Don’t Give In

Tax credits are on the front burner again, with two new bills introduced this week. One by Rep. Ernie Fletcher (R-KY) offers $1,000 to individuals and $2,000 to families with incomes up to $35,000 to buy their own health policies or to use toward their costs of a job-based plan.

The Fletcher bill (H.R. 4170), supported by the Employment Roundtable, provides a 100% tax deduction for health insurance for those who don’t qualify for the credit and allows rollover of money employees have saved in their flexible spending accounts. A unique feature: It would allow any qualified insurance company offering policies under any one state to sell those policies in every state. This provision is somewhat controversial, but it is designed to set up competition among the states over health insurance mandates and regulation.

Separately, Reps. Kay Granger (R-TX) and Albert Wynn (D-MD) introduced their own tax credit bill (H.R. 4604) with a refundable tax credit for health insurance, also usable in the workplace. A $1,000 credit is available to individuals earning $65,000 a year, and up to $3,000 for families earning up to $105,000.

Tax credits also are at the center of the debate over the trade bill, which the Senate could begin debating next week. Both sides are trying to wedge as much as of their own agendas as they can into the bill.

Leaders are cutting a deal that would allow some COBRA expansion for health coverage, with federal subsidies of up to 75% of the cost, in exchange for some limited tax credits for displaced workers. BUT workers could only use the credits to buy into existing group plans, like union health plans or state government health programs, not to shop in the competitive private market.

Labor strongly supports the COBRA subsidies, but management believes (rightly) that they could be a camel’s-nose-under-the-tent for employer mandates on health insurance.

Ways and Means ranking member Charles Rangel (D-NY) and others proclaimed in a letter that, “Health care is as important as food and shelter,” but another Democrat told CongressDaily tax credits “are a non-starter.”

Tax credits are the best idea to expand health coverage that free-market advocates have proposed in recent memory. The real danger is that supporters will cave in and over-compromise on their issue, condemning it to the same fate as the over-regulated Medical Savings Accounts. Free-market ideas don’t work under the constraints of micro-management. It would be better to wait to do it right.

Don’t miss the write up below of an important new study just released by the American Association of Health Plans that documents the cost of government meddling in the health care system.

I travel to Charleston today for a debate Saturday morning before the South Carolina Medical Association about the merits of a single-payer system. (Hmmm?wonder which side I’m taking?) If you would like a copy of my PowerPoint presentation, please e-mail Tara Persico at

And be sure to join us next Wednesday at 10 a.m. for our briefing on Capitol Hill. You’ll learn about creative solutions the insurance industry is developing to engage consumers in making decisions about their health coverage and to give them incentives to use the system more efficiently. See the events section below for details. Hope to see you there.

Grace-Marie Turner

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