Social Policy: Rx Band-Aids To Patch Up Health Care

The idea that every American should have access to affordable health care has been gathering political force since Democrat Harris Wofford used it to trounce former Attorney General Dick Thornburgh in the Pennsylvania Senate race last fall. Here, Democrats believed, was a domestic issue they could use to help drive George Bush from the White House -- and Republicans feared they were right. And so last week the President, unnerved by declining approval ratings and a tepid response to the hodgepodge of tax cuts he proposed in his State of the Union address, unveiled his own prescription for reforming the health-care system.

Bush's plan is designed to make it easier for the 36 million Americans who currently lack medical insurance to obtain it, while leaving the basic structure of the health-care system intact. Working families who earn less than $14,300 annually would receive vouchers worth as much as $3,750 to pay health-insurance premiums. Middle-class families with earnings of up to $80,000 a year could deduct premiums of as much as $3,750 from their federal tax returns. To cut the cost of policies, Bush urges small businesses to band together in "health-insurance networks" that could bargain for lower rates.

Health insurers -- who would gain millions of new customers under Bush's plan -- hailed the proposal. The President was praised for addressing one of the major flaws in the existing insurance system: denial of company-sponsored coverage to new employees if they suffer from "pre-existing" ailments. With Bush's plan, companies could no longer legally turn down applicants no matter what their health status, but the cost of private coverage would still be prohibitive.

But Bush's reform plan has huge drawbacks. One is that his $3,750 tax credit and deduction will not cover the $5,600 price of insurance premiums for an average family. Another is that it will do little to curb the skyrocketing costs of medical care, on which the U.S. spent $800 billion last year and which are rising at a rate much higher than that of inflation.

Moreover, Bush did not spell out precisely how to pay the $100 billion, five-year cost of his program, saying, "We'll figure that out." He sent Congress a 38-page list of financing options, none involving higher taxes.

Some of the money would come from restrictions on federal payments for Medicaid, the program that serves 27 million Americans, including half of all nursing-home patients. The plan would also hike Medicare premiums for the wealthy, an idea that is certain to provoke protests. In 1988, the last time Congress attempted to make upper-income retirees pay more, a revolt among seniors forced repeal of the catastrophic-care law the following year. Fear of a similar backlash led Bush advisers to drop the idea of reducing tax deductions for company-paid health insurance, a subsidy expected to cost $43 billion this year. Administrators of teaching hospitals, often the care providers of last resort for the poor, are poised to battle Medicaid cuts. They note that even now they do not receive enough money to meet the task.