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GAO Questions Health Insurance Tax Breaks

By Staff Writer

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NU Online News Service, Feb. 16, 2005, 7:22 p.m. EST

A congressional think tank says a broad review of federal finances could include a look at incentives for purchases of medical coverage.[@@]

A team of analysts at the U.S. Government Accountability Office has published suggestions that health insurance tax incentives deserve close attention in a major new report, “21st Century Challenges: Reexamining The Base Of The Federal Government.”

The team, led by David Walker, comptroller general of the United States, points out that it is talking about the kind of review that could take a generation or more and include topics such as the solvency of Social Security, the complexity of the tax code and the need to maintain a strong national defense.

In the health care section, the GAO team raises 2 discussion questions of direct interest to health insurers:

How can health care tax incentives be designed to encourage employers and employees to better control health care cost? For example, should tax preferences for health care be designed to cap the health insurance premium amount that can be excluded from an individual’s taxable income?

What reforms will encourage the private health insurance market to sufficiently pool risk and offer alternative levels of affordable coverage to ensure that all Americans have access to essential health care coverage? For example, are there alternatives to employer-based coverage through professional organizations, trade associations, or other entities?

Deductions for employers’ health insurance premium payments and individuals’ purchases of health saving accounts “represent a significant source of forgone federal revenue and work at cross-purposes to the goal of moderating health care spending,” the GAO team writes.

The GAO team has posted the report on the Web at //www.gao.gov/new.items/d05325sp.pdf