The "Tax Cuts For Healthcare" "plan" screws the poor more than I thought:

Jan 23 2007 Published by under Uncategorized

I made a fairly large error when I wrote my previous article on the health care "plan" that Bush will announce during the State of the Union Address later today. When I did my back-of-the-envelope calculations of the tax breaks that different people would receive under the plan, I missed an important consideration. When I initially read the press release, I thought that everyone would get the $15,000 income deduction. I wasn't reading carefully enough.

In reality, only those who have health insurance will get any sort of tax break. This means that unless the uninsured poor can scrape together enough money to come up with health insurance - and the tax break will cover less than half of the White House's optimistic estimate of that cost - they will get absolutely nothing. The tax breaks, under this so-called plan, will go only to those who can afford to buy health care coverage.

If "health insurance" is defined loosely enough, this could create a fairly major loophole. In the highly unlikely event that this plan goes anywhere, I foresee a sudden growth in the number of "insurance companies" offering cheap "health insurance" plans that provide minimal coverage and have massively high deductibles. This might technically decrease the number of uninsured, but it will probably result in an increase in the number of underinsured.

Unsurprisingly, Bush is proposing an ideologically-based approach to a problem that needs a reality-based solution.

2 responses so far

  • Mark P says:

    While it is true that the Bush plan will do virtually nothing to solve the health insurance problem in the US, based on the account I heard this morning on NPR, it will at least give those who must and can buy their own health insurance a little of the tax/income benefit of those who are provided health insurance at work and who are not required to pay tax on the employer contribution. As a self-employed person, at least now I can deduct the cost of my health insurance, a change from a few years ago. It is, of course, dishonest to imply (much less say) that it is an attempt to address the health care insurance problem in the US.

  • MattXIV says:

    The point of the change in the first point in the proposal is to remove structural incentives to tie insurance to a given place of employment by changing insurance benefits to income. It does this by counting employer-provided health insurance as taxable income to even out the tax treatment health insurance. Since on its own this would be a tax hike for those with employer provided health insurance (a pretty large group), it has an offsetting tax cut tacked onto it for the relevant group. It looks like it will be a net cut, but whether it is depends on the details of what price range of polices people end up choosing after it is in effect. Of course, since the issue it addresses only affects those with employer provided insurance or the means to buy their own, so it's not going to have much impact on access to care.