Study Finds High Administrative Costs in Insurance Tax Credit Program

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<p>In his continuing assessment of the federal Health Coverage Tax Credit program, the Urban Institute's Stan Dorn has found there is much policymakers can learn from the only tax credit designed to help the uninsured purchase health coverage. Tax credits have recently been revisited in proposals to cover the uninsured.<br><br>In a new <a href="/cnlib/pub/enews_clickthrough.htm?enews_item_id=27561&return_url=http%3A%2F%2Fwww%2Ecmwf%2Eorg%2Fpublications%2Fpublications%5Fshow%2Ehtm%3Fdoc%5Fid%3D471189%26%23doc471189">Commonwealth Fund issue brief,</a> Dorn sheds light on an aspect that has received little attention thus far: the extent to which public dollars are spent on administering the program rather than purchasing health care services. While administrative costs have fallen significantly since the program's start-up, Dorn has found they still comprise approximately 34 percent of total spending--an unacceptably high proportion.<br><Br>Dorn says it is possible that a simpler health insurance tax credit, with fewer health plan choices and much higher enrollment, could help lower administrative costs.<bR><bR>Health Coverage Tax Credits, which are fully refundable, pay 65 percent of health insurance premiums for certain early retirees and workers displaced by international trade. In 2004, approximately 11 percent of eligible individuals used the credit either in its advanceable form or by claiming the credit on end-of-year tax returns.</p>