Using tax-cut apples to solve health-care crisis oranges

In honor of last night's State of the Union, it's time for another heath-care-and-taxes rant.

I'd seen articles suggesting that a health-care proposal would figure into the speech, and looking at a transcript, I see that Bush acknowledged we have a problem: "Many Americans cannot afford a health insurance policy." (Bush also said that the government has an obligation to care for "the elderly, the disabled, and poor children," and that private insurance is the best way to cover everyone else. I disagree and think we should have universal, government-based health care, but it seems like we're still a few years away from the current system collapsing into such a rubble that universal-care proposals become tenable.)

I am left genuinely confused about how the proposal is supposed to address the problem. Once again, this seems like an outright tax break camouflaged as a health-care-reform measure.

Bush's proposal is to create a new, additional standard deduction (available even if you don't itemize your return) for people who purchase health insurance. If you buy it, you'll be able to deduct $7,500 (for individuals) or $15,000 (if you have family insurance) from your taxable income. The idea seems to be that this reduced tax burden will free up money that currently uninsured people will use to purchase insurance.

The flaw in that logic? If you can't afford the premiums for a health-care plan, it's unlikely that a tax incentive will change your mind. CNN's detailed analysis includes White House estimates that this tax break would motivate 3 million to 5 million currently uninsured people to get coverage. With an estimated 46 million Americans uninsured, that's a barely noticeable dent.

This proposal would make insurance more affordable for self-employed people who don't currently get any tax write-offs for buying health care, as people with employer-sponsored plans already do. (All of my health-care premium payments are already tax-free.) That's a great thing, and I'd be happy to see tax breaks targeted at that specific issue. But this plan would also hand money back to scads of people who already have insurance and don't need this incentive. (Like me. Since the proposed $7,500 deduction is far more than amount I currently deduct to cover my premiums, this plan would effectively shelter an additional $6,000 or so of my income.) If Bush wants to increase standard deductions, fine, but, doing so under cover of "addressing the health care problems" is duplicitous.

Because this tax plan does nothing to address the real source of skyrocketing health-care expenses: a massively inefficient system. Getting more people insured does little good if insurance plans continue cutting back on what they cover and hiking premiums, while the system's worst problems, including its inscrutable and inflated cost structure, continue unchecked. For a very good (and very long) examination of what's going wrong and why, check out "The Health Care Crisis and What to Do About It."

Bush's State of the Union proposal is, of course, simply a proposal. Any actual legislation along the lines he suggestions would take months to pass and years to enact, and is unlikely to get through the current Congress, anyway. (Right now, it seems unlikely Bush could get a resolution praising fluffy kittens through Congress without vicious opposition.) But the administration's drastic misdiagnosis of the problem bodes ill for the chances of any significant reform proposals to address the urgent-and-growing problems with our health-care system.