11.2: Low-Income Assistance

Make available financial assistance for purchasing insurance, equivalent to the tax credit, to households with no tax liability and prorated to those with a tax liability less than the value of the available credit

Other Information:

Assistance for Lower-Income Working Families. Financial assistance for purchasing insurance, equivalent to the tax credit, is made available to households with no tax liability and prorated to those households with a tax liability less than the value of the available credit. This money can be used only for purchasing health insurance and typically would be sent directly to the chosen plan in return for a dollar-for-dollar reduction in the premium to the family. This is like the way the government's contribution to a federal employee's FEHBP reduces the employee's premium. Thus, if a family's tax liability is less than the value of the credit, the family receives assistance partly in the form of a credit (up to its tax liability) with the rest in the form of direct assistance for insurance. If this family's income rises in subsequent years, the amount it receives as assistance is phased out and the credit amount is phased in, maintaining the same full credit/assistance amount throughout the income change. In contrast to the current patchwork health care model, the Heritage plan streamlines federal assistance to ensure that no families fall through the cracks. For very-low-income families with children earning less than 200 percent of the federal poverty level (FPL), the Heritage plan provides an additional federal subsidy worth $5,500. The full additional subsidy would be available to families up to 133 percent of the FPL and would gradually phase out between 133 percent and 200 percent of FPL. This enhanced subsidy is intended for the traditional, "mandatory" Medicaid populations—the groups that states are required by federal law to include in Medicaid—and the eligibility phaseout is designed to minimize work disincentives, unlike current law, in which Medicaid has a very sharp eligibility cutoff. In 2011, a family of three with an income below $37,000 would meet this threshold. Again, this is paid for with reductions in federal spending. Of course, states may provide additional assistance to low-income families and individuals.

Stakeholder(s):

• Lower-Income Working Families

Indicator(s):

Indicator:1

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