Members of Congress will soon have an opportunity to make a crucial decision about how to deal with the problem of uninsurance in America. The broadest and most effective approach would be for Congress to finance a new system of refundable income tax credits for health insurance, which would give individuals and families direct assistance in purchasing health care coverage. Several bills before Congress, particularly legislation introduced by Senator Jim Jeffords (I-VT) and Representatives Richard Armey (R-TX) and John Cooksey (R-LA), incorporate this approach.

Recently released U.S. Bureau of the Census figures indicate that 39.3 million Americans were without health insurance in 1999. The fiscal year (FY) 2002 budget resolution approved by the House and Senate in May authorizes $28 billion in either spending or revenue reduction over three years to make health insurance available for the uninsured. Some in Congress propose extending Medicaid to more people. Others propose enrolling adults in the State Children's Health Insurance Program (SCHIP). Some suggest providing a tax credit to employers, and others propose an income tax deduction for the purchase of health insurance. Although the laudable intent of these proposals is to reduce the number of uninsured, these approaches would merely expand inferior or
inefficient government programs while failing to get the job done.

The challenge for Congress will be to reduce the numbers of uninsured low-income Americans without exposing the federal government or the states to greater financial obligations that hamper their ability to reach all those who need help. The choice for Congress is clear: It can expand the existing inefficient bureaucratic government programs that are inferior in the delivery of care, or it can promote patient choice and free market competition in the ailing health care system by allowing individuals to make their own key health care decisions.

• Individualized. Targeting tax credits at the individual would encourage uninsured Americans to obtain health coverage.

• Refundable/Advanceable. Making individual tax credits refundable is important because it will enable individuals, even those who owe no taxes, to use the credit at the time they purchase a policy without having to wait for a tax refund.

• Transferable. For administrative reasons, the credits should be transferable to a private insurer, much as is done in the Federal Employees Health Benefits Program (FEHBP).

• Meaningful. The tax credit must be large enough to offset at least partially the average cost of health insurance coverage. Recent studies have shown that achieving this goal may not be as difficult as is often assumed.

Benefits of Individual Tax Credits.
The best way to ensure that those who do not have coverage obtain it is to give them a positive incentive to buy the coverage they need. Tax credits would provide that incentive. They promote:

• Choice by enabling individual workers and their families to choose the coverage that best fits their personal medical needs.

• Control by enabling individuals, not their employer or a bureaucrat, to decide which coverage they are to buy.

• Continuity by creating true portability, thereby ensuring that coverage will no longer be contingent upon one's employment or employment status.

Current Legislative Proposals.
Senator Jeffords and Representatives Armey and Cooksey have introduced tax credit bills that recognize these principles and benefits. The Relief, Equity, Access, and Coverage (REACH) Act (S. 590), the Fair Care for the Uninsured Act (H.R. 1331), and the Patient Access, Choice and Equity (PACE) Act (H.R. 2250) each would provide refundable tax credits to the uninsured to assist them in the purchasing of health insurance for themselves and their families. These bills all follow the above-cited four key principles and offer a framework to which other ideas that promote individual decisionmaking could be added.

Conclusion.
In considering these bills, the 107th Congress, working with the Bush Administration, has an opportunity to write a fresh new chapter in federal health care policy. Instead of building on bureaucratic structures or relying on outmoded welfare programs, they can promote personal choice in health plans and benefits by transferring decisionmaking power in the health care system to individuals and families. Such an approach would make health plans more accountable to their consumers and Americans more satisfied with their plans.

Nina Owcharenko is Health Care Policy Analyst at The Heritage Foundation.