In his state of the union address last week President George Bush proposed changes to the tax laws that would, he said, let more people buy individual health insurance policies. This would help to insure the 47 million Americans who now lack coverage, he said.
The president also proposed redirecting Medicaid funds away from hospitals that provide free care to uninsured patients to subsidies to help poor people buy health insurance. Big city hospitals that treat uninsured patients said that this proposal would result in their suffering financial cuts of $30bn (£15bn; €23bn), which would particularly affect their emergency and outpatient departments.
Critics said that the tax changes would benefit richer people, while poorer people would still not be able to afford health insurance. Furthermore, the proposed changes would undermine the existing system of health insurance through employers.
The secretary for health and human services, Mike Leavitt, asserted that the proposed policy would make health insurance more affordable for uninsured people and would help states expand their health insurance coverage for poor people and for children.
About half of Americans receive health insurance through their jobs. Typically they pay part of the cost (deducted from their pay), and their employers pay a part.
Bush's proposal would consider money spent on health insurance as taxable income, but would offer each family a new $15 000 deduction for health insurance premiums from its federal income tax. Single people would get $7500.
People who get their health insurance through their jobs would face a choice. If they could buy health insurance more cheaply than what their employer pays (typically around $11 500 for a family) then they would benefit: they would be able to deduct $15 000 from their taxes but buy the insurance for less. Such people would probably drop out of their employer's health insurance plan.
If a generous employer provided a plan worth more than $15 000, then people would pay tax on the amount over $15 000.
However, older people and people with existing health problems would be likely to stay with their employer provided health insurance because they would be unable to buy health insurance in the marketplace or would face high premiums. That would leave employers with a pool of older, sicker workers. Health insurance companies would probably raise premiums paid by the workers and their employers. The upshot might well be that employers would stop offering health insurance as a job benefit—a trend that has been under way for years.
Comments on President Bush's plan have varied. The Wall Street Journal said, “Overall, the plan is a step in the right direction” (http://online.wsj.com, 24 Jan, “Bush health-care plan finds business backers”).
Karen Davis, a health economist and head of the non-profit Commonwealth Fund, said that the plan “would fail to assist most of the uninsured.”
She said, “Insurance premiums would still be unaffordable for Americans with modest or low incomes.” About 95% of uninsured Americans would not benefit substantially from the tax deductions, because their incomes are so low that they pay little or no income tax, she said.
The Baltimore Sun said that the Bush proposal “would almost certainly destroy the fragile structure through which most Americans get health insurance in hopes of luring the working poor into the private market, where they would have no advantage of group pricing and no coverage for pre-existing conditions” (www.baltimoresun.com, 24 Jan, “Missing opportunities . . .”).
The New York Times said, “The scheme is mostly a reflection of how the administration is unwilling to accept true responsibility for the uninsured” (www.nytimes.com, 26 Jan, “The president's risky health plan”).
The Denver Rocky Mountain News said that the proposal “would amount to the most ambitious reform of health insurance in many years” and “makes some sense” (www.rockymountainnews.com, 24 Jan, “Mostly dead on arrival”). However, it said that if President Bush had proposed this after being elected six years ago the proposal might have had a chance, but “there is little or no hope now.”
The Washington Post said the proposal “has flaws, but those can be addressed—if Democrats are willing to do more than hurl criticism” (www.washingtonpost.com, 24 Jan, “State of troubles”).