Fixing Health Care

Tuesday, September 18, 2007

SEN. HILLARY Rodham Clinton released the final prong of her health-care plan yesterday, on providing coverage to the uninsured. The essential elements, not surprisingly, bear a strong resemblance to earlier proposals by her Democratic rivals, most notably that of former North Carolina senator John Edwards. But Ms. Clinton, in setting out her route to universal coverage, adds some promising policy twists. The most interesting would limit the tax deductibility of employer-sponsored health plans for the wealthiest Americans, a sensible step toward fixing one of the most expensive and counterproductive parts of the tax code.

The health insurance proposals of Ms. Clinton, Mr. Edwards and Illinois Sen. Barack Obama have more similarities than differences. All would set up purchasing pools to make insurance more affordable; prevent insurers from cherry-picking the healthiest enrollees; and offer a choice between private plans and a government-run plan similar to Medicare. They would offer help to those unable to afford insurance and roll back the Bush tax cuts for the wealthy to help pay the cost.

Ms. Clinton and Mr. Edwards would require all Americans to obtain health insurance; Mr. Obama would impose that requirement only for children, meaning that his plan would provide less than universal coverage and be susceptible to being undermined by the cost-shifting created when the uninsured end up being treated at emergency rooms.

All three candidates would require larger employers to provide coverage for workers or pay into a fund for the uninsured. Here, Ms. Clinton has come up with an intriguing alternative that has both policy and political benefits: small businesses, instead of being required to offer insurance, would be given a tax credit if they chose to do so. Within an employer-based system, this is sensible policy. Meanwhile, the politics of helping out small business are obvious to anyone who, like Ms. Clinton, bears the scars of the 1993-94 health reform effort.

Ms. Clinton's plan differs from her rivals', as well, in that it would address affordability by capping individuals' responsibility for paying for insurance at a set percentage of their incomes. The campaign does not say what percentage it would apply, and one concern is that this could turn out to be a huge cost over time, especially if health-care costs continue on anything like their current trajectory.

The most intriguing part of the Clinton plan would limit the tax-deductibility of employer-sponsored health insurance for those making more than $250,000 a year. At that income level, employees would have to pay tax on plans more generous than the standard federal employee health plan. This makes enormous sense: Why should middle-class Americans subsidize health insurance for the affluent? The current unlimited tax break for employer-sponsored health insurance is expensive and unfair; it helps push up health costs and benefits the wealthiest. The only argument against this part of the Clinton plan is that it does not go far enough. Still, Ms. Clinton deserves credit for being the only Democratic candidate to take even this step toward a more rational system.

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