Reader Responses January 25, 2007

SURVEY SAYS: Will the President's Health Care Proposal Level the Playing Field?

Tuesday night in his State of the Union address President Bush unveiled a new health-care proposal.

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The President says that the proposal would make health care more affordable for those who must buy health insurance outside employer-sponsored programs – but admits that it will make it more costly for at least some of those who have access to those programs through the workplace (supposedly, 20% of those who have that access).

This week, we asked readers how they thought it would turn out.

Well, according to this week’s responses, President Bush’s health-care proposal fails to live up to the medical profession’s Hippocratic Oath – to first do no harm. More than half – 57% of this week’s respondents – thought that the proposal would not only fail to help those without workplace coverage, but would also hurt those who currently benefited from such coverage. “This is a no-win proposal for many of us who provide excellent health benefits for our employees,” noted one. “The benefit package is what we use to recruit and maintain top employees in our sector. In today’s societ,y where benefits can mean more than wages in employee comfort, this is a move in the wrong direction for many of us.”

“It will raise taxes and ensure the level of insurance for all will be diminished to a level needed to cover the amount companies have to fork over in additional taxes. Inc. after a company name does not mean endless financial resources available,” said another.

“I doubt if it will help or hurt many: Those who have very expensive coverage are likely to be able to afford the tax, and those who don’t have insurance are unlikely to be able to afford the coverage even with the tax break,” said one reader. “Tax deductibility is not the crucial deciding factor for low-income families who do not purchase health insurance. You first need to be able to afford the insurance,” observed another.

“I don’t think a tax break is going to help the uninsured,” opined another. “I am afraid that the proposal could move companies now providing plans to decide to provide decreased benefits or eliminate the plan all together.”

One reader picked up on a comment by an Administration official in the press conference “So, as far as the employer is concerned, everything is the same except they now treat this premium that they were paying for you just like they treat the wages that they paid you. So it shows up on your W2. It’s FICA — payroll taxes are due on it and income taxes are due on it.” The reader noted that ” this implies that it is NOT neutral for the employer, because the employer pays a share of the FICA. If the employer now has to pay FICA on the insurance benefit money, we have a new cost that has NOT been clearly spelled out.”

Not that Simple

Roughly 15% thought that it would help those who currently don’t have coverage, but hurt those who do. Still, as one noted, the Administration “seems to think that private health insurance is freely available to all at affordable prices, regardless of your medical history. How will this proposal help someone who is uninsurable?” A number of readers raised concerns that regional differences in things like health-care costs (and health-care benefit levels) would be disproportionately impacted. Other concerns included the large number of lower-income workers who aren’t paying enough federal taxes to make the deduction worthwhile, and the indexing of the deduction to the consumer price index, rather than health-care costs ( “AMT II , “ one called it, referring to the current debacle over the Alternative Minimum Tax).

Of course, even if the proposal served to make it more financially viable for those currently without health care, one asked, “Did I miss the part of this plan that involved a magic wand and fairy dust that causes the entire country to suddenly become educated and frugal health consumers?”

In fact, 17.5% said it was too soon to tell. However, that group included the reader who said, “It may be (d) too soon to tell but, initially, I am guessing it will (a) resolve inequities in health-care cost/access, unfortunately NOT by helping those who don’t currently have workplace coverage, but by hurting those who do. It appears to me that we will be weakening the strong, which, according to Abraham Lincoln, will not strengthen the weak.”

The remaining 10% (tellingly, no one was willing to concede the President’s stated objectives would be achieved) opted for “other,” for a variety of reasons, including:

“What a bunch of bunk! That’s the most ridiculous idea I’ve ever heard!”

“After reading your survey immediately after the Wednesday Wisdom article, I can only say that Mr. Friedman was an optimist.”

“If the billions of dollars the lobbyists and special interests spend would be used to help the health-care problem, there wouldn’t be a problem anymore.”

“While I applaud the effort, I do not like the thought of government ‘fixing’ our problems. It hasn’t worked in the past.”

“Armies of experts continue to divide and conquer consumers at the bargaining table.”

“It’s not going anywhere, so why speculate?”

