Is a Tax Credit System the Cure for U.S. Healthcare?

Evaluating a Transformative Shift from Traditional Payer Models to a Public-Private Credit Framework

The U.S. healthcare system, marked by extraordinary technological capability and deeply rooted inequities, has reached a critical inflection point. While leading the world in innovation, it lags behind in outcomes like life expectancy and chronic disease prevention. This disparity stems in large part from a payment system that rewards reactive treatment over proactive care and one that ties insurance coverage to employment status. In response, a tax-credit-based healthcare model has emerged as a bold and viable alternative. This article outlines a structured roadmap to assess and potentially implement this innovative approach.

1. Review of the Affordable Care Act: Strengths and Limitations

The ACA, enacted in 2010, introduced significant reforms, including Medicaid expansion, the establishment of health insurance exchanges, and the prohibition of pre-existing condition exclusions. These changes lowered the uninsured rate and nudged the system toward value-based care. However, state-level variability and political resistance diluted its long-term impact. Key components like the individual mandate and Health Insurance Tax (HIT) were weakened or repealed, leaving gaps in funding and enforcement.

2. The Employer Coverage Trap and the Need for Decoupling

Employer-based insurance, which covers over 150 million Americans, is increasingly misaligned with today’s dynamic workforce. The current model jeopardizes care continuity when employment is disrupted—precisely when patients need support the most. A new approach must decouple health coverage from employment and ensure universal access regardless of job status.

“While wellness products and organic food remain luxury goods, unhealthy options are cheaper and more accessible.”

3. The Financialization of Healthcare

Healthcare has transformed into a profit-driven sector where insurers, hospitals, and pharmacy benefit managers prioritize margins over outcomes. While wellness products and organic food remain luxury goods, unhealthy options are cheaper and more accessible. Any new model must redirect financial incentives toward long-term community wellness.

4. Introducing a Tax-Credit-Based Payment System

At the core of this proposed framework is the use of digital, time-extended, transferable tax credits issued by the federal government. Modeled on IRS Section 6418 (from the Inflation Reduction Act), these credits act as a secondary currency for healthcare services.

“At the core of this proposed framework is the use of digital, time-extended, transferable tax credits issued by the federal government.”

• Eligibility: Licensed medical professionals, including physicians, nurse practitioners, and behavioral health specialists.
• Usage: Credits can offset federal tax liabilities, be transferred within networks, or be sold on federally licensed exchanges.
• Value Acceleration: Credits increase in value the longer they are held, incentivizing long-term investment.

5. Mechanisms of Transfer: Direct and Exchange Options

• Direct Transfers: Between providers, family members, or affiliated legal entities without tax liability.
• Exchange Transfers: Providers can list credits on the Healthcare Tax Credit Exchange (HTCX) for corporate buyers seeking tax offsets. Primary sales are tax-exempt; secondary sales incur a flat 15% capital gains tax.

Example 1: Dr. Rodriguez earns $200,000 in credits. She transfers $75,000 to her son and invests the rest in a group equity pool, gaining an accelerator after five years.

Example 2: A clinic in Minneapolis sells $1.2 million in credits to a biotech firm via HTCX. The firm resells a portion five years later, incurring capital gains tax.

6. Financial Sector Integration and Investment Vehicles

Credits would behave like government-backed financial assets:

• Pooled Securities: Credit-backed bonds offering fixed returns.
• 401(k) Tiers: Retirement plans offering allocations in tax credits with enhanced caps.

This structure attracts institutional investors while reinforcing healthcare infrastructure.

7. Infrastructure and Oversight: Building the Ecosystem

Supporting institutions include:

• Federal Tax Credit Clearinghouse (FTCC): Verifies and tracks credit issuance.
• Healthcare Value Commission (HVC): Sets base values by geography and outcomes.
• State-Level Coordinators: Support integration with Medicaid and provide assistance to smaller practices.

8. Implementation Strategy: Phased Rollout Plan

• Phase 1: Legislative approval and pilot programs in five regions.
• Phase 2: National platform launch with integrated APIs and provider training.
• Phase 3: State-level adoption and market integration.
• Phase 4: Expansion of funding to clinics and targeted care programs.

9. Addressing Social Determinants of Health

• Environmental Health: EPA-led exposure mapping; credits for remediation services.
• Nutrition: Incentives for produce access and school nutrition.
• Education & Housing: Credits for STEM scholarships and affordable housing development.

10. Metrics of Success: Tracking Outcomes and Equity

Key indicators include:

• Access: % with a primary care provider, appointment wait times.
• Health: Reduced ER visits and chronic disease burden.
• Economics: Lower uncompensated care and stabilized premiums.
• Equity: Closing racial and income gaps in major health outcomes.

A national Health Equity Dashboard will ensure transparency and drive data-informed improvements.

Conclusion: Health as a Right, Wealth as a Responsibility

This proposal reframes healthcare as a shared societal investment, aligning economic tools with public health goals. It offers a system that rewards care quality, increases access, and invites private capital to contribute to national well-being. With the right governance and phased execution, a tax-credit-based model can become a cornerstone of 21st-century healthcare policy.

About the Author

Anil Kochhar brings extensive experience in healthcare strategy, actuarial modeling, policy design, and risk analysis. His work spans innovative financing structures, payment reform, value-based care, and the integration of actuarial insight into public and private healthcare systems.