Bush's health care proposal

From the NYTimes:

The new health care proposals announced by President Bush this week purport to tackle the two toughest problems confronting the American health care system: the rising number of uninsured Americans and the escalating costs of medical care.

But on both counts, they fall miles short of what is needed to fix a system where — scandalously — 47 million Americans go without health insurance.

The financial sinkhole in Iraq and huge tax cuts for wealthy Americans have left the administration with no money to really address the problem. To keep the program “revenue neutral,” Mr. Bush would instead use tax subsidies to encourage more people to buy their own health insurance, while imposing additional taxes on people who have what Mr. Bush deems “gold plated” insurance.

It is a formula that would do little to reduce the number of uninsured Americans and would have a high risk of producing pernicious results. Even White House officials acknowledged earlier this week that they expected the number of uninsured to drop by only three million to five million people as a result of Mr. Bush’s proposals. They expect the states to take on most of the burden.
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After the proposed starting date in 2009, the administration estimates, about 80 percent of workers with employer-provided policies would pay lower taxes and 20 percent would pay higher taxes, unless they reduced the value of their health coverage to fit within the standard deduction.

The new standard deduction would almost certainly entice some people to buy health insurance who had previously elected not to. But a tax deduction is of little value to people so poor that they pay little or no income tax. And unfortunately, it is those people who account for the vast majority of the nation’s uninsured.

Instead of trying to fix that fundamental flaw, the administration has decided instead to buck it to the states. The White House has offered few details. But its idea is to allow states to redirect federal money that now helps to finance hospitals that provide charity care and use it instead to subsidize health insurance for the poor.

If the administration really wanted to help low-income people, it would have proposed a refundable tax credit that would have the same dollar value for everyone — instead of a tax deduction, which primarily helps people in high tax brackets. Even those who do not pay taxes would get a check for the dollar value of the credit, providing them at least some money to help pay for health insurance. Congress ought to recognize that credits are the better approach for even such a limited plan.

As for the tax increases on those “gold plated” health policies, the White House is hoping to discourage people from using high-priced comprehensive health policies that cover everything from routine office visits to costly diagnostic procedures that are not always necessary.

The administration’s goal is to instead encourage people to take out policies that might reduce the use of medical services, like policies with high deductibles or co-payments, or managed care plans. But even “copper plated” policies can exceed $15,000 in cost if they are issued in areas where medical prices are high or to groups with high numbers of older or chronically ill workers.

The whole approach rests on the premise that comprehensive prepaid health policies are a major factor in driving up costs; the theory is that people will tend to use services if they are covered. There is probably some truth in that.

But the main drivers in rising health costs are the costly services, high-priced drugs and hospitalizations for people who are seriously ill with catastrophic diseases or multiple chronic illnesses. Making their health coverage less generous would simply make it harder for them to get the care they need.

The greatest risk in the president’s proposal is that it would seem likely to lead many small- and medium-size employers to stop offering health benefits altogether on the theory that their workers could buy affordable insurance on their own. That would leave many more Americans at the mercy of the dysfunctional individual policy market, where administrative costs are high and insurers strive to avoid covering people who are apt to become sick and need costly care.

For all its fanfare, Mr. Bush’s plan would be unlikely to reduce the ranks of the uninsured very much. And if things went badly, it could actually increase their numbers. That’s not the answer Americans are waiting for and not what they deserve.

Wow, what a shock. Again, a plan from Bush that favors the insurers and health care corporations and is designed to squeeze the middle class ever further.

The way this plan is designed, it only affects those making enough income to own fairly steep income taxes, which of course leaves out millions of people. Beyond that, Bush apparently thinks that those lucky enough to enjoy good health care have "gold plated" coverage and should have to pay more for it, the assumption being that these people can afford it. Unfortunately, that's not always the case. Teachers, nurses, certain union members, and others often are not paid very high wages, but much of their compensation is in the form of good health insurance. These folks will now have to either give it up or pay big for it from often middling incomes.

Even the White House estimates that this plan would result in only 5% of uninsured people in the country buying insurance. Not exactly a great stride forward.

Paul Krugman offers his observations on the issue:

On the radio, Mr. Bush suggested that we should “treat health insurance more like home ownership.” He went on to say that “the current tax code encourages home ownership by allowing you to deduct the interest on your mortgage from your taxes. We can reform the tax code, so that it provides a similar incentive for you to buy health insurance.”

Wow. Those are the words of someone with no sense of what it’s like to be uninsured.

Going without health insurance isn’t like deciding to rent an apartment instead of buying a house. It’s a terrifying experience, which most people endure only if they have no alternative. The uninsured don’t need an “incentive” to buy insurance; they need something that makes getting insurance possible.

Most people without health insurance have low incomes, and just can’t afford the premiums. And making premiums tax-deductible is almost worthless to workers whose income puts them in a low tax bracket.

Of those uninsured who aren’t low-income, many can’t get coverage because of pre-existing conditions — everything from diabetes to a long-ago case of jock itch. Again, tax deductions won’t solve their problem.

The only people the Bush plan might move out of the ranks of the uninsured are the people we’re least concerned about — affluent, healthy Americans who choose voluntarily not to be insured. At most, the Bush plan might induce some of those people to buy insurance, while in the process — whaddya know — giving many other high-income individuals yet another tax break.

While proposing this high-end tax break, Mr. Bush is also proposing a tax increase — not on the wealthy, but on workers who, he thinks, have too much health insurance. The tax code, he said, “unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need.”

Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums. And look at the condescension. Will all those who think they have “gold plated” health coverage please raise their hands?

According to press reports, the actual plan is to penalize workers with relatively generous insurance coverage. Just to be clear, we’re not talking about the wealthy; we’re talking about ordinary workers who have managed to negotiate better-than-average health plans.

What’s driving all this is the theory, popular in conservative circles but utterly at odds with the evidence, that the big problem with U.S. health care is that people have too much insurance — that there would be large cost savings if people were forced to pay more of their medical expenses out of pocket.

**UPDATE** I neglected to specifically note that the tax portions of Bush's proposal are DOA. Charlie Rangle, chair of the House Ways and Means committee where tax measures must originate, said immediately that he'd not consider that part of the proposal. So in that respect, much of the idea is meaningless. The only part remaining is jiggering the federal aide to states.

Such a relief to see that congress now has at least some means of blocking White House efforts to continually help out the already well-off while punishing the lower and middle class.