Wednesday, January 25, 2006

In the news: Bush to announce health care tax breaks (yawn)

WaPo says that President Bush plans to announce a number of health-care related initiatives, starting with tax breaks for personal health spending. Snip:
The new tax breaks for personal health spending, to be included in the 2007 budget Bush will release in less than two weeks, are designed to help the uninsured and to allow people with insurance to write off a greater portion of the money they spend on co-payments, deductibles and care that is not covered. Under current tax rules, people can deduct medical expenses only if they exceed 7.5 percent of their adjusted gross income.
The president also plans to call for an expansion of health savings accounts, an idea long favored by conservatives and approved by Congress slightly more than two years ago, in which people who buy bare-bones insurance policies are allowed to put money into tax-free accounts for their medical expenses.
In addition, Bush intends to propose changes to allow people to keep their insurance, without extra cost, if they change jobs or decide to start a business, building on a decade-old law that was designed to make health coverage more 'portable.'
The three proposals -- and possibly others -- are part of a renewed effort by the White House to tackle medical costs, a theme that administration officials said yesterday Bush intends to emphasize in his State of the Union address next week. The health initiative also represents one of the few areas in which the president will try to create new domestic policies through what he and aides have said will be an austere budget.

1. Tax deductions: if Bush does away with the 7.5% floor, that will most likely mean nothing to those of us who participate in flex spending accounts. FSAs allow participants to pay qualified expenses from pre-tax earnings. If you're participating, you're already getting the same benefit that you would get from a deduction.
2. HSAs: It's a nice tax shelter for those rich enough to "self-insure" out of their own pockets. Will it lead to a net increase in the number of people who have health insurance? Doubt it. Will it lead people to make better choices about when and how they incur medical expenses? Doubt it.
3. Portability: Interesting. Could it lessen "job lock"? Maybe, but what good is it to be guaranteed the right to buy insurance if you can't keep up with double-digit increases in the cost?

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