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CENTER-LEFT THINK TANK LOOKS AT BUSH HEALTH PROPOSALS

February 16, 2007

The center-left Tax Policy Center has a surprisingly favorable report on the Bush health care standard deduction proposal. From the report's introduction:

The president's plan effectively turns the existing tax subsidy for health insurance into a kind of voucher. It would increase the amount of tax relief that subsidizes acquisition of some health insurance while eliminating the tax advantages at the margin for increased consumption of health care over all other goods. The proposal will almost certainly encourage some people who currently lack insurance, particularly middle-income families, to get it. And the core of the new proposal is not biased towards the provision of favored forms of insurance (e.g., high deductible policies) over other forms of insurance that could reduce spending (e.g., managed care or plans with higher copayments).

However, as under current law, the subsidy will be more valuable for high-income people than for those with lower incomes who most need help. In fact, low-income households with no income tax liability would get very little help, as is true under the current structure. These limitations could easily be addressed by converting the proposed standard deduction into a flat credit or even a sliding-scale credit that is larger for low-income families.

The report also questions whether the proposal adequately encourages the development of markets in individual health insurance. Considering the source, this is praising the plan with faint damns.

Prior coverage:

IN THIS CORNER, THE VILLANOVA MAULER

TRY ON THE PRESIDENT'S HEALTH PLAN

STATE OF THE UNION HEALTH CARE PROPOSAL

WHITHER HEALTH INSURANCE TAX?

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