“As with most initiatives of this nature, the devil is in the details. I am curious about exactly who has a ‘golden platter plan’….Oh, wouldn’t that be Federal employees, and wouldn’t it be a shock if they are exempt!?”

But this week’s Editor’s Choice goes to the reader who noted, “Only someone who doesn’t have to rely on coverage by their employer would think of something as idiotic as this.”

Thanks to everyone who participated in our survey!

Armies of experts continue to divide and conquer consumers at the bargaining table.

As with most initiatives of this nature the devil is in the details. I am curious about exactly who has a "golden platter plan"...Oh wouldn't that be Federal employees and wouldn't it be a shock if they are exempt!?

As far as helping the average middle class family that has no insurance to get insurance - they now have some real options - they can either fork out 30+% of their gross income now in order to realize that valuable tax deduction in 14 months or they can take their chances - don't buy any insurance- invest all the money they are saving in their newly acquired 401(k) -since their DB plan went belly up. They can then pay for their unpaid medical expenses via hardship withdrawal - of course that might ruin the whole tax break concept!

I listened to the speech and I have read a bunch about the proposal this morning. We sell Health Insurance at my firm. Unfortunately I still don't understand it. I don't think a tax break is going to help the uninsured. I am all for tax breaks! I believe most folks that don't have Health Insurance are not going to go out and buy it just so they can get a tax break. I am afraid that the proposal could move companies now providing plans to decide to provide decrease benefits or eliminate the plan all together.

After reading your survey immediately after the Wednesday Wisdom article I can only say that Mr. Friedman was an optimist.

I'll choose E, other. Only someone who doesn't have to rely on coverage by their employer would think of something as idiotic as this. Until Congress and the rich have to use the same process as the rest of us, I wish they would just shut up and let us handle it.

I would opt for "d" as it's too soon to tell. As we all know, what we get in the end will look nothing like what the president proposes after all of the lobbyists and special interest hacks get finished with Congress. In fact, if the billions of dollars the lobbyists and special interests spend would be used to help the health care problem there wouldn't be a problem anymore.

I just don't think the President understands the Healthcare issue, so (c) not help those without workplace coverage - and hurt those who with coverage. My belief is that bad debts, malpractice premiums, inequity in the price for service to insured vs uninsured and the paperwork required for doctors to get paid from the array of payors are 70% of what patients pay for when we visit our physician. To illustrate, I had a procedure last year that, although not uncommon, my doctor said might not be covered by insurance. I called the doctors office and asked "How much?" The answer "$1,850". "How much if my insurance doesn't pay" "If you pay on the day of the procedure, $600"

C-While I applaud the effort, I do not like the thought of government "fixing" our problems. It hasn't worked in the past. Look at HIPAA, FMLA, and Social Security, good legislation and programs that have been turned into nightmares for employers to manage and threatened insolvency for future retirees, all courtesy of our legislators. I have a feeling if the idea is pursued in Congress, somehow it will it will turn out to be like no-fault car insurance in Michigan. (All of the insured drivers pay a portion of their premiums into a pool to cover the expenses of those drivers who do not have insurance on their vehicles and get have accidents. Yet, it is illegal not to carry at least PL&PD....).

I doubt if it will help or hurt many: those who have very expensive coverage are likely to be able to afford the tax, and those who don't have insurance are unlikely to be able to afford the coverage even with the tax break. I didn't hear anything about indexing the exemption, leading me to wonder if this is a prelude to taxation of 100% of the cost of health care benefits.

I'll go with answer (e) other. In my opinion anything that President Bush proposes before getting our troops out if Iraq will be stuck in committees (i.e. neutral). Without support from both sides in the House and Senate the President is a "lame duck" almost two years before the 2008 election. I hope that I am wrong and they can all work together to accomplish great things for our country but the Iraq issue is the most polarizing issue in a very long time. With an approval rating of 28% President Bush is fighting an UPHILL battle for anything he proposes. God Bless our Troops and our Country.

(e) other. I responded this way because even though I've ready a summary of his proposal (not many details), I still don't quite understand the proposal nor what the impact will be on employees covered under employer-sponsored health plans within a 125 plan.

