Editorial: Bush’s plan is no cure

Sunday, Jan. 28, 2007 | 7:32 a.m.

P resident Bush unveiled his health care reform proposal during last week's State of the Union address. The plan may look good at first glance, but in reality it would end up costing health care consumers more.

The centerpiece of Bush's proposal is a new tax benefit that would allow families to deduct $15,000 and individuals to deduct $7,500 annually for health care costs - even if they spend less than those amounts on coverage. It applies to people who are insured through their employers and those who buy coverage on their own. The 17 million Americans who currently buy their own coverage would benefit because most of them cannot deduct that much now.

However, the amount that employers pay toward workers' coverage would be considered taxable income, and therefore no longer would be exempt from federal and payroll taxes. But financial analysts recently told The Washington Post that the 30 million workers whose employers provide generous health coverage could end up paying higher taxes because their coverage amounts would exceed the standard deductions.

And, over time, these standard deductions would be worth less. The tax breaks would increase annually for inflation, but it is possible that health care premiums would increase faster. So analysts predict that in 10 years barely 60 percent of Americans who receive insurance through their employers would still benefit from Bush's proposal.

Some experts told the Post that employers might simply drop employee coverage and instead give workers pay raises to buy their own coverage on the open market. These workers likely would discover that health coverage is much more difficult to obtain as individuals. One errant test reading or chronic medical condition, such as high blood pressure, can be grounds for rejection or excessively high premiums.

Meanwhile, Bush offers no plan to contain rising health care costs or to provide coverage to the 47 million Americans who have no insurance - half of whom are too poor to pay federal taxes, and therefore would not be eligible for the proposed tax benefit.

Bush is demanding no sacrifice on the part of the health care or insurance industries, while proposing a plan that would result in higher taxes for the middle class and offer nothing to the poor. It is classic Bush policy, which, historically, is classically bad policy.