Bush Health Plan Contains Several Traps – Analysts January 25, 2007
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By Kristen Gerencher
Linked since World War II, health insurance and the workplace may be heading for a separation.
The tax-free status of health insurance for workers who receive coverage through their jobs will disappear for many if President Bush’s health-care tax reform proposal gains support. It may fail to do that in a Democrat-controlled Congress, but here’s a look at what’s on the table.
During his State of the Union address Tuesday night, Bush proposed implementing a standard deduction for health insurance in an effort to “level the playing field” between Americans who get coverage through their jobs and those who buy individual private plans – mostly self-employed people and those who work for small businesses. Under the proposal, starting in 2009, workers would have to pay taxes on family health plans valued over $15,000 or individual plans worth more than $7,500. The government would consider insurance beyond those thresholds taxable income.
“Changing the tax code is a vital and necessary step to making health care affordable for more Americans,” Bush told the nation.
The administration estimates the change would result in lower taxes for 80% of employer-sponsored policies. The other 20% of people with higher-value policies would have the choice of trading down to a less comprehensive, less expensive plan or paying the excess tax bill to keep the plan they have. Job-based insurance is currently tax-exempt for workers and tax-deductible for employers, who are allowed to claim it as a business expense.
Some economists have been urging such a change for years, arguing that the system unfairly penalizes people who are between jobs or otherwise can’t get group coverage. Others maintain health care’s tax treatment has led people to buy broader coverage than they need, inflating costs and distorting the marketplace.
Regardless of the outcome of Bush’s plan, the return of health care to the national agenda is a welcome sign. Spiraling costs have tethered the budgets of employers, governments and individuals alike, restricting U.S. enterprise in a global economy.
But several aspects of the Bush proposal could bring dire unintended consequences if left untreated, critics and analysts warn.
First, the exclusion caps would rise in tandem with the consumer price index, meaning general inflation, instead of being calibrated to health-care inflation, which rose last year at 7.7% and has gone up a cumulative 87% since 2000, according to the Kaiser Family Foundation. Health costs on average have been far outpacing general inflation and wage gains for the last six years. Such a scenario could lead to a tax situation that functions like the alternative minimum tax by ensnaring more and more middle-income people who have insurance that exceeds the cap.
Second, the proposal may create an incentive for employers to get out of the business of offering health care to workers, further eroding employment-based coverage. The percentage of employers offering coverage fell to 61% last year from 69% in 2000, according to the Kaiser Family Foundation. Less than half of the smallest companies (those with three to nine employees) offer coverage.
Savvy employees also may get restless. By setting up a calculation between tax liability and out of pocket costs, workers – especially the young and healthy – may ask their employers to cut them a check for the cost of their health benefits so they can go out and buy their own policy at a lower price, leaving older, sicker workers to populate a reduced workplace pool and potentially higher costs.
A market in need of a revamp
One big criticism is that the individual insurance market needs an overhaul if it’s expected to work for people who need coverage the most – the uninsured, low-income families and those who are older and sicker. People buying insurance on their own hardly receive a fair deal compared with their employment-sponsored counterparts. Individuals have to pay the full cost of premiums, which tend to be much higher, with their own after-tax money while employers typically pay about 75% of the premium for workers receiving job-based coverage.
Even if individuals can afford it they may not be able to get insurance in the first place or hold on to it if they need it. In many states, companies may choose not to offer coverage to older, sicker people or those with pre-existing conditions. They also may rescind it or escalate the price if a person makes too many claims.
Neither large employers, which provide the bulk of the nation’s private insurance, nor Democrats expressed much enthusiasm about Bush’s tax-deduction proposal. Rep. Pete Stark (D-Calif.), chairman of a powerful health subcommittee, said he wouldn’t consider it.
“The President’s so-called health-care proposal won’t help the uninsured, most of whom have limited incomes and are already in low tax brackets,” Stark said in a prepared statement. “But it will hurt middle-income Americans, whose employers will shift even more cost and risk to their employees.”
Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute, said the impact of the caps wouldn’t be felt for a few years. But when it does kick in, big changes could come rapidly. By 2012, assuming an 8% medical inflation rate, the average family policy could exceed $18,200, making for a $3,000 bill on which taxes would be due, he said.
“This is the beginning of the end of employment-based coverage as we know it,” Fronstin said. “For every year those two rates of inflation have a gap between them, more and more people will become subject to the cap.”
A combination of employers that are tired of the costs and headaches of offering insurance and workers who want cash to take their chances on the open market may lead to a shrinking and then disappearing group market, he said. “All it takes is one employer to make that move and you’ve got a big herd right behind it.”
Making consumers take on more responsibility
The tax proposal is part of a continuing movement toward making consumers more sensitive to costs, said Steve Wojcik, vice president of public policy for the National Business Group on Health, a coalition of 260 large employers. Bush’s big victory in this area was the 2003 creation of health savings accounts, which are portable accounts attached to high-deductible health plans that consumers can use to pay for qualified health-care expenses.
Of the proposed tax caps, Wojcik said, “I think the political reality is it’s going to be a nonstarter.”
“We would be very cautious about this approach, but we still want to see more details,” he said. “Outside of the Medicare program, this is the second most popular way people have coverage, and we don’t want to do anything that would damage that. That’s not to say it’s a great system, but we don’t want to do harm to people’s coverage as we’re seeking solutions to the cost of care, affordability crisis and rising number of uninsured.”
Wojcik said he’s waiting to see if the market responds with improved individual plans in Massachusetts, which is beginning a universal health-care law that makes buying insurance coverage mandatory. “If we don’t get rid of some of the dysfunctions in the marketplace for health coverage, it may not be so meaningful to have the tax deduction.”
Tom Billet, senior consultant with Watson Wyatt in Stamford, Conn., agreed. “The major drawback here is that the individual insurance market is badly broken and this proposal doesn’t deal with it at all. Does it put more money into the system? Yes. But it doesn’t address the problem.”
Getting access to individual policies is more of an issue for many people than the cost, and many large companies wouldn’t count on that market to maintain a healthy, productive work force, Billet said. He called the idea that employers would stop offering insurance a “fantasy.”
“I don’t think they’re looking to throw their people to the wolves and say ‘Here’s a check. Good luck. See what you can do.’ I think they’re interested in giving their people quality, affordable health-care coverage.”
“What this shows is it’s very, very hard to reform health insurance in a piecemeal fashion,” Billet said.
Uwe Reinhardt, professor of economics at Princeton University in New Jersey, said changing the tax code would be “somewhat more equitable” but wouldn’t solve health care’s overarching problems. Still, it’s a starting point around which Democrats could negotiate, he said.
POINT OF VIEW: General Discusses High Stakes In Iraq Plan January 16, 2007
Posted by notapundit in Commentary, Military News, US News.add a comment
By Richard J. Levine
A Dow Jones Newswires Column
NEW YORK (Dow Jones)–“It’s been a heck of a week.”
So began Gen. Peter Pace, chairman of the Joint Chiefs of Staff, at the outset of a 90-minute lecture and question-and-answer session at the Cornell Club in midtown Manhattan last Friday evening.
It was around 8 p.m., and the nation’s highest-ranking military officer was running more than an hour behind schedule after having been delayed flying up from Washington.
There, he had just finished a second tough day of appearances with Defense Secretary Robert Gates before skeptical – and in some instances hostile – congressmen and senators on President Bush’s new Iraq plan, which calls for dispatching 21,500 additional U.S. troops to secure Baghdad. The personable, 61-year-old ramrod-straight Marine had earned his pay, defending a strategy that much of the country opposes and whose outcome is highly uncertain.
He must have been tired, though he didn’t show it. And he probably would have preferred to be home relaxing over a drink rather than facing a largely Ivy League audience that, while respectful and appreciative of the general’s service and appearance, hardly was a bastion of Bush support. (The club had made sure there was a good scotch in the reception room, but he never had a chance to sample it.)
