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Bush
Health-Care Plan Wall Street Journal
It's a measure of the failure of government these days that business has emerged as a leading advocate of action on social issues in the U.S. Increasingly, business leaders recognize that problems left to fester by Washington will eventually infect them. That's why 10 of the nation's largest companies -- including General Electric, DuPont, Caterpillar, Alcoa and Duke Energy -- called on the White House this week to support mandatory cuts in the emissions believed to cause global warming. Such action would likely mean higher costs for the companies. But they fear that President Bush's failure to engage on the issue will leave them facing a hodgepodge of state and foreign restrictions, and the possibility of much tougher action in the future by an administration less friendly to business. That's also why business lobbyists were quick to support the White House plan to overhaul the nation's health-care financing system. The president's proposal would impose a stiff tax increase on people with the most costly employer-provided health coverage, which includes not only highly paid union members but also the well-heeled executives of many of the nation's largest companies. But business groups say they are willing to take that hit in return for the chance to create a market-oriented health-care system. The rush to back the president's health plan may stem partly from ignorance. As of yesterday, business groups had only sketchy details from the White House and little sense of how the plan would affect their own members. For the proposal to work, somebody out there must pay tens of billions of dollars in added taxes. Yet no one seems to know exactly who. The president's plan follows the dictum of the late Sen. Russell Long -- son of Huey Long, the legendary Louisiana governor and senator -- that "tax reform means, 'Don't tax me, don't tax thee, tax that fellow behind the tree.' " The U.S. health-care system provides a veritable forest of sequoias. Exactly who pays how much for what remains obscure. Here's how the plan would work: The government would give every family with health insurance a standard deduction from income taxes of $15,000 ($7,500 for a single person). For people who buy their own health-care insurance, this would be an instant windfall because their insurance costs aren't deductible now. Those without health coverage would have a big incentive to buy it. For people with employer-provided health insurance, however, the benefit is harder to calculate. All employer health-care payments would be reported as income, and the employee would have to pay taxes on them. If the payments totaled less than $15,000, the family's tax bill would go down under the Bush plan. If they totaled more than $15,000, the tax bill would go up. Trouble is, most people don't have a clue how much their employer pays for their care. If the president proposed a tax on everyone who spent more than $30,000 on a car, we'd know whose ox was being gored. With health care, most of us are in the dark, which may help explain why we, as a society, pay so much for it. Any health-care plan like this has its drawbacks. One fear with the president's plan is that it will push businesses to drop their health insurance, a trend that's already well under way. Another is that it penalizes people in insurance pools dominated by older and sicker people. But overall, the proposal is a step in the right direction. The current system of health-care tax breaks is indefensible. It gives generous subsidies to well-paid union workers and executives who use their "cafeteria" health benefits and flexible spending plans to finance designer eyeglasses and orthodontics, while providing no subsidy at all to shop clerks who must buy insurance on their own. The president's plan levels the playing field. Moreover, the plan's business backers hope it could turn Americans into better health-care consumers, making them more aware of -- and more sensitive to -- the cost of their care. Will it become law? Not anytime soon. Mr. Bush is the lamest of ducks, mired in a war in Iraq and breathtakingly short on public approval. Meanwhile, Democrats already are busy fielding one of the largest casts of presidential wannabes in history. Washington is very unlikely to accomplish anything so ambitious in the next two years. Still, the Bush plan is a big idea that will help frame the health-care debate for the future. Alan Murray welcomes reader questions and will respond at WSJ.com/TalkingBusiness. Write to Alan Murray at Alan.Murray@wsj.com ABOUT BUSINESS
Alan Murray's Business, published Wednesdays, examines the intersection of business, public policy and economics. Alan is an assistant managing editor at The Wall Street Journal and a regular contributor to CNBC. A graduate of the University of North Carolina, he joined the Journal in 1983; he served for nearly a decade as the Journal's Washington bureau chief before joining CNBC in 2002. He holds a master's degree in economics from the London School of Economics. Alan is the author of "The Wealth of Choices: How the New Economy Puts Power in Your Hands and Money in Your Pocket." He is also a regular panelist on Public Broadcasting Service's "Washington Week in Review." Write to him at business@wsj.com.
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