In his State of the Union address last week President Bush finally
acknowledged, after five years in office, that “we must confront the rising
cost of [health] care…and help people afford the insurance coverage they
need.” Millions of Americans have lost access to health insurance since
Mr. Bush took office in 2000. But his proposal to “strengthen health savings
accounts by making sure individuals and small business employees can buy insurance”
will have little if any impact on the poor and middle class who lack coverage.
Instead, it will help the wealthy protect their assets, and actually increase
the ranks of the uninsured.
According to a study by the Economic Policy Institute, approximately 3.7 million
people lost employer-sponsored health insurance between 2000 and 2004. The proportion
with health insurance provided by their employer declined from 63 percent in
2000 to 59 percent in 2004. Although 80 percent of families in the top one-fifth
of wage earners have insurance, only 20 percent of families in the bottom one-fifth
of wage earners have health insurance. Families earning $20,000 - $38,000 annually
saw the largest decline in employer-sponsored insurance since 2000, falling
from 54 percent to 47 percent.
Since 2000, part-time workers have experienced a decline in health insurance
supplied by their employers by almost three percent. Full-time workers have
seen a decline of more than two percent. Employer-provided health care coverage
has declined more precipitously for children than any other group. Between 2000
and 2004, the decrease in insurance provided by employers for dependent children
dropped by almost five percent.
Only 18 percent of children in the bottom one-fifth of wage earners have employer-sponsored
insurance, compared to 87 percent of children in the top one-fifth of wage earners.
Not surprisingly, during President Bush’s first term the proportion of
children enrolled in Medicaid, the federal health care plan for the poor, grew
by almost seven percent.
Mr. Bush’s plan to expand health savings accounts (HSAs) would have almost
no impact on those currently lacking health insurance. But as with most of President
Bush’s fiscal policies, it would be a huge tax advantage for the wealthy,
according to a study by the Center on Budget and Policy Priorities. HSAs allow
families who enroll in high-deductible health insurance plans with minimum deductibles
of $2,100 to establish tax-favored savings accounts. The accounts are wonderful
tax shelters for the wealthy since contributions, earnings, and withdrawals
for out-of-pocket medical expenses including deductibles, co-payments, and non-covered
medical costs are tax-free.
Under proposals recently offered by the Bush administration, 100 percent of
the costs of a high-deductible insurance policy would be tax deductible. But
since the value of a tax deduction increases with a family’s tax bracket,
the proposal would ensure the largest tax benefits for the wealthy, most of
which can already afford health insurance. Workers who do not earn enough to
pay taxes and who lack insurance would receive no benefit from the deduction.
And the deduction would decrease the cost of health insurance policies by only
10 to 15 percent, at best, for three-fourths of America’s middle class
Many economists have warned that allowing the total cost of the premium for
a high-deductible insurance policy to become a tax write-off would prompt some
employers to decrease or eliminate the health plans they offer. Since workers
could claim more of their medical expenses on their taxes, economists fear that
this would serve as a rational for some employers to simply discontinue offering
Currently, families with an HSA may claim a tax deduction for contributions
made to the account of up to $5,450. President Bush’s proposals include
raising the tax deduction to $10,500. But families without health insurance
are overwhelmingly among the bottom one-fifth of wage earners. These families
simply do not have $10,500 to devote to a health insurance policy; they typically
earn $38,000 or less annually. This proposal would almost exclusively benefit
the wealthy, which would use it as a tax shelter. And it would further encourage
employers to discontinue offering health insurance.
Last year was the fifth consecutive year in which employer-sponsored
health insurance coverage declined. At least 46 million Americas are now without
health insurance. And most earn too little to put much money toward a high-deductible
health insurance policy. With rising inflation the working poor and middle class
are lucky enough to be able to save $100 toward the cost of their health care,
let alone $10,500. The president’s proposal to “strengthen health
savings accounts” is nothing more than an attempt to increase tax shelters
for the rich.
Gene C. Gerard, firstname.lastname@example.org
taught history, religion, and ethics for 14 years at a number of colleges
in the Southwest and is a contributing author to the forthcoming book Americans
at War, by Greenwood Press.He writes a political blog for the world news website
OrbStandard at www.orbstandard.com/GGerard.