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Jewish World Review Jan. 17, 2002 / 4 Shevat, 5762

Morton Kondracke

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Consumer Reports

Give tax credits for health insurance a fighting chance -- A FURIOUS new debate is set to break out over how to provide health insurance for the uninsured. In fact, it began last year during the fight over an economic stimulus package.

The main quarrel that blocked agreement on the stimulus in December - medical benefits for workers who have lost their jobs in the recession - was a microcosm of the struggle to come over coverage for the nation's 40 million uninsured.

The battle is set to resume on both fronts soon as both Democrats and Republicans reintroduce stimulus proposals and longer-range plans to cover the uninsured.

Stimulus talks broke down partly over disagreements on tax policy, but the larger reason was that most Democrats and the AFL-CIO detest the idea of giving workers tax credits to purchase their own health insurance.

That was a major feature of the House-passed stimulus package backed by President Bush, which he will likely revive in his State of the Union address Jan. 29.

Outside health experts say White House health policy economist Mark McClellan is also working up a proposal for the speech that would offer tax credits to the uninsured at a cost of $70 million to $100 million per year.

To mainstream Democrats, health care tax credits are as anathema nowadays as medical savings accounts were when conservative Republicans made them their health care mantra in the 1990s.

During the stimulus debate Sen. Jay Rockefeller (D-W.Va.) threatened to lead a filibuster against tax credits and won support from Majority Leader Thomas Daschle (D-S.D.), who blocked a Senate debate on a stimulus package.

The Democrats offered an alternative proposal for the unemployed that would combine a 75 percent government subsidy to help displaced workers keep their former company benefits and expanded Medicaid benefits.

Democrats and unions are wedded to the idea that insurance should be provided either by private employers or the government. They adamantly oppose vouchers or tax credits to enable individuals to buy their own insurance.

At one point during the stimulus debate, Democratic Rep. Charlie Rangel (N.Y.) charged - correctly - that the chief House backer of tax credits, Ways and Means Chairman Bill Thomas (R-Calif.), wants to demolish the nation's current employer-based insurance system.

Thomas does want to replace this system with one in which individual workers would purchase their own insurance using funds provided by employers. Also under the plan, the government would give money to the poor to buy policies.

Democrats argue - perhaps correctly, in the long run - that the money Republicans propose for tax credits would be insufficient to enable the uninsured to purchase adequate policies.

On the other hand, the Thomas-Bush stimulus plan, featuring a refundable tax credit worth 60 percent of the cost of a premium, actually was $5 billion more costly than the 75 percent subsidy the Democrats were offering.

And Republicans contend that the President's plan would have provided more insurance too, because employer policies available under the statute known as COBRA tend to cost twice as much as those available on the private market.

Democrats argued that few such policies were available, but the nation's largest online insurance-purchasing system,, lists some 3,000 policy options offered by 100 companies.

Democrats also charge that persons with pre-existing medical conditions wouldn't be able to buy insurance with tax credits, but Republicans claim that the Thomas bill specifically provides for this.

All the arguments likely will be rehashed for as long as unemployment rates remain high and the parties push for a stimulus package. Then they'll be repeated in the bigger fight over coverage for the uninsured.

Last year's budget resolution actually set aside $28 billion for the uninsured, and the Senate Finance Committee was poised to debate rival plans last August. However, declining budget surplus estimates, arguments over Medicare policy and the Sept. 11 attacks blocked action.

Sens. John Breaux (D-La.), Jim Jeffords (I-Vt.) and Bill Frist (R-Tenn.) sponsored last year's tax credit bill. Sens. Max Baucus (D-Mont.) and Olympia Snowe (R-Maine) proposed a measure to expand government Medicaid and Children's Health Insurance Program coverage.

A middle-ground alternative was proposed by Sens. Rob Wyden (D-Ore.), Gordon Smith (R-Ore.) and Bob Graham (D-Fla.). They combined both ideas: tax credits for small businesses that begin offering insurance to their employees and expansion of government assistance to the poor.

This proposal contains no provision for individual tax credits for insurance purchases, but conceivably one could be written in - if there is a will to achieve an agreement with the administration.

Chances are the will doesn't exist, though. The likelihood is that the same ideological differences that blocked a stimulus package will prevent action to help the uninsured.

It's a sad commentary on the state of American politics. Forty million people lacking health coverage - and the number is due to grow, given rising health costs and a soft economy - is a national scandal. And it's a scandal that politicians won't solve the problem.

JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.

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