Bush wants states to plan coverage of uninsured

President Bush’s top healthcare official on Monday proposed a strategy for covering the uninsured that would offer incentives to each state to develop its own plan for expanding access, but stopped short of guaranteeing universal protection.

With Bush expected to address concern about rising premiums and shrinking coverage tonight in his State of the Union speech, Health and Human Services Secretary Mike Leavitt offered governors greater leeway in how they use federal healthcare money for the poor if they would take the lead on offering help to the estimated 47 million now uninsured.

“The president will make clear he believes the federal government should not run healthcare,” Leavitt told reporters. “He wants to partner with states.” Leavitt said he expected a dozen or more states to pursue health reform efforts this year.

The Bush approach adds to a growing list of proposals for expanding medical insurance coverage and dealing with other aspects of healthcare. Like the others, it is likely to fuel the coming debate on the issue in Congress and on the campaign trail.

Hospital groups warned that the administration’s proposal could undermine existing programs by redirecting federal funds. And on Capitol Hill, some leading Democrats grew more outspoken in their criticism of Bush’s emerging healthcare strategy -- a sign it may not get very far in Congress.

Leavitt, in a session with reporters, outlined what he called an “affordable choices initiative,” which he said was the second major piece of the administration’s plan, along with a proposal to tax high-value medical insurance provided by employers to some workers.

Under the initiative, the federal government could reallocate as much as $40 billion a year that now goes to hospitals and other providers that treat large numbers of uninsured and low-income patients, he said.

Funds would instead be used to provide basic health insurance coverage for low-income people, who could then see their own doctors and perhaps avoid costly hospitalizations. “Rather than perpetually paying the bills of uninsured people, it would be better to use part of the money to help them get an insurance policy,” Leavitt said.

Over the weekend, the president unveiled the first part of his plan -- a tax deduction that would make insurance more affordable for people who don’t have employer-sponsored coverage. The proposal would be financed by taxing people with the richest health plans, those with premiums of more than $15,000 a year for family coverage, or $7,500 for individuals. Revenue from the tax would be used to cover deductions given to middle-class workers, many of them self-employed, to buy coverage.

Monday, the office of Senate Majority Leader Harry Reid (D-Nev.) issued a press release saying that part of Bush’s plan “amounts to a tax increase for the middle class.”

And the chairman of the House Ways and Means health subcommittee, Rep. Pete Stark (D-Fremont), accused Bush of “pursuing a policy designed to destroy the employer-based healthcare system through which 160 million people receive coverage.”

Some middle-of-the-road Democrats also questioned Bush’s plan.

“I am concerned about how the administration’s proposal will affect a middle-class person who’s lucky enough to have a good healthcare package,” said Sen. Ron Wyden (D-Ore.). “The proposal involves a lot of pieces, and its hard to calculate how they all fit together.” Wyden has a health reform plan of his own.

White House officials said the Democrats were overreacting. About 80% of employer-provided polices have annual premiums under the $15,000 and $7,500 taxable thresholds, according to administration figures.

The tax changes, designed to take effect in 2009, would result in an estimated 5 million people gaining coverage, White House officials said. No estimate of gains in coverage could be made for the other part of the administration’s package, because it would depend on the states.

States would set up insurance-purchasing pools, decide who is eligible for subsidized coverage, and determine a basic benefits package, Leavitt said. They may well have to invest additional state funds, he noted.

In exchange, Washington would provide the states with greater flexibility over how to spend federal dollars now allocated to provide healthcare for the poor and uninsured. Leavitt did not promise additional federal money, and some congressional aides predicted cuts in healthcare spending as part of the budget Bush will send to Congress next month.

But hospital groups said the idea comes with a catch. Many states don’t pay enough to cover care for poor people who have Medicaid coverage, so hospitals depend on the federal payments to make ends meet.

“This is literally taking money away from the poor,” said Peters Willson, vice president for public policy with the National Assn. of Children’s Hospitals. “You are taking money away from children covered by Medicaid, and you could throw the safety institutions we are counting on being there for everybody into financial jeopardy.”

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ricardo.alonso-zaldivar@latimes.com