Bush Sees Tax Credits as Way to Insure Poor

The Bush administration unveiled a plan Wednesday that relies largely on tax credits to help low-income Americans buy health insurance. The proposal set the stage for another partisan battle on Capitol Hill and renewed doubts that the growing number of Americans without health care would get any government help this year.

In his budget proposal for fiscal year 2003, which he will submit Monday to Congress, President Bush will ask for $89 billion over 10 years to help individuals and families buy private health insurance. Currently, about 39 million Americans have no health insurance, and the recession and spiraling health costs threaten to push the numbers even higher.

Health and Human Services Secretary Tommy G. Thompson, speaking at a community health center in a transitional neighborhood about two miles from the White House, said the tax credit--as much as $3,000 for a family with two or more children with a household income of less than $25,000--would bring health insurance to 6 million people over 10 years.

Conservatives say tax credits support the existing system of private insurance and allow consumers to choose their own health care plans, all without establishing new government bureaucracies.

But congressional Democrats and consumer advocates, citing private studies that indicate that the average group policy for a family of four costs more than $7,000, said the proposed credits would be far too small to help people most in need. And by encouraging a movement away from employer-based insurance to an individual market, the critics said, tax credits ultimately could make health insurance more expensive and harder to get for everyone.

Rep. Pete Stark of Hayward, the top Democrat on the House Ways and Means health subcommittee, called the tax credit proposal “a terribly naive and poorly crafted idea. What they’re doing is so marginal as to be next to useless.”

Ron Pollack, executive director of the consumer group Families USA, likened the proposal to “giving a person a 10-foot rope to get out of a 40-foot hole.”

Such deep disagreement about tax credits is not new in Washington. The conflict over how to best help laid-off workers keep health coverage--with credits or subsidies--in large part was responsible for stalling the president’s economic stimulus package in December.

And tax credits for the uninsured is just one of several divisive health care issues on the political agenda this year. A patients’ bill of rights is bogged down over House-Senate differences in the amount of damages a patient could win from an HMO that had denied needed medical care. And the administration and lawmakers of both parties are proposing different ways to help senior citizens afford prescription drugs.

But even critics of the administration had kind words for other initiatives Thompson announced Wednesday. They include:

* $114 million in new funds for community health centers, an 8% increase over last year.

* $3.2 billion for state programs for uninsured children, money that went unused after being set aside for other purposes, and that would otherwise be returned to the federal Treasury.

* $350 million in Medicaid services for families moving from welfare to work.

* A $44-million increase in funds to encourage health-care professionals to work in inner cities and rural areas.

* Fewer restrictions on medical savings accounts.

Some even praised the size of the tax-credit proposal.

“It’s putting $89 billion on the table for expanded access in a time of tight budgets” Pollack said. “An increase in the level of their commitment [last year’s proposal was about $72 billion] is good news.”

But overall, the “disproportionate focus” on tax credits is disappointing, Pollack said.

Thompson, defending the plan, said another initiative, which would make it easier for states to custom-design their health-care programs for the poor, would help 1.8 million people get health insurance and expand health benefits for 3.5 million more people.

“We’re using all of these programs to attack the problem” of the uninsured, Thompson said.

The health insurance industry praised the plan, which would also provide a credit of as much as $1,000 for individuals who earn up to $15,000 a year.

Dr. Don Young, president of the Health Insurance Assn. of America, said the uninsured could use the credits to buy good, basic health insurance policies. Such policies are available for as little as $800 to $1,200 for individuals, he said, and from $3,000 to $6,000 for families.

“We are delighted that the president has moved forward with this approach,” Young said. “The strength of the president’s proposal is that it lets people look around for the best deal and be good shoppers.”

An aide to a Democratic House member, who spoke on condition of anonymity, strongly disagreed. “There’s an extreme degree of skepticism that these programs help anyone but insurers,” he said. The biggest problem with tax credits, he said, “is that it’s a way to get government out of health care, get employers out of health care.”

No one, however, called the administration’s plan a nonstarter. “There is a vast difference of opinion between the two parties on how it should be done,” Stark said. “But I would be happy to work with [Thompson] to expand on the idea.”