His appearance had been scheduled through the Oxonian Society months before, when no one could have anticipated that it would come a few days after a highly controversial presidential address to the nation on Iraq. He could have canceled, and most of the 175 in attendance would have understood. But he kept his commitment, perhaps the result of his 40 years in the Marine Corps and close ties to New York. He was born in Brooklyn and grew up in nearby Teaneck, N.J., before attending the Naval Academy. His father, an electrician, had emigrated from Italy.
The general spoke informally with intelligence, insight and warmth in unvarnished language that indicated he understands the high stakes and long odds facing this latest plan to avoid disaster in the heart of the Middle East.
He started by discussing the Joint Chiefs’ role in shaping the new policy, saying that younger combat commanders just back from Iraq were invited to join the deliberations in the search for new ideas. He explained how he hoped the U.S. and Iraqi military would work together on the mean streets of Baghdad.
But he readily conceded that neither he nor anyone else could “guarantee” that the president’s plan would succeed. He said it would work only if the military steps were accompanied by political progress (the creation of an effective national government that truly embraces both the minority Sunnis and Kurds as well as the Shiites) and economic progress.
So far, he added, Iraqi Prime Minister Nouri al-Maliki’s word has been good. That was last Friday. By Monday news reports were circulating of wrangling between the U.S. and Iraqi military over the details of how to put the new strategy into effect – hardly an encouraging sign.
Gen. Pace didn’t confine his remarks to Iraq. Asked about the situation in North Korea, he responded by saying “four foot ten” before labeling it “dangerous.” He quickly explained to his momentarily puzzled audience that he had recently seen pictures of North Korean, South Korean and American soldiers and was struck by how short the North Koreans were as a result of widespread malnutrition in the country. Because North Korea is so poor and the only thing of value it has to sell is weapons, the obvious danger is that its weapons will end up in the hands of the enemies of the U.S.
As for the recent U.S. air strikes in Somalia targeting al-Qaida suspects, he defended them as carefully and fully authorized operations to “kill” high-value targets in a limited window of opportunity.
Surveying the global war on terrorists that the U.S. has been waging since 9/11, Gen. Pace said he worried that as time goes by Americans would tend to forget the horrific attacks on New York and Washington that day. And then he admitted that he didn’t know whether it was military action abroad, increased security at home or just plain “luck” that accounted for the absence of new attacks on U.S. soil.
Whether they agreed with him or not, the well-dressed and well-informed New Yorkers gave the plain-speaking, long-serving Marine a standing ovation at the end of a long, difficult week for him and for the nation.
It was hard not to believe that it was meant as appreciation not only of Gen. Pace but all who serve under him, even as the national debate over the war in Iraq intensifies.
2006 A Year Of More Pain, Strategic Stumbling In Iraq December 17, 2006
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By Robert H. Reid
Of THE ASSOCIATED PRESS
BAGHDAD (AP)–After years of optimistic claims from Washington, Iraq is ending 2006 with the American strategy in shambles and a politically weakened Bush administration struggling for a way out of the impasse.
Sectarian slaughter rages in Baghdad and religiously mixed areas, carried out by shadowy militias and death squads believed linked to Shiite and Sunni politicians and clerics. Prime Minister Nouri al-Maliki has done little to curb the militias – some linked to allies among his fellow Shiites.
In the dusty towns of Anbar province, Sunni Arab insurgents ambush American and Iraqi forces daily. An estimated 100,000 Iraqis flee the country every month to escape the violence, according to the Washington-based Refugees International. The U.S. death toll neared 3,000 in December.
Gone is talk of “staying the course,” a phrase which even U.S. President George W. Bush has disowned. Gone too is the hope that the mere establishment of a democratically elected government of national unity would be enough to stem the bloodshed.
Instead, a bipartisan commission, led by longtime Bush family friend James Baker, has described the situation as “grave and deteriorating” and warned that America’s ability to influence events in this turbulent country “is diminishing.”
