An Evaluation of the President's Health Insurance Proposal

President Bush has proposed to replace most tax subsidies for healthcare with a standard deduction for health insurance available for taxpayers who have qualifying insurance coverage. The proposal would equalize the tax treatment of traditional health insurance for people who get coverage through their jobs and those who buy insurance in the nongroup market, although it would retain some preferences for high-deductible health plans. It would also remove current incentives to overspend on healthcare. The basic thrust of the proposal - leveling the playing field for health insurance - is laudable. But the plan fails to address some of the most significant problems in today's market for health insurance and actually threatens many of the most vulnerable families.This report explains the proposal and its likely effect on the distribution of tax burdens and insurance coverage. It suggests specific changes that would make the proposal fairer, improve its chances of meeting its goals, and reduce the risks of exacerbating the market's current problems