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January 24, 2007

It Only Gets Worse

Brad makes a good point on the President's health plan. Given the current march of health costs, a tax change that would currently effect a relatively small number of Americans would rapidly harm a huge majority:

The deduction would indeed worsen the finances of only 20% of those with employer-sponsored coverage in 2009. But it would worsen the finances of about 50% of those with employer-sponsored coverage in 2019. And 90% of those with employer-sponsored coverage by 2030.

So every effect I've mentioned would become exponentially worse with every passing decade. If the change would initially convince a small number of families to purchase skimpier health coverage, the economic pressure to do so would heighten mightily five years down the road. So let's be clear: This is a way to make HSAs and shitty, high-deductible, high-risk plans more attractive with every successive year. It's a backdoor effort to remake the nation's health care system in conservatism's image. And, as Jon Cohn writes, Democrats are not so weak and the moment not so dark that such an offer must be treated respectfully:

Four years ago, a proposal like the one Bush is making might have been the opening bid on a workable compromise--one that could have helped make medical care more affordable for a modest, but significant, group of people. But the conversation about health care reform has moved way past that point already. Even conservative industry groups like the Business Roundtable and America's Health Insurance Plans have put their imprimatur on far more sweeping initiatives. Meanwhile, a Republican governor (Schwarzenegger) is proposing truly universal coverage for his state while a former Republican governor (Mitt Romney) has already enacted it for his. Forget the talk about Bush's bipartisanship; at least on health care, he can't even keep up with his own party.

January 24, 2007 in Health Care | Permalink

Comments

Four years ago, a proposal like the one Bush is making might have been the opening bid on a workable compromise--one that could have helped make medical care more affordable for a modest, but significant, group of people.

Ummm... has there been _anything_ in the last 6 years Bush has been interested in a compromise on? Is there anything he's put to Congress that wasn't either forced through by a party-line vote or too obviously catastrophic to even garner Republican support?

Posted by: legion | Jan 24, 2007 4:06:20 PM

it will also cause employer's to further cut health benefits because of the tax-deduction alternative. so the middle class will be hurt on social security contributions, on the faster growth of health costs compared with inflation and by employer's seeing the opportunity cutting their offerings. tax cuts for the millionaire-elite (the real bush base) and cutbacks and tax increases for the dwindling middle class.

Posted by: della Rovere | Jan 24, 2007 6:43:41 PM

While I prefer something closer to the Wyden approach to the Bush proposal, I think high deductible plans (without any tax benefit) are fine, and even preferable, for the upper half of the income distribution. I've said before that I would prefer to see the cost of health insurance unbundled into a catastrophic coverage piece (100% coverage above a $5K deductible for single coverage) and what I would call a routine care piece (coverage either from 0 to $5K or $1,001 to $5K).

I think everyone should have the catastrophic coverage piece one way or another. For the routine coverage insurance, if you don't want it and can pass an income or asset test (to demonstrate that you can handle the expenses yourself), you shouldn't have to buy it. For low income people, we could offer sliding scale subsidies to obtain both catastrophic and routine coverage. Lower income people might pay nothing if their income is below 1X the FPL up to, perhaps 7.5% or 8.0% of income at the 4X FPL level. People above 4X the FPL who don't want to self-insure below the point where the catastrophic coverage would begin, could buy a policy themselves on a community rated basis with any deductible they want and pay an appropriate price for it. Since the bulk of healthcare costs are attributable to a relatively small number of very expensive cases, adverse selection should not be a significant problem within the market for the routine coverage component.

I note that in our school systems, we provide free and reduced rate lunches to children from low income families, but we expect the middle class and upper middle class to pay their own way. I think the approach to routine health expenses should work the same way. People also seem to be capable of maintaining their cars without insurance because they know the car will "die" prematurely if it is not properly maintained and taxpayers will not buy them another car when it does. If they can exhibit personal responsibility in maintaining their car, I think they can do it for their body as well. Personal responsibility should count for something, and I think it is reasonable to expect it of people.

Posted by: BC | Jan 24, 2007 7:50:26 PM

That can be easily fixed by making the amount indexed to inflation or inflation of some healthcare index. If such indexing is available and the plan can encourage and bring down the burden on the uninsured, then why not?

Posted by: prasen9 | Jan 24, 2007 9:39:26 PM

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Posted by: JUDY | Sep 26, 2007 4:23:57 AM

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