The President's Risky Health Plan

　　The new health care proposals announced by President Bush this week purport to tackle the two toughest problems confronting the American health care system: the rising number of uninsured Americans and the escalating costs of medical care.

　　But on both counts, they fall miles short of what is needed to fix a system where — scandalously — 47 million Americans go without health insurance.

　　The financial sinkhole in Iraq and huge tax cuts for wealthy Americans have left the administration with no money to really address the problem. To keep the program “revenue neutral,” Mr. Bush would instead use tax subsidies to encourage more people to buy their own health insurance, while imposing additional taxes on people who have what Mr. Bush deems “gold plated” insurance.

　　It is a formula that would do little to reduce the number of uninsured Americans and would have a high risk of producing pernicious results. Even White House officials acknowledged earlier this week that they expected the number of uninsured to drop by only three million to five million people as a result of Mr. Bush’s proposals. They expect the states to take on most of the burden.

　　One enlightened element is that the plan would provide equal tax treatment to those who bought their insurance policies on the individual market and those who got coverage through group policies at work, thus ending a longstanding inequity that favors employer-based policies. To level the playing field, the administration proposes to grant everyone who gets qualifying health insurance a standard deduction — $15,000 for family coverage or $7,500 for single coverage — off their income subject to taxation. Those with family policies exceeding $15,000 in value would have to pay taxes on the excess amount.

　　After the proposed starting date in 2009, the administration estimates, about 80 percent of workers with employer-provided policies would pay lower taxes and 20 percent would pay higher taxes, unless they reduced the value of their health coverage to fit within the standard deduction.

　　The new standard deduction would almost certainly entice some people to buy health insurance who had previously elected not to. But a tax deduction is of little value to people so poor that they pay little or no income tax. And unfortunately, it is those people who account for the vast majority of the nation’s uninsured.

　　Instead of trying to fix that fundamental flaw, the administration has decided instead to buck it to the states. The White House has offered few details. But its idea is to allow states to redirect federal money that now helps to finance hospitals that provide charity care and use it instead to subsidize health insurance for the poor.

　　In an ideal world, it would make good sense to insure people in advance rather than wait for them to show up in a high-cost emergency room. But this plan could quickly cripple the safety-net hospitals. Fortunately, no governor would have to accept the offer to redirect funds. The scheme is mostly a reflection of how the administration is unwilling to accept true responsibility for the uninsured.

　　If the administration really wanted to help low-income people, it would have proposed a refundable tax credit that would have the same dollar value for everyone — instead of a tax deduction, which primarily helps people in high tax brackets. Even those who do not pay taxes would get a check for the dollar value of the credit, providing them at least some money to help pay for health insurance. Congress ought to recognize that credits are the better approach for even such a limited plan.

　　As for the tax increases on those “gold plated” health policies, the White House is hoping to discourage people from using high-priced comprehensive health policies that cover everything from routine office visits to costly diagnostic procedures that are not always necessary.

　　The administration’s goal is to instead encourage people to take out policies that might reduce the use of medical services, like policies with high deductibles or co-payments, or managed care plans. But even “copper plated” policies can exceed $15,000 in cost if they are issued in areas where medical prices are high or to groups with high numbers of older or chronically ill workers.

　　The whole approach rests on the premise that comprehensive prepaid health policies are a major factor in driving up costs; the theory is that people will tend to use services if they are covered. There is probably some truth in that.

　　But the main drivers in rising health costs are the costly services, high-priced drugs and hospitalizations for people who are seriously ill with catastrophic diseases or multiple chronic illnesses. Making their health coverage less generous would simply make it harder for them to get the care they need.

　　The greatest risk in the president’s proposal is that it would seem likely to lead many small- and medium-size employers to stop offering health benefits altogether on the theory that their workers could buy affordable insurance on their own. That would leave many more Americans at the mercy of the dysfunctional individual policy market, where administrative costs are high and insurers strive to avoid covering people who are apt to become sick and need costly care.

　　For all its fanfare, Mr. Bush’s plan would be unlikely to reduce the ranks of the uninsured very much. And if things went badly, it could actually increase their numbers. That’s not the answer Americans are waiting for and not what they deserve.