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Health Plan to Revive Debate

Bush prepares initiatives intended to make the system more efficient, but some critics say people would bear too much financial risk.

January 23, 2006|Peter G. Gosselin | Times Staff Writer

WASHINGTON — President Bush is preparing to unveil a series of proposals intended to make the nation's healthcare system more efficient, but he is likely to revive a bitter debate -- begun last year over Social Security -- about how much of life's biggest risks Americans should bear on their own.

Although many of the proposals, such as limits on medical malpractice lawsuits, are ones the president has failed to get through Congress, he plans to unveil new initiatives as part of his vision for reshaping U.S. healthcare policy, aides and advisors said.

Among the possible initiatives: offering additional tax breaks for the use of Health Savings Accounts, and making most out-of-pocket medical spending by individuals tax-deductible. Currently, individuals must spend 7.5% of their annual incomes on healthcare before they qualify for an income tax deduction.

Bush's supporters say that the changes would help tame rocketing medical costs by encouraging people to buy their own healthcare insurance and become smarter shoppers, rather than relying on employers or government programs such as Medicare and Medicaid to cover their health costs.

Critics argue that Bush's expected proposals would undermine the employer-provided health insurance system that covers most working Americans. And, they say, it would encourage them to switch to the Bush-authored Health Savings Accounts, established in 2003, under which they would bear more of the financial risks of illness and injury.

Just as with Bush's Social Security personal accounts proposal, the president would be seeking to persuade Americans to rely less on government-provided or employer-provided safety nets and more on themselves.

He would also exhibit the kind of combativeness that has become a trademark of his time in Washington. Despite the political drubbing that the administration sustained on Social Security and over the flawed rollout of its Medicare prescription drug benefit, Bush appears eager to return to the fray.

"We may be looking at the start of a fundamental shift in what we mean by health insurance, from a system where we share risks to one where it's up to individuals to make their own deals and bear their own risks," said Drew E. Altman, president of the nonpartisan California-based Kaiser Family Foundation.

"The danger," Altman said, "is that this new arrangement could work out very well for some people, especially the young, the healthy and the affluent, but be very bad for the health system as a whole."

The Health Savings Accounts, known as HSAs, are designed to encourage people to cover a substantial portion of their healthcare costs by opening tax-advantaged accounts from which they can pay routine medical expenses. The account must be paired with a high-deductible insurance policy to cover catastrophic medical costs.

The theory behind the accounts is that people who pay more of their own costs become better consumers and less likely to demand unnecessary care. Proponents say the accounts would encourage people who have no insurance to buy at least some coverage.

Detractors fear that the accounts will attract only the healthiest Americans, leaving traditional employer-provided plans with people who have the highest health costs.

Bush signaled his readiness to act on healthcare in a campaign-style speech in Virginia last week, saying that government must ensure "healthcare is available and affordable." He explicitly linked the proposals he will make in this year's State of the Union address later this month and new budget plan to last year's Social Security fight by discussing healthcare in the same "ownership society" terms that he used in touting Social Security personal accounts.

"I think people ought to be allowed to own their own healthcare account and make decisions for what's best for them," Bush told his audience.

Last year, Bush made a considerable effort trying to convince Americans that younger workers should be allowed to divert a portion of their Social Security taxes into stock and bond accounts that they would own and control. In return, their traditional Social Security benefit would be reduced. But the plan failed to gain popularity with the public or in Congress amid a debate over whether it would undermine the finances of the overall program and would leave workers too exposed to stock market risk.

Much of the president's recent thinking about healthcare appears to be influenced by former Reagan administration economist John F. Cogan, now at Stanford University, and former Bush chief economic advisor R. Glenn Hubbard, now dean of Columbia University business school.

The two, together with Stanford economist Daniel P. Kessler, have just unveiled a plan for overhauling the nation's healthcare system.

The proposals include new tax breaks for individual health spending, an expanded system of "report cards" on doctors and hospitals, stricter enforcement of antimonopoly laws against health providers and insurers, and a limit on malpractice suits.

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