January 20, 2007

CAN'T SPELL WYDEN WITHOUT W:

Bush to Urge New Tax Plan for Health Care Coverage (SHERYL GAY STOLBERG and ROBERT PEAR, 1/21/07, NY Times)

White House officials say Mr. Bush has decided to forgo the traditional formula for the State of the Union -- a laundry list of ideas, many of them dead on arrival -- in favor of a more thematic speech that will concentrate on a few issues, like health care, immigration and energy, on which he hopes to make gains with the new Democrat-controlled Congress.

The basic concept is that employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free. Workers could be taxed if their coverage exceeded limits set by the government. But the government would also offer a new tax deduction for people buying health insurance on their own.

"I will propose a tax reform designed to help make basic private insurance more affordable," Mr. Bush said in his weekly radio address on Saturday, "whether you get it through your job or on your own." He did not offer specifics, but an administration official provided details of the plan. [...]

White House officials say the health tax plan would neither increase spending nor reduce tax revenues. Supporters say it would expand coverage to some of the 47 million uninsured. But critics say it would, in effect, tax people with insurance to provide coverage to those without it.

That would amount to a tectonic shift in the way people get and pay for their health coverage, and historically it has been all but impossible to win Congressional approval for such changes. When President Ronald Reagan made a proposal similar to Mr. Bush's in 1986, it died in Congress, with Mr. Rangel helping to lead the opposition. [...]

In his radio address on Saturday, Mr. Bush described his proposal as a way to "treat health insurance more like home ownership," giving people tax deductions for their health insurance in much the same way as they get tax deductions for home mortgage interest. He said the current system "unwisely encourages workers to choose overly expensive, gold-plated plans," driving up the overall cost of coverage and care. [...]

In preparation for the president's speech, the White House has been shopping the idea around Capitol Hill, trying to sound out lawmakers like Senator Charles E. Grassley of Iowa, the senior Republican on the Senate Finance Committee, and Senator Ron Wyden, Democrat of Oregon.

The administration official said Mr. Wyden's plan contained tax provisions similar to the one proposed by the president.


To maximize the value of HSAs to society you need to force folks into them.

Posted by Orrin Judd at January 20, 2007 11:57 PM
Comments

The basic concept is that employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free. Workers could be taxed if their coverage exceeded limits set by the government. But the government would also offer a new tax deduction for people buying health insurance on their own.

This paragraph is key.

The Medicare reform of 2003 made possible insurance packages that couple HSAs with high-deductible catastrophic insurance plans. Because that package is much much cheaper than traditional insurance coverage, where the price point is set for deductibility is key. If it's set low enough, that will create an incentive for more people to take the HSA/high-deductible insurance coverage. That's a market-oriented outcome that's obviously not good for the left, but one wonders if libertarians and conservatives will understand it that way.

Posted by: kevin whited at January 21, 2007 3:35 PM

FYI, Senator Wyden has slammed President Bush's plan. From Bloomberg:

Even Senator Ron Wyden, an Oregon Democrat whose own health- care plan was cited as a model by administration officials, said Bush's proposal was inadequate because it didn't require insurance companies to extend coverage to the most ``vulnerable'' Americans.

``Right now, insurance companies want to take healthy people, filter out the sick and send the sick to government programs that are more fragile than they are,'' Wyden said. ``There hasn't yet been any comment from the White House about what would be done to fix the market and insure those people.''

Posted by: Kari Chisholm at January 23, 2007 1:48 PM

The taxpayers will extend the insurance, not the private sector.

Posted by: oj at January 23, 2007 2:38 PM
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