The American Enterprise Institute (AEI) has released a "playbook" for replacing the Patient Protection and Affordable Care Act of 2010 (PPACA).
Thomas P. Miller, the author of the PPACA alternative proposal, "When Obamacare fails," is calling for policymakers to kill the current group health insurance tax deduction.
The ideal would be to go cold turkey and simply eliminate all tax subsidies for health coverage, Miller said.
If that's not politically possible, Congress could start by creating an individual health insurance purchase tax credit for people under 65, Miller said.
The initial value of the credit could be comparable to the current value of the group health tax subsidy, or about $5,000 to $6,000 per family, Miller said.
"Any household that chose to forgo purchasing at least some basic level of insurance would lose the entire value of the credit," Miller said.
The risk of losing the credit would be more effective at getting families to buy coverage than the PPACA individual coverage ownership mandate, because the sixe of the Miller health insurance tax credit would be much higher than the PPACA uninsurance tax, Miller said.
Policymakers could adjust the tax credit and make it bigger for sicker, lower-income taxpayers, Miller said.
But one challenge would be that adminstering the adjustment mechanisms could make the tax credit more complicated and harder to explain, Miller warned.
Miller, a resident fellow at the AEI, was a senior health policy advisor for the John McCain presidential campaign in 2008. Earlier, he was a senior health economist at the Joint Economic Committee, an arm of Congress. He also has been director of health policy studies at the Cato Institute and director of economic policy studies at the Competitive Enterprise Institute.
Many health policy analysts refer to federal income tax breaks as "tax expenditures," or efforts by the government to hide the fact that it is spending large sums of money by having taxpayers use money that would normally be sent to the tax collectors to buy what the government wants them to buy.
Using tax expenditures to help pay for health coverage fosters the illusion that "we can pay most, or at least a substantial share, of everyone's health insurance premiums with other people's money," Miller said. "But there simply is not a sustainable line of credit or enough projected tax revenue to keep financing these efforts at the same current-law levels far into the future."
Reducing group health tax deduction tax expenditures on health coverage for upper-middle-income and high-income taxpayers would free up money the government could use to reduce the budget deficit and pay for basic care for people with very low incomes or unusually serious health problems, Miller said.
Miller also calls for replacing the current version of Medicare with the kind of "premium support" version of Medicare that Rep. Paul Ryan, R-Wis., has promoted.
