Kaiser Daily Health Policy Report

Monday, January 29, 2007

Administration News
Experts Divided Over President Bush's Health Care Proposals
Health policy experts are divided in their analyses of how President Bush's health insurance tax proposal would impact the insurance market, the Milwaukee Journal Sentinel reports (Boulton, Milwaukee Journal Sentinel, 1/26). Bush last week in his State of the Union address announced two health care proposals, including one that would offer a federal tax deduction of $7,500 for individuals and $15,000 for families who obtain health insurance on their own or through an employer, regardless of the cost of the coverage. The proposal would for the first time levy a tax on the value of employer-sponsored health insurance in some cases. Currently, most employees are not taxed on the value of their employer-sponsored health insurance. Under the proposal, individuals and families with employer-sponsored health insurance plans worth more than the proposed allowable deductions would pay taxes on the difference. The deduction would be available to all individuals and families who purchase health insurance, regardless of the value of their policies or whether they itemize deductions on their tax returns. For U.S. residents who receive employer-based health insurance, the deduction would be offset by the cost of their coverage. The proposal would pose no net cost to the government over 10 years, according to the administration. Bush also advocated redirecting portions of existing federal funding to create "Affordable Choices" grants that would give states more flexibility to expand health insurance (Kaiser Daily Health Policy Report, 1/26).
Employer-Sponsored, Individual Markets
Experts debated how Bush's tax proposal would affect the markets for employer-sponsored and individual health insurance, the New York Times reports. Joe Kaplan, White House deputy chief of staff, said that under Bush's proposal, more people "would be able to buy insurance in the individual market," so there would be "a net increase in the number of insured" (Pear, New York Times, 1/28). Stuart Butler, a health care economist at the Heritage Foundation, said, "This levels the playing field, and it's good for all concerned," adding, "More people will end up with coverage, adequate coverage as a result of this" (Boulton, Milwaukee Journal Sentinel, 1/26). Robert Reischauer, a former director of the Congressional Budget Office, said, "The president's proposal addresses inequities in the tax code that provide an open-ended subsidy for premiums paid by employers." However, he added, "A glaring problem with the president's plan is that he did not call for any stronger regulation of the individual insurance market" (New York Times, 1/28). Karen Davis, president of the Commonwealth Fund, said, "The uninsured simply don't have the discretionary income required to pick up the difference between the value of the tax incentive and the high premiums they face in the individual insurance market." She added, "This group of Americans cannot afford insurance premiums -- whether or not they receive a tax refund the following year." Ron Pollack, executive director of Families USA, said the proposal is "like throwing a 10-foot rope to someone in a 40-foot hole" (Lipman, Cox/St. Paul Pioneer Press, 1/28). In addition, some observers noted that many U.S. residents -- particularly those with pre-existing medical conditions -- could face difficulty in acquiring insurance through the individual market. Mila Kofman, an associate research professor at the Health Policy Institute at Georgetown University, said, "In most places you have to be in almost perfect health to buy a policy" (Milwaukee Journal Sentinel, 1/26).
Meanwhile, officials from several public hospitals are criticizing the aspect of Bush's proposal that potentially would redirect portions of federal funds currently designated for hospitals that treat large numbers of uninsured patients. According to the Times, the proposal "would end a longstanding regulation that allowed public hospitals to receive more money from Medicaid ... than private hospitals receive for the same services." The resulting savings would be directed toward the Affordable Choices grants proposed by Bush in the State of the Union. Officials from the New York City Health and Hospital Corporation -- which runs the city's public hospitals, diagnostic centers and health clinics -- estimate that the plan would cost the agency about $350 million annually, or about 7% of its budget (Rivera, New York Times, 1/28). HHC President Alan Aviles said, "We're the next best thing to universal health care coverage," adding, "Historically, the public hospitals have relied on the government as a source of funding. It's critical. There's so much funding involved, it's not just going to be replaced by another source." House Ways and Means Committee Chair Charles Rangel (D-N.Y.), who attended a news conference with HHC officials, said he would oppose Bush's proposal, adding, "How can a great nation like ours explain that we can't take care of our own?" (Chang, Long Island Newsday, 1/28). Ken Morris, CFO of the Duke University Health System, said, "The strategy cannot be to yank away the safety net and just hope that people use tax savings to go out and buy insurance" (Fisher, Raleigh News & Observer, 1/29).
HSA Promotion
Some health policy experts said Bush's tax proposal would encourage the growth of high-deductible health insurance policies with health savings accounts. HSA plans, which were authorized by Congress in 2003, currently account for about 3% of the health insurance market, according to RAND. Former CMS Administrator Mark McClellan said, "I think it would be a big push for HSAs," adding, "That's what a lot of people who don't get insurance through their jobs are buying now." Katherine Baicker, a member of the White House Council of Economic Advisers, said "[T]his is an even bigger step towards leveling the playing field and removing some of the weird disincentives to getting basic insurance and paying for routine care out of pocket." Len Burman, director of the Tax Policy Center -- a joint project of the Urban Institute and the Brookings Institution -- said Bush also should eliminate the current tax benefit for HSAs. He said the benefit is a boon for wealthy individuals who can afford to pay out of pocket for health services under high-deductible plans while also putting large amounts of money in HSAs tax-free. "If the goal is to try to get people to spend less on health care, why subsidize high-deductible health plans over aggressively managed care?" Burman said. In addition, eliminating the existing tax benefits for HSAs would create new revenue that could be used toward Bush's state grant proposal, according to Burman (Lee, Washington Post, 1/27).
In related news, the AP/Philadelphia Inquirer on Sunday examined how various health insurance proposals could affect business for insurers (Freed, AP/Philadelphia Inquirer, 1/28).

Broadcast Coverage

APM's "Marketplace Money": The segment includes comments from Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of the Kaiser Commission on Medicaid and the Uninsured; Peter Harbage, a senior program associate at the New America Foundation; and a business owner who purchases health insurance for his family (Napoli, "Marketplace Money," APM, 1/26).

Audio of the segment is available online.

NPR's "Morning Edition": The segment includes comments from Len Nichols, director of the Health Policy Program at the New America Foundation; Larry Levitt, a vice president at the Kaiser Family Foundation; and a New Hampshire state employee with employer-sponsored health insurance (Neighmond, "Morning Edition," NPR, 1/29).

Audio of the segment is available online.

WBUR's "On Point": The segment includes comments from Marilyn Werber Serafini, a health reporter for the National Journal; Phillip Swagel, assistant secretary of the Treasury for Economic Policy; Arnold Relman, emeritus professor of medicine and social medicine at Harvard Medical School; Joseph Antos, health care and retirement policy expert at the American Enterprise Institute; and Herb Schultz, senior health policy adviser to California Gov. Arnold Schwarzenegger (R) (Ashbrook, "On Point," WBUR, 1/25).

Audio of the segment is available online.