AMA supports progressive tax policies for health care
AMA meeting: AMA clarifies plan on tax credits for insurance
By Doug Trapp
American Medical News
July 7, 2008
Existing AMA policy, first approved a decade ago, calls for ending employees’ federal income tax exemption for work-based coverage. That should happen, however, only after establishing a system of tax credits to help people buy health insurance. Related AMA policy also calls for… an individual insurance mandate for those earning more than 500% of the federal poverty level, and subsidies for medically high-risk people.
AMA policy adopted at the (House of Delegates) meeting further specifies that once tax credits are in place, employee exemptions for health insurance spending should end only for federal income taxes — not for state or federal payroll taxes, which include Medicare, Social Security and unemployment taxes. (T)he exemption for payroll taxes… would disproportionately affect lower-income people and raise employers’ payroll taxes, and would not provide additional revenue for health insurance tax credits.
Richard Warner, MD, a Kansas psychiatrist, offered an amendment to maintain tax-free HSA contributions after insurance tax credits are in place, but the house did not adopt it.
Delegates also clarified AMA policy on the tax deductibility of health insurance spending. Previous policy had called for deductibility of out-of-pocket medical expenses and insurance premiums, but the house rescinded it in favor of the tax credit plan. AMA policy still envisions people with lower incomes having more generous tax credits and easier access to them than wealthier people.
David McKalip, MD, a neurosurgeon in St. Petersburg, Fla., offered an amendment to give Americans at all income levels tax credits for purchasing health insurance. He said the AMA policy represents a massive transfer of wealth that would discourage wealthier Americans from having health insurance by ending their tax incentives for buying it. His proposal was rejected.
http://www.ama-assn.org/amednews/2008/07/07/prsk0707.htm
Comment:
By Don McCanne, MD
From a policy perspective, this is really great news. The AMA already is on record for supporting progressive financing of our health care system through the use of refundable, advanceable, inversely-income-indexed tax credits to purchase private health plans. The current additional actions of the AMA House of Delegates even more explicitly support the concept of progressive financing of health care, based on ability to pay.
Health savings accounts (HSAs) are a regressive method of financing health care because they provide a greater tax deduction to higher income individuals. The AMA proposal would end this unfair policy by no longer allowing the deduction of HSA contributions from taxable income. An attempt to endorse the continuation of tax-free HSA contributions was rejected.
AMA policies would tend to shift coverage from employer-sponsored plans to the individual market. To encourage this shift, some policymakers recommend eliminating the deductibility of employer-sponsored coverage, and making premiums and out-of-pocket expenses deductible for the individual. The AMA recognizes that this would perpetuate unfair regressive tax policies. Instead, the AMA recommends not allowing the deductibility of medical expenses or premiums, but instead providing tax credits that are inversely proportional to each individual’s income. There could not be a more explicit support of shifting from regressive to progressive tax policies to fund health care.
The AMA also supports a mandate to purchase insurance for individuals with incomes over 500 percent of the federal poverty level. This is another policy that explicitly acknowledges that the wealthy have a responsibility to contribute to the pooling of funds for health care for everyone.
The AMA also supports tax subsidies for high-risk people, yet another acknowledgment that financing of major health care costs must be through progressive tax policies.
Perhaps the most exciting news of all is the action taken on an amendment offered in protest to the “massive transfer of wealth” that would take place by ending the regressive tax incentives to purchase private insurance. (Technically, the AMA proposal would end the “massive transfer of wealth to the wealthy” through health plan deductibility, and replace it with a transfer to lower-income individuals who need help paying for health care.) The AMA rejected this amendment, seeing through the mean-spirited “massive transfer of wealth” rhetoric. AMA members are first and foremost physicians who really do care about their patients.
In relying on private health plans to provide coverage, the AMA still has a major hurdle before reaching a model that actually would work. They do support greater regulation of the insurance plans, but through a robust market of private plan choices. Regulations are required to make the plans do their job of providing us with affordable access to health care, whereas markets function to provide us with price-competitive insurance products that keep prices down by preventing us from having affordable access to health care that we need. We can avoid that perpetual push-pull by replacing the private plans with a single risk pool, funded through progressive tax policies, and administered by our own public agency.
The AMA is getting closer. If they would just knock down this private-plan hurdle, the AMA could lead the way.