Bush healthcare plan: Bad for what ails you
Universal coverage is MIA in tax-based healthcare proposal

 There is a famous scene in the Robert Altman movie “M*A*S*H” when a doctor walks past a wounded soldier, lying on an operating table following surgery.

“Is this an officer or an enlisted man?” the doctor barks at the surgical team.

“Enlisted.”

“Make the stitches bigger!”

The scene was all but replayed in January’s State of the Union address, when president Bush suggested that the way out of America’s escalating healthcare crisis was through tax breaks. Faced with a stretched and unraveling safety net—the millions of Americans who are either uninsured or underinsured— the president chose a plan that simply weaves the net a little looser.

Here’s how the president’s health insurance plan would work: Current premiums on employer-based health plans are exempt from individual income tax and payroll tax (including Social Security and Medicare taxes). Bush proposes an end to this exclusion, and he offers a tax deduction as the sweetener. Workers who purchase their coverage through the employer or on their own would receive a $7,500 standard deduction for individual health insurance or a $15,000 deduction for family plans. So, for example, a worker who opts for a bare-bones, high-deductible single plan at $3,000 would receive something of a tax windfall: a deduction worth $7,500, even though he was only out $3,000 for health coverage.

The windfall deduction is the “carrot” but it pales by comparison with the “stick”: the long-term erosion of existing health plans and the continued neglect of the health insurance needs of low-income and unemployed workers. Tax deductions are only as good as the income you earn; they don’t help millions of uninsured Americans who are either out of work or employed at meager salaries.

That’s not to say the Bush plan wouldn’t be felt. It almost certainly would have a major and perhaps catastrophic effect on the millions of families that rely on employer-provided health insurance benefits at work. Should anything like the Bush plan become law, expect employers to step up efforts to push all health insurance costs onto workers—this time under the banner “It’s deductible!”—or to jettison their plans altogether.

And the employees who manage to maintain coverage at work almost certainly will be facing stiffer costs. As more healthy people opt out, the “risk pool” for these plans will change. Increasingly, they will be populated by workers with an immediate need for health insurance—employees who can’t risk a bare-bones plan or afford to buy a decent plan on their own (assuming that one was even offered).

With skyrocketing health prices and ever-increasing costs for traditional coverage through the job, it won’t be long before the cost of these plans exceeds the standard deduction. At that point, workers still in the plan will pay more for coverage and face higher taxes for the right to decent healthcare.

The administration is billing this as a tax on “Cadillac” health plans. Such descriptions ignore the fight of unions to preserve decent health benefits for workers—often at the cost of competitive increases in salary during contract negotiations. “There is indeed little evidence to suggest that only high earners consume costly plans, and there are good reasons to believe they do not,” the Economic Policy Institute writes in a recent analysis of the Bush plan. “Even blue-collar workers who have successfully bargained for benefits often pay higher premiums. What is billed as progressive may not necessarily be so.”

“Rather than undermine existing employer-provided health insurance for workers and their families, we should move toward universal healthcare by expanding Medicare coverage to the uninsured—especially disadvantaged children,” says AFT president Edward J. McElroy.

AFL-CIO president John Sweeney says the Bush plan also plays a cynical generational card in a nation where two out of three Americans rely on employer-based health insurance. Younger, healthier workers would have more incentives to buy low-cost, bare-bones plans under the president’s proposal, leading to higher costs for those struggling to keep comprehensive coverage.

“Those more costly workers who remain in comprehensive plans take a double hit, since the arbitrary threshold means they’ll pay more in taxes, too,” Sweeney warns, adding that we need universal health coverage to ensure that all Americans have “the security of knowing they can get affordable healthcare when they need it.”