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.
In effect, this would help level a playing field in which employer-based insurance enjoys tax-free status, while individuals must buy insurance with after-tax dollars. This would save $4,500 for a family of four earning $60,000 a year, thus helping to put insurance "within reach" for more Americans, Bush said. The new taxes on those with high-end insurance would help offset the cost of this plan.
Second, he said the government should provide grant money to help states that are coming up with innovative ways to cover the uninsured.
Those could include states such as Massachusetts, which is seeking to achieve nearly universal insurance through a mandate that all individuals obtain insurance. In California, Gov. Arnold Schwarzenegger recently launched a similar proposal.
Many healthcare experts support the notion of leveling the playing field, in terms of tax treatment, for employers and individuals.
And by taxing those with expensive insurance, it would counter the regressive nature of the current tax system. (As businesses deduct their healthcare expenses, top-tier workers with the costliest coverage are reaping the largest government subsidy.)
But many experts also say the plan does not go far enough. For one thing, they say, it won't result in coverage for most of the uninsured.
"We have to have a system of universal insurance coverage," says Henry Simmons of the National Coalition on Health Care, a nonprofit, nonpartisan group in Washington.
The coalition is one of several lobbying for more sweeping changes to expand coverage, control costs, and improve the quality of care.
Universal coverage could be achieved through mandates on employers or individuals, or through expansion of government programs, Dr. Simmons says.
Business groups, for their part, say they welcome a full debate of these and other options. But they are wary of a single-payer approach.
In part, that's based on skepticism of whether it will be effective at containing costs that are rising faster than overall inflation.
Some experts say the fast-growing spending isn't necessarily a bad thing. Medical technology and treatments are improving, they say, so it's natural that health spending has grown to about 16 percent of the national economy.
And they say that a single-payer system would reap big reductions in administrative costs.
But others note that countries with purely single-payer systems are not all happy with their systems, and some are trying to shift in a more market-oriented direction to curb costs and expand consumer choice.
In the US, the cost of Medicare alone promises to strain the federal budget in the years ahead, and even that program doesn't cover all health costs for the elderly Americans it serves.
"I have yet to hear a proposal coming out of the single-payer crowd [to address soaring costs] other than 'Trust me, things will be better,' " says Joseph Antos, a health policy expert at the conservative American Enterprise Institute in Washington.
Dr. Blendon, at Harvard, predicts that Democrats won't generally push for a single-payer system. He expects a Democratic plan to extend public coverage to children, expand Medicaid, "but the rest of their efforts will be to get working populations into private coverages."
That leaves plenty to debate this year and beyond.