Bush health care proposals have winners, losers
WASHINGTON – Economists are still sorting out the implications of the broad health care proposals President Bush unveiled this week, but already some clear winners and losers are emerging.
Families with generous employer-sponsored coverage would be worse off, while those who buy insurance on the individual market, or whose health plan costs less than $15,000 annually, would come out ahead. But some of the winners will probably become losers over time, analysts said.
Moreover, while Bush’s plan would alter a historic imbalance in the tax code that favors generally better-off consumers who get insurance through their jobs, it could undermine coverage for some sicker, older people and erode the employer-sponsored system that still provides coverage to more than half of all Americans.
Some experts questioned whether the plan would have any impact on holding down spiraling health costs or extending health coverage to some of the 47 million people in the U.S. who have none.
“It’s not solving the uninsured problem, and it’s not solving the cost problem, so it’s not really advancing what we need to have happen,” said Karen Davis, president of the Commonwealth Fund, a nonprofit health policy research organization.
Bush would treat the contributions that employers make to their employees’ coverage as taxable income, no longer exempting from payroll and income taxes the money workers use to buy health insurance.
Instead, the president would create a new tax break for everyone who buys health insurance, regardless of where they get it. The government would allow each family to deduct up to $15,000 a year from its taxable income to offset the cost of their policy; individuals would be allowed to deduct up to $7,500.
Democrats on Capitol Hill have panned the plan.
“The president’s proposals are an opportunity missed,” said Sen. Edward Kennedy, D-Mass. “They will not improve access to good coverage and won’t help working families afford the spiraling cost of health care.”
Under the plan, which would take effect in 2009, winners would vastly outnumber the losers – at least at first.
Families that spend less than $15,000 on their health coverage (either on their own or with an employer’s contribution) would come out ahead, since the new deduction would apply to all of the money spent on premiums. A family that spends, say, $13,000 a year on health insurance could claim the full deduction. The administration says about 100 million people with employer-sponsored coverage would see their tax bills go down.
Other winners include the 17 million people who buy health insurance on the individual market, who would for the first time enjoy a tax break on the money they use to pay health premiums.
On the losing side are consumers with more expensive policies, especially those financed by employers, who would have to pay taxes on the money used to pay premiums exceeding $15,000. About 30 million people with employer coverage would see their tax bills go up in the first year, the administration says.
Advocates said the proposals would hold down health care costs by motivating people to seek plans that cost $15,000 or less, and would help put basic insurance within reach of about 5 million of the uninsured. Other experts said the proposals were interesting but flawed.
The $15,000 deduction would increase annually by inflation, but health care premiums typically rise faster. The administration estimates that in 2009, 80 percent of policies will fall under the $15,000 deduction.
After 10 years, though, only about 60 percent will, so more people would be hit by the tax, according to an analysis by the Tax Policy Center, a project of the Brookings Institution and the Urban Institute. The administration’s own figures show the government losing as much as $40 billion in tax revenue in the first year but breaking even over a decade as more revenue rolls in.