Bush pitches tax code change to expand healthcare coverage

Re: To expand health coverage, Bush pitches tax code change - Los Angeles Times:

The current tax breaks for health insurance are worth about $147 billion a year, surpassing the mortgage interest deduction. Not only is employerprovided health insurance tax-free for employees, but companies can also deduct the cost as a business expense.

There are two main reasons many economists and healthcare experts believe this system is flawed.

One is that it gives no help to people without employer provided coverage. In effect, that makes health insurance coverage even more prohibitive for small employers and the self-employed.

“It's an unlevel playing field in terms of providing support,” said Mark McClellan, who formerly headed Medicare and Medicaid and is a health economist and physician. “In the 21st century, we have more people working in self-employment, so there are more and more people who don't benefit from the tax exclusion.”

The other reason is that many economists believe an unlimited tax deduction for employer-provided coverage encourages wasteful healthcare spending.

Many of those who would have to pay more under Bush's plan are union workers who have negotiated generous health insurance packages. The plan is likely to be opposed not only by organized labor, but also by big employers, which fear that unions would push for bigger wage hikes if health benefits were curtailed.

Additionally to point two above, the unlimited deduction means that society is foregoing taxes on the super healthcare coverage of the superrich ... they don't need that “incentive” via a tax deduction.

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