Journal Issue: The Next Generation of Antipoverty Policies Volume 17 Number 2 Fall 2007
Variations on the Proposal
The proposal provides a credit of uniform value in a nation where health care and health insurance costs vary.49 It will be relatively easy for people who live in low-cost regions to get good coverage, whereas those in regions with higher costs may find the credit inadequate to purchase a good policy. Some reform proposals vary the credit by the underlying cost of insurance. This adds a substantial layer of complexity and creates some troubling incentives for the health system as a whole (the more expensive you are, the more you get paid).
Similarly, the credit value could vary by the age or health status of the applicant. This would avoid the risk-selection problems already noted, but would be extremely difficult to administer. Alternatively, the proposal could mandate that states adopt community rating policies for health insurance. This would solve the risk-selection problems, but create other disruptions within the current health insurance market. It would also fundamentally alter the balance between state and federal power in health insurance regulation— a change to which the states would be sure to object.
Finally, the proposal could have provided an option for people to receive the EIHC if they purchase coverage in the individual insurance market. Such a structure provides less of an assurance that the insurance policies will be adequate, is far more prone to the substitution of private dollars with public dollars, and requires the creation of an entirely new administrative structure to enable the credit to flow to families.