Mariner
Active Member
Anyone here have one? I'm glad Bush is trying to do something to fill the gap for the uninsured, but where are poorer people to get the money to put into their HSA? It seems wealthy people are going to benefit the most, as in all Bush policies. From Business Week last week:
Bush's Health-Care Scheme Needs a Doctor: As ill as the current system is, the President's latest proposal, which expands health savings accounts, is no cure, BusinessWeek,
By Howard Gleckman
2/2/2006 -- President George W. Bush is right when he says the U.S. should add a dose of market competition to its health-care system. But giving the wealthy a big new tax break for tummy tucks may not be the best way to do it.
That is, no kidding, a major piece of how the President wants to tackle the nation's health-care problems. He outlined some of his ideas last night in his State of the Union address (see BW Online, 2/1/06, "A Probusiness State of the Union" <http://businessweek.com/bwdaily/dnflash/feb2006/nf2006021_1615_db038.htm> ). But the key change, which he only mentioned in passing, is described in a White House fact sheet <http://www.whitehouse.gov/news/releases/2006/01/20060131-7.html> . Bush would dramatically expand health savings accounts, which are tax-free savings vehicles that are linked to high-deductible insurance policies.
He would make HSAs far more attractive by layering new tax breaks on to them (see BW, 6/13/05, "HSAs Could Keep You in the Pink" <http://businessweek.com/magazine/content/05_24/b3937110_mz070.htm> ). People who enroll in HSAs outside of their job would get a generous new deduction for all their health costs, including both premiums and out-of-pocket expenses. Not only would those costs be deductible from income taxes but they would also be free from payroll taxes. Today, you can deduct only medical expenses that exceed 7.5% of your income -- a tax break that just the very sick can use.
TO THE FISCAL BOTTOM. The current system gives a huge advantage to employer-sponsored health plans. If you buy insurance at work, your company can take a tax deduction for its share of the cost. But you get the benefits of those contributions tax-free. If you buy insurance on your own, you get no such break.
Think of it like this: A typical company pays about $8,000 for its share of a family policy. If your employer paid you the $8,000 in cash, you would pay income tax on the money, and perhaps payroll taxes as well. But as things are now, you get $8,000 worth of health insurance tax-free. For someone in the 30% tax bracket, that's worth $2,400. Overall, the tax break is expected to increase the deficit this year by $126 billion.
Most economists say the best way to level the playing field is to trim the tax break for employer-based insurance. In fact, last year, Bush's own tax-reform panel proposed putting a cap on the amount of tax-free insurance workers could get. But the President isn't willing to tackle that tax break, because much of the business community would oppose it. Instead, in a race to the fiscal bottom, he would create more goodies for those who get health care on their own.
WILL THEY BUILD IT? The new deductions would be a first step toward decoupling health insurance from the workplace. The good news about such an idea is that you would keep your health network when you change jobs, and you wouldn't have to worry about finding new doctors and hospitals. The bad news is that there's no real individual insurance market today. Premiums are stunningly high, especially if you suffer from a chronic illness such as heart disease.
Backers see the individual market as a reverse Field of Dreams: If consumers come, insurance companies will build it. But Len Nichols, director of the Health Policy Program of the New America Foundation, a centrist think tank, says Bush's plan will succeed in driving the healthy and wealthy to the individual market, leaving group policies stuck with a population of only the sick. That, in turn, will drive up rates and create more uninsured. "They are creating each-man-for-himself health insurance, and celebrating it with tax breaks," Nichols says.
Since both insurance and out-of-pocket costs would be deductible, the President's proposal would encourage people to buy low-premium coverage even if it meant paying a bigger chunk of actual medical expenses. Backers hope that spending more of their own money will make people more careful consumers.
JACUZZI BREAKS. That's also something of a roll of the dice. Studies by Rand and others suggest that people who pay more out-of-pocket for their health care buy less of it. And while that can discourage them from getting unneeded care, it may also discourage them from going to the doctor when they should.
And then there's the tummy-tuck problem. A Beverly Hills starlet who wants to make a few, umm, adjustments to various body parts would get a tax break. So would a CEO who buys a Jacuzzi to ease his back pain. With a budget deficit likely to top $350 billion in 2006, this may not be the best use of taxpayer dollars.
Because it's structured as a deduction, the wealthy will get the biggest chunk of the benefit. For most Americans, a deduction is worth only about 10 cents on the dollar. So, $5,000 in cosmetic surgery would still cost $4,500 -- enough to discourage most folks. But if you're in the 35% bracket, Uncle Sam would knock your after-tax cost down to $3,250. And it's hard to see how that would discourage wasteful medical spending.
