WASHINGTON—One day after President Bush unveiled his health care tax plan to the nation, Congressional Democrats all but buried the proposal Wednesday, saying it could wreck the system of employer-based care and burden middle-class working families.
Beginning in 2009, Bush wants to give taxpayers with basic health insurance a standard tax deduction of $15,000 for family coverage or $7,500 for single coverage. Those whose coverage costs more—an estimated 35 million people—would pay taxes on the difference.
The proposal would give people who buy health insurance outside the workplace the same tax break currently enjoyed by those with job-based coverage. About 80 percent of the estimated 175 million people with job-based coverage would see lower taxes from the plan, the government estimates.
Health care experts have expressed modest support for the proposal as a starting point to reduce the nation's 46 million people without health insurance. But Democrats, who've long championed the cause of America's uninsured, were loath to concede the political high ground to an unpopular lame-duck president on one of their most potent domestic policy issues.
One by one on Wednesday, key Democratic leaders made it clear that they would use their new majority status to block the measure even as Bush was set to travel to Lee's Summit, Mo., on Thursday to promote the plan.
Rep. Pete Stark, D-Calif., chairman of the House Ways and Means Health Subcommittee, said his panel won't consider Bush's proposal. "If I could just deep-six it, they'd build a statue of me in Health Care Square," Stark said. "It gives (a) $1,000 tax cut to families who don't pay any taxes and about a $6,000 benefit to people with incomes of $170,000 or more. It encourages companies to cancel their health care. It's designed for disaster."
Sen. Charles E. Schumer, D-N.Y., said the provision of the president's plan that taxes higher-priced health plans would penalize people who are trying to provide the best care for their families.
"It is good that the president is trying to cover the uninsured, but it shouldn't be done at the expense of those in the middle class who have already achieved good health care," Schumer said.
Democrats also fear that the tax deduction could cause healthy people to forgo employer-based coverage and find better private coverage. That could leave employer plans with more old and sick people, who would drive up costs.
With their dismissal of the Bush plan, Democrats will face pressure to come up with a better option or risk possible voter wrath for a lack of action on health care as the 2008 presidential campaign nears.
Bush's proposal was loosely based on a similar plan recommended by his bipartisan tax-reform panel in 2005. The Democratic co-chairman of that panel, former Louisiana Sen. John Breaux, told McClatchy Newspapers that Democrats were making a "terrible mistake" by ignoring Bush's plan.
"I think this is something to work with. This should be applauded—the president is trying to solve this problem. Don't write it off. This is a serious effort, which I think is very progressive," said Breaux, now a senior counsel at the law firm of Patton & Boggs, whose lawyers advise clients on legal issues pertaining to energy and health care.
Stark, however, was unmoved. "I've always thought John Breaux doesn't know what he's talking about. He's just trying to gin up lobbying fees. I wouldn't give him the time of day."
Grace-Marie Turner, president of the Galen Institute, a health care research group, said Bush's plan will become an important reference point in the debate over revamping the health care system.
"I think it's just so big that people have to get their heads around it," she said.
The White House estimates that the average tax bill would decline under the Bush proposal by more than $3,650 for families who buy health coverage outside their jobs. Families with no health insurance would see their average tax bill drop by $3,350.
The Tax Foundation, a nonpartisan tax research group, estimates that a family of four earning $80,000 would get tax savings of $1,500 under the Bush proposal. The same family with health benefits that cost $5,000 more than the $15,000 standard deduction would face $1,500 in new taxes. An uninsured single mother who earns $25,000 and receives the Earned Income Tax Credit would get $2,250 in tax savings through the Bush plan, while an uninsured single man earning $50,000 would save $3,000.
Breaux applauded the standard deductions that Bush suggested. "That's very generous," he said.
But those deductions "seem to be awfully inconsistent with how large our budget deficit is. It's like handing out tax cuts," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan health research group in Washington. "It's probably offering too big an incentive . . . in a constrained budget environment."
That environment will keep Democrats from immediately pursuing a universal care plan under Medicare, which Stark and Senate Health Committee Chairman Edward Kennedy, D-Mass., favor. Kennedy said Democrats will instead focus on smaller health care fixes.
"Our first thing will be stem cells, which we'll hopefully pass here in the next very few weeks," Kennedy said. That could be followed by legislation to stop discrimination based on genetic data and a measure to address parity in mental health funding.
HEALTH INSURANCE AT A GLANCE:
_The average cost of a family's health care policy was $11,480 in 2006, $4,242 for unmarried individuals.
_Families with children paid 27 percent of the cost of their health plans in 2006; individuals shouldered 16 percent of the costs.
_The number of uninsured Americans is believed to be about 46 million. Of them, 69 percent have full-time workers in the family.
_About 98 percent of businesses with 200 or more employees offer health coverage, compared with 60 percent of those with 199 or fewer workers.
_Employers are expected to deduct more than $146.8 billion spent on employee premiums and medical care against their taxable income this year. From 2007 to 2011, these deductions will amount to almost $889 billion.
_That tax break for employers is nearly twice what home owners get for mortgage interest deductions.
Source: Kaiser Family Foundation; Analytical Perspectives, Budget of the U.S. Government Fiscal Year 2007.
(c) 2007, McClatchy-Tribune Information Services.
GRAPHICS (from MCT Graphics, 202-383-6064): STATEUNION HEALTHCARE
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