President Bush: Health insurance should be tax deductible up to $7,500 for individuals and $15,000 for families, both for people who purchase health care on their own and for people who get insurance from their employers.

• “With this reform, more than 100 million men, women and children who are now covered by employer-provided insurance will benefit from lower tax bills. At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, my proposal would mean a substantial tax savings… And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health plan within their reach.”

DMI SAYS: “Despite the impressive sounding numbers, President Bush’s proposal offers tax benefits that are modest at best for the middle class, as part of a plan that will actually do little to make insurance more affordable for the low-income uninsured. What’s more, the President’s proposal would provide a dangerous incentive for employers to stop offering job-based health coverage entirely.”

• The President promotes this deduction as an incentive for the uninsured to purchase coverage, but the reason 1 in 7 Americans aren’t insured isn’t a lack of incentives. It’s the cost of health insurance -- which is simply out of reach for these Americans.
• What’s more, a tax deduction won’t help. A tax deduction is only useful if you earn enough to pay income taxes.  Many of the uninsured pay little or no income taxes to begin with.
• Instead, the tax break will act as an incentive for well-off and healthy people to leave traditional employer-sponsored plans and go off on their own. With a lower risk of illness, these healthy people may get cheaper coverage in the marketplace, but they leave behind a weakened insurance pool, raising the cost of coverage for older, sicker, and lower-income Americans.
• The tax breaks offer a disincentive to employers to provide coverage. This will harm middle-class Americans who will lose their employer-provided coverage and be stuck paying more out of pocket to maintain the quality of their coverage.
• The President’s proposal assumes that the quality of existing care is too high, leading people to use too much health care – but, as we explain in the section on Associated Health Plans, this is not what’s driving up costs.
• The skyrocketing costs of health care are attributable to a host of factors, from new technology, to inefficiencies in the system, and soaring HMO profits.
• The fact that people with insurance can see a doctor when they want is one of the few strengths of our current system, not a weakness.

Relevant Statistics:

• Number of children without insurance: 10 million
• According to the National Priorities Project, the U.S. could pay for a year of health care coverage for every American child three times over for roughly the same amount of money the nation has spent so far on the war in Iraq.
• Amount it would cost to provide the nation’s uninsured with health care for one year: half the annual cost of the Iraq war
• Number of Americans who currently get private health insurance through their employers: 175 million
• Estimated amount the U.S. would save each year on paperwork if it adopted single-payer health care: $161,000,000,000
• According the Commonwealth Fund, percentage of people in the U.S. of working age with moderate to middle incomes who went without health insurance for at least part of the year in 2005: 41, up from 28% in 2001

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