Wednesday, January 24, 2007

The 401(k)-zation of Health Care

It was hard to get interested in Bush's SOTU address, partly because the only thing remotely new was his health care proposal. I figured my initial antipathy was a kneejerk reaction to anything Bushian. This morning I recognized that the goal of the plan is to end the system of employer provided health benefits.

By taxing health benefits provided by employers while giving a (wholly inadequate) tax deduction to individually purchased health plans the effect will be to discourage employer health benefits. If this is implemented as described it will, over time, cause employers to provide the barest minimum benefits and shift the burden of finding and paying for health plans to the employees. With the experience of the 401(k) pension system as a predictor, I expect scores of millions of Americans will find their health care greatly diminished by the Bush shift.

As for the working poor, what good is a big new tax deduction if it only applies to income taxes and not payroll taxes.

Art taken from article on the Bush health plan. George W. - the Jolly Proctologist.

Update: American Prospect points out that the Bush plan will let the working poor deduct their health expenses from the payroll taxes at the cost of reducing their later Social Security benefits. They also point to the effect of reducing health care.


two crows said...

another back door attack on Social Security AND an attack on employer-provided health care plans?
ANOTHER war on two fronts!
unfortunately, if he gets away with it, this one might work.

Anonymous said...

By taxing health benefits provided by employers...

But he didn't actually say this did he? I combed through the speech and couldn't find it. Made the whole health-care proposal make even less sense. I know that the tax has been alluded to on a number of occasions previously. Strange.

KnightErrant said...

The plan, as I understand it, is to tax "Cadillac" benefits.