Equally damning, the commission accused the Pentagon of significantly underreporting the level of violence. After nearly four years of war, the U.S. “still does not understand very well either the insurgency in Iraq or the role of the militias,” the commission said.
The situation has become so desperate that some U.S. politicians believe the best course is to give up on a unified Iraq and partition the country along religious and ethnic lines – even though the idea finds little support among the majority of Iraqis.
That bleak reality is vastly different from what U.S. officials were hoping for a year ago.
With a new constitution ratified and a freely elected parliament in place, hopes ran high that 2006 would mark a turning point in the U.S. campaign to build a stable democracy on the wreckage of Saddam Hussein’s dictatorship.
U.S. officials even spoke of reducing U.S. troop strength in Iraq below 100,000 by the end of 2006, and Iraq’s national security adviser confidently assured reporters of a “sizable gross reduction” in American forces here.
Those hopes were dashed after Feb. 22 when Sunni Arab extremists blew up a sacred Shiite shrine in Samarra, a Sunni city north of Baghdad. That brazen attack outraged the country’s long-suffering Shiite majority, which had endured suicide attacks, car bombings and assassinations by Sunni religious extremists, including al-Qaida in Iraq.
The Samarra blast triggered a wave of sectarian reprisal killings that has led many scholars and political analysts to conclude that the country is now in a low-intensity civil war – with the 140,000 U.S. troops caught in the middle.
In the wake of Samarra, Iraq’s leading Shiite clerics, who had cautioned patience during years of vicious sectarian attacks, could no longer curb the tide of Shiite retribution.
The bombing and the frenzied vendetta that followed also sabotaged American efforts to promote trust among Sunni Arab, Shiite and Kurdish politicians at a critical moment. Iraq’s leaders were just beginning the process of forming a government of national unity after the December parliamentary elections.
U.S. Ambassador Zalmay Khalilzad, who had worked tirelessly to promote a political agreement, said repeatedly that a unity government of Shiites, Sunnis and Kurds offered the best chance for Iraq to build a stable democracy.
Although negotiations continued and a government took office three months later, sectarian bitterness runs so deep that al-Maliki has been unable to forge an effective administration and see through a program of national reconciliation.
Instead, political momentum belonged to the sectarian extremists – armed gangs of Shiites and Sunnis who kidnap, murder and intimidate each other. The United Nations estimated that by last summer, an average of 100 people were dying each day – most of them in the Baghdad area.
Scores of bodies appear almost daily in vacant lots and side streets of the capital, often with horrific signs of torture – holes driven into the skull and eyes gouged out.
Iraqis fear the extremist goal is to divide Baghdad, a religiously and ethnically mixed city, into a mostly Shiite zone east of the Tigris river and a largely Sunni area to the west.
Al-Maliki promised to restore order and as one of his first acts, he announced a major crackdown to rid the capital of the killers. He cited the threat posed by al-Qaida and other Sunni religious extremists.
That angered Sunni leaders, who complained that the real threat was posed by Shiite militias, including the Mahdi Army of radical anti-American cleric Muqtada al-Sadr, a close al-Maliki ally.
With the Iraqi army and police riddled with Shiite militiamen, many Sunnis saw the security operation as a cover to crack down on their community. Many Sunnis who had stayed out of the insurgency took up arms to protect their neighborhoods. Many Shiites did the same.
But the crackdown faltered, forcing the U.S. command to send thousands of American soldiers into the streets, some from flashpoints in the insurgent-ridden Anbar province. That led to a spike in U.S. casualties – more than 100 dead in October alone – but failed to stop the violence.
U.S. soldiers complained that the Iraqi troops weren’t motivated. Privately, Americans complained that they simply didn’t have enough troops of their own to quell the violence.
With casualties rising, opposition to the war soared in the United States. Congress established the Baker commission to study ways to reverse the slide, and the Republican loss of the House and Senate in the October elections fueled cries for a course change.
