Bush to Urge New Tax Plan for Health Care Coverage - New York Times

Re: Bush to Urge New Tax Plan for Health Care Coverage - New York Times:

...in an interview, Mr. Wyden was skeptical. He said any tax changes must be coupled with regulations that would encourage private insurance companies to offer affordable coverage to people with pre-existing health conditions.

“The market is broken,” Mr. Wyden said. “Private insurance companies cherry-pick. They’re trying to take just healthy people and send fragile people over to government programs more fragile than they are, and I’m not sure what this does to fix the broken market.”

The Census Bureau estimates that 175 million Americans obtain private health insurance through employers, while 27 million people are covered by insurance bought outside the workplace. The rest, with the exception of the 47 million uninsured, are covered through government programs like Medicare and Medicaid and military health care.   

It would work like this: The administration would cap the amount of benefits that can remain tax free at $15,000 for a family and $7,500 for an individual. Anyone whose health insurance cost more than that would pay taxes on the difference. For example, a family with coverage costing $16,000 a year would pay taxes on $1,000.

In the context of small tweaks to the current system, some elements of this make sense.  Why should CEO's get fancy healthcare coverage subsidized when they can afford it just fine.  To the extent that capping the deduction at $15,000 generates tax revenues that can allow us to expand the deduction to those buying insurance on their own, that increases fairness: why should only employer-provided healthcare premiums be deductible??

However, it doesn't do anything to address those who can't afford insurance today, or are, as Wyden points out, excluded from the health insurance market.  If you are making $30,000/year with no insurance today, the deduction won't allow you to suddenly be able to put $15,000 of that $30,000 into health insurance premiums.

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