Tax credits, uninsured coverage driving points of Bush's healthcare proposal

Tax credits for Americans buying their own insurance, leveraged federal funding to states with programs to cover the uninsured and a plea to save Medicare and Medicaid were the driving points of an ambitious healthcare proposal announced by President Bush in his 2007 State of the Union Address.

The proposal was delivered amidst a fiscal plan to balance the federal budget in five years without raising taxes, restrict federal spending and cut the number of earmarks in half by the end of this session of Congress.

Bush's two-part healthcare reform agenda began with a proposal to reform the tax code to give a standard tax deduction to Americans buying their own insurance. Single taxpayers will see the first $7,500 of their annual income exempt from payroll and income tax, while families will have $15,000 of tax-exempt income.

The big catch of the tax code reform policy is that taxpayers with employer-sponsored insurance will begin paying taxes on the coverage as if it were income. Currently, approximately 175 million Americans have employer-sponsored health insurance, while about 27 million buy their own insurance.

"Changing the tax code is a vital and necessary step to making healthcare affordable for more Americans," Bush said.

The second part of the president's healthcare proposal addressed the need to provide coverage for 47 million uninsured Americans. He proposed increased federal funding for states that initiate programs to cover their uninsured residents. Through "Affordable Choices" grants, state governors will have more money and flexibility to cover the uninsured.

Along with Social Security, Medicare and Medicaid are commitments of conscience, Bush said. He noted, "We're failing in that duty. Somehow we have not found it in ourselves to act." Bush urged Congress to "save Medicare and Medicaid," but made no mention of privatization either program.

Although he urged congressional bipartisanship on healthcare and other issues, leading Democrats generally rejected the president's proposal, which some dismissed as a mere tax increase for people who have health benefits. "We're talking about exchanging one regressive tax for another," said Sen. Hillary Clinton (D-NY).

Presidential aspirant Sen. Barack Obama (D-Ill.) said, "I don’t see a way of controlling costs in this program." Obama also noted that the issue of quality improvement was not included in the president's proposal.

Advocacy groups have issued a range of reactions to the healthcare proposal. Commonwealth Fund President Karen Davis criticized the plan as one that would do little to cover the uninsured. Additionally, "the proposal doesn't do anything to make individual coverage available or affordable for those with modest incomes or health problems," she noted.

Groups such as the American Medical Association and America's Health Insurance Plans lauded the announcement of the tax credit. AMA President William G. Plested III, MD, said, "Bottom line: Americans with individually purchased health insurance pay taxes on the entire cost of their insurance, while those with employer-sponsored health coverage don't."

AHIP President Karen Ignagni said, "Enacting common-sense tax incentives for individuals will go a long way toward helping millions secure and maintain the coverage they need."

President Bush also spoke of encouraging price transparency, expanding health savings accounts, passing medical liability reform and using information technology, but did not provide details on any of these topics.

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