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If an individual

A flat subsidy would be easy to administer

account to be held against the individual's

future health care expenses.27 However, for

and relatively transparent. It would also be

mandate for

costly. After all, any subsidy must be large

most people, the withheld refund will almost

health insurance

enough to cover all or most of the cost of

certainly be less than the cost of insurance.

is going to be

insurance for low-income Americans, other-

The average state tax refund in Massachusetts

last year was $401.28

wise the mandate will amount to a highly

effective, some

regressive tax on those least able to pay. The

In the end, most of the proposed penalties

form of subsidy

cost of a health insurance policy for a family

would likely be either too punitive or effec-

of four today averages more than $10,000 a

tive against only the minority of uninsured

for low-income

year.31 Clearly, low-income individuals would

with moderate or high incomes.

Americans will

have difficulty absorbing such costs. Even if

have to be found.

the cost could be reduced by mandating a

The Complexity of

more limited package of benefits or shifting

Subsidies

to a high-deductible policy (with or without

an accompanying health savings account),

the burden on low-income workers would be

The number-one reason that people give

substantial.32

for not purchasing insurance is that they can-

not afford it.29 Therefore, if an individual

Once the subsidy became available to indi-

mandate for health insurance is going to be

viduals purchasing insurance on their own,

effective, some form of subsidy for low-income

businesses that currently provide their work-

Americans will have to be found. As the New

ers with health insurance would either

America Foundation notes, "Making basic

demand equivalent subsidies or drop their

coverage mandatory for individuals necessi-

health coverage altogether, only too happy to

tates making coverage available and affordable

shift the cost of insuring workers to the tax-

for all."30 That raises three important design

payer. That behavior is already clearly visible

with Medicaid.33

and implementation questions.

That is why proponents of an individual

Voucher or Tax Credit?

mandate frequently combine it with an

Should the subsidy be in the form of a

employer mandate. (The Heritage Foundation

voucher payable to the insurer or a tax credit

and Governor Romney have resisted that

payable to the individual?

temptation.) Knowing that an employer man-

The most commonly suggested form of

date would ultimately result in lower wages or

subsidy is a tax credit, most likely refundable.

fewer jobs, proponents generally try to offset

That would take advantage of a system

such costs by providing subsidies to employers

already set up to make payments to millions

as well as individuals. Thus, the federal gov-

of individuals. However, the strength of the

ernment ends up indirectly paying a large part

system is also its weakness. There would be no

of the cost of health coverage, including cover-

way to provide the subsidy to those who did-

age for people who are currently insured.

n't file tax returns. On the other hand, a

If the subsidy is linked to income or oth-

voucher payable to insurers would require a

erwise means tested, there are three ways to

potentially costly new administrative struc-

do so: 1) projected income for the current

ture. Simply mailing the voucher to people

year, 2) last year's income, and 3) regularly

who move or without a fixed address poses

adjusted weekly or monthly income. Each of

the potential for administrative chaos.

those methods has problems.

Guessing future income is simply an exer-

Flat Amount or Linked to Income?

cise in crystal ball gazing. Relying on past

Should the subsidy be a flat amount for

income provides an accurate starting point

all Americans, or should it be linked to

but does not necessarily tell us about an indi-

income?

vidual's current subsidy need. For example, if

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