President Bush Health Insurance Reforms: Going Nowhere

In his State of the Union address last night, President George Bush offered his vision of health insurance reform. Unlike some of the approaches being considered at the state level, the Bush plan doesn’t even pretend to provide universal coverage.  The centerpiece of the president’s proposal is to provide every American with a tax deduction for health insurance premiums and to offset that hit to the budget by taxing American’s who have coverage costing more than the deduction. He would also redirect some Medicaid funds to the states to support experimentation with universal coverage.

The concept has a lot of merit. Why should employers get to deduct health insurance premiums, but not those who purchase individual and family medical plans? And why not fund the deduction with taxes on those who have rich benefits many of whom are high income individuals. The current system, in which employees benefit from employer-paid medical premiums on a tax free basis is grossly unprogressive. The CEO of a company, who no doubt is in the highest tax bracket, gets a nearly 50% subsidy on the value of the premium; the clerks in the same company, who pay little in taxes, receive maybe a 15% subsidy — and maybe none. Where’s the justice in that?

So, while it’s tough for me to admit this (as I am far from being a fan), the president actually put forward some interesting ideas. They would make the system more fair and would bring about 5 million uninsured into the health care coverage system (according to the Administration). But it really doesn’t matter. His proposal is going nowhere.

The president’s proposal is already receiving widespread criticism among the committee chairs in Congress. And I can’t imagine the Democrats handing the Republicans a victory on health care reform when what’s on the table is so distant from the universal coverage they seek.

It would be nice if Congress would simply make health insurance premiums deductible for individuals and family who buy their own medical coverage. That would be a huge boon to the growing number of self-employed in this country. But even that’s a long shot. So while the federal debate will be interesting and is important for framing issues, the reality is, the president’s proposal is going no where.