As the year drew to a close, the commission released its recommendations: more regional diplomacy, shifting the U.S. military role from combat to training, and pressing the Iraqi factions to compromise on the nation’s future.
But the commission offered no solution to the core problem – the absence of a genuine political agreement among Iraq’s sectarian and ethnic factions.
Instead, the country is locked in a bitter struggle for power as all sides try to ensure a strong position for the day when the Americans go home. The Baker commission recommended that the U.S. reduce economic and military aid if the Iraqis can’t reach such an agreement.
“The U.S. effectively sent a bull in to liberate the china shop,” former Pentagon analyst Anthony Cordesman said. “And the study group now called upon the U.S. to threaten to remove the bull if the shop doesn’t fix the china.”
Saudi Divisions On Iraq Could Strain Ties With U.S. December 13, 2006
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By Salah Nasrawi
An AP NEWS ANALYSIS
CAIRO (AP)–Saudi Arabia’s royal family and government leaders are deeply divided over how to handle the growing crisis in Iraq and other looming Mideast problems like Iran, with some favoring strong aid to fellow Sunnis and others more cautious.
The split played a key role in this week’s abrupt resignation of the Saudi ambassador to Washington. It also could hurt U.S. efforts to forge a new overall strategy to calm Iraq.
More broadly, the internal dispute shows how Arab countries like Saudi Arabia, long key partners in U.S. efforts to stabilize the Mideast, are struggling to decide how to proceed as Iraq boils over and Iran gains influence.
The tension in the region is straining Saudi relations with the U.S., despite both countries’ assertions that all is fine.
The resignation of Prince Turki al-Faisal, after just 15 months as ambassador to Washington, for example, came after Saudi officials concluded he wasn’t succeeding at building strong ties with the U.S., a Saudi official said Wednesday.
“Many in the royal family concluded that if he stayed longer, things might even get worse,” said the official, who has close working ties with the Saudi foreign ministry but spoke on condition of anonymity because of the issue’s sensitivity.
The Saudis had no official comment, and the White House merely wished Turki well. Turki himself couldn’t be reached for comment.
But Iraq was clearly central to the dispute.
Turki last week fired a Saudi security consultant, Nawaf Obaid, after Obaid wrote in The Washington Post that “one of the first consequences” of any American troop pullout from Iraq would “be massive Saudi intervention” in Iraq “to stop Iranian-backed Shiite militias from butchering Iraqi Sunnis.”
Saudi Arabia denied that Obaid was speaking on its behalf.
But The Associated Press reported last week that Saudi private citizens are sending millions of dollars to Sunni insurgents in Iraq, much of it used to buy weapons, because they worry about Iranian influence in Shiite-led Iraq.
Iraqi officials have said they believe some members of the Saudi royal family are either involved in that flow of money or turning a blind eye – a charge Saudi Arabia strongly denies.
The Saudis and the U.S. also denied a Wednesday report in The New York Times that the Saudi king had told U.S. Vice President Dick Cheney the kingdom might provide financial aid to Iraqi Sunnis if the U.S. pulls troops out of Iraq.
“That’s not Saudi government policy,” White House spokesman Tony Snow said. He added that the Saudis, however, were “rightly concerned about the adventurism of Iranians in Iraq, and we share that concern.”
The U.S. has been pushing Saudi Arabia to persuade Sunnis in Iraq to leave the insurgency and join with Shiites in political efforts – an effort the Saudi government has said it is undertaking.
But the royal family has been sharply divided over what strategy to adopt toward Iraq, said two Saudis with close ties to the government, speaking anonymously because internal royal deliberations are highly sensitive. Some favor robust support of fellow Sunnis inside Iraq, while others urge caution.
The bottom line has been power struggles and indecision about the best course, both said.
“They have an obsession that Shiites and Iran will control Iraq, but they do not know how to stop that,” said one Saudi. The other described what he called total confusion within the government over the best course.
