About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

34 IRET Congressional Advisory 1 (1994)

handle is hein.taxfoundation/iretcgadv0033 and id is 1 raw text is: July 5, 1994 No. 34 HEALTH PLANS FROM WASHINGTON WOULD CREATE A DEPENDENCY TRAP Most of the government controlled health insurance plans now being debated in Washington would provide low-income subsidies for purchasing a government-approved insurance package. The complex and sweeping plan that the Clintons' introduced last year would require everyone to obtain government-specified health insurance but would provide an assortment of subsidies to low- income individuals and small, low-wage firms. Those elements have been retained, individuals with has drafted a plan that also calls for subsidized coverage of low-income individuals. Although low-income subsidies may seem appealing at first glance, they have the unfortunate disadvantage that they erode normal incentives to work and save. First, the granting of subsidies would reduce or take away what would otherwise be an important reason to work and save. High quality health insurance is now a reward for work and saving. Under the Clintons' plan and many others, those who did not work or save would receive, for free, the same health insurance everyone else has to pay for. Because of this giant new government entitlement program, health insurance would cease to be a reward for effort because some people would be given health insurance without ever needing to work or save. Second, all the major plans proposed in Washington would phase out the low-income Although low-income subsidies may seem appealing ... they hae the un for-tunate disadvantage that they erode normaIl incentives to work an d save ... Sutrpsingly some of the sharpest disincentives would fall on the poor and the lower- middle income class... subsidies as income rises. That would actively penalize working and saving. In many of the plans, working and saving would bring only punishment: those who worked and saved would be subject to higher taxes, but receive the same health insurance as those who did not. Thus, the proposed health insurance entitlement would turn incentives upside down. albeit with many modifications, in several Congressional proposals which acceded to the Clintons' plan as their starting point. Congressional offspring of the Clintons' plan have now passed the Senate Education and Human Resources Committee, chaired by Sen. Edward Kennedy (D-Mass.), the House Education and Labor Committee, chaired by Rep. William Ford (D-Mich.), and the House Ways and Means Committee, chaired (on an acting basis) by Rep. Sam Gibbons (D-Fla.). The Senate Finance Committee approved a plan offered by self-styled centrist members that features radical changes in how insurance policies are written and that contains a low-income subsidy. Sen. Robert Dole (R-Kan.) Surprisingly, some of the sharpest disincentives would fall on the poor and the lower-middle income class, rewarding them for dependency and penalizing them for effort. This is because, in all of the plans, the low-income health insurance subsidies would phase out with increases in income. In effect, the poor and near poor would face a new, special tax on their work and saving. This new government penalty for working and saving would be in addition to the many taxes and subsidy phaseouts now on the books that already discourage the poor and near poor from trying to earn additional income. Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501 (c)3) economic pol icy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 e Fax 202-463-6199 0 Internet www. ret.org

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most