At first glance, the Bush plan doesn't sound like much. And it's awfully complicated. But the closer you look, the riskier is seems.
Bush's Health-Care Scheme Needs a Doctor: As ill as the current system is, the President's latest proposal, which expands health savings accounts, is no cure, BusinessWeek,
By Howard Gleckman
2/2/2006 -- President George W. Bush is right when he says the U.S. should add a dose of market competition to its health-care system. But giving the wealthy a big new tax break for tummy tucks may not be the best way to do it.
That is, no kidding, a major piece of how the President wants to tackle the nation's health-care problems. He outlined some of his ideas last night in his State of the Union address (see BW Online, 2/1/06, "A Probusiness State of the Union" <http://businessweek.com/bwdaily/dnflash/feb2006/nf2006021_1615_db038.htm> ). But the key change, which he only mentioned in passing, is described in a White House fact sheet <http://www.whitehouse.gov/news/releases/2006/01/20060131-7.html> . Bush would dramatically expand health savings accounts, which are tax-free savings vehicles that are linked to high-deductible insurance policies.
He would make HSAs far more attractive by layering new tax breaks on to them (see BW, 6/13/05, "HSAs Could Keep You in the Pink" <http://businessweek.com/magazine/content/05_24/b3937110_mz070.htm> ). People who enroll in HSAs outside of their job would get a generous new deduction for all their health costs, including both premiums and out-of-pocket expenses. Not only would those costs be deductible from income taxes but they would also be free from payroll taxes. Today, you can deduct only medical expenses that exceed 7.5% of your income -- a tax break that just the very sick can use.
TO THE FISCAL BOTTOM. The current system gives a huge advantage to employer-sponsored health plans. If you buy insurance at work, your company can take a tax deduction for its share of the cost. But you get the benefits of those contributions tax-free. If you buy insurance on your own, you get no such break.
Think of it like this: A typical company pays about $8,000 for its share of a family policy. If your employer paid you the $8,000 in cash, you would pay income tax on the money, and perhaps payroll taxes as well. But as things are now, you get $8,000 worth of health insurance tax-free. For someone in the 30% tax bracket, that's worth $2,400. Overall, the tax break is expected to increase the deficit this year by $126 billion.
Most economists say the best way to level the playing field is to trim the tax break for employer-based insurance. In fact, last year, Bush's own tax-reform panel proposed putting a cap on the amount of tax-free insurance workers could get. But the President isn't willing to tackle that tax break, because much of the business community would oppose it. Instead, in a race to the fiscal bottom, he would create more goodies for those who get health care on their own.
WILL THEY BUILD IT? The new deductions would be a first step toward decoupling health insurance from the workplace. The good news about such an idea is that you would keep your health network when you change jobs, and you wouldn't have to worry about finding new doctors and hospitals. The bad news is that there's no real individual insurance market today. Premiums are stunningly high, especially if you suffer from a chronic illness such as heart disease.
Backers see the individual market as a reverse Field of Dreams: If consumers come, insurance companies will build it. But Len Nichols, director of the Health Policy Program of the New America Foundation, a centrist think tank, says Bush's plan will succeed in driving the healthy and wealthy to the individual market, leaving group policies stuck with a population of only the sick. That, in turn, will drive up rates and create more uninsured. "They are creating each-man-for-himself health insurance, and celebrating it with tax breaks," Nichols says.
Since both insurance and out-of-pocket costs would be deductible, the President's proposal would encourage people to buy low-premium coverage even if it meant paying a bigger chunk of actual medical expenses. Backers hope that spending more of their own money will make people more careful consumers.
JACUZZI BREAKS. That's also something of a roll of the dice. Studies by Rand and others suggest that people who pay more out-of-pocket for their health care buy less of it. And while that can discourage them from getting unneeded care, it may also discourage them from going to the doctor when they should.
And then there's the tummy-tuck problem. A Beverly Hills starlet who wants to make a few, umm, adjustments to various body parts would get a tax break. So would a CEO who buys a Jacuzzi to ease his back pain. With a budget deficit likely to top $350 billion in 2006, this may not be the best use of taxpayer dollars.
Because it's structured as a deduction, the wealthy will get the biggest chunk of the benefit. For most Americans, a deduction is worth only about 10 cents on the dollar. So, $5,000 in cosmetic surgery would still cost $4,500 -- enough to discourage most folks. But if you're in the 35% bracket, Uncle Sam would knock your after-tax cost down to $3,250. And it's hard to see how that would discourage wasteful medical spending.
At first glance, the Bush plan doesn't sound like much. And it's awfully complicated. But the closer you look, the riskier is seems.
