Urban Institute Panel Examines Bush Tax Credit Proposal and Medicaid Restructuring

Speakers at an Urban Institute briefing yesterday outlined the pros and cons of President Bush's proposed tax credit for the uninsured and the National Governor's Association plan to restructure Medicaid, CongressDaily/AM reports. Mark McClellan, the "Bush administration's expert on the uninsured," said that two problems exist with the concept of tax credits: The uninsured "may be reluctant to take [a] tax credit in advance on a monthly basis out of fear they will end the year ineligible for the program and have to pay the money back," and government agencies "have difficulty actually making the program work." He said that Bush's proposal would address the former concern by "bas[ing] eligibility for the credit on the previous year's income" (Rovner, CongressDaily/AM, 5/2). Bush's plan would offer tax credits of up to $1,000 for individuals earning up to $15,000 and of up to $2,000 for families earning up to $30,000 to "defray" the cost of private insurance premiums. The credits could be used either retroactively, when taxpayers prepare their tax returns at the end of the year, or in advance, to help low-income families afford monthly insurance premiums (Kaiser Daily Health Policy Report, 4/20). Linda Blumberg of the Urban Institute said the proposal was better than earlier plans because its credits are "larger and refundable so that those who owe taxes still get the benefit," but said that the credits were still "too small and too inflexible" to make a significant impact on the uninsured.

Passing the Buck?
Addressing the NGA's proposal to restructure Medicaid to give states more flexibility in administering benefits, the Urban Institute's John Holahan warned that the "primary effect of the plan" would be to "shift more Medicaid spending to the federal government," since 67% of Medicaid spending goes towards "optional" services, which would receive "enhanced funding" under the NGA proposal. While he said that such a shift would make Medicaid expansions less expensive for states and cuts "less attractive," Holahan added that "states could theoretically cut benefits and still receive more money from the federal government" (CongressDaily/AM, 5/2).