Exploring health care reform

Marketplace Staff Jan 26, 2007

KAI RYSSDAL: There was lots of coverage this week of the president’s State of the Union address. We thought today we’d zero in on one slice of what he offered up–health care. You’ve probably heard by now that Mr. Bush wants to change the way health benefits are taxed. The president says that ultimately it’ll help more Americans afford insurance. We asked Marketplace’s Lisa NAPOLI: to look into who’ll actually, well, benefit.

LISA NAPOLI: Michael Saltzman knows he’s a lucky guy. He not only works for himself, he’s able to pay for health insurance for his family. We sat down at the Starbucks near his office to talk about it. And how much does it cost you?

It costs us approximately $550 a month, but that’s really with a very high deductible.

And has it gotten more expensive, I would imagine, over the last five years?

Yeah, and we’ve done two things. We’ve cut back on the deductible. It just gets higher and higher so it really doesn’t pay for any out of pocket. And it just gets more expensive every year. So we’re screwed both ways.

And that’s how most of the people I talked to this week feel about health care, whether they’re single or married, self employed or at a job, insured or not. But would the president’s proposal help any of us? Here’s the plan–he wants to make it so that anyone with health insurance, no matter how they get it, would be able to take a flat tax write off for it–$15,000 for families, $7,500 for single people. For Michael Saltzman, it would mean a deduction that’s higher than what he pays out for insurance. It wouldn’t be a bad thing for you to write $15,000 off on your taxes would it?

No, I mean that would be great, but you’ve got to wonder who this really is designed to help anyway.

Most of the health care policy wonks I talked to say not the people who need it most, the poor. After all, a tax deduction of any size is useless if you don’t make enough to pay taxes. And it isn’t going to help someone who can’t afford insurance come up with the cash to buy it. Diane Rowland is with the Kaiser Family Foundation which studies health care policy.

So it really is not a proposal about insuring America’s 46 million uninsured. It is, in fact, a proposal about restructuring how those with insurance get their insurance and the scope of the insurance they have.
Rowland says the proposal for a flat deduction might have another consequence. Some employers might choose to stop offering insurance at all since they know you’ll be able to take a write off. And even if that write off doesn’t sound so bad, consider that it won’t rise as quickly as health care premiums, which have skyrocketed 70 percent over the past five years.

ROWLAND: So over time the benefit of this deduction would erode and that would tend to force people to buy less and less comprehensive policies in order to be able to live within the deduction.

Now it may be that this whole story is moot anyway since most people don’t expect the president’s plan will fly in its current form. Peter Harbage of the New America Foundation is one of them.

You know health care is very complicated. It can be very polarizing as Senator Clinton found out when she was First Lady in 1993. These are very difficult issues with a lot of money at stake.

Harbage says for the president’s plan to work, it needs to get at the complexity of what’s causing health care costs to rise. But he admits doing that isn’t going to be easy.

It’s taken us 40 years to, you know, develop the broken system that we have now and no one’s going to be able to fix it overnight.

Harbage says there is something good about the president’s plan, he’s acknowledging the health care crisis and that will put it front and center in the national debate.

In Los Angeles, I’m Lisa Napoli for Marketplace Money.

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