Getting More from Tax Incentives: Health Insurance

1
Getting More from Tax Incentives Health
Insurance

• Janet McCubbin, AARP Public Policy Institute

2
Q Should the government intervene?

• A Yes

3
Q Should we use

• fiscal incentives
• explicit regulation
• soft paternalism
• A all of the above, especially a and b

4
Q Should we use tax incentives or direct
spending?

• A not entirely clear
• How you deliver the subsidy depends on what the
  market looks like.
• How does the exchange work?
• What is the employers role?
• IRS and other agencies will have roles.
• At a minimum, IRS helps to verify income
• Medicaid expansion for low-income nonfilers tax
  subsidies for others?

5
Q What features would make tax incentives most
effective?

• A efficiency, equity, administrability

6
Q What features would make tax incentives most
effective?

• A efficiency
• Tie the subsidy to the thing that you want people
  to buy.
• Can tax policy further help to reduce the growth
  in health care spending?
• Transparency of costs
• Indexing

7
Q What features would make tax incentives most
effective?

• A equity
• Vertical equity
• How much redistribution?
• What is the affordability standard?
• Horizontal equity
• Exchange
• Employer sponsored small employer
• Employer sponsored large employer

8
Q What features would make tax incentives most
effective?

• A administrability
• Two tradeoffs to consider
• Targeting vs. simplicity, low admin costs
• Accuracy vs. low admin and enforcement costs

9
Q What policy would you recommend?

• A Janets views only
• Refundable tax credits to individuals who
  purchase from the exchange, harmonized with the
  employer exclusion.
• Medicaid expansion.