A Proposal for Financing the Purchase of Health Services

Charles W. Baird

Journal of Human Resources, 1970, vol. 5, issue 1, 89-105

Abstract: The proposal is made to grant tax credits against the personal income tax for 75 to 80 percent of all health care expenditures other than those made for the initial visit to a physician per illness. This in effect provides all individuals in the United States with a health insurance policy which has deductible and coinsurance clauses to cope with the problems of moral hazard and the generally uninsurable routine health expenditures. The premium paid by each individual-the amount that his tax bill must increase to offset the decrease in tax revenues from the credits-would depend on his income. Both a progressive and a proportional premium scheme are investigated. The advantages of such a scheme are that it would obviate the necessity for growing government involvement in the health market and that it, more clearly than existing government programs, would benefit the poor sick more than the wealthy sick.

Date: 1970
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