Correction to This Article
A Jan. 25 article and an accompanying chart about President Bush¿s health-care proposals incorrectly indicated that self-employed people cannot deduct the cost of health insurance premiums from their taxable income. Self-employed people whose businesses generate a net profit can deduct, as an adjustment to income, up to 100 percent of their health insurance premiums for federal income tax purposes. But they cannot exclude the premium costs from federal self-employment taxes for Social Security and Medicare.

Experts Examine Bush Health Plan

By Christopher Lee and Lori Montgomery
Washington Post Staff Writers
Thursday, January 25, 2007

Economists are still sorting out the implications of the broad health-care proposals President Bush unveiled this week, but already some clear winners and losers are emerging.

Families with generous employer-sponsored coverage would be worse off, while those who buy insurance on the individual market, or whose health plan costs less than $15,000 annually, would come out ahead. But some of the winners will probably become losers over time, analysts said.

Moreover, while Bush's plan would alter a historic imbalance in the tax code that favors generally better-off consumers who get insurance through their jobs, it also could undermine coverage for some sicker, older people and erode the employer-sponsored system that still provides coverage to more than half of all Americans.

Some experts questioned whether the plan would have any impact on holding down spiraling health costs or extending health coverage to some of the 47 million people in the nation who have none.

"It's not solving the uninsured problem and it's not solving the cost problem, so it's not really advancing what we need to have happen," said Karen Davis, president of the Commonwealth Fund, a nonprofit health policy research organization. "What it does is favor individual insurance. . . . The question is, should you try to undermine employer coverage? Employer coverage has lower administrative costs and it covers everybody in a firm, not just those who are healthy enough to pass a medical exam."

Bush would treat the contributions that employers make to their employees' coverage as taxable income, no longer exempting from payroll and income taxes the money workers use to buy health insurance.

Instead, the president would create a new tax break for everyone who buys health insurance, regardless of where they get it. The government would allow each family to deduct $15,000 a year from its taxable income to offset the cost of its policy; individuals would be allowed to deduct $7,500.

Democrats on Capitol Hill have panned the plan.

"The president's proposals are an opportunity missed," Sen. Edward M. Kennedy (D-Mass.) said. "They will not improve access to good coverage and won't help working families afford the spiraling cost of health care."

Under the plan, which would take effect in 2009, winners would vastly outnumber the losers -- at least at first.

Families that spend less than $15,000 on their health coverage (either on their own or with an employer's contribution) would come out ahead, because the new deduction would apply to all of the money spent on premiums. A family that spends, $13,000 a year on health insurance could claim the full deduction. The administration says about 100 million people with employer-sponsored coverage would see their tax bills go down.

Other winners include the 17 million people who buy health insurance on the individual market, who would for the first time enjoy a tax break on the money they use to pay health premiums.

CONTINUED     1        >

© 2007 The Washington Post Company