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Expanding Health Care Through Tax Deductions

What Bush Said: "We share a common goal: making health care more affordable and accessible for all Americans. The best way to achieve that goal is by expanding consumer choice, not government control. So I have proposed ending the bias in the tax code against those who do not get their health insurance through their employer. This one reform would put private coverage within reach for millions, and I call on the Congress to pass it this year."

Analysis: President Bush's proposal — originally unveiled in the 2007 State of the Union speech — would replace the existing tax exemption for employer-provided health insurance with a tax deduction for everyone, regardless of whether they get insurance on the job. Individuals would get a deduction worth $7,500; families would get $15,000.

That means for the first time, people who are not self-employed and who purchase their own coverage would get a tax benefit. But it would also mean that for the first time, people with very generous employer-provided coverage might have to pay taxes on the value of that coverage. And because the majority of the uninsured have low enough incomes that they pay little or no taxes, a tax deduction will not make insurance that much more affordable. The most optimistic estimate for the plan says it would reduce the number of uninsured Americans by less than 20 percent.

Outlook in Congress: Congress last year showed little interest in taking up the plan. Even Republicans who are generally supportive of the concept of using the tax code to advance health reform were furious when the Bush administration tried to tie it to the renewal of the State Children's Health Insurance Plan (S-CHIP).

On the Campaign Trail: All of the Republican presidential candidates have some sort of tax deduction or credit proposal that at least approximates what Bush has offered. None of the Democratic candidates does. The Democrats all have plans to provide universal or near-universal coverage with a series of government subsidies, employer contributions and individual mandates. Clearly, the stage is being set for a general election showdown on whether changing the tax code is the best way to address the problem of health care coverage.

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