# Bush's Health Care Plan



## DJRooster (Nov 4, 2002)

For your information. I am neither for nor against at this time. A little long but informative.

What Bush's health plan means to you
Under the proposal most people will see a tax break -- at first. But unless healthcare consumption changes, more workers covered by their employers will ultimately see a tax hike. 
By Jeanne Sahadi, CNNMoney.com senior writer
January 23 2007: 2:38 PM EST

NEW YORK (CNNMoney.com) -- President Bush in his State of the Union address will propose changing how the money you pay for health insurance is taxed.

The move would make health insurance more affordable for those who are currently uninsured (46.1 million) and for those who buy coverage on their own (18 million) by offering them a tax break.
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President Bush is expected to adress some key economic issues in the SOU address. CNN's Stephanie Elam reports (January 23)
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But the proposal could ultimately mean a tax hike for many who are covered by their employers, if they don't change their health spending habits.

At first, an estimated 80 percent of the 160 million people insured through work will actually see a bigger tax break than they currently enjoy. But if they don't become more cost-conscious in selecting their healthcare plans, they will end up paying some tax on money used to buy health insurance where currently they pay none.

Based on conversations with tax experts and health policy experts at Brookings Institution, the Cato Institute, the Tax Policy Center, the Kaiser Family Foundation, the Employee Benefit Research Institute, CCH and Ashwaubenon Tax Professionals, here's a breakdown of how the proposal would work and how to estimate the tax consequences for you.

*	How would it work?
*	How much of a tax break or hike would you see under the proposal? 
*	Who is most likely to get the biggest benefit? 
*	Who is most likely to see a tax increase? 
*	How might this proposal change your behavior? 
*	Who might not be affected by the deduction?
*	What are the pros and cons of the proposal?

How would it work? Everybody who buys health insurance, whether through work or independently, would get a standard deduction of $7,500 for individual coverage and $15,000 for family coverage.

This standard deduction would be available to everyone, whether they itemize on their tax return or not. And you can take the full deduction even if your health plan costs less.

So if you paid $10,000 for family coverage, you could still deduct $15,000.

The proposal differs from current law in two key ways: 1) under current law, people who buy insurance on their own typically don't get a tax break at all; under the proposal they would; and 2) those who are insured through work can currently buy coverage with an unlimited amount of tax-free money. Under the proposal, a limit would be set.

A primary goal of the proposal is to level the playing field, in terms of tax breaks, between those who buy insurance on their own and those who buy it through an employer.

How much of a tax break or hike would you see under the proposal? Figure out the difference between the total cost of your healthcare plan and the federal cap on your health tax benefit ($7,500 for single coverage; $15,000 for family coverage). Then multiply that difference by the sum of your top tax rate plus 7.65 percent (which is the portion of payroll taxes you pay for Social Security and Medicare).

This will give you a ballpark idea of your tax savings or tax increase.

So if your plan costs $12,000, the difference between your expense and the $15,000 family deduction is $3,000. If you're in the 25 percent tax bracket, you'd multiply $3,000 by 32.65% (25% + 7.65%), which would give you tax savings of about $980.

Conversely, if you pay $3,000 more than the deduction cap for insurance, you'd pay an extra $980 in income tax and payroll tax.

Economists would suggest you use 15.3 percent to reflect your payroll tax credit (your half of payroll taxes -- 7.65% -- plus your employer's, also 7.65%). That's because they believe workers bear the brunt of the employer's portion through lower wages. So, in the example above, instead of multiplying $3,000 by 32.65% you'd multiply it by 40.3% (25% +15.3%). That would result in effective tax savings or an effective tax increase of $1,209.

Who is most likely to get the biggest benefit? Those who buy insurance on their own and those who are currently uninsured and choose to buy it and take the deduction.

Currently, if you buy insurance on your own and your medical costs do not exceed 7.5 percent of your adjusted gross income (most people's medical costs don't) you get no tax break under the current system. Under the proposal, your tax bill would be lower relative to what it was before, even if your plan costs exceed the deduction cap by a bit.

The White House Council of Economic Advisors estimates that a family buying insurance on their own today would save an average of $3,650 in taxes under the proposal. It also estimates a family which is currently uninsured could save an estimated $3,350 in taxes if they purchase healthcare coverage under the proposal.

Who is most likely to see a tax increase? Health insurance costs vary by region, so those who live in high-cost states like New York and California will be more likely to see their plan costs exceed the deduction cap, and that difference would be subject to income and payroll tax.

But, ultimately, it's not just those in high-tax states who may see a tax increase. It could affect a much broader swath of workers, unless they choose to buy lower cost plans.

Initially, only 20 percent of those who are covered through work will see a tax increase, according to White House estimates. But that number could go up quickly, because while the deduction cap would be indexed to inflation, health care costs rise much more quickly. Hence, your plan costs could exceed the deduction cap within a few years of the cap's implementation.

