Tax Credits Are Not a ‘Viable Option’ for Many Adults, Health Affairs Reports

While some lawmakers have supported plans to provide tax credits to uninsured Americans to help them purchase health coverage, an article in the July/August issue of Health Affairs, based on a recent Commonwealth Fund study, suggests that most proposals would still force many "midlife" adults to "pay between one-quarter to two-fifths of their pretax income for health insurance." In the article, titled "Market Failure? Individual Insurance Markets for Older Americans," Elizabeth Simantov, a former senior research analyst at the Commonwealth Fund; Cathy Schoen, vice president of research and evaluation for the group; and Stephanie Bruegman, a program assistant for the group, also point out that tax credits would not likely "offer a viable option" for adults ages 50 to 64 who do not qualify for Medicare or Medicaid. This age group, which includes many adults with "poor health and low incomes," would likely "find an unwelcome reception" in the private insurance market or face "relatively high out-of-pocket costs for health care because of restricted benefits, cost sharing and deductibles, as well as high monthly premiums," the authors write. Although most tax credit proposals -- including a plan offered by President Bush -- would provide subsidies of $500 to $1,200 per year, the authors maintain that tax credits would "need to be set" higher to allow adults ages 50 to 64 to purchase "comprehensive benefits," including prescription drug coverage, and would have to be "adjusted by age and region to reflect market realities." They conclude that lawmakers must include "risk pooling" in tax credit proposals to control costs; "access and rating reforms" to "minimize or prohibit discrimination based on individual health status"; and provisions that would allow "group-coverage options" (Simantov et al., Health Affairs, July/August 2001 issue). The full report is available online.