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Bush health plan not likely to help state's uninsured

By Ben Evans
Associated Press Writer

WASHINGTON — Policy experts say a health care plan like the one President Bush proposed last week would have little impact in moving roughly 650,000 uninsured Alabamians into coverage.

But because insurance costs in the state are typically lower than elsewhere in the country, more Alabama residents could be eligible for new tax breaks, at least for the short-term, than those in other states, they said Monday. Higher-paid workers would likely benefit the most.

Bush's plan, unveiled in his State of the Union speech, would change the way the IRS treats health benefits. The cost of an insurance policy — including what an employee and an employer pay — would be treated as taxable income.

To offset that income, Bush would create a $15,000 standard tax deduction for family coverage and a $7,500 standard deduction for individual coverage. People who keep their plans' costs below those thresholds would reduce their taxable income, and thus their tax bill; people with more expensive plans would see an increase.

"In Alabama, a lot of folks win in the sense that most of us — even those with pretty good health insurance — probably are spending less than the $15,000, $7,500 limits," said Michael A. Morrisey, director of the Lister Hill Center for Health Policy at the University of Alabama at Birmingham. "I think a whole lot of us would find that we get tax cuts."

Others warned that even those who initially get a break could see it gradually disappear as skyrocketing insurance costs eclipse the $15,000/$7,500 deductions.

"You go five and ten years out ... and you'll find more and more individuals who have very typical benefit packages facing additional taxes with this," said Kenneth E. Thorpe, professor of health policy at Emory University in Atlanta.

Fundamentally, Morrisey, Thorpe and others agreed that the benefits aren't enough to lure low-income people into buying insurance, particularly because many don't pay enough in taxes to use the deduction. They noted that even the White House is projecting a reduction of about 5 percent to 10 percent in the uninsured population, which is estimated at 46.6 million nationwide.

"It doesn't attack the problem of making health care more affordable, and it certainly does very little to cover the uninsured," Thorpe said.

Gary Claxton, director of the Health Care Marketplace Project at the Kaiser Family Foundation, said workers at poverty level often pay little or nothing in taxes, so a large deduction provides them with a minor benefit at best. Workers earning higher wages who pay a 25 percent or 35 percent tax rate would see a greater benefit, but then only if they can hold their costs down, he said.

"This isn't a major push for coverage," Claxton said.

According to estimates from the Washington-based health advocacy group Families USA, average insurance premiums shared by workers and employers in Alabama totaled $11,316 in 2006, slightly below the national average and well below the typical costs in many northeastern states.

One sector that will benefit significantly from the new plan is self-employed workers who buy insurance on their own and who currently get little tax help. Under Bush's proposal, those workers would be eligible for the same deductions as workers insured through their employers.

According to Kaiser, some 4 percent of Alabama's non-elderly residents buy their own insurance, or about 141,950 people.

Lawmakers from both parties have responded coolly to Bush's proposal but have said it could serve as a starting point for debate on health care reform.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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