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Gephardt's Plan
April 29, 2003
By Patrick McIntyre

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Congressman Dick Gephardt rolled out a proposal for universal health coverage this week to a chorus of jeers from conservatives who want to portray it as anti-business. But a closer look at the plan shows that it will benefit businesses as well as rich and poor alike.

Gephardt's plan to use the Bush tax cuts should be attractive to rich and poor alike. The poor will get health coverage at affordable rates, and the majority of the rich people will still enjoy their tax cuts.

How can that be, you might ask? It's really very simple. The people whose taxes would go back up to Clinton-era levels are by and large either employees, investors or owners of corporations who already offer health insurance benefits to their workers. The revenue generated by reinstatement of the old income tax rates would go to doubling the tax credit such companies receive for providing coverage, which would result in lower health care costs for those businesses; this would result in a larger profit margin whereby salaries and dividends would most likely increase accordingly. For companies who don't currently offer insurance to their employees, they might see the wisdom of providing coverage so they could get in on that same 60% tax credit to recoup what they might feel they lost from the reinstatement of the old tax rate.

Insurance companies would be wise to support Gephardt's proposal, as it doesn't put any restrictions on them that aren't already in place. Add to that the fact that with more people covered, the cost of care can be spread over a larger pool of policyholders which should reduce their average annual per capita cost of care. More premium revenues with lower costs should sound like the sweetest tune ever played on an actuarial table!

Gephardt's proposal is one I would imagine any state governor, regardless of his party, should welcome with open arms. State and municipal governments would be reimbursed for 60% of the cost of covering their employees, which could save states a total of $172 billion dollars over the first three years. This money could go a long way towards restoring services which they have been forced to cut because of the 2001 tax cuts.

Mr. Gephardt has set the cost of the first three years of this program at $700 billion,but the actual cost is much less. Over $100 billion per year would go directly to employers in the form of insurance premium tax credits, as much as $62 billion would reimburse states for coverage costs for their employees and up to $70 billion to subsidize coverage for the unemployed and others with no access to traditional coverage. This results in about $233 billion in yearly costs, with a similar amount of savings to taxpayers in various forms.

This is as close as I have seen anyone come to a delivering the Holy Grail of a revenue-neutral plan to provide universal coverage. What taxpayers don't get back from the federal government in tax credits they will get back from state and local governments in the form of either further tax cuts or expanded services. For most businessmen any increase in taxes will be offset by tax credits for doing things he's already spending money to do.

As I believe most working Americans are already in favor of some form of universal coverage, Mr. Gephardt should focus the main thrust of his sales pitch for this plan on businesses who may not realize how advantageous this plan will be for them as well.

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