How might this proposal change your behavior? If you buy your health insurance at work, the compensation you use to do that is tax-free, so there is little incentive to buy a lower cost plan. With a cap on the tax benefit for health coverage, the knowledge that you will be taxed on money you use to buy coverage above that cap will push more people to look for lower cost plans. And that, proponents say, will increase competition among insurers and healthcare providers, thereby lowering healthcare costs.

"One of the goals of this policy is really to rationalize our health care spending so that we're getting higher value, more efficient care, and we hope in the long run that that substantially brings down the trajectory of growth in national health spending, because [people will] be allocating their health care dollars more efficiently," said Katherine Baicker, a member of the Council of Economic Advisers, in a briefing on Monday.

The move, if enacted, could make high-deductible plans more popular. A high-deductible health insurance plan covers you only in the event of a serious medical condition or catastrophe, and typically its premiums are lower than they are with more traditional plans.

Who might not be affected much if at all by the deduction? Many low-income and uninsured people.

According to Treasury Department and White House estimates, the proposal would reduce the number of uninsured by 3 million to 5 million people. That number is low relative to the total number of uninsured (over 46 million) for two reasons primarily:

*	43 percent of the uninsured have no income tax liability, according to Kaiser Family Foundation. But they would still get a payroll tax credit if they have wages and they buy health insurance.
*	Many uninsured still won't be able to afford coverage even with the new deduction. (More than 50 percent of the uninsured are in the 15 percent tax bracket or less). Others won't want to part with the cost of insurance premiums up front, even though they'll get it back on their tax return.

To provide more of the uninsured with coverage, President Bush is also proposing what he's calling the Affordable Choices Initiatives. Although details are still sketchy, that program would offer federal help to states to reform their insurance market and would help subsidize coverage for low-income people.

What are the perceived pros and cons of the proposal? Whatever their political persuasion, tax and health policy experts agree on a few things: Health care costs are out of control, something has to be done to make health insurance more affordable, and it's a good thing to level the playing field between those who buy insurance at work, with the tax advantages that affords, and those who buy it on their own.

From this perspective the president's plan gets kudos. "This proposal would eliminate the cruelest inequity in the tax code, make coverage more affordable for millions, and encourage all Americans to be more responsible health care consumers," said Michael Cannon, health policy director at the Cato Institute.

And Cannon noted that for some who buy insurance on their own -- primarily younger, healthier people who don't cost insurers much -- what they would save in taxes as a result of the deduction might equal or even exceed the cost of their health insurance.

That would be an incentive for healthy people to join plans, which lowers the cost of premiums for everyone.

But, said Paul Fronstin, director of the Employee Benefit Research Institute's health research program, a lot of older, less healthy people who are currently uninsured would also buy insurance, and that might negate some of the effect of adding healthy people to the pool.

Some are concerned, too, that employers may decide to stop offering healthcare plans at work and just give money to employees to buy insurance on their own. That could make it harder for less healthy individuals to buy affordable coverage, because they're not as desirable to insurers as healthy people. And some of those healthy people may decide to forego coverage altogether if it's not a default offering at work, said Robertson Williams, principal research associate at the Tax Policy Center.

Advisors to the president say that the decision by employers to either sponsor health insurance plans or just give money to workers to buy coverage on their own will be determined by demand.

"There are dynamics there that will work out between businesses and their employees," said White House spokesman Tony Fratto at Monday's briefing. Business owners may "feel that their employees want employer-provided health coverage, and they want to provide it because it's their way of attracting the best talent."


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## KEN W (Feb 22, 2002)

Bush has a health care plan?????You mean it isn't everybody for themselves???


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## Bobm (Aug 26, 2003)

Bush has always been a closet Dem, so was his dad.

I never could understand why you don't like him hes supported most things the libs like. Just like the presciption drug bennies for blue hairs his heath care thing is no suprise.

The only reason he wasn't popular with Dems is politics and ignorance about the Islamic threat ( about the only things hes done conservatives agree with) If you guys consider his true actions as president its undeniable hes a liberal president on many really most issues.

Or you could continue believeing the political driven distortions of your liberal media instead.


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## DJRooster (Nov 4, 2002)

There are a lot of things that should have been done in the last 8 years but I guess there were never enough votes to get it done. Now we can have the Republicans blaming the Democrats after 8 years of Democrats blaming the Republicans. Such is the politics of our country. George W and the republican majority had a chance to do great things for the American people and quite frankly they blew their chance on some critical issues. It's time for someone else to write a legacy. At least the reality of George W's presidency is finally starting to sink into his mind and the mind of the republican party. Even Newt Ginrich realizes how blinded the republican party had become by their own greed for power. But the American public is much smarter than the media and the politicians would have us believe and the American voters did not take kindly to the lack of leadership and poor decisions made by this president and the republican majority. With a position of leadership comes responsibility and in a democracy if you don't like what you see you cast your vote and speak your mind and the will of the people is done. Only time will tell if better leadership will prevail or if we will continue to squander our chance to really make a difference.


