VII. Key Issues: Regulation & Reform >> C. Health Reform >> Voluntary Health Reform >> Universal Health Tax Credits (last updated 2.26.17)
Universal Tax Credits (Goodman/Ferrara)
- History. This proposal by John Goodman and Peter Ferrara was developed in two books– Goodman’s Priceless (published 2012) and Goodman’s A Better Choice (published 4.28.15)–and incorporates both individual pay or play and health status insurance in a model of universal health tax credits and universal health savings accounts that would replace private heath insurance, with Medicaid as a universal back-up option.
- Eligibility: Every potential buyer of private health insurance (roughly 200 million people) would be eligible for fixed tax credits that are refundable, advanceable and transferable. These would vary by age (e.g., $1,500 per child, $2,500 per adult). Medicaid would become a public plan open to anyone.
- Benefits: Tax credits could be used towards the purchase of private health insurance and deposits to a Roth Health Savings Account, but would go to a local safety net institution in the case of individuals who elected not to purchase coverage. If someone joins Medicaid, their tax credit would be sent to the Medicaid program and the individual would pay a premium reflecting the difference between the tax credit plus whatever income-related amount each state elects to provide and the expected cost of their Medicaid coverage. Conversely, if someone leaves Medicaid, the expected cost of their Medicaid coverage (i.e., a risk-adjusted amount plus income-related amount that would vary by state) could be applied to the purchase of private coverage, with the individual making up any premium difference out of pocket.
- Freedom of Choice: This proposal would expand freedom of choice for most Americans. Those purchasing coverage for less than the combined amount of the credit and employer fixed dollar contributions could keep the savings while those purchasing more expensive coverage would do so with after-tax dollars.
- Financing. All existing federal, state and local subsidies for health insurance coverage (roughly $300 billion) would be supplemented with another $100 billion in conditional tax breaks and converted to fixed tax credits. Individuals may supplement their health insurance or Roth HSA contributions with after-tax dollars. Employers could continue to provide health coverage, but the tax exclusion for such coverage would be eliminated. The higher taxes paid for health benefits would be partially or fully offset by the fixed tax credits. Individuals who became uninsured would lose their tax credit which instead would be transferred to their local safety net institution. Conversely, previously uninsured individuals who became insured would receive the $2,000 tax credit while their local safety net institution would receive $2,000 less that year reflecting reduced need for safety net services. States would be given a block grant for Medicaid, which would encourage them to use managed care, competitive bidding by health care providers, comprehensive case management by private insurers for those on Medicaid, and to shift more long term care out of nursing homes to home and community-based care.
- Regulation: employers would be permitted to buy portable insurance for their employees provided they make a defined contribution. Any difference between the employer contribution and the actual premium for coverage would be deducted or added to the worker’s paycheck. insurers could risk rate individuals under certain circumstances. For individuals moving from non-group health coverage, insurance must be guaranteed renewable, the insurer must offer health status insurance and must take all comers. However, they will have access to a federal high risk pool for their highest cost enrollees.
- John C. Goodman. Priceless: Curing the Healthcare Crisis. Oakland, CA: Independent Institute. 2012.
- John C. Goodman. A Better Choice: Healthcare Solutions for America. Oakland, CA: Independent Institute. 2015.
- Goodman Institute. A Universal Tax Credit: The Right Way to Subsidize Health Insurance. Brief Analysis No. 102. April 6, 2016. A tax credit of $2,500 for an individual and $8,000 for a family of four would allow almost everyone to obtain insurance equivalent to a well-managed Medicaid plan.
- Goodman Institute. The Universal Health Tax Credit: How Generous Should It Be? What Will It Buy? Brief Analysis No. 103. April 6, 2016. We propose a tax credit of $2,500 per adult and $1,500 per child or $8,000 for a family of four.
The World’s Greatest Healthcare Plan (Sessions/Cassidy)
- History . This was introduced in Congress 5.19.16, by Representative Pete Sessions (R-TX) as H.R. 5284 (1 cosponsor) and on 5.25.16 by Senator Bill Cassidy, M.D. (R-LA) as S. 2985.
- Full Text. Full text of H.R. 5284.
