President Bush’s Tax Credit Proposal ‘Falls Far Short’ of Health Premium Costs, Study Finds

The tax credit plan that President Bush has proposed to help low-income Americans purchase health coverage "falls far short" of the cost of health insurance premiums nationwide, according to a Families USA study scheduled for release today, the Washington Post reports (Connelly, Washington Post, 5/11). Under the Bush tax credit proposal included in the administration's fiscal year 2003 budget plan, families with annual incomes less than $25,000 would qualify for a $3,000 tax credit. Families with annual incomes between $25,000 and $60,000 would qualify for a smaller tax credit based on income. Individuals with annual incomes less than $15,000 would qualify for a $1,000 tax credit. Individuals with annual incomes between $15,000 and $30,000 would qualify for a smaller tax credit based on income (California Healthline, 1/31). The study found that many individuals who would receive a tax credit would have to spend 10% to 50% of their annual incomes for policies that do not cover a number of services, such as maternity care, mental health treatment or prescription drugs. "It's like throwing a 10-foot rope to a person in a 40-foot hole. The number of people who can benefit from this is inconsequentially tiny," Families USA Executive Director Ron Pollack said. In the study, Families USA examined the cost of individual health insurance policies in the 50 states and the District of Columbia that provide benefits similar to those offered to federal employees through the BlueCross BlueShield standard option plan, which has a $250 deductible and "moderate" copayments for physician visits and prescription drugs. The average premium for a healthy, 55-year-old woman cost $4,934 per year and $2,459 per year for a 25-year-old woman, the study found. According to study, the results raise "doubts about how many people would take advantage" of the Bush tax credit plan.

Although Bush administration officials acknowledge that the tax credit plan has limits, Bobby Jindal, an HHS assistant secretary, said that the proposal represents a "credible first start in terms of covering the uninsured." Mark McClellan, the chief White House health policy adviser, added that the plan would be "even more valuable" for individuals who can purchase health insurance through their employers or state programs. "This health insurance credit is going to make a difference for millions of Americans quickly," he said. Vip Patel, founder and chair of eHealthinsurance Inc., a company that markets health insurance online, said that a $1,000 tax credit may "mean the difference between no coverage and a basic plan." However, according to the Commonwealth Fund, "Flat-rate tax credits alone are insufficient if the policy goal is to make health insurance affordable to low-income adults." Opponents of the plan also point out that individuals who have common medical problems may not have access to individual health insurance and that tax credits may prompt some employers to drop health coverage for employees. Jonathan Gruber, a researcher at the Massachusetts Institute of Technology, said that the Bush tax credit plan would reduce the number of uninsured by 1.9 million (Washington Post, 5/11).