Bush's Health Insurance Proposal

John Irons over at the Budget Blog at the Center for American Progress lays out some views on President Bush’s latest proposal to provide tax deductions on those who purchase healthcare outside of work.

Greg Mankiw weighs in here and provides an upbeat look on the proposal:

Economists have long suggested that tax subsidies lead to excessive use of employer-provided health insurance. This proposal would help fix that problem, while giving a helping hand to the uninsured.

John Irons dislikes the proposal because…

What ails the nation’s health care system cannot be cured by a simple tax change. For a variety of proposals on how to reduce costs and cover the uninsured, see CAP’s health care work.

Obviously John and Greg are two very intelligent economists, and I agree with the both of them, and it’s these kinds of informed men who should be engaging in the political debate. As for myself, while I may not agree with Arnold Kling on everything, I agree with this statement from him:

The number two policy problem is that American's extravagant use of medical procedures with high costs and low benefits is paid for in part by government subsidies. Remove the subsidies, and I don't care how Americans handle their health care, just as I don't care how they buy cars.

My stance: I also don’t like the subsidies because those too provide inefficiency in the healthcare system. Unfortunately, I also agree that a real problem in health insurance is for people who can’t afford health insurance at all. Yet, maybe there’s a way we could provide a “floor” for coverage that does not exclude larger ailments, but rather, helping protect against those large ailments (e.g. cancer) is the main reason why the insurance would exist. The “floor” would act almost like liability insurance for vehicles, which may not be the best coverage, but still provides insurance in accidents and large catastrophes. Arnold Kling is a proponent of this idea, and while I’m still not sold completely on it, I believe it is part of the best way forward.

If I could, I would vote for the proposal if President Bush changed it in the way this Washington Post Op-ed suggests:

Rather than embracing tax deductions, which are most valuable to people in high tax brackets, Mr. Bush could have made his proposal even more progressive by recommending a refundable tax credit that would be worth the same to everyone.

Maybe President Bush will change it. I certainly hope he does.