Guess who the big loser is under Bush health plan

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Tue, 21 Feb 2006 22:25:09 -0800

Guess who the big loser is under Bush health plan

 

 

 

 

http://www.chron.com/disp/story.mpl/editorial/outlook/3672813.html

 

Feb. 20, 2006, 7:30PM

Guess who the big loser is under Bush health plan

 

By FROMA HARROP

 

 

 

Heads up, Americans. The Bush administration is now greasing the skids

for employers to drop your health coverage. This is a biggie.

 

Radical change was not the headline when the president unfurled his

latest proposals for health savings accounts. It was presented mainly

as a sensible-sounding way for people without medical insurance to buy

it with pre-tax dollars, the same way companies do.

 

Bush's new HSA is actually a rocket-powered tax shelter dressed up as

a sweet little program to help the uninsured. It would also undermine

the traditional health coverage now offered by employers. (More on

that in a minute.) And in case anyone still cares about deficits, it

would cost the Treasury $156 billion in lost tax revenues over 10

years — more than wiping out any savings Bush hopes to achieve with

his cuts in projected Medicare spending.

 

An HSA lets people put pre-tax earnings into a tax-advantaged account

to be tapped for medical expenses. They must also buy a

high-deductible health insurance policy to pay for big-ticket medical

needs.

 

Bush's HSA proposal is a wedding cake of tax credits piled on top of

tax deductions. And unprecedented in the annals of tax breaks, this

one would tax neither the earnings going into the accounts nor the

withdrawals coming out. This is unlike 401(k) plans, where people

contribute pretax dollars into accounts but pay taxes on the money

they withdraw.

 

If you thought that the people most in need of help buying health

coverage were the working poor, you haven't been hanging around

administration circles. The Bush plan would raise the amount that

could be contributed into an HSA to $10,000 a year, a sum even most

middle-class families don't have lying around.

 

" This is not about health care anymore, " notes Jason Furman, senior

fellow at the Center on Budget and Policy Priorities. " It's an excuse

for allowing people to put $10,000 away tax-free. "

 

The center figures that for a family making $180,000, a $1,000

contribution into an HSA would reap a $433 tax subsidy. If that family

makes $15,000, the subsidy would total only $153 — and that's assuming

that a tax credit is made refundable. Otherwise, it would be zero.

 

Demonically, the Bush proposal gives employers new reasons not to

offer traditional health coverage, or any medical benefits at all.

Indeed, the new health savings accounts could do to the traditional

health plan what the 401(k) plan did to the traditional pension: Kill

it off.

 

Like 401(k)s, the proposed HSAs could save money for employers while

transferring the cost and risk of providing what was once an expected

benefit onto the workers. The move from traditional pensions to 401(k)

plans has already amounted to a major hidden pay cut for millions of

American workers.

 

Under the Bush plan, small businesses would have new reasons not to

offer employees coverage. Big companies can still get good deals by

buying insurance in bulk. But because the Bush plan would end the tax

advantages of purchasing employer-based coverage over buying insurance

in the individual market, small businesses might just opt out of the

whole health-benefit thing. The boss and other top-earning people,

meanwhile, could retreat to their own HSA tax shelters.

 

Health savings accounts would be most attractive to the healthy and

wealthy, drawing this group out of traditional coverage. That would

leave the sick and poor in the higher-cost insurance plans, which

would then sink.

 

So the Bush proposal would actually cause more Americans to lose

coverage than to gain it. In 2004, MIT economist Jonathan Gruber

computed the numbers on the basis of a health savings account proposal

that was far more modest than Bush's. He figured that adding a tax

deduction for buying high-deductible health insurance to the

tax-advantaged HSA would result in 1.1 million currently uninsured

people obtaining coverage. These would be mostly the richer folks who

are uninsured for some reason and who make enough money to fully enjoy

the tax breaks. But the changes would lead to 1.4 million people

losing their employer coverage. Guess who they would be.

 

Harrop is a nationally synidcated columnist based in Providence, R.I.