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Abstract
The Bush Administration has proposed using a tax deduction approach to expand health insurance coverage instead of expanding SCHIP coverage for more children. On October 3, the president vetoed the SCHIP reauthorization bill passed by Congress. This brief compares the financial burden for families associated with purchasing coverage for their children under the President’s proposal and under the SCHIP reauthorization bill and discusses the likely impacts on uninsurance among children. We find that the financial burdens for families between 150 and 300 percent of the federal poverty level would be much higher under the tax deduction approach than under SCHIP.
Introduction
The Bush administration has proposed using the tax system to subsidize the purchase of health insurance, suggesting that offering parents tax deductions to offset the costs of insurance—rather than expanding the State Children’s Health Insurance Program (SCHIP)—would be an effective way to extend coverage to more children. This brief compares the financial burden that parents would incur in obtaining coverage for their children under the president’s tax-deduction proposal against that associated with SCHIP. It finds that the financial burdens for families between 150 and 300 percent of the federal poverty level (FPL) would be much higher under the tax-deduction approach than under SCHIP. Even after receiving the proposed tax subsidies under the president’s proposal, a two-parent family with two children earning approximately $32,000 per year would pay 39 percent of their income to obtain private nongroup coverage for their children with comparable benefits to that provided through SCHIP at no cost to the family. Under the president’s proposal, a two-parent/two-child family earning approximately $54,000 per year would still spend more than a fifth of their income on private nongroup health insurance to obtain comparable benefits to what they could obtain for their children under SCHIP for 1 percent of their income. The financial burden for single-parent families with one child are even greater under the tax proposal. Therefore, the potential to decrease the number of uninsured children would be substantially greater under an SCHIP expansion than under proposed tax deductions.
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
