President Bush will propose that Americans be allowed to take tax deductions on more of their out-of pocket medical expenses, as part of an initiative the White House believes will rein in soaring health costs by shifting responsibility toward individuals, according to congressional and other sources familiar with the administration’s thinking.
The new tax breaks for personal health spending, to be included in the 2007 budget Bush will release in less than two weeks, are designed to help the uninsured and to allow people with insurance to write off a greater portion of the money they spend on co-payments, deductibles and care that is not covered. Under current tax rules, people can deduct medical expenses only if they exceed 7.5 percent of their adjusted gross income.
This idea is slightly funny. The premise is that people don’t pay enough of their medical bills when they have private insurance. The way to get them out of insurance is to…um…pick up part of their medical bill. Admittedly the percentage of third-party payment would fall, at least if this works as planned. But note we are making the government the new insurer. I also predict the tax deduction will evolve into a credit which will evolve into…Yikes!
That is not all. Health savings accounts will be expanded and:
Bush intends to propose changes to allow people to keep their insurance, without extra cost, if they change jobs or decide to start a business, building on a decade-old law that was designed to make health coverage more "portable."
I have no idea what is the underlying premise as to whether people overinvest or underinvest in private sector health insurance. I will blog more details of this as they become available. In the meantime, Arnold Kling shares my doubts.