Summing up the tax code problem succinctly:
As an individual moves up the income scale, the likelihood of qualifying for government health programs declines. Those on the right side of the scale with higher incomes are much more likely to have job-based health coverage, which is generously subsidized through the tax code.
Working Americans with incomes of around $25,000 are most likely to be uninsured and are caught in the trough, which we call the Galen Gap. They earn too much to qualify for public programs but are unlikely to have the good jobs that provide health insurance as a tax-free benefit.
John Sheils of the Lewin Group in Fairfax, VA, estimates that families earning $100,000 or more in 1998 received a tax benefit worth $2,357 from the favorable treatment of job-based health insurance. However, families with incomes of less than $15,000 received only a $71 benefit. This is a highly regressive subsidy that drives many of the problems involving cost and access to health coverage in the United States.
One alternative? Level the regressive tax code and offer tax credits.