Reviving a failed
Pat McCrory, Republican candidate for governor, is proposing health reforms that he says would help implement his belief that all North Carolinians deserve “affordable, high quality health care.” The goal is admirable, although it’s hard to find a politician anywhere these days who thinks our health system is fine and people should keep paying more for coverage.
Examining exactly how a political candidate proposes to expand affordable health coverage is a worthwhile exercise. When the soaring rhetoric meets the hard facts of rising health costs and insurance company profits, the sudden crash can be revealing. Unfortunately, the first on the list of McCrory’s reforms would actually move North Carolina further toward a system that favors wealthier and healthier residents while leaving many others behind.
McCrory resurrects the child health-insurance tax credit — a failed idea that was aimed at increasing affordable health plans for children but ended up costing millions and doing little to expand coverage. The credit was implemented in 1998 when North Carolina started its award-winning affordable child-health program for working parents, Health Choice. Parents whose income was too high to qualify for Health Choice could get a $100-$300 per year credit to purchase child health coverage on the individual market.
After a couple of years, several major problems became apparent with the credit. Primary among these was the lack of fairness. The N.C. Department of Revenue, looking at the ever-increasing numbers of parents claiming the credit who obviously had jobs at large companies, came to the conclusion that many families were claiming the credit that clearly weren’t entitled to it. It wasn’t that parents were intentionally violating the tax code. Rather, many people didn’t understand the credit was only to help purchase coverage on the individual market and not to purchase coverage from health plans available through an employer — which were (and are) already tax-subsidized.
The second problem was increasing cost. Suddenly the credit was costing N.C. taxpayers over $18 million. This was an amount that rivaled a large fraction of the state cost for the Health Choice program serving 80,000 children with comprehensive health coverage. The N.C. Justice Center’s Health Access Coalition estimated that the money saved by eliminating the credit could serve an additional 20,000 children immediately with comprehensive health insurance.
Finally, reality set in. The special bipartisan 2001 North Carolina Efficiency and Loophole Closing Commission, chaired by former Republican Gov. Jim Holshouser, former Democratic Gov. Bob Scott and conservative Democrat Harlan Boyles, made elimination of the child health-tax credit their first recommendation. Bipartisan agreement in the General Assembly followed that year on a budget that eliminated the credit.
If it was a bad idea back in 2001, the child health credit is an even worse idea today. Even if administrative problems could be fixed, the idea that an end of year tax credit of $100 to $300 would have any major effect on encouraging parents of uninsured children to purchase coverage is a false hope. First, even for a healthy child, a standard health plan in the state’s individual market for a single child can easily cost $1,800 a year. Even for the wealthier families who are the ones with enough tax liability to benefit from a credit, a couple hundred dollars at year-end is little help with such an expensive year-round purchase.
More importantly, it’s only the healthy child that can qualify for that $1,800 a year plan. Parents of children with even minor chronic health conditions quickly find out insurance companies can and do charge two, three, four, even five times as much for insuring a child who is generally healthy but has asthma, allergies or mild depression. Costs skyrocket even further for a child with major health problems or more serious disease such as a heart condition or diabetes. Since the tax credit is the same amount regardless of how much insurance companies want to charge parents, it is terribly unfair to people without perfectly healthy children who face such higher costs.
McCrory’s misguided tax credit proposal is one that has already been tried in North Carolina and proven to be expensive and ineffective. Expanding health coverage to all North Carolinians is too important a goal to try to accomplish by repeating the mistakes of the past.