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feedbackBy JULIE APPLEBY, USA TODAY
President's Bush's State of the Union health care proposal couples an old idea, capping tax-free benefits for health care, with a new one: a standard deduction for all who buy health insurance.
If approved, and the plan faces a chilly reception in the Democrat-controlled Congress, the administration says it would give people who buy their own health insurance equal tax breaks with those who get coverage through their jobs. The tax savings could help 3 million to 5 million of the nearly 47 million now-uninsured people buy coverage, the administration says.
For the rest, the president proposes moving some money that currently goes to hospitals and nursing homes into subsidies to help lower-income people buy health insurance through state-sponsored insurance programs.
Opponents, such as liberal advocacy group Families USA, says the proposal mainly benefits wealthier Americans. Others say it could lead some employers to drop insurance, forcing workers onto the individual market, where some may not be able to afford coverage.
A similar plan to cap tax-free health benefits offered by employers was proposed by President Reagan in 1986 but failed to pass Congress.
Rep. Pete Stark, D-Calif., chairman of a key health subcommittee in the House, said he would not even consider hearings on the proposal. He says it would give wealthier Americans with health insurance a far larger tax break than the lower-income uninsured that the plan purportedly aims to help.
The White House outlined some elements of the plan:
• Health insurance offered through jobs would become taxable income. But insured workers' taxable income would be reduced by a deduction of $15,000 for a family plan or $7,500 for an individual. Currently, the average family health plan offered by employers costs $11,500 for families and $4,300 for singles, a Kaiser Family Foundation survey says. Only people with insurance worth more than the deduction would pay more tax.
• People who buy their own insurance would get the same deductions: $15,000 for families, $7,500 for singles, lowering their taxable income by that amount - even if their health plans did not cost that much. Currently, only the self-employed who buy their own insurance get a tax deduction.
• The administration says more than 100 million workers - out of about 175 million - who now get their insurance through their jobs would see their tax bills go down.
"For a lot of people, it would be a bonanza," says Joe Antos of American Enterprise Institute. He and other supporters of the plan say it would encourage employers to offer less-generous insurance plans. They say generous plans drive up the cost of health care.
Paul Fronstin of the Employee Benefit Research Institute says the proposal might lead more employers to drop coverage. Some employers might also find that younger, healthier workers would opt out of company plans to buy their own insurance, leaving sicker, more expensive workers behind, he says.
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Originally published January 23, 2007
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