Bush to Unroll Tax Breaks to Help Cover Health Insurance

Times Staff Writer

President Bush will propose helping as many as 14 million people acquire health insurance over the next 10 years through tax breaks and expansion of a program that covers children, officials said Friday.

The proposal is part of the federal budget he will submit to Congress on Monday.

Some 45 million Americans have no medical insurance. The tax breaks could make it easier for some of them to buy high-deductible health insurance to cover “catastrophic” costs for serious illness or injury while building up tax-sheltered health savings accounts for routine expenses. Bush says this approach would make coverage more affordable and would allow consumers to control their costs.

The president will also propose a federally funded experiment to see if some elderly and disabled nursing home residents instead can be cared for in their own homes and communities. Under the pilot program, the federal government would subsidize home care to see whether net savings are possible.

Mark McClellan, administrator of the Centers for Medicare and Medicaid Services, previewed the budget highlights to ease concerns that the administration was planning sharp cuts in the Medicaid health program for low-income people.


“We are not looking for savings at all,” said McClellan, explaining that money saved would be plowed back into extending services. “We are trying to help states make dollars go farther so they can cover more people.”

McClellan also announced that Medicaid spending had been growing more slowly than previously estimated, by 9% a year instead of 11%. That means the administration expects to spend about $91 billion less from 2006 to 2015 than was estimated a few months ago. Those new numbers could help shield the program from cuts, if congressional budget experts accept them.

Medicaid is a $300-billion-a-year program, jointly funded by the federal government and the states. It covers about 50 million people, including children and nursing home residents.

In a weak economy, Medicaid has become the last resort for many low-income working families, driving up government costs and making the program a prime target for cutbacks.

McClellan said Medicaid spending was still unsustainable, but called for a dialogue with the nation’s governors about future changes.

He said states should have greater freedom to shape benefits -- presumably to lower costs to government -- for working adults and their families. He called for making home and community care the leading alternative to nursing homes. And he said more care for uninsured people should be provided through community health centers instead of expensive emergency rooms.

In a concession to advocacy groups, McClellan said the administration would not propose any changes in benefits for the disabled.

The number of uninsured grew by some 5 million during Bush’s first term, and now stands at nearly 45 million Americans. Bush’s budget proposals could help 12 million to 14 million people gain coverage over the next 10 years, administration officials said.

The budget will call for $142 billion over 10 years to help expand access to health insurance, McClellan said. The centerpiece would be a $74-billion tax credit to help working-age individuals and families buy health insurance.

Worth as much as $3,000 for a family of four, the credit could be used to cover the cost of high-deductible insurance and health savings accounts, or traditional coverage. The benefit would phase out at incomes of $30,000 for individuals and $60,000 for families. The median income for a family of four is about $63,000 a year.

In another incentive for combining catastrophic medical insurance and health savings accounts, Bush will also call for a new tax deduction to help offset the cost of premiums for high-deductible health insurance, and a rebate program for small businesses that contribute to employees’ health savings accounts.

Increasing the number of children covered by health insurance has been a priority for lawmakers of both parties for a decade. Bush is proposing a $1-billion “Cover the Kids” campaign to sign up as many children as possible in a joint federal-state insurance program.

Advocates for the poor are still eyeing Bush’s Medicaid proposals warily, as are many state officials. Although McClellan said the administration would not propose spending caps for the program, he did not rule out accepting such limits if Congress imposed them.

“If the federal government shifts additional costs on the backs of the states, then more and more seniors and children and the sickest part of the population will be at risk of losing their health coverage,” said Ron Pollack, director of Families USA, a liberal advocacy group.



Covering the uninsured

President Bush’s budget will call for $142 billion over 10 years to help reduce the number of Americans without health insurance. It will include a new tax credit of up to $3,000 for low-to-middle-income households.

Major items / Cost in billions

Health insurance tax credit / $74

Tax deduction for high-deductible insurance / $28.5

Rebates for small employers / $19.2

Outreach campaign to cover children / $11.3

Note: Cost figures do not include all budget proposals. All cost estimates are for 10 years.

Source: Centers for Medicare and Medicaid Services