I'll have to concede that at least this Republican administration is addressing the issue. (b) is the obvious and easiest choice While considering all the political motivations and ramifications... the other end of the issue is where the problem truly lies. Taking on the AMA would still be more effective and adversely affect fewer financially.

He's in the midst of a crash and burn with the Iraq debacle. As long as political suicide is on the horizon, why not go down in a true blaze of glory by reforming health care costs where the costs are generated and out of control - not just rearranging the methods used to finance them.

(C) As I understand it the vast majority of uninsured people will still not be helped and the people with insurance by 2009 are likely to see a tax hike due to the rising costs of insurance even if they are currently under the $7,500 deduction.

What is not getting referenced at all is what the states will do. North Carolina bases its taxes on federal taxable income plus some additions. The moment health benefits become taxable income for the US Government North Carolina will tax them and the probability of getting any offsetting standard tax deduction in NC is zero.

You put the correct answer to the survey question in the Wednesday Wisdom!!! Option (e) is my answer... "The government solution to a problem is usually as bad as the problem."

b - It's government meddling again. It will help those who purchase health care outside of an employer plan - and that's great. However, as I understand it, the employer will not receive a deduction for the employer contribution. If this happens, employers will shrink their contribution to health care which will hurt employees. It's a nice try, but just reshuffles the deck.

(d)--do we really think that a hostile Democratic Congress will be caught dead passing anything proposed by this weakened President these next two years?! Not on your life.

Inasmuch as the health insurance premium would under this plan be taxable income, are there any thoughts on the effect on social security taxes for both the employer and employee? It's not much of an incentive if 7.5 % additional has to be paid by both the employer and employee. Am I right, or don't I see something here?

I would have a question as to the FICA treatment of this income. If in fact kicking the premium into earned income would trigger social security taxes for both the employee and employer, it doesn't seem it would be all that exciting. If it did not but required the employee to fill out some sort of filing form with the IRS, our experience has been that those would benefit most probably would not file, thus losing the advantage. Is this thinking correct or am I missing something?

I choose (c) because I'm not in favor of current taxation for an eventual credit. I'm not sure how this helps anyone unless they *don't* have insurance and get the credit.

(d) Other.

Under the Bush proposal, employees of companies with aging workforces will pay higher taxes because their health care costs and their costs per covered employee will likely exceed the deduction limits.

Baby boomers have been patiently paying for employer-sponsored health care plans for more than three decades while their claims costs as a cohort were relatively low, thereby subsidizing health insurance for the preceding generation. Now that the baby boomers are middle aged and can expect more medical expenses, both political parties want to change the rules to reduce benefits or transfer costs to the older employees. The Bush proposal is unacceptable. However, the Democrat Free Clinic approach to health care "reform" which we can expect from Hilary Clinton, John Edwards, et.al. is far worse and unacceptable as well.

(e) I don't think it addresses the health care issue. Everyone needs health insurance, but it is provided by public companies whose responsibility is to be as profitable as possible for their shareholders - not as affordable as possible for the general population.

My opinion re Bush's health care proposal is (c), that it won't help those without workplace coverage and will hurt those with coverage.

I like how your Wednesday Wisdom goes with the survey topic. I choose (D). I don't think this is going to help anyone, but it'll hurt those who enjoy employer-paid health benefits. I don't know much about the proposal, but I am wondering if it'll end up somehow causing more taxes to be paid by the employers, as well as the employees, thus causing the employers to change or eliminate their health-care programs.

Herr Buschler seems to think that private health insurance is freely available to all at affordable prices, regardless of your medical history. How will this proposal help someone who is uninsurable?

Regarding President Bush's new proposal to tax health care benefits provided by employers in exchange for a standard tax deduction, I have lots of questions and issues:

As usual, the high cost regions of the country, like New York and Southern California (i.e., the blue states), will end up subsidizing the lower cost regions (i.e., the red states), because the cost of health insurance is much more likely to exceed the $15,000 deduction if you live in a high cost area. Since insurance re-imbursement is often based upon UCR fee levels, how about an adjustment to either the taxable amount to the employee or the amount of the standard deduction based upon the regional differences in health care costs?

