employees. Workers then would have to purchase their own insurance; low-income individuals would receive government subsidies to purchase coverage. Money for those subsidies would come from elimination of the current tax "exclusion" that allows employees to avoid paying taxes on the value of insurance provided by their employers. The proposal also calls for reforms in the individual insurance market.

McCrery said that he was "impelled" to develop the plan to avoid the "otherwise ... inevitable move towards the government-run 'single payer' system" that other lawmakers, including McDermott, support. McDermott said that he participated in the proposal because he wants to "do something in the short run to take advantage of the strong economy." He added that compromise on the issue was necessary because of the evenly divided Congress. Former HCFA head Gail Wilensky praised the plan, saying, "What we really need to do is pick a direction and start." But other health policy analysts expressed doubts over "key elements" of the plan. Thomas Scully, president and CEO of the Federation of American Hospitals and a candidate for HCFA administrator, "questioned" the financial feasibility of taking health benefits from those who already have it. Former Clinton health adviser Judy Feder added that unless the tax credits are large enough to cover the cost of insurance, they will not help low-income individuals. "You're talking about giving a 10-foot rope to someone in a 30-foot hole," she said. Aides for both McCrery and McDermott said that many of the plan's "key details" are "yet to be worked out" (Rovner, CongressDaily, 2/27).