Your Health Insurance Is on the Ballot

"When Dr. Johnson defined patriotism as the last refuge of a scoundrel, he was unconscious of the then-undeveloped capabilities of the word 'reform.'"

—Roscoe Conkling, New York politician of the Gilded Age.

George W. Bush's health-care "reform" plan would destroy the employer-based health insurance system. If this is the first time you've heard that charge, blame the same media that enabled the Iraq war.

Discussion has focused on how many uninsured the plan would cover—not on its effects on the insured. In fact, it would cover at best 6 of the 45 million Americans without health insurance; some experts estimate that it would cover only 1 million. Bush's 2005 budget contains no new funding for the plan, which would cost $70 to $100 billion; it would have to be paid for by cuts in other programs, but the Administration does not specify which ones. Thus, as Edwin Peck points out in a paper for the Center on Budget and Priorities, Bush finesses the situation so he can say he has a plan to extend insurance to the uninsured, "while also maintaining that deficits would be cut in half by 2009."

This is the pattern of deceit Paul Krugman has observed in Bush's overall budget forecast: Bush's claim that he will halve the deficit in his second term assumes that his chief domestic priority for that term—making the tax cuts passed in his first term permanent—will not be enacted.

Bush's "plan" to extend coverage—which consists of tax credits of $1,000 to individuals and $3,000 to families of four earning $25,000 or less—is the same one he proposed in the 2000 campaign. Yet insurance premiums have risen by over 50 percent since then; to more than $9,000. How many families earning $25,000 could come up with the remaining $6,000? Only 3 percent of those eligible have taken advantage of similar tax credits included in trade legislation passed in 2002. An unfunded "plan" to insure families obliged to invest a quarter of their incomes to benefit from it is a hoax wrapped in an illusion.

Clearly, insuring the uninsured is not the purpose of Bush's health-care reform plan. Undermining the employer-based insurance system is. This becomes apparent when you consider the other elements of Bush's plan—Health Savings Accounts and Association Health Plans. They share a common property. They will siphon the healthy and the wealthy out of standard group insurance plans. That will cause premiums to rise for the less healthy and wealthy remaining in those plans. Unable to afford the premium increases, more employees will drop out of these plans, increasing premiums for those who don't; and more employers will stop offering them. That will swell the ranks of the uninsured. Employers of low-wage workers, meanwhile, will curtail their group policies, telling employees to obtain insurance through the tax credits. Few will be able to afford the premiums, and as a result, many will become uninsured. Thus, a plan to insure the uninsured will in fact increase their number, and the crisis of the uninsured will engulf the insured. As a result, the employer-based health insurance system will unravel.

Health Savings Accounts were part of the 2003 Medicare Reform Bill; Bush wants to expand them in his second term. Health Savings Accounts allow individuals and families to opt out of their employer's comprehensive low-deductible medical insurance plans and take out high-deductible plans, which they can pay for by making tax-deductible contributions (of up to $5,000 a year) into IRA-like accounts. Experience bears out the contention that only the wealthy and the healthy would use them. On the "wealthy" point: Of the 16,000 employees of the University of Minnesota offered the high-deductible low-premium option, the incomes of those who took it were 48 percent higher than the incomes of those who did not. On the "healthy" point: Only 7 percent of the 4,600 employees of Humana, the hospital giant, took the high-deductible option and they were, as Gail Shearer and Susan Montezemolo write in a study for the Center for American Progress, "significantly healthier in every measure" than those who did not.

For the affluent, HSAs are savory deals. Those who chose this "catastrophic health care coverage," as Bush called it in his State of the Union address, can deduct 100 percent of the cost of their premiums on their tax returns. Before age sixty-five, tax-free withdrawals can only be made for medical expenses. After age sixty-five, tax-free withdrawals can be made for any purpose, which would make the HSA an unmatched retirement fund. $5,000 contributions for thirty years would create a nest-egg of $150,000, which contributors could invest as they wish.

The Bush administration calculates that HSAs would cost the treasury $150 billion over ten years. But, by making both contributions and withdrawals tax-free, the Center for Budget and Policy Priorities notes, the plan "breached a longstanding bright-yellow line," and is likely to provoke a rush to enroll. The long-term cost to the Treasury could be "hundreds of billions or even trillions of dollars of what otherwise would have been taxable income." Creating such structural deficits, on the testimony of Karl Rove, is the GOP's "starve the beast" strategy. Drained of funds, the beast—i.e. the federal government—will be unable to fund even basic services. That will weaken support for federal taxes, and provoke a tax revolt, which will further erode services, deepening the tax revolt. The idea is to return the federal government to the night-watchman state of the nineteenth century.

As for the Association Health Plans, they would allow small businesses to pool together across state lines to bargain for lower premiums. The Congressional Budget Office estimates that AHPs would increase premiums for 80 percent of businesses by the same "adverse selection" spiral described above: AHPs could obtain lower rates only by enrolling healthier members. "Meanwhile," Bradford Plumer reports in Mother Jones, "those workers who stay in an AHP will no longer be protected by state regulations, meaning that businesses could craft policies to weed out the less healthy." The result: more uninsured.

Some readers may object: what would be the political gain for the GOP in destroying employer-based health insurance? Lenin's question—Who benefits?—points toward the answer. Converting billions in premium costs into profits, business would benefit. Retiring on Health Savings Accounts, the wealthy would benefit. Unregulated insurance providers would benefit. The GOP would benefit from campaign contributions from all of the above. Fresh vistas of cronyism would open—as they did in last year's Medicare bill. The owner of a company that "helped craft the portion of the ... bill that allows seniors to buy drug discount cards," The Boston Globe reported, contributed to Bush's campaigns. And no wonder—Bush was an original investor in the company.

But surely the public would not sit still for this assault on health insurance? Which public? The 42 percent of Americans who still believe Saddam Hussein was involved in 9/11? The even-larger percentage who regard George W. Bush—a man unfit "to run a hardware store," in Philip Roth's words—as a "strong leader?" Bush calls the destruction of the employer-based system a step toward "the ownership society," and that Orwellian label should throw the media off the scent.

The Iraq war revealed how susceptible Americans are to propaganda. The Bush campaign rests on it: as they would have it, John Kerry has voted to raise taxes 98 times and to gut the defense budget; he wants to "nationalize" health care; and he was not a war hero.

So much more than health insurance is on the ballot.