Also, this does nothing to help those whose incomes are the lowest, who still won't be able to purchase health insurance or who won't get any income tax benefit because they are not paying income taxes! Many of the working poor are already getting the Earned Income Tax Credit, so another deduction won't provide any additional purchasing power for them to purchase health insurance privately.

What happens to those of us who itemize our deductions? Living in a high cost state where my real estate taxes and state income taxes are high (well in excess of the current standard deduction plus $15,000), will I still get the benefit of the new standard deduction?

Will the deduction affect the Alternative Minimum Tax calculation? What good will the deduction be if I'm actually paying the AMT, not the regular income tax?

Lots of questions!!

I'm thinking (b), I don't have a problem with helping those who do not have coverage at work, but why do those of us who do have coverage at work have to pay more. My contribution into our health care plan at work has gone from $0 to $360 per month in just a few years. Now granted that's not a lot of money considering the cost of healthcare, but I haven't gotten a salary increase commensurate with the rise in healthcare premium.

I think that what Bush has proposed will not help the majority of people who currently do not have health insurance. Tax deductibility is not is the crucial deciding factor for low income families who do not purchase health insurance. You first need to be able to afford the insurance. If you are earning $10 an hour (around $20,000 annually) you can hardly afford to pay the high insurance premiums, let alone worry about a deduction. Who will benefit the most from this tax deduction, the wealthy who can afford to pay for insurance. Not the low to middle class, hard working, average American family who struggles to pay the rent, pay for insurance or save for retirement.

Survey answer.

I think C. It's not going to make a big difference for those without health care coverage and it will definitely hurt those with coverage. It is short sighted and inappropriate to "punish" those who have good health insurance through their employers. It's just taking one part of the system that works and trying to make it not work. Makes no sense whatsoever. I do think there should be a tax deduction for those buying insurance on their own. That seems fair to me but paying for it on the backs of those who do have insurance is wrong. People work hard for their benefits, make employment choices to get good benefits and, as some have pointed out, have given up wage increases to get those benefits. I have written much more and erased it several times. I will let discretion reign and say no more. Personally though, I think it's a terrible idea.

Survey vote for choice C. Anything Bush comes up with will be a disaster.

For those who have no coverage now - how can anyone make it affordable for them if they don't have a job or are working poor? Most employees already pay a fortune for their coverage. Most employers are having a hard time paying the high costs and are passing them down every year. And now Bush wants to pile on too. I don't know much about how it is elsewhere, but I have heard that people in other countries are appalled at our (lack of) health coverage.

(However, I am not affected by my employer's increases. I am covered under my husband's union insurance which is truly a blessing. All those who "ney say" unions don't understand.)

Other: It's not going anywhere, so why speculate

I guess I'd have to pick (d), because I have some questions that haven't been answered.

1) What about FICA? The press briefing specifically said:

"So as far as the employer is concerned, everything is the same except they now treat this premium that they were paying for you just like they treat the wages that they paid you. So it shows up on your W2. It's FICA -- payroll taxes are due on it and income taxes are due on it." This implies that it is NOT neutral for the employer, because the employer pays a share of the FICA. If the employer now has to pay FICA on the insurance benefit money, we have a new cost that has NOT been clearly spelled out. For any Safe Harbor-type 401(k) plan, the employer also pays 3% of wages. If we are dramatically increasing wages, there will also be an effect of the employer's cost for the Safe Harbor designation.

2) What about the AMT? A new huge deduction will surely make a lot of people get hit by the Alternative Minimum Tax and thereby lose the deduction. I live in a high-tax state so it is quite easy to fall into AMT in my state. If the AMT problem is not addressed, the tax effects they are planning on will be elusive.

It may be (d) too soon to tell, but initially I am guessing it will (a) resolve inequities in health care cost/access, unfortunately NOT by helping those who don't currently have workplace coverage but by hurting those who do. It appears to me that we will be weakening the strong, which, according to Abraham Lincoln, will not strengthen the weak. I would suspect that the 20% who have the best healthcare benefits will have those benefits reduced.

Re: survey response is "b", but also "d" in that it's too soon to tell if it will really help those w/o employer-provided coverage.

