thepresidentshealthinsuranceplan

The President's Health Insurance Plan

President Bush announced his plans to remedy the nation’s health insurance crisis in his State of the Union address. Despite the growing interest in expanding access to health care articulated by politicians in Washington and some state capitols, the President’s plan appears to be little more than a band-aid for a national embarrassment—47 million uninsured Americans and many more with too little insurance to meet their needs.

The President would revise current tax law so that health insurance premiums paid for by employers are treated as part of a worker’s income for tax purposes. Presently, workers do not pay tax on the value of the health care premiums paid by their employer. Under the new proposal, people with health insurance, whether paid for by their employer or paid out of their own pocket, would be able to deduct the cost of health insurance premiums up to a maximum of $7,500 for individuals and $15,000 for families from their taxes. Policy makers generally agree that many people who are insured through their work will see some tax break, but the plan is skewed to give the most benefit to those with incomes over $50,000 a year. People earning less than that amount, who arguably need more help, will see much smaller tax savings, if any.

According to an official White House announcement of the plan: “The President's proposal will lower taxes for all uninsured Americans who purchase health insurance, helping millions of uninsured Americans afford coverage.” To my mind, this boastful promise to the uninsured borders on the disingenuous. In fact the President’s proposal will help only an estimated 3-5 million of the uninsured obtain coverage. What’s more, according to the U.S. Treasury data, 55% of the 47 million people currently uninsured have incomes so low that they pay no income tax and another 40% are in the very lowest tax brackets. Given the high cost of individually-purchased health insurance, the majority of the uninsured do not have enough disposable income to pay the premiums—especially in advance of any tax refund received after year’s end.

The White House touts other claims: “The President's proposal levels the playing field for Americans who purchase health insurance on their own rather than through their employers…” Unfortunately the plan’s benefits for the estimated 12 million self-insured Americans are greatly exaggerated by the administration. For example, studies show that one out of five people trying to buy health insurance on their own are either denied coverage because they have an existing health problem or are charged a much higher premium. Even if they are healthy, those with limited disposable income will find it difficult, if not impossible, to purchase affordable health coverage in the high priced, self-pay private insurance market.

The President’s plan does nothing to change the disturbing reality that, despite leaving 47 million people without insurance, inflationary U.S. health care spending now adds up to be two to three times more per capita than the rest of the developed world. While our outlay of $2 trillion per year for health care contributes handsomely to the bottom lines of drug and device makers, private insurance companies and other health care profiteers—we don’t live as long or as well as people in many of the countries that spend far less.

Simply tinkering with tax laws does nothing to make U.S. health care affordable, safer, and less wasteful. The administration’s tax-based proposal also ignores the reality that reining in the profit excesses of the powerful private health insurance industry, or else eliminating it altogether, is a necessary precursor to ending the plight of the uninsured.