President's Health Care Tax Cut Proposals Are Likely To Weaken Employer-Based Health Insurance, Primarily Benefit High-Income People, and Worsen Deficits
End Notes
[1] See, for example, Sarah Lueck, “Bush to Seek Bigger Health-Savings Tax Break,” Wall Street Journal, January 21, 2006; Peter G. Gosselin, “Health Plan to Revive Debate,” Los Angeles Times, January 23, 2006; and Amy Goldstein, “New Tax Breaks for Medical Expenses,” Washington Post, January 25, 2006.
[2] Linda J. Blumberg, Lisa Clemans-Cope, and Fredric Blavin, “Lowering Financial Burdens and Increasing Health Insurance Coverage for Those with High Medical Costs,” Urban Institute, December 2005.
[3] For further analysis of Health Savings Accounts, see Edwin Park and Robert Greenstein, “Latest Enrollment Data Still Fails to Dispel Concerns About Health Savings Accounts,” Center on Budget and Policy Priorities, Revised January 30, 2006.
[4] See Emmett B. Keeler, et. al., "Can Medical Savings Accounts for the Nonelderly Reduce Health Care Costs?" Journal of the American Medical Association, June 5, 1996, p. 1666-71; Len M. Nichols, et. al., "Tax-Preferred Medical Savings Accounts and Catastrophic Health Insurance Plans: A Numerical Analysis of Winners and Losers," Urban Institute, April 1996; American Academy of Actuaries, "Medical Savings Accounts: Cost Implications and Design Issues," May 1995; Daniel Zabinski et. al., "Medical Savings Accounts: Microsimulation Results from a Model with Adverse Selection," Journal of Health Economics, April 1999, p.195-218; and Gail Shearer, "The Health Care Divide: Unfair Financial Burdens," Consumers Union, August 10, 2000 (relying on Lewin Group estimates).
[5] Preliminary enrollment data offered by HSA proponents have not refuted these adverse selection and tax sheltering concerns and some recent data show that HSAs are primarily attractive to healthy, affluent individuals. Park and Greenstein, op cit.
[6] In an analysis issued in 1998, the General Accounting Office found that more than 90 percent of the uninsured had no tax liability or were in the 15 percent tax bracket. General Accounting Office, Letter to the Honorable Daniel Patrick Moynihan, June 10, 1998. The 10 percent tax bracket, which was carved out of the 15 percent bracket by the 2001 tax legislation, did not yet exist. Another study states that roughly half of the uninsured have no tax liability. Jonathan Gruber, “Tax Policy for Health Insurance,” National Bureau of Economic Research, December 2004.
[7] See Edwin Park and Robert Greenstein, “Proposal for New HSA Tax Deduction Found Likely to Increase the Ranks of the Uninsured,” Center on Budget and Policy Priorities, May 10, 2004.
[8] Park and Greenstein, op cit.
[9] John Cogan, R. Glenn Hubbard, and David Kessler, 2006, Healthy, Wealthy and Wise: Five Steps to a Better Health Care System, Washington, DC/Stanford, CA: AEI/Hoover Institution Press.”
[10] Cogan et al argue that there would still be some incentive: under their proposal employer contributions to health insurance would still be excludable from payroll taxes while out-of-pocket health costs would not be. This, however, is considerably smaller than the incentive in existence today. With less of an incentive, there would be less employer coverage.
[11] President’s Advisory Panel on Tax Reform, 2005, Simple, Fair & Pro-Growth: Proposals to Fix American’s Tax System.
[12] Gosselin, op cit.