This is a no win proposal for many of us who provide excellent health benefits for our employees. The benefit package is what we use to recruit and maintain top employees in our sector. In today's society where benefits can mean more than wages in employee comfort this is a move in the wrong direction for many of us.

(e) What a bunch of bunk! That's the most ridiculous idea I've ever heard!

I guess your question was rhetoricalâ€¦. Since you answered your own question â€¦ see above.

I don't know enough about Bush's "surface run" at this problem. However, I do suggest that leveling the playing field: Give everyone a deduction for medical careâ€¦ it would have to be a tax credit based on familyâ€¦ "health premium to a maximum of $1,5single, $6,000 married and $8,000 married and two kids, â€¦ for example. Health savings accounts should be available to all, with a maximum of $5,000 pre-tax.

A lot moreâ€¦.

To me it's a strong (e), yet another welfare cradle to grave unneeded social program and a path into taxing one of the few things currently untaxed.

It will raise taxes, when government is involved they simply can't help themselves. It always starts on paper as something that pays for itself, then benefits are added and reality hits and sha-zaam a new tax is born out of this new dire need or even a full scale crisis. . It will raise taxes and assure the level of insurance for all will be diminished to a level needed to cover the amount companies have to fork over in additional taxes.

Inc. after a company name does not mean endless financial resources available, come on down!

At this point, d) too soon to tell, but sounds like b)

I vote (e) with Milton, "The government solution to a problem is usually as bad as the problem."

My gut reaction is that if you give people a flat credit, regardless of what they actually had to pay, then the best outcome that can be expected is that our creative uninsured people will find the cheapest coverage available to get the maximum tax credit. And for those unfortunate people that can't figure out how this plan effects them personally, or still can't afford a quality medical plan, will remain uninsured. So our end result is that we'd have people barely insured getting a pretty good tax break, those 20% currently covered getting a tax increase, and a large population still uninsured. -Or did I miss the part of this plan that involved a magic wand and fairy dust that causes the entire country to suddenly become educated and frugal health consumers?

You didn't put the link where we can read more about the proposal.

Off the cuff, I'd say "c". Penalizing those of us with good health care plans through our employers isn't the solution. There needs to be a health care plan set up that would be open to anyone who is not covered through their job. It should be affordable and have decent benefits. One plan for millions of eligible people should be fairly profitable to whoever administers it.

And Bush's previous suggestions about health care savings plans are not going to cut it for those people making minimum wage - they can't afford basic needs, where would they get money to save - even it is tax deferred?

I would have to go with option 'c,' and your Wednesday wisdom tells why ("The government solution to a problem is usually as bad as the problem." - - Milton Friedman) The problem with health care is its high and uncontained costs, not the lack of insurance coverage. In fact, health care costs exploded only after the government created Medicaid and Medicare, which forced companies to offer similar benefits to their employees. Once people were covered by insurance or government programs, they no longer cared what medical care cost, because they paid little or none of the costs. People need to pay some fraction of the actual expenses incurred so that they realize what health care costs, and, then, perhaps, they will become more informed consumers.

Definitive D followed closely by E. Nothing is as it seems. Bush's leveled playing fields leave all the divots behind. There is bound to be a sink hole or two just waiting to catch the unwary.

Personally, I liked the other survey also: John Hancock Life Insurance Company said the survey participants would opt for the will planning over retirement planning. Why not? Death is for sure but retirement looks less & less likely. More than half (53%) said that going to a nursing home is worse than becoming bankrupt (my aside: & usually follows it), and half said they consider time served in a nursing home worse than dying. I believe!

Hey! Actually that was the one part of the speech I wanted to know more about. Of course, I couldn't find anything succinct online (and your link wasn't there or wasn't working on my e-mail). On the surface it sounds like a prime opportunity to get screwed. I know IBM spends more than $15,000 a year on me on insurance, so would I be taxed on the amounts ABOVE that? That's what I was wondering...also, does the cap increase with the cost of healthcare? If it doesn't, it will be rendered useless eventually.

Not help those without coverage; hurt those with coverage. In the area of employee benefits the President has surrounded himself with people who are long on ideas based on his marketplace philosophy and short on real life experience. This dog won't hunt.