Getting More from Tax Incentives: Health Insurance Janet McCubbin, AARP Public Policy Institute

AARP 2 Q: Should the government intervene? A: Yes

AARP 3 Q: Should we use: a) fiscal incentives b) explicit regulation c) soft paternalism A: all of the above, especially a and b

AARP 4 Q: Should we use tax incentives or direct spending? A: not entirely clear > How you deliver the subsidy depends on what the market looks like. > How does the “exchange” work? > What is the employer’s role? > IRS and other agencies will have roles. > At a minimum, IRS helps to verify income > Medicaid expansion for low-income nonfilers + tax subsidies for others?

AARP 5 Q: What features would make tax incentives most effective? A: efficiency, equity, administrability

AARP 6 Q: What features would make tax incentives most effective? A: efficiency > Tie the subsidy to the thing that you want people to buy. > Can tax policy further help to reduce the growth in health care spending? > Transparency of costs > Indexing

AARP 7 Q: What features would make tax incentives most effective? A: equity > Vertical equity: > How much redistribution? > What is the affordability standard? > Horizontal equity: > Exchange > Employer sponsored – small employer > Employer sponsored – large employer

AARP 8 Q: What features would make tax incentives most effective? A: administrability > Two tradeoffs to consider: > Targeting vs. simplicity, low admin costs > Accuracy vs. low admin and enforcement costs

AARP 9 Q: What policy would you recommend? A: Janet’s views only: > Refundable tax credits to individuals who purchase from the exchange, “harmonized” with the employer exclusion. > Medicaid expansion.