To expand health coverage, Bush pitches tax code change

WASHINGTON — President Bush on Saturday entered the growing debate about providing healthcare coverage for uninsured Americans, calling for a major change in the tax system to help those whose employers don't offer a plan.

Bush's proposal is a combination of carrots and sticks -- and, if enacted, would create new winners and losers in the health insurance arena. It is likely to run into opposition in the Democratic-led Congress but could serve as a key element of a broader package dealing with rising healthcare costs and shrinking coverage.

The carrot in Bush's plan is the creation of a health insurance tax deduction that all taxpayers would receive -- $7,500 a year for individuals and $15,000 for families.

But the proposal also comes with a stick: Those with insurance plans with an annual premium more than the deduction would have to pay income taxes on the difference. That would be a big change from current law, under which all employerprovided health insurance is tax-free for workers.

Bush wants to use tax revenue from people with benefit-rich plans -- the healthcare haves -- to pay for the new health insurance deduction. That would enable many of the estimated 47 million uninsured Americans -- the healthcare have-nots -- to buy coverage.

"One of the most promising ways to make private health insurance more affordable is by reforming the federal tax code," Bush said in his weekly radio address.

"Today, the tax code unfairly penalizes people who do not get health insurance through their job," he said. "It unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need."

Bush's plan may seem like a startling move from a president who has repeatedly vowed not to raise taxes. People with generous healthcare coverage would face the higher taxes, although they could avoid the hit by switching to a standard policy. Family coverage costs an average of $11,500 to $13,000 a year, according to industry surveys.

Defending the plan, a White House official said it would be a wash for federal coffers. Over 10 years, all the additional revenue would go toward the tax deduction to help people buy coverage.

Saturday's radio address signaled that healthcare will be a theme of the president's State of the Union message on Tuesday, in which he will also propose an initiative to help governors expand coverage.