- Summary. The bill is based on Goodman’s ideas outlined in Priceless and A Better Choice; according to Goodman, “of twelve bold ideas in the legislation, fully half have never appeared in any previous bill or in any previous proposal—Republican or Democrat.” The bill includes universal tax credits that would vary by age and geography but not by income, and will average $2,500 per adult and $1,500 per child in 2017. Goodman details the proposal here.
Patient Freedom Act (Cassidy/Collins)
- History . This was introduced 1.23.17 by Sens. Bill Cassidy, M.D. (R-LA) and Susan Collins (R-ME) (4 co-sponsors).
- Full Text. Full text (html) (pdf).
- Summary. The bill is based on ideas included in The World’s Greatest Healthcare Plan (Sessions/Cassidy) including universal tax credits that would vary by age and geography but not by income. A key difference is this is a compromise proposal in which many components of the ACA would remain such as dependent coverage through age 26, ban on annual and lifetime limits, and many of the taxes. More importantly, the bill gives states three options:
- Continue to run the Affordable Care Act as is without any changes
- Switch to a different health insurance expansion that emphasizes auto-enrolling all uninsured residents into a federally subsidized catastrophic plan
- Offer no coverage expansion at all, and the state would lose the money it currently receives for insurance subsidies and Medicaid expansion.
For option two, the plan would add up all the money a state would get from the health care law’s private insurance subsidies and Medicaid expansion (even if a state has not expanded Medicaid, it would still get the funds). That money would get divided up on a per-person basis to people who purchase their own health coverage. States would also have the option of leaving Medicaid expansion in place and just divvying up their premium subsidy dollars. Thus, universal tax credits would only be available in the states selecting this option. See one-page background document and six-page summary by Kaiser Family Foundation.
- Sara Kliff. Cassidy-Collins, the GOP replacement plan that lets liberal states keep Obamacare, explained. Vox.com, 1.24.17.
- Goodman, John. A Better Choice: Healthcare Solutions for America. Independent Institute. 4.28.15.
- Goodman, John. Priceless: Curing the Health Care Crisis. The Independent Institute, 2012.
- Goodman, John and Peter Ferrara. Health Care for All without the Affordable Care Act
- NCPA. 10 Steps to Universal Coverage without a Mandate
- HSA Allowable Health Care Expenses. This is a detailed alphabetical compilation of commonly incurred medical expenses based on various IRS rulings and publications listing whether they are HSA-reimbursable and under what conditions.
No modern industrialized nation has adopted this approach to national health insurance. The closest parallel is Singapore’s Medishield program. However, this is a compulsory approach in which individuals with mandatory Medisave accounts are automatically enrolled (and premiums paid from their Medisave accounts) unless they request not to be enrolled. Medishield has a high deductible and only covers hospital expenses and certain expensive outpatient treatments, such as kidney dialysis and outpatient cancer treatments, but note that the entire arrangement is on top of mandatory and universal Medisave accounts to which all citizens are required to contribute 6-8 percent of earnings up to a maximum dollar limit; these latter accounts pay for the lion’s share of medical expenses in Singapore.
- Hsiao, William C. 1995. Medical Savings Accounts: Lessons From Singapore. Health Affairs14(2/October):260-266.
- Ham, Christopher. 2001. Values and Health Policy: the Case of Singapore. Journal of Health Politics, Policy and Law 26(4/August):739-745.
- Haseltine, William. Affordable Excellence: The Singapore Health System. Since achieving independence, Singapore undertook the monumental task of transforming itself to a modern, prosperous, secure city-state. Many institutions needed to be erected to reach this goal, but one that stands out and is the subject of this book was the need for a world class health care system. Affordable Excellence examines how Singapore succeeded in its efforts, setting up a health system that has become one of the best in the world, delivering high quality care at a fraction of the cost of most First World systems. Ranked 6th globally on performance, Singapore spends less than 4% of GDP on health care. Both the Kindle edition and Nook version are free. Haseltine talk at Brookings on Singapore health system.
- McKee, Martin and Reinhard Busse. Medical savings accounts: Singapore’s non-solution to healthcare costs, ; BMJ 347(2), July 31 2013:f4797-f4797.
The Incidental Economist. Aaron Carroll has written a series of blog posts on Singapore’s health system here.