Tax Code and Health Insurance CoverageLeonard E. Burman
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In this testimony Burman argues that there are limitations to using tax credits to expand health insurance coverage. A program of health insurance tax credits combined with reforms of the market for nongroup health insurance could significantly expand coverage, but at a very high cost. The testimony summarizes the current tax treatment of health insurance, the effects of tax subsidies on coverage and health care costs, and discusses ways that tax credits might affect health coverage. Burman offers recommendations and adds that the most cost-effective approach to expanding health insurance coverage may not be a tax subsidy at all, but an expansion of an existing public program, such as Medicaid, S-CHIP, or Medicare.
The text below is Leonard Burman's oral testimony.
Read the full written testimony in PDF format.
Chairman Spratt, Ranking Member Ryan, and members of the committee: Thank you for inviting me to discuss the role of the tax system in expanding access to health insurance. This hearing is extremely timely. About 47 million Americans under age 65, including 9 million children, lack health insurance. They are less likely to get important preventive screenings while healthy, and they receive lower-quality care when sick. And, the public ultimately shoulders the burden of paying for the medical treatment of those lacking insurance, through higher taxes or higher health care costs.
The recent debate over the State Children’s Health Insurance Program (S-CHIP) has focused on the best way to cover uninsured children, and many, including the president, have suggested that the tax system is the answer. I’d like to focus on the potential and limitations of using tax credits to expand coverage, as that is the only feasible way to use the tax system to help lower-income households obtain health insurance. Mr. Ryan has cosponsored a bill, H.R. 914, to provide a refundable credit up to $4,000 per year to help lower-income households purchase insurance in the individual nongroup market, similar to an earlier proposal from President Bush.
In considering such options, it is best to keep in mind Hippocrates’ dictum: “Do no harm.” A carefully designed program of health insurance tax credits combined with effective reforms of the market for nongroup health insurance could significantly expand health insurance coverage, although potentially at very high cost per newly insured person. And proposals to subsidize nongroup insurance alone with no meaningful provisions to fix the inherent failings in the nongroup health-insurance market would cause millions of Americans to lose their health insurance coverage. Those who suffer from chronic health conditions or have low incomes would be most vulnerable.
My testimony briefly summarizes the current tax treatment of health insurance, the effects of tax subsidies on coverage and health care costs, discusses ways that tax credits might affect health care coverage, and concludes with some recommendations.
The text above is Leonard Burman's oral testimony.
Read the full written testimony in PDF format.
The views expressed are those of the author and should not be attributed to the Urban Institute, its trustees, or its funders.
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