the challenges of implementing health reform through the tax system
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The Challenges of Implementing Health Reform Through the Tax System. Janet Holtzblatt Congressional Budget Office February, 2008. New Responsibilities for IRS?. Limit existing subsidies for employer-based insurance. Subsidize taxpayers who buy non-group insurance.

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the challenges of implementing health reform through the tax system

The Challenges of Implementing Health Reform Through the Tax System

Janet Holtzblatt

Congressional Budget Office

February, 2008

new responsibilities for irs
New Responsibilities for IRS?
  • Limit existing subsidies for employer-based insurance.
  • Subsidize taxpayers who buy non-group insurance.
  • Subsidize individuals who have no income tax liabilities.
  • Subsidize small businesses.
  • Enforce mandates (or personal responsibilities).
  • Require agency, other than IRS, to collect premiums.
possible reasons to use irs
Possible Reasons to Use IRS
  • Builds on existing tax preferences.
  • Most people file returns.
  • Access to information on income.
  • May complement tax policy goals.
3 big challenges
3 Big Challenges
  • Can the targeted population be reached?
  • Can IRS enforce either a mandate or eligibility rules for a subsidy?
  • Can IRS enforce mandates or pay out subsidies in a timely fashion?
slide6
Can the Targeted Population be Reached?A. Counts of Filers and Non-Filers in 2007(Source: JCT; Counts in Millions)
1 can the targeted population be reached a addressing the non filer issue
1. Can the Targeted Population be Reached?A. Addressing the Non-Filer Issue
  • Require non-filers to file income tax return (2008 stimulus payments)
  • Require non-filers to file a short form (2007 telephone excise taxes)
  • Effectively exempt non-filers from mandate and provide subsidies through other means (most health proposals)
  • Spread responsibilities between agencies
slide8
1. Can the Targeted Population be Reached?B. Providing Tax Benefits to Families with No Income Tax Liabilities
can the targeted population be reached c targeting criteria general
Can the Targeted Population be Reached?C. Targeting Criteria (General)
  • Income tax return contains information on income and family that could be used to target assistance.
  • Confusion, avoidance, and evasion likely when information incomplete or rules are complicated.
    • Family structure
    • Business structure
can the targeted population be reached c targeting criteria unique to health reform
Can the Targeted Population be Reached?C. Targeting Criteria (Unique to Health Reform)
  • Does individual have health insurance?
  • Is the individual receive another health subsidy?
  • Does the benefit package meet requirements?
  • Did employer drop coverage prior to eligibility for subsidy?
  • What is the value of employer contributions and do they exceed cap?
challenge 2 can tax rules be verified and enforced 2b challenges for information reporting
Challenge 2: Can Tax Rules be Verified and Enforced?2b. Challenges for Information Reporting
  • Certifying qualifying plan
  • Accelerating timing
  • Receiving information from state programs
challenge 3 can subsidies be paid in real time 3a determining eligibility eitc experience
Challenge 3: Can Subsidies be Paid in Real Time?3a. Determining Eligibility (EITC Experience)
  • Criteria
    • anticipated annual income
    • marital status on 12/31
    • number of months lived with child
  • Reconciliation when file return at end of year
  • Outcomes
    • 3 percent choose advance payment option
    • 40 percent of advance claimants do not file
    • about 2/3 of those who file misreport advance payments
challenge 3 can subsidies be paid in real time 3a using prior year income to determine eligibility
Challenge 3: Can Subsidies be Paid in Real Time?3a. Using Prior Year Income to Determine Eligibility
  • Advantages
    • Reduces uncertainty
    • Reduces risk
  • Disadvantages
    • Loss of target efficiency
    • Reporting and verification lags reduced, but not eliminated
challenge 3 can subsidies be paid in real time 3b does irs have ability hctc experience
Challenge 3: Can Subsidies be Paid in Real Time?3b. Does IRS Have Ability? (HCTC Experience)
  • Criteria
    • Eligibility for HCTC monitored monthly
    • Must purchase insurance first before becoming eligible
    • Credit recipients pay premiums to IRS
  • IRS pays full amount (subsidy plus recipient’s contribution) to insurer
  • Outcome
    • Participation appears to be low
    • IRS outsources tasks to private sector
conclusions
Conclusions

Can the IRS meet the three challenges?

  • Balance targeting and simplicity.
  • Information, information, information.
  • Making recurring payments is difficult with current infrastructure.
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