Bush's Health Plan

Let me do the unpopular thing today and tentatively suggest that George Bush's rumored health legislation will be a good thing. If early reports are to be believed, tomorrow night's State of the Union will see Bush set a limit on the deductibility of employer-based health care, capping it at $7,500 for individuals and $15,000 for families. That's not a stingy limit. The average employer-provided health plan, according to the Kaiser Family Foundation's 2006 Employer Benefit Survey, costs $4,242 for individuals and $11,480 for families. And it's not as if plans costing more will be declared illegal. They will simple be taxed, like they should have been all along, with the new tax revenues creating deductibility in the individual market, where the lack of such favorable tax treatment amounts to a 30+% penalty on those unlucky enough to purchase coverage outside of an employer's umbrella. The self-employed will now have the same deductibility -- and limits -- as everyone else.

Early response from many on the left is lukewarm, at best. And, to be sure, dismissing this as useless incrementalism is a fair attack. Bush's plan will do nothing to salve the deeper dysfunctions of the health care system. It will not keep insurers from discriminating on grounds of health and history, it will not subsidize low income workers, it will not create universality, or widen the risk pool, or aggregate buying power, or end the employer tie, or do most anything else that needs to be done.

But so far as incrementalism goes, this is supportable. The full deductibility of employer-based benefits has had nothing but pernicious consequences for the health system, creating and strengthening a structure that traps Americans in jobs, giving employers absurd control over their workforce's health security, and penalizing the entrepreneurial and unemployed alike. And every taxpayer, whether they have insurance or not, is forced to subsidize this unjust, inefficient structure. It's crazy. Progressives should indeed support efforts to sever the Gordian knot tying insurance to employment and, now, with Democrats in control of Congress, should see this proposal as a starting point atop which a yet-more progressive tax change can be constructed.

Taxing high-end health plans may be unpleasant, but a flipside to our health system's many, many losers is that there are quite a few winners, and affordable reforms will, on some level, make them a bit worse off. Were Republicans still in control of Congress, such a risk would be unwise. But they are not. Bush is taking a tentative first step towards a traditionally progressive end: Making the health care system more equal, and untethering it from employers. And this militates towards the ultimate goal as well: If employer benefits cease being so subsidized, and their true cost and inefficiency comes clearer, the case for reform will strengthen. In reality, Bush's proposal may be but a minor tweak that exposes little save the paucity of his vision, but it's an opening through which more comprehensive solutions can stride.

If you want to learn more about this stuff, by the way, the best article is Jason Furman's "Our Unhealthy Tax Code" from the inaugural issue of Democracy.

Also at Tapped.