Reactions to President’s Health Proposal Vary
Lawmakers and health policy experts on Monday offered mixed reactions to a Bush administration proposal that would offer federal tax deductions of $7,500 for individuals and $15,000 for families who acquire health insurance on their own or through an employer, the AP/San Jose Mercury News reports (Freking, AP/San Jose Mercury News, 1/22).
President Bush in his weekly radio address on Saturday announced the proposal, which would for the first time levy an income tax on the value of employer-sponsored health insurance in some cases. Currently, employees are not taxed on the value of their employer-sponsored health insurance. Under the proposal, individuals and families with employer-sponsored health insurance plans worth more than the proposed allowable deductions would pay income taxes on the difference.
The deduction would be available to all individuals and families who purchase health insurance, regardless of the value of their policies or whether they itemize deductions on their tax returns. For U.S. residents who receive employer-based health insurance, the deduction would be offset by the cost of their coverage (California Healthline, 1/22).
Bush is expected to promote the proposal in his State of the Union address Tuesday evening (AP/San Jose Mercury News, 1/22).
The proposal would pose no net cost to the government over 10 years, Katherine Baicker of the White House Council of Economic Advisers said Monday (Pender, San Francisco Chronicle, 1/23).
According to the AP/Mercury News, the proposal "appears to be shaping up as a tough sell in the Democratic Congress."
House Ways and Means Health Subcommittee Chair Pete Stark (D-Calif.) said, "Under the guise of tax breaks, the president is pursuing a policy designed to destroy the employer-based health care system through which 160 million people receive coverage" (AP/San Jose Mercury News, 1/22). Stark said the proposal "won't help the uninsured, most of whom have limited incomes and are already in low tax brackets. But it will hurt middle-income Americans, whose employers will shift even more cost and risk to their employees" (Pugh, McClatchy/Miami Herald, 1/23).
House Energy and Commerce Committee Chair John Dingell (D-Mich.) said, "The administration is attempting to drive people into the unregulated individual insurance market that has been known to deny coverage for common illnesses such as cancer and diabetes" (Johnson/Vaughan, CongressDaily, 1/22).
Senate Finance Committee Chair Max Baucus (D-Mont.) said some moderate lawmakers might be willing to consider a variation on the Bush proposal, CQ HealthBeat reports. "I applaud the president for putting health care coverage at the fore of his State of the Union address," Baucus said, adding, "I want to look closely to see whether his proposal will help cover the uninsured and help to meet the needs of those with real medical expenses" (Reichard, CQ HealthBeat, 1/22). Baucus said his top priority is expanding health insurance for children (AP/San Jose Mercury News, 1/22).
Sen. Ron Wyden (D-Ore.), who has proposed legislation that would require individuals to obtain health insurance, said, "I want to make it clear that my door is open to work in a bipartisan way, but it's got to be a comprehensive overhaul," adding, "You can't start by hitting the middle class that way and not take care of the (health insurance) marketplace."
Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.) said, "I am concerned that taxing health benefits may undermine the good coverage that many Americans already have, while inadequate credits will do little to make health care more affordable for those who are struggling to pay their premiums now."
Sen. Dianne Feinstein (D-Calif.) said, "It's a good idea. It's a partial solution."
Senate Minority Leader Mitch McConnell (R-Ky.) said, "Too many people today who don't get health insurance through their jobs are unfairly priced out of the market because of government interference," adding, "The president is right. The tax code should be changed to help them" (CongressDaily, 1/22).
Karen Ignagni, president of America's Health Insurance Plans -- which has not taken a position on the proposal -- said, "With the president coming forward and making health care such a major issue on his priority list, I think progress is definitely possible." Ignagni said the proposal might increase cost for some unionized employees (AP/San Jose Mercury News, 1/22).
Randel Johnson, vice president of labor and employment benefits at the U.S. Chamber of Commerce, said, "We're open-minded and looking at it."
JoAnn Volk, a health care lobbyist for AFL-CIO, said the proposal would have an adverse effect on unionized employees with good health benefits and would not address health care cost. "It sounds like the same bad policy," Volk said (CongressDaily, 1/22).
