Rethinking Health Care Policy—The Case for Retargeting Tax Subsidies
More than 40
million Americans currently have no access to health care for reasons of income. Moreover, plans enacted or discussed at the
state level to cover the uninsured face problems of cost and quality of service as well as the
question of who pays for such programs. To solve the problem of access, Senior Fellow Walter M. Cadette advocates switching from the current
method of financing health care—employment-based health insurance with tax-excluded
premiums—to a system that would require everyone to purchase basic but
comprehensive coverage with after-tax income. A sliding-scale tax credit, based on level of
income, would then be granted. The plan could be paid for with the revenues resulting from
eliminating the current exclusion (about $74 billion in federal revenues and $5 billion in state revenues) and the $11 billion the Medicaid program pays to hospitals to assist them in paying for
services rendered to those who could not pay for them. The role of the
federal government would be to ensure that all plans meet minimum standards of coverage and,
possibly, to subsidize part of the cost of high-risk subscribers. State and local governments
would channel funds for the insurance of nontaxpayers directly to their insurance carriers.
This method of financing health care would eliminate the vertical and horizontal inequities of the
existing system and, according to Cadette, encourage individuals to seek out less expensive
insurance.