A standard tax deduction for health insurance will “level the playing field,” according to President Bush in Tuesday’s State of the Union address. “When it comes to health care, government has an obligation to care for the elderly, the disabled, and poor children. We will meet those responsibilities. For all other Americans, private health insurance is the best way to meet their needs.” The president’s proposal--to be implemented in 2009--would provide a standard deduction of $15,000 for purchase of a family policy and $7,500 for purchase of a single policy. For the uninsured, the proposal is intended to provide an incentive to purchase insurance. For those who get health insurance through their employers, this proposal would provide the incentive to purchase lower-cost insurance and pay for more health care out of pocket. The proposal is designed to be revenue neutral. “People will be purchasing higher-value plans, they’ll be allocating their healthcare dollars more efficiently,” said Katherine Baicker of the president’s Council of Economic Advisors at a White House press briefing yesterday. “We think that will bring down national health spending both immediately, as people change the quantity of health insurance versus wages that they take in their compensation packages, and even more in the long run, as there’s an incentive to develop a more rational, efficient healthcare system.”
In addition, the president proposed an initiative called Affordable Choice that would allocate existing federal healthcare dollars to help states provide basic insurance to those who are poor or hard to insure.
American Hospital Association president Richard Umbdenstock said the proposal was “unworkable for many and not focused on those most in need.” He said the proposal would encourage purchasing from the unstable small group insurance market, that “even with a tax break, coverage remains unaffordable and out of reach” for many, and that the proposal could “undermine the employer-based system.”
In his State of the Union address, the president also called on Congress to “expand health savings accounts…encourage price transparency…and protect good doctors from junk lawsuits.”
