A study done at Blue Cross and Blue Shield of Maryland stated that the cost of health care in the United States is increasing so drastically that many people will not be able to afford it in the near future. Already, over 30 million Americans lack health insurance, and millions more are "underinsured." If this study is correct then in a few more years the number of Americans without coverage will have grown to over 40 million. Meanwhile, the cost of health care in the United States is escalating and some of our care is of questionable value. There have been some programs developed for a health care reform strategy that addresses these three fundamental problems in the U.S. health care system. One of these programs is for a universal tax credit, funded by the government, that enables all Americans to purchase basic health coverage. Other programs to be combined with the universal tax credit are, insurance reforms including pooling and reinsurance mechanisms, requirements that all employers make insurance available to their employees, and efforts to measure and improve the quality and efficiency of health care services. This strategy would help us to achieve universal health insurance coverage, while creating the proper incentives for cost control, and allowing it to be largely internally financed through savings automatically triggered by its implementation.

The purpose of this paper is to describe a new approach to achieving universal health insurance coverage in the United States in a way that also creates the proper incentives for cost control. Many Americans face the dilemma of purchasing health care when the health care costs are rising sharply. Furthermore, purchasers of health services are often uncertain about the value they are getting for their money, as they lack adequate measures of quality of care. There are some basic principles that are necessary to adequately handle the problems facing Americans today.

These principles are as follows:

(1) No on should be denied access to necessary care for financial reasons,

(2) Consumers should be empowered to purchase health care coverage for themselves,

(3) Cost discipline must be built into efforts to expand access, and consumers should share in the financial consequences of their choices, and

(4) No one should be excluded from receiving subsidies because of arbitrary characteristics such as family or welfare status.

The concept of universal tax credits uses the above principles to help remedy the three fundamental problems. To describe this concept it would help to know exactly what it does. The universal, refundable tax credits are a means for assuring that universal coverage will be derived from refundable federal income tax credits, that could be used exclusively for health care coverage. The credits received would be sufficient to cover a large sum of the basic insurance plan's premium. Households with no federal tax liability would still get the credit because of the refundability feature. Even those people who do not file for taxes would still get a refund simply by filling out a one-page form.

This form of tax credits would replace the current Medicaid and the federal tax provisions for health insurance. With the current tax provisions many lower- income people end up having little or no assistance, while the proposed tax credit would benefit all Americans. Under this proposal, a universal tax credit would be extended to every taxpayer and require every employer to offer group coverage. This proposal allows for the end-user, as the purchaser, to seek the greatest value for their dollars. They would choose between competing, managed systems of health care on the basis of price and quality, just as they make choices between other products and services. Only carriers qualified on the basis of managed care performance and financial stability would be permitted in the market. They would b e required to offer the core benefit policy, in addition to whatever other products they sell. The cost of this tax credit could be paid by eliminating a tax expenditure, the deduction currently allowed for health insurance. The effect of switching the old tax program with this new tax credit would be to make our tax system much more progressive than it currently is. There are several advantages to this proposal that are in addition to tax equity. For example, government costs would be dramatically lowered under this plan. The credit would relieve all levels of government of a substantial part of the cost of providing health coverage for their employees. This would free up substantial resources for all levels of government to meet other pressing domestic needs and to reduce existing deficits.

The overall picture results in a tax financed, individual mandate which affords a great opportunity to increase the productivity of our economy. Because it would no require an employer contribution, and because it would reduce the amount of unnecessary medical utilization, business earnings would increase dramatically. As a result, new income would be available for additional investments, wages, or benefits. American goods and services would become more competitive on a global basis. It would also eliminate the cost shift currently practiced by health providers who seek to make up for uncompensated care. A major advantage of the tax credit proposal is that it preserves our valuable tradition of free choice between competing health plans.

The best health care system for America is one that builds on our existing strengths of free choice and rapid innovation. It can be improved. By making our system universal, and implementing managed care, we can eliminate waste and promote preventive health measures that hold the most promise of improving our health status. The United States is the richest nation on earth. We got that way by putting consumers at the head of our economy. Through the power of their choices, a disciplined marketplace has constantly rewarded innovation and improved. We should put the same strategy to work in reforming our health care system, and providing the dignity of affordable coverage for all Americans.

BACK