Summary of the Gephardt Health Care Plan

The Gephardt Plan achieves the twin goals of universal health care coverage and significant immediate economic stimulus to our troubled economy. The plan uses proven, existing private and public structures to extend health insurance coverage to 97% of the uninsured. At the same time, the resulting economic stimulus will pump more than $280 billion into the economy over the first three years. The plan is paid for by repealing the Bush tax cut, replacing a failed economic plan with demonstrable economic stimulus.

The plan maintains employer-based health insurance coverage that promotes greater efficiency through group health insurance coverage and avoids putting in place an unworkable, bureaucratic structure. Finally, the plan directs the benefits of the stimulus package immediately to America's working families. Gephardt's plan consists of five major components.

(1) Gephardt's plan will stimulate the economy by providing a 60% refundable tax credit on the employer's share of premium costs for those employers who currently provide health insurance coverage. Under current law, an employer may deduct up to 100% of the cost of health insurance coverage, which is approximately a 30% tax credit. A 60% refundable tax credit would essentially double the value of the tax relief to these businesses. Additionally, a 60% refundable tax credit would be extended to the self-employed, replacing the current deduction.

Increasing the value of the existing tax subsidy for employers will allow businesses that offer health insurance to maintain coverage for employees in the face of rising costs and expand coverage to uninsured and underinsured employees, such as part-time workers. The tax credit will reduce the number of uninsured Americans by 6 million.

This plan will stimulate economic growth by providing a tax cut of $316 billion in three years to businesses that currently provide coverage. In addition to creating jobs by increasing the GDP by at least 1% annually, reducing the cost of health benefits to employers will result in the reallocation of the savings to higher wages and better benefits for workers. Higher wages will generate increased income and payroll tax revenue.

(2) Gephardt's plan provides a 60% refundable tax credit for the full premium cost to employers who currently do not offer health insurance coverage. Employers who currently do not offer health insurance coverage would be required to accept the credit and pass on the full value of the credit to their employees in the form of health insurance coverage. Such a credit makes health care coverage affordable for employees while not placing new financial burdens on employers.

Extending this tax credit to businesses that do not currently offer health insurance reduces the number of uninsured Americans by 19.5 million. No employer would be required to contribute to the cost of health coverage beyond the nominal administrative cost of providing health insurance coverage. Employees would not be required to pay more than 40% of the premium cost.

To assist low-wage workers to pay the premium cost, the plan also provides an additional 25% refundable tax credit to workers whose income is up to 100% of the poverty level. This credit would phase out for workers making up to 200% of the poverty level.

(3) Gephardt's plan would expand existing public programs to insure those not covered by employers. A Medicare buy-in would allow individuals between the ages of 55 and 64 to purchase Medicare coverage. Also, a 65% federal subsidy for COBRA coverage would be created for the eligible unemployed. Finally, an extension of Children's Health Insurance Program (SCHIP) and Medicaid coverage to the parents of eligible children would be combined with new efforts to enroll uninsured SCHIP-eligible children.

Such an expansion would reduce the number of uninsured Americans by 2.9 million.

(4) Gephardt's plan would reimburse state and local governments for 60% of the cost of health insurance coverage for their employees totaling $172 billion in the first three years.

In addition, by greatly reducing the cost of uncompensated health care that burdens state and local governments at an annual savings of $30 to $40 billion, the combined savings will provide significant relief to state and local governments and allow them to commit more of their resources to address the vital needs of their citizens.

(5) Gephardt's plan produces significant cost savings in the health care system.

Covering the uninsured and significantly reducing uncompensated health coverage could have the effect of lowering health premium costs by 5% to 7%. Additionally, the plan will task the National Institute of Health to collect and disseminate information on best practices which will assist in extending the best possible health coverage and promoting greater cost efficiencies.