1115.org

(1) Enduring Myths

That it offers “tax breaks to people to encourage them to buy health insurance on their own”. Yes, it offers tax breaks to people, but it does nothing to actually encourage people to buy health insurance. It offers larger tax breaks to people without employer-provided plans than people with employer-provided plans. But once that money is in your pocket, you can use it how you want.

That the plan is designed to “(expand) access to affordable health care”, as President Bush put it in his weekly radio address. A plan designed to help the 47 million Americans who lack health insurance would give money only to those who cannot afford and do not have health insurance. Instead, Bush’s plan gives more money to those who can afford and already have private health insurance. (It’s like having a welfare system which says all families with a household income of less than $100,000 will qualify for welfare payments, and families with household income above $50,000 will get more than families with household income below $50,000.)

That the plan discourages the purchase of “gold plated” health insurance plans. (Gold-plated, of course, means plans that provide better coverage for higher premiums. President Bush wants us to buy the insinuation that if someone buys better coverage for themselves, that somehow makes health insurance more expensive for the rest of us. He wants us to buy the fiction that the real problem with health insurance is that too many people have good health insurance plans. He wants us to buy into the notion that what we need the government to do about health care is to force people to cut back their coverage. But let that go, that’s not my point here.) Say you have an employer-provided family plan for which your employer pays a premium of $20,000. Under the new proposal, if you keep that plan, you will now have to pay tax on the $5,000 difference between that $20,000 subsidy and the $15,000 standard deduction the plan provides. If you’re in the 25% tax bracket, you’re out of pocket by $1,250 per year if you choose to keep your existing plan. President Bush wants us to believe that this tax disincentive will encourage you to walk away from your employer’s subsidized plan to buy private health insurance instead. Suppose you buy a substantially cheaper private plan with an annual premium of $12,000. You spend that $12,000 out of your own pocket but you pick up the standard deduction of $15,000, which saves you $3,750 in taxes. So you’re out of pocket by 12,000 – 3,750 = $8,250, if you switch to the private plan. President Bush wants you to believe that people will decide to dramatically reduce their coverage (from a $20,000 plan to a $12,000 plan) even though that dramatically increases their out-of-pocket expense (from $1,250 to $8,250).

(2) A Simple Fix
It’s funny how simple it is to take Bush’s plan and tweak it so that it would in fact achieve what the President claims it does: expanding access to affordable health care.

Don’t allow a flat standard deduction of $7,500 per individual or $15,000 per family. Instead allow people to deduct the actual premium they pay for private heath insurance, or the actual premium their employer pays for a employer-provided plan, up to a maximum of $7,500 per individual or $15,000 per family.

Now someone without health insurance gets a tax break only if they actually buy health insurance. And the size of your tax break increases if you spend more on health insurance (up to the prescribed limit). Voila! Now people without health insurance actually have an incentive to go out and get meaningful health insurance. (Provided, of course, that the tax break is sufficient to make it affordable. Which won’t be true of everyone.)

That seems to be a major improvement on the system Bush has proposed and is stoutly defending. His system gives you a tax break whether or not you buy meaningful health insurance, and you get the same tax break no matter how little you spend on health insurance. (That, of course, is just an invitation for the private sector to hawk meaningless mickey-mouse “insurance” policies, with vanishingly small premiums for non-existent coverage.)

(My simple fix, of course, still doesn’t address the issue that people who can afford and already have private health insurance will stand to get more money than those who are currently without health insurance. Stick that in the “pending” file for now.)

(3) The Ugly Truth
The fix is so simple and so obvious that there’s no way it wasn’t proposed and considered before Bush chose the plan he went with. And that speaks volumes right there about what his plan is really designed to do.

Adopting this fix would eliminate the tax break that Bush’s plan will confer on each taxpayer with an employer-provided family plan whose premium is less than $15,000. Since the median family health plan has a premium of $11,500, that’s a substantial chunk of middle-class America right there. (Like the White House was crowing, “about 80 percent of people with employer-based plans” will benefit from the tax break.)

Giving these middle class families a tax break has absolutely nothing to do with expanding access to affordable health care. Eliminating the tax break to them would also make the plan substantially cheaper, surely an attractive proposition given the size of the current deficit. But Bush obviously has absolutely no interest in a cheaper plan that focuses only on expanding access to affordable health care, without providing a substantial tax break to middle class folks.

I think the ugly truth is that Bush’s real agenda has absolutely nothing to do with expanding access to health care. Bush doesn’t care about the 47 million Americans who are without health care coverage. But he cares passionately about 80% of the people with employer-based plans. I think his real agenda is to try and buy off middle class America with the only political currency he knows and trusts: a substantial tax cut. I think he’s convinced that if he gets his “health care” proposal to pass, then middle class America will vote their pocketbooks in 2008 in large numbers, and give us four more years of a Republican presidency. I think his handlers have convinced him that’s the most positive thing he can do at this stage to try and pull his legacy out of the toilet. And I think that’s the only thing Bush cares about these days, his effing legacy.