Presidential Panel Considers Proposals To Reform Federal Tax Subsidies for Health Insurance
The President's Advisory Panel on Federal Tax Reform on Wednesday considered proposals to make the U.S. tax system "fairer and simpler" in relation to health insurance and other areas, the AP/San Francisco Chronicle reports.
Eugene Steuerle, a senior fellow at the Urban Institute, and Mark Pauly, a health care economics professor at the University of Pennsylvania, told the panel that federal tax subsidies to employers and employees for health insurance, flexible spending accounts and new health savings accounts do not promote the expansion of basic health coverage and increase the number of uninsured residents. According to Steuerle, the federal government currently provides $150 billion in subsidies for health insurance, and the amount will reach $250 billion in several years.
Pauly said that the subsidies, which he estimated at more than $188 billion currently, are "mistargeted" and only serve to decrease taxes for higher-income individuals. He said that under the current system "the richest half get 75% of the subsidy. The poorest half make up 75% of the uninsured." Pauly added, "By most definitions of fairness, the patterns of distribution of these differences in their taxes would be regarded as highly unfair and inequitable." Pauly recommended limited subsidies for health insurance in combination with refundable tax credits to help low-income and uninsured residents purchase coverage.
However, Steuerle said that the current federal budget deficit and an aging population could make the establishment of such tax credits difficult.
Former Sen. John Breaux (D-La.), vice chair of the panel, said that the need to improve the tax system to help reduce the number of uninsured residents is the "biggest problem" for the United States. The panel plans to issue a report this summer (Dalrymple, AP/San Francisco Chronicle, 3/24).