Bush's gambit on health insurance

With pressure building to reform America's healthcare system, President Bush has launched what may be his most ambitious bid to tackle the issue from a free- market basis.

Lately, the momentum has appeared stronger in another direction: States have been considering mandates on employers and individuals to purchase health insurance.

Mr. Bush, by contrast, wants to help more Americans get health coverage by creating new tax deductions. He's trying to wipe away a longstanding problem that America's tax code has nurtured: that health insurance is more affordable for large employers than for small employers or individual households.

Democrats in Congress say the president's idea is too little. And some analysts say that, coming seven years into his administration, it is too late.

Still, the debate over how best to contain spiraling costs and cover millions who are uninsured is far from over. Bush has made a bid for conservative ideas to be on the table as voters weigh this issue in the run-up to the next presidential election.

"I think it will help push [healthcare] further up the agenda in 2008," says Robert Blendon, an expert on health policy at Harvard University in Cambridge, Mass. "He sets the floor,... that government has some role in trying to deal with this and has to make some very substantial changes."

Political pressure for a healthcare fix has been mounting for several reasons. Costs keep rising faster than inflation. That's a problem for anyone paying for care, but for many employers it's a matter of global competitiveness. The rising cost of health benefits are one big reason, for instance, why US automakers are having trouble competing with foreign rivals. The soaring costs also mean that many small employers don't offer insurance. About 16 percent of Americans – 46 million people – lack coverage.

The debate now includes three major paths down which America's health system can travel:

•Trying to preserve and improve elements of a free market, with competition and information for consumers holding prices in check. Call it the Bush plan.

•Mandating that all employers provide insurance to their workers, or contribute a share of their payroll to help government insure the workers. This is the path many states are taking.

•Shifting toward a single-payer system, the model in many developed countries, where Congress would expand a program like Medicare to be an insurance provider for all Americans.

Health insurance is currently a blend of federal, state, employer, and individually purchased coverage – and it's likely that the nation will maintain some form of hybrid system.

But with Democratic victories in last fall's election, momentum has shifted toward proposals that involve stronger government involvement.

In his State of the Union address Tuesday night, Bush acknowledged the need for Washington to do more, but he also tried to define a limit.

"Government has an obligation to care for the elderly, the disabled, and poor children," Bush said. "For all other Americans, private health insurance is the best way to meet their needs."

He outlined two major proposals.

One would be a standard tax deduction for health insurance, $15,000 for families, $7,500 for individuals. But health insurance that costs more than that – whether obtained through an employer or individually – would be considered taxable income.

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