Bush’s Health Plan Called Smart Politics; Critics See a ‘Gimmick’

When President Bush’s critics would charge that the administration’s healthcare policy -- which emphasized tax-advantaged health savings accounts -- was tilted in favor of the rich, supporters had an easy answer. They would point to a costly White House proposal to provide poor families with tax credits toward the purchase of medical insurance.

Now, that response is no longer available. After making no progress winning congressional approval for the 10-year, $74-billion credit, administration officials have quietly revamped the measure in ways that would sharply reduce its costs and thereby offset the price tag for the White House’s proposed expansion of health savings accounts.

Some analysts see smart politics behind the design of the administration’s latest healthcare package, which Bush announced, with little detail, in his State of the Union address Tuesday.

“They have hit some really important themes, they’ve solved some political problems and, if it were to pass, it wouldn’t cost much,” said Joseph Antos, a health policy expert with the conservative American Enterprise Institute in Washington.

But the proposal for more tax breaks to promote the accounts, along with a much narrower tax credit to help provide medical coverage for the poor, seems certain to gall White House critics, who were organizing Wednesday against the president’s plan.

“Like his Social Security privatization fiasco, President Bush’s health savings accounts are a gimmick that will only make a bad situation worse,” Sen. Edward M. Kennedy (D-Mass.) told a Capitol Hill rally.

Health savings accounts, which have long been favored by conservatives and won congressional approval in 2003, are designed to get individuals to play a bigger role in shopping for healthcare with the hopes that they will make more cost-effective choices.

The idea is that by coupling a bare-bones, high-deductible insurance policy with an account into which people can deposit money tax-free and withdraw it for medical expenses, individuals will have a greater financial stake in getting reasonably priced care.

The accounts are “an opportunity for people to ... have more skin in the game,” Allan B. Hubbard, director of the White House National Economic Council, told reporters during a briefing Wednesday.

Most elements of the administration’s latest package are not new. Even sympathetic observers, such as Antos, think the plan stands little chance of passage during what promises to be a contentious midterm election year.

But the president and his aides hope the proposal will prove sufficiently compelling that voters credit the administration with trying to act against rising health insurance costs.

In addition, Bush appears to want to use the health issue to help keep alive the “ownership society” agenda he advanced during last year’s Social Security debate -- the idea that individuals should shoulder many of the risks and responsibilities now included in government safety-net programs.

Among the key elements of the latest White House health plan:

* Raising the annual amounts that people can contribute tax-free to their health savings accounts from the current maximums of $2,700 for individuals and $5,450 for families to $5,250 and $10,500, respectively. Administration officials said the higher contribution levels would allow people to pay all of their out-of-pocket medical expenses tax-free, but critics say the White House estimate is exaggerated.

* Permitting individuals to use the tax-free funds in their accounts to pay the premiums for the required bare-bones insurance policies. Critics say this illustrates that the White House’s assertions are exaggerated, noting that if the money in the accounts went to pay premiums -- which in the case of a family policy can be $8,000 or more -- it would not be available to pay out-of-pocket expenses.

* Preempting state regulation of insurance policies used to qualify for certain types of health savings accounts. White House officials say this would reduce the cost of policies by protecting them from expensive state mandates. Critics, including some conservatives, say this is at odds with traditional Republican beliefs in small government and states’ rights. “It violates the bedrock principle of federalism,” said Michael F. Cannon, health policy director with the libertarian Cato Institute in Washington.

One area in which analysts said the White House plan seemed unexpectedly light was in requiring doctors, hospitals and insurers to provide price information so individuals could shop among providers. White House documents said the president would “urge” disclosure of the information, but went no further.

Under the administration’s original low-income tax credit, which it has proposed repeatedly in recent years, individuals making as much as $15,000 and families making as much as $25,000 were eligible for credits of $1,000 and $3,000, respectively, to help pay for traditional comprehensive insurance.

Under the new proposal, low-income families would only be eligible for the credit if they buy bare-bones policies.