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Bush Touts Health-Care Plan as Cost Control
The administration, however, contends that the plan would eliminate the blatant disparity favoring employer-sponsored coverage, which has been a feature of the tax code since the middle of the last century. Currently employer contributions to their workers' health benefits do not count as taxable income for the employee, which administration officials say encourages workers to get more expensive plans and use more health care than they otherwise would. Buyers of insurance on the individual market do not enjoy the same tax advantages.
The idea of altering that balance dates at least to the early 1980s, when President Reagan proposed limiting the amount of employer health contributions that could be excluded from an employee's taxable income and diverting the resulting tax revenue to reducing the federal deficit.
Thomas A. Scully, a Republican congressional staffer at the time who later became a top health policy adviser to President George H.W. Bush, said the plan went nowhere: Republicans panned it as a tax increase, and Democrats feared it would penalize some unionized workers with generous health benefits.
In 1992, under the first President Bush, the White House considered scaling back the unlimited tax break on employer coverage and using the new revenue to pay for refundable tax credits to help low-income people get coverage, Scully said. House Republicans, still smarting from Bush's decision to raise taxes as part of the 1990 budget deal, objected, and Bush's advisers stripped the plan out of the budget at the last minute.
"The political timing was terrible," Scully said.
A proposal similar to the current one was recommended two years ago by a presidential advisory panel studying the federal tax system. The panel recommended capping the exclusion from taxable income of employment-based health benefits at $11,500 for family coverage and $5,000 for individuals, starting in 2006. The key difference was that the panel's proposal would have limited the new deduction to the cost of premiums, while Bush's plan would allow even those with cheaper policies to claim the full $15,000 amount.
"The truth is that policy wonks have been talking about this for well more than 20 years, but politicians generally look at it and say, 'This doesn't look like a good deal for me,' " said Joseph Antos, a health economist at the American Enterprise Institute who supports the new Bush plan. "As we've joked around here for years, it's an idea that only a policy wonk could love."
Not so, said Bush.
"If people in Washington are serious about dealing with the uninsured, here is a serious idea for them to consider," he said. "They're just dismissing things because of pure politics; we have put forth ideas that are worthy of debate, and we believe will work."