A Workable Social Insurance Approach to Expanding Health Insurance Coverage

Publication Date:

Publisher: Economic and Social Research Institute

Author(s): C.E. Steuerle

Research Area: Health

Type: White Paper

Abstract:

Eugene Steuerle criticizes the inefficiency and inequity of both the present system of subsidizing health coverage and many of the proposed approaches for new subsidies. He argues that the present system—especially the tax provision that does not count employer-paid health premiums as taxable income for employees—is very expensive to government and highly inefficient. It encourages excess purchase of insurance, and little of the subsidy goes to people who need it most. In addition, neither providers nor consumers have financial incentives to economize in using health services. Steuerle proposes an alternative that would allow people to choose either a tax credit or the tax exclusion, but with a fixed "cap" on the amount of employer premiums that could be excluded. He also would indirectly mandate that households buy coverage, with the penalty for noncompliance being disqualification for certain tax relief provisions such as the personal exemption.