Millions could see taxes up in Bush health plan

Reuters
Millions could see taxes up in Bush health plan

WASHINGTON (Reuters) - About 30 million Americans could face a tax hike under President George W. Bush's plan to expand health insurance coverage and address rising health care costs, the White House said on Monday.

"There are always going to be some winners and some losers, but the people who might initially be losers have options," Kate Baicker, a member of the White House Council of Economic Advisors, told reporters.

There are about 47 million people with no health insurance in a country of 300 million. Baicker said Bush's tax proposal would result in "upwards of 3 million or more newly insured people."

Bush plans to highlight the plan in Tuesday's State of the Union speech to the U.S. Congress.

Bush is proposing to make health insurance premiums taxable income, with people who get employer-provided plans that cost more than $15,000 a year facing a tax hike if they do not get cheaper insurance, the White House said. Average family coverage offered by employers costs about $11,500 annually.

The president is proposing tax deductions -- $15,000 for a family and $7,500 for an individual whether or not they purchase their own health coverage or get it from their job -- to help buy insurance.

The plan also envisions funneling federal money to states that seek to arrange for uninsured residents to get coverage. But a White House statement said this would involve no new federal spending or entitlements, instead "allocating current federal health care funding more effectively."

Baicker said about 30 million Americans could face higher taxes under the president's plan "if they didn't change their behavior" -- meaning giving up an employer's more generous health plan in favor of a less-costly one. The White House added that "more than 100 million Americans" would save money under Bush's plan.

Baicker described Bush's proposed tax changes as "revenue-neutral," meaning they would neither increase nor decrease the overall income taxes paid to Washington.

DEMOCRATS SKEPTICAL

"The President's so-called health care proposal won't help the uninsured, most of whom have limited incomes and are already in low tax brackets," said California Democratic Rep. Pete Stark, Chairman of the Ways and Means Health Subcommittee.

"But it will hurt middle-income Americans, whose employers will shift even more cost and risk to their employees," he added.

Health and Human Services Secretary Mike Leavitt said Bush will emphasize opposition to proposals favored by some Democrats for universal health coverage run by the government. Without offering many details, Leavitt also said Bush wants to "partner with the states" in developing plans that provide Americans access to basic affordable health coverage.

Under Bush's plan, states could subsidize health insurance premiums directly, they could establish high-risk pools for the sickest people, and could help individuals and small businesses create their own insurance pools.

To get the federal money states would need to make health insurance affordable by such means as "reducing benefit or premium mandates," it said. Currently, each state has its own set of mandated conditions that health insurers must cover.

States already work with the federal government under the Medicare, Medicaid and children's health insurance plans for the elderly, needy and the very young.