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.