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Bush Pushes Plan For Standard Health Insurance Deduction January 25, 2007

Posted by notapundit in Politics, US News, White House.

WASHINGTON (Dow Jones)–As he hits the road to sell his plan to ease soaring health-care costs, President George W. Bush said individuals should get the same tax treatment regardless of whether they have private insurance or a plan provided by their job.

“One way to encourage you to make the right decisions when it comes to health care is to take the inequities out of the tax code,” Bush said during a roundtable on health care at a hospital in Lee’s Summit, Mo., just outside Kansas City. “There’s discrimination in the tax code based upon who you work for.”

Detailed during his State of the Union address Tuesday, the president’s proposals are designed to encourage more people to buy private health-care policies instead of relying solely on employer-provided plans. The initiative would create a standard deduction for everyone who gets health insurance – $15,000 for families and $7,500 for singles. Employer-provided coverage over that level would be taxable.

The idea is to level the playing field between people who buy insurance privately and those who currently get a tax break on their work-provided plans. As of now, people who get health insurance through work pay no tax on the value of their plans. The president’s proposal would amount to a tax increase for people with so-called gold-plated health plans, but lower taxes for many more and provide an incentive for others to buy insurance.

The proposal “makes it more likely an individual would be able to afford health care,” Bush said. “The system is geared toward enabling the individual to have more control over his or her decision-making and make the tax code fair for the individual.”

Bush is also pushing a plan to redirect federal money to help states provide coverage to the uninsured, an effort that could conflict with some states’ efforts to require more employers to offer insurance.

Democrats complain that Bush’s ideas on health care would undermine the system of employer-provided health plans.

Americans United for Change, an interest group that says Bush is proposing to increase the burden of health care costs on working Americans, criticized the president for taking his message to Lee’s Summit. The group sent out a press release with Census data portraying the town of 86,000 as the home of an affluent, well-educated workforce.

“Instead of taking his proposal to the working-class families that need assistance to pay for health insurance, the president instead is going to peddle his health-care plan for the rich in Lee’s Summit, Mo., one of the most affluent communities in the country,” Americans United for Change said.

That tone has characterized much of the Democratic reaction to Bush’s plans, foreshadowing a difficult road on Capitol Hill.

Michael Leavitt, Secretary of Health and Human Services, acknowledged as much on Wednesday, but said the proposal isn’t dead on arrival. “Now it may be the debate will begin to center on different proposals, perhaps it will be an offshoot of this one. But we need to have this debate. This is a problem ripe for solving,” Leavitt told the Christian Science Monitor.

Bill Frenzel, guest scholar for economic studies at the Brookings Institution, agreed, saying the president’s tax code reform idea is a good starting point for a necessary discussion.

“I don’t think either the Congress or the public is going to tolerate very much longer the public subsidies for Cadillac health plans when money is needed in other places,” Frenzel said. “I am not sure Congress is going to embrace this plan, but somewhere in here are some kernels of truth and interest that the Congress is going to get to, and we may see some policy definition over the next two years.”

Bush said he and the American people expect Congress to “take a good look” at his proposals.

Polls show most Americans aren’t happy with the affordability of healthcare, ranking it as their most pressing economic concern.

In Lee’s Summit, Bush also reiterated other parts of the White House’s health-care agenda, including increased price transparency, medical liability reform, expanded use of health savings accounts, and pooling insurance plans among small businesses.

By Henry J. Pulizzi, Dow Jones Newswires


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