On Monday, 30 prominent Saudi clerics called on Sunni Muslims around the Middle East to support Sunnis in Iraq against Shiites and praised the insurgency. The clerics warned that Shiite Muslims were taking control of Iraq in a conspiracy with “crusaders” – a reference to Westerners – to marginalize Sunni Muslims.
Many of the clerics are known to have close connections with top royal family members and receive generous donations from them.
Iran and Lebanon also are worrying Saudi Arabia, leading to other strains in its relations with the U.S. as Saudi’s influence in the region wanes slightly.
Saudi Arabia has told the U.S., for example, that it believes a peace deal on the Palestinian-Israeli issue is key to solving the region’s problems. But the Bush administration says the Hamas-led Palestinian government first needs to recognize Israel and renounce violence.
Saudi Arabia so far has failed to convince Hamas to do that, at a time when Iran’s influence is growing and militant groups look increasingly to Iran for leadership. Last week, Riyadh turned down a request from Hamas Prime Minister Ismail Haniyeh to visit the kingdom.
In part because of such developments, Saudi Arabia, traditionally a regional powerhouse, is gradually losing some its regional influence. Its relations with Syria, for example, are strained, because of the political crisis in Lebanon and the summer war between Hezbollah and Israel.
And it has shown little ability to mediate a solution to the deepening political crisis in Lebanon, despite the fact that it brokered the 1990 agreement to end Lebanon’s civil war.
Despite all that, Saudi and U.S. ties have long endured and “Saudi diplomacy is very much active,” said Saudi political analyst Fahad al-Harithi. It looks to the contrary, he said, only “because the smoke is billowing high in the area, and hides this reality.”
Not-A-Pundit: The Renaissance 
Likely Scenario That Will Be Pretense For War With Iran February 10, 2007
Posted by notapundit in Commentary, Congress, Main, Military News, Politics, US News, White House, World News.1 comment so far
This will be my last post on Not A Pundit. With the birth of my second “baby pundit” I find that I am having to squeeze my news posts at odd hours of the day. I leave you all with this final post on what I hope will not come to be true, but I think that Zbigniew Brzezinski has laid out a likely scenario that will be pretense for war with Iran.
Unless you live like a hermit or live in a cave, you must be aware of the Bush saber rattling towards Iran. The nuclear weapons issue is important but some analyst agree Iran is years away from being able to build a weapon. I’m not an intelligence official so it may be true or it may not be true, but one thing that is true is the capture of five Iranians in Iraq that has increased tensions between both the US and Iran. Iraq has become a military quagmire at a time when North Korea, Venezuela and Iran are testing our world hegemony. That is not a good thing to show the world. So what to do?
Would the US go to war with Iran alone? Yes and no. At this point I don’t see the US confronting Iran militarily without some Sunni Arab support. Not necessarily military but tacit approval from those nations. Israel and NATO frankly are the better military allies.
The truth is that Iraq is a powder keg ready to explode. In more ways than just a proxy war between the US and Iran. But a powder keg indeed:
The US has increased its military presence in the Persian Gulf with additional battle carriers. The troop surge supposedly to go to Iraq is forming in Kuwait awaiting their orders. Hhmm…I wonder when they’ll reach Iraq?
Let there be no doubt of possible war with Iran, because our President has made it clear:
This leads me to my final point that reminds me of an article that went over the newswires that grabbed little attention. Basically Zbigniew Brzezinski laid out to the Senate Foreign Relations Committee what he thought would be the likely outcome of a continued military quagmire in Iraq and the likely scenario leading to a confrontation with Iran.
Brzezinski’s Solution:
Can this be something that our President will do? I’m not holding my breath. Can Congress use its legislative power to push for such a massive policy shift? Lets all hope they can. They can recall the National Guard back to the states. They can place a cap on troops in Iraq. They can refure to provide funding for additional troops. They simply can refuse to authorize the President to go to war with Iran. Plain and simple. Our congressional leaders just need to actually debate the issue this time in the full light of day, instead of the weak abdication of power they showed when authorizing the war in Iraq.