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Medical Class Warfare

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> Fri, 16 Jul 2004 06:46:49 -0700

> Krugman: Medical Class Warfare

>

>

>

<http://www.nytimes.com/2004/07/16/opinion/16KRUG.html?hp>

> Medical Class Warfare

> By PAUL KRUGMAN

>

> Published: July 16, 2004

>

> If past patterns are any guide, about one in three

> Americans will go

> without health insurance for some part of the next

> two years. They

> won't, for the most part, be the persistently poor,

> who are usually

> covered by Medicaid. They will be members of working

> families with

> breadwinners who have jobs without medical benefits

> or who have been

> laid off.

>

> Many Americans fear the loss of health insurance.

> Last week I described

> John Kerry's health plan. What's the Bush

> administration's plan?

>

> First, it offers a tax credit for low- and

> middle-income families who

> don't have health coverage through employers. That

> credit helps them

> purchase health insurance. The credit would be

> $3,000 for a family of

> four with an income of $25,000; for an income of

> $40,000, it would fall

> to $1,714. Last year the average premium for

> families of four covered by

> employers was more than $9,000.

>

> A study by the Kaiser Family Foundation estimates

> that the tax credit

> would reduce the number of uninsured, 44 million

> people in 2002, by 1.8

> million. So it wouldn't help a great majority of

> families unable to

> afford insurance. For comparison, an independent

> assessment of the Kerry

> plan by Kenneth Thorpe of Emory University says that

> it would reduce the

> number of uninsured by 26.7 million.

>

> The other main component of the Bush plan involves

> " health savings

> accounts. " The prescription drug bill the Bush

> administration pushed

> through Congress last year had a number of

> provisions unrelated to

> Medicare. One of them allowed people who purchase

> insurance policies

> with high deductibles, generally at least $2,000 per

> family, to shelter

> income from taxes by setting up special accounts for

> medical expenses.

> This year, the administration proposed making the

> premiums linked to

> these accounts fully tax-deductible.

>

> Although the 2005 budget presents that new deduction

> under the heading

> " Helping the uninsured, " health savings accounts

> don't seem to have much

> to do with the needs of the families likely to find

> themselves without

> health insurance. For one thing, such families need

> more protection than

> a plan with a $2,000 deductible provides.

> Furthermore, the tax

> advantages of health savings accounts would be small

> for those families

> most at risk of losing health insurance, who are

> overwhelmingly in low

> tax brackets.

>

> But for people whose income puts them in high tax

> brackets, these

> accounts are a very good deal; making the premiums

> deductible turns them

> into a great deal. In other words, health savings

> accounts will offer

> the already affluent, who don't have problems

> getting health insurance,

> yet another tax shelter. Meanwhile, health savings

> accounts, in the view

> of many experts, will actually increase the number

> of uninsured.

>

> This perverse effect shouldn't be too surprising:

> unless they are

> carefully designed, medical policies often have side

> consequences that

> worsen the problems they supposedly address. For

> example, the

> Congressional Budget Office estimates that one-third

> of the retirees who

> now have drug coverage through their former

> employers will lose that

> coverage as a result of the Bush prescription drug

> bill and will be

> forced to accept inferior coverage from Medicare.

>

> In the case of health savings accounts, the key side

> consequence is a

> reduced incentive for companies to insure their

> workers. When companies

> provide group health insurance, healthier employees

> implicitly subsidize

> their sicker colleagues. They're willing to do this

> largely because the

> employer's contributions to health insurance are a

> tax-free form of

> compensation, but only if the same plan is offered

> to all employees.

>

> Tax-free health savings accounts and premiums would

> provide healthier

> and wealthier employees an incentive to opt out,

> accepting higher

> paychecks instead, and would lead to higher

> insurance premiums for those

> who remain in traditional plans. This would cause

> some companies to stop

> providing health insurance, or raise employee

> contributions to a level

> some workers can't afford.

>

> The difference couldn't be starker. Mr. Kerry offers

> a health care plan

> that would extend coverage to most of those now

> uninsured, paid for by

> rolling back tax cuts for those with incomes over

> $200,000. President

> Bush offers a tax credit that would extend coverage

> to fewer than 5

> percent of the uninsured, plus a new tax break for

> the affluent that

> would actually increase the number of uninsured. As

> I said last week, I

> don't see how Mr. Bush can win this debate.

> --

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