WASHINGTON — Wrapped in the promise of big new tax deductions, President Bush's plan for encouraging more people to get health insurance is one of the most sweeping changes yet proposed for financing medical care -- bringing potential benefits for some, new taxes and new uncertainties for others.
And healthcare experts said that although Bush's immediate proposal faced almost certain rejection by the Democratic Congress, the basic ideas underlying it would probably play a part in the coming debate over a healthcare overhaul.
For The Record
Los Angeles Times Friday January 26, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 30 words Type of Material: Correction
Bush's health proposal: In Thursday's Section A, an article on the president's insurance proposal misspelled the last name of San Francisco insurance broker and small-business advocate Scott Hauge as Hague.
Today, the premiums that pay for job-based medical insurance -- by far the most common source of healthcare coverage -- are not treated as taxable income. Employer-sponsored health insurance has been a tax-free benefit for most of the last half-century.
Under Bush's plan, that tax exemption would be eliminated. Premiums for workers' health insurance -- the amount paid by the employer plus any share paid by the worker -- would be added to their taxable income. Then, tax deductions -- up to $15,000 a year for families, $7,500 for single workers -- would be provided to cover the premiums for workers with typical plans.
"With this proposal, more than 100 million men, women and children who are now covered by employer-provided health insurance will benefit from lower tax bills," Bush said in his State of the Union address Tuesday.
But the plan would also raise taxes for 30 million people. And, with health insurance premiums steadily rising, the initial tax savings could disappear for many middle-class workers as the cost of their coverage rose above the caps.
The proposal's complexity and uncertainty about its possible effects appeared to stir anxiety even among potential beneficiaries.
Twenty-nine-year-old Nathan Hardwick of Hesperia, for example, is the father of four and has worked for seven years on the maintenance staff at TXI Oro Grande Cement. He earns $55,000 a year and has employer-sponsored health insurance worth about $8,400 a year for which he pays $57 a month. Projections show he would save about $1,500 in annual taxes under the new plan.
But Hardwick, who voted for Bush in the past, worries that his tax savings will evaporate as healthcare costs rise. "I'd much rather be on my plan now and pay my $57 a month and not get the tax break," he said.