Karen Davis, president of the Commonwealth Fund, said, "Ninety-five percent of the uninsured wouldn't get a significant amount of money from this deduction because they earn so little" (Luhby, Long Island Newsday, 1/23). Davis said the proposal would not significantly reduce the number of uninsured U.S. residents, adding that it is difficult for residents of certain states to obtain affordable non-group health insurance if they have pre-existing medical conditions.
Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute, said the proposal would mean "the end of employer-based coverage as we know it." Under the proposal, employees "would get the same tax breaks on their own as their employers, so employers may view this as a reason to stop offering the benefit," Fronstin said (Fahy, Pittsburgh Post-Gazette, 1/23).
Diane Rowland, executive vice president of the Kaiser Family Foundation, said some people with health insurance policies worth more than $15,000 do not necessarily have "gold-plated" plans, a term Bush used in his speech. Rowland added, "A single cap can mean very different things in different places of the country" (AP/San Jose Mercury News, 1/22).
Paul Ginsburg, president of the Center for Studying Health System Change, said the current system gives employers an incentive to offer "Cadillac coverage" because they can write off all of their employee health care spending, which "contributes to rapidly rising health care costs." However, Ginsburg said that older or sicker people could have trouble obtaining non-group coverage under the Bush proposal (McClatchy/Miami Herald, 1/23).
In related news, HHS Secretary Mike Leavitt on Monday released additional details on a Bush administration proposal that would give states greater flexibility to use federal money to expand health insurance to their residents, the Los Angeles Times reports.
The proposal is a second component of the administration's health care plan that Bush is expected to outline in the State of the Union address. It would redirect as much as $40 billion in Medicaid funds that currently go to hospitals and other providers for care of uninsured and low-income patients (Alonso-Zaldivar, Los Angeles Times, 1/23).
The New York Times reports that the proposal would cut Medicaid payments to public hospitals and other safety net providers by $3.9 billion over the next five years (Rutenberg/Pear, New York Times, 1/23). The proposal is designed to give states incentives to develop plans to expand health insurance coverage (Los Angeles Times, 1/23).
The state plans would be required to define which residents need coverage, outline a basic health insurance policy and establish a subsidy that would help uninsured residents obtain coverage, Leavitt said (Carey, CQ HealthBeat, 1/22). Leavitt said Bush "wants to partner with states," adding that he expects at least 12 states to propose health insurance reforms this year (Los Angeles Times, 1/23).
Leavitt added, "We want to be able to redirect federal payments away from institutions and to needy individuals. Rather than perpetually paying bills for the uninsured, it's better to help them buy insurance."
Debbie Bachrach, a deputy commissioner in the New York State Health Department, said the funding cuts would affect hospitals that "serve some of the lowest-income, most vulnerable patients" (New York Times, 1/23).
Several broadcast programs reported on the Bush administration's proposal:
- APM's "Marketplace": The segment includes comments from Robert Laszewski, a health policy analyst, and Len Berman, an economist at the Tax Policy Center (Wicai, "Marketplace," APM, 1/22). Audio of the segment is available online.
- NPR's "All Things Considered": The segment includes comments from Melissa Block, host of "All Things Considered," and Julie Rovner, a health policy correspondent for NPR (Block/Rovner, "All Things Considered," NPR, 1/22). Audio of the segment is available online.
- NPR's "Day to Day": The segment includes comments from Luke Burbank, host of "Day to Day," and Rovner (Burbank/Rovner, "Day to Day," NPR, 1/22). Audio of the segment is available online.
- NPR's "Morning Edition": The segment includes comments from Rovner; Bush; Fronstin; Chip Kahn, president of the Federation of American Hospitals; and Thomas Miller, an economist at the American Enterprise Institute (Rovner, "Morning Edition," NPR, 1/23). In addition, "Morning Edition" reported on themes, including health care, that Bush is expected to address in his State of the Union speech (Greene, "Morning Edition," NPR, 1/23). Audio of the first segment is available online. Audio of the second segment also is available online.