Bush Unveils New Health Insurance Plan


Washington - President George W. Bush on Saturday proposed tax breaks to make health insurance more affordable to the nearly 47 million Americans who lack it, while removing some tax benefits for the most expensive employer-provided health care plans.

Health care is emerging in opinion polls as a top concern among many Americans as private health insurance costs soar, putting a burden on workers and companies.

The president, looking to gain momentum for his domestic agenda amid concerns it will be overshadowed by the Iraq war, will include the health proposal in his State of the Union address on Tuesday.

"We must address these rising costs, so that more Americans can afford basic health insurance. And we need to do it without creating a new federal entitlement program or raising taxes," Bush said in his weekly radio address.

Most Americans who have coverage get it through their employers, but others receive it through government programs such as those for the elderly, the disabled and low-income children. Some people also buy it on their own.

Bush's proposal would for the first time allow people to take a tax deduction -- similar to the one used by homeowners for their mortgage costs -- when they buy health coverage on their own instead of through an employer.

The program is intended to have no effect on government revenues because the cost of the tax breaks would be offset with other tax changes, according to a senior administration official who described the proposal to reporters.

Currently, employees who receive health coverage through their jobs do not pay taxes on the benefit. Bush would set a cap on the amount of coverage that would be considered tax-free. Anything above that would be taxed as income.

The limit for deductions would be $15,000 for families and $7,500 for individual, one administration official said. The average cost of family health coverage is $11,500.


While some people would get hit with higher taxes, there would be a windfall for those who opted for low-cost plans.

For example, a family who purchased a plan costing $10,000 could still take the full $15,000 deduction and pocket the extra money.

"This is essentially a standard deduction for health care, and the size of the deduction will be significantly higher than the cost of an average policy," said a senior White House official. "Because of this, about 80 percent of people with employer-based plans will see their tax liability fall because their insurance policies cost less than the deduction."

Bush said the tax code unfairly penalized people who want to buy health insurance on their own while offering incentives for people to use expensive, "gold-plated" coverage.

At least one senior lawmaker in the new Democratic Congress raised objections to Bush's proposal.

"This is a dangerous policy that ultimately shifts cost and risk from employers to employees and could result in a higher number of uninsured," said New York Democratic Rep. Charles Rangel, chairman of the House Ways and Means Committee.

Rangel said the Bush plan would increase the tax burden on working families.

A few states are experimenting with ways to extend coverage to the uninsured, including California and Massachusetts. Nationally, Oregon Democratic Sen. Ron Wyden has offered a universal health-care proposal and Democratic 2008 presidential candidate John Edwards is making health care a top campaign theme.


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