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## Plainsman (Jul 30, 2003)

> But the American public is much smarter than the media


Lets see the average american voter, and the media ---- the only thing I can think of is "dumb and dumber".

The republicans should have done more. In some cases they couldn't because the democrats were mostly obstructionists. If you noticed last night they talked about our country needing to get judges appointed. The liberals have blocked as many appointments as possible. They block them because they want judges that will legislate from the bench. That way they can distort existing laws if they can't legislate laws to fit their agenda. 
We will see what happens now. Will the republicans be obstructionists as the democrats have always been? If so what will they obstruct. Laws that would endanger the second amendment? Obstruction can be good or bad, but obstructing the appointment of judges has no redeeming values for America. I see political active judges as counter productive to democracy.


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## DJRooster (Nov 4, 2002)

Speaking as an average american voter, we can't all be as smart as you! :beer:


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## MOB (Mar 10, 2005)

DJ stated "George W and the republican majority had a chance to do great things for the American people and quite frankly they blew their chance on some critical issues. "

How about a few examples of the blown critical issues?

Like no terrorist attacks on our home soil?
How about the high gas prices? That was blamed on Bush by many liberals, is the gas prices recent drop GWs fault too?


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## Plainsman (Jul 30, 2003)

You don't have to be smart you just have to care. They just didn't make a movie called ignorant and more ignorant. Unfortunately most voters care more about which football team will be in the Supper Bowl, or who will win American Idol, than what is happening to our nation. 
:beer:


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## DJRooster (Nov 4, 2002)

A lot of them that don't care don't vote!!


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## DJRooster (Nov 4, 2002)

Ah, for starters let try the issues like fixing social security and health care and unifying the nation. Seems to me these were big campaign promises just to name a few. If you are going to solve a major problem there is no better time than when you control both legislative branches, the executive branch and have the opportunity to appoint X number of supreme court justices.


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## Plainsman (Jul 30, 2003)

I don't know why they didn't do more with healthcare, but the other two ---- come on Rooster are you serious.

Bush had a good plan for social security. So good that it scared the heck out of democrats. They had to be obstructionists, because they were about to loose their number one tool to scare the elderly.

As for unifying the nation, that can only happen if the other side wants to play ball. After his statement as a unifier there was no way the democrats were going to be cooperative with him. In the eyes of the democrats a republican success can not be allowed. That is why only 51 percent want us to win in Iraq. They have based their future on an American defeat, and by golly one way or another they are going to have it.


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## gandergrinder (Mar 10, 2002)

The only answer to social security (a redistrubution of wealth tool based on a pyramid scheme) is to throw it out the window and put people in control of their own retirement. My generation is getting ROBBED by the government. It is a joke to think that I will get anything back from paying into social security when I retire.

I really liked the Bush social security plan with personal retirement accounts. It puts everyone in a position to be a benefactor of the market and gives INCENTIVES for people to work harder.

Democrats opposed the Bush plan because it made people owners in American business. When enough Americans become owners in the businesses they will start saying "hey my business investments are getting taxed too much, I don't like these redistributionists (democrats)."


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## PSDC (Jul 17, 2003)

I could not agree more GG, but with the vast majority of "baby boomers"
reaching retirement age, it will be a hard sell when they EXPECT to see
their monthly social security electronic deposit. Since the pyramid has
shifted to more pay-outs than pay-ins, the country is in for a bumpy 
ride for SSI. The mistakes where made long ago when the govt. open
SSI up to dependents, and dependent children, etc. Same as Medicare,
when they opened the enrollment up to the disabled under age 65.

With regards to health care, the 7.5% threshold has been a joke for 
years, for self-employed. There should be 100% tax deduction for 
premiums and out-of-pocket expenses on both the state and federal
levels. There should not be a tax credit, but purely a tax deduction.

Socialized medicine is not the answer, preventive care is the answer!


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## DJRooster (Nov 4, 2002)

Social security struggles because we have borrowed so much money the program cannot support itself.


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## DJRooster (Nov 4, 2002)

There is a saying, "if it ain't broke, don't fix it." Now the theme in Washington with both parties has become, "if it is broke, we won't fix it!"


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## DJRooster (Nov 4, 2002)

Another problem with today's politics is that the media and particularly the television media spread so much misinformation and biased half truths about both parties and then there are those in the audience that actually believe what they are saying and can't seperate fact from fiction. When you have such tremendous bias it is very difficult to find middle ground and work for the good of the people. This is actually not much different than the sectarian violence in Iraq. They hate each other and have treated each other so poorly that it is impossible to do something that is good for the country of Iraq. We also get so brainwashed into thinking these are black and white issues that we lose track of the middle. Seems to me that 90% of the hogwash is far left or far right and this is the position that comes out of TV talk. I listen to this crap and it makes me want to uke: and is an insult to the listeners because the media thinks we are dumb enough to believe. Give me some substance and quit insulting my intelligence.


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