Bush’s health insurance plan
In the SOTU address tonight, Bush will propose market-based reforms to health insurance. The idea is to eliminate the bias in the health insurance system that leads to most people getting their insurance through their employers. The President is offering a health insurance tax deduction of $7,500 for individuals and $15,000 for families. Currently, health insurance benefits offered by employers are not taxed, but individuals and the self-employed have to pay taxes on their insurance coverage. Under the White House plan, all health insurance is treated the same by the tax code.
Under Bush’s plan, if you don’t have employer-provided coverage, you’ll be able to buy insurance and get a tax deduction to cover the costs, up to the deduction limits, which were set higher than the average health insurance costs for individuals and families. You can take the full deduction no matter how much you actually pay for your insurance. If you pay less than the deduction, you get a tax cut. If you pay more, you’ll pay taxes on the amount that exceeds the deduction. That also means that if you currently have employer-provided insurance that costs more than $7,500 for an individual or $15,000 for a family, you will pay taxes on whatever amount exceeds those limits — unless you change your plan. And changing your plan is part of Bush’s goal.
I participated in a conference call with White House Press Secretary Tony Snow this afternoon, and below is his take on the plan.
“What the President’s really trying to do is create an individual market for health care,” Snow said. Asked about the folks who would get a tax increase under the White House plan, Snow said, “That’s assuming the markets don’t work and people don’t adjust their behavior.”
Snow said that once people were empowered to shop around for the health care plan they wanted, instead of having to take whatever employers offered, “I can guaran-damn-tee you” that a lot of insurers would offer a variety of packages that cost less than the $7,500 and $15,000 tax deduction cutoffs.
Currently, health insurance is sold in a state-by-state market, not a national market. You can buy car insurance from GEICO or All State or State Farm or whomever, but you can’t do that with health insurance. The President believes his plan will end that and create a true nationwide market for health insurance that will lower costs and empower consumers.
“This is going to create a national market,” Snow said. “We can’t go in as federal marshalls and just take that (state regulations) out. People are going to get a chance to look around the country and see a very vigorous market for private competition. We did not think of federalizing it, but what we are doing is nationalizing it.”
Theoretically, this is exactly the type of approach that conservative think tanks have advocated for decades. End the tax code bias that favors employer-provided health insurance and you can create competition that will lower prices, create portability and make health insurance more affordable for more people. But politically, with Democrats in charge it is hard to see how this gets off the ground. The impact the President wants is not something you can see beforehand or create instantly. The market has to respond to the incentives, and so you’d have a window of time in which some people would experience a tax increase while waiting for insurers to offer competing packages. And because it does not result in universal coverage, the Democrats are likely to come out hard against it (though the White House intends for states to expand coverage to more uninsured people).
I like the approach in theory. The question is whether it will work as intended.
Comment from Dave Jarvis in Londonderry:
I hope you are not attempting to prepare the American public for a Democratic failure with regard to Health Care reform.
This is a move in the right direction, a move which could have won broad support from a Republican congress. It is also quite well thought out. My guess is it didn’t take twenty three days to whip this thing together, so Mr. Bush had every opportunity to reform Health Care prior to the Democrats taking control of congress.
Now that we have a Democratic congress we are asked to believe this intelligent, well thought out plan is the product of a genuine desire to reform healthcare? Sorry, I just don’t buy it. I would have supported the president’s desire for reform and respected him a lot more if he put this thing out there before the November elections.
You have my sympathies Drew. I know you see through this stuff and must be as disgusted as anyone.
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