Bush's Health Plan--merged threads

[landover]

http://www.bloomberg.com/apps/news?p...kf0&refer=home

[Martha]

I understand that the idea is to limit the tax deduction employers can take for health insurance provided to employees , to avoid so called "Cadillac plans" and in return, allow a deduction for people who buy individual health insurance.

Show me these Cadillac plans--I am not seeing them out there. Is a Cadillac plan one that actually covers your illnesses? Insurance already doesn't cover things like tummy tucks, face lifts, etc. What his plan risks doing is penalizing small and medium sized businesses that have to pay more for insurance than big business because they don't have the same bargaining power.

I see the inequity of not allowing individuals to deduct insurance premiums but allowing employers to do so, but the problem isn't so called Cadillac plans.

[FIRE'd@51]

Originally Posted by Martha

I see the inequity of not allowing individuals to deduct insurance premiums but allowing employers to do so, but the problem isn't so called Cadillac plans.

I would state it a bit differently. The inequity is not that the employer can deduct the premiums (the employer can deduct salaries and other benefits). The inequity is that those provided with employer-based insurance (whether working or retired), do not have to declare the cost of the insurance as income - that is, they are paying for their insurance with pre-tax dollars. Those who buy individual policies must pay the premiums with after-tax dollars, unless they itemize. Even if they itemize, policy premiums are deductible on schedule A as a medical expense and are subject to the 7.5% of AGI threshold (10% if you get caught in the AMT). The "Cadillac" policies are low-deductible policies which cost more and exacerbate this effect. To remove the inequity, either the employer-provided insurance should be treated as income, or those who purchase individual policies should be able to deduct the entire premium "above the line" without having to itemize. Ron Wyden addresses this inequity in his plan.

[samclem]

Maybe a "Cadillac plan" is one that goes beyond the normal purpose of "insurance." In every other case, people buy insurance to cover unanticipated expenses that cannot be paid out of pocket without hardship. People don't buy "auto repair insurance" or "rent insurance" because both are anticipatable expenses. IMO, medical insurance should be the same thing: I know I'm going to get sick, wear out, maybe hammer my thumb: I should anticipate the normal medical expenses attendant with living. Other expenses are unusual: a liver transplant, brain surgery, etc and will exceed what is normally expected. When these medical costs exceed what is normaly expected, that is what medical insurance should be for, IMO. Plans that pay for regular anticipatable expenses might be termed "Cadillac plans."

Of course, no one knows what a "Cadillac plan" means to a Texan. He might be talking about medical insurance plans with horns attached to the hood.

[lets-retire]

sam--I understand where you are coming from, but I can see the argument. Someone who is barely living because they have a minimum wage job can't afford to go to the doctor when the slam their thumb with a hammer, so all medical issues are "Cadillac" issues.

martha--I was talking with the DW about insurance the other day and it reminded me of a conversation with my Chief about the insurance provided at work. There were a few people complaining that we did not go to an organization that purchased insurance then resold it to small cities. The thought was to allow the small cities to gain the bargaining power available to larger cities. The Chief's explanation was the insurance did cover eye care and dental, which ours didn't, but it cost an extra $60 per month and the copays were higher. So the city opted to keep it's small company policy that was a bit cheaper and provided rather good coverage for medical expenses. This sounds like it is not the norm, but it is what the Chief told me. On a side note, the Chief and the city officials had the same policy we did.

Most of the people at the agency did not wear glasses and the cost for most dental care is not that expensive. The worst horror story I had heard while there was on guy who had a tooth abscess and it cost either $600 or $800 to have it fixed. He would have had the treatment paid for by the end of the year and then would be paying through the nose for unneeded insurance. The dentist I went to charged about $70 for the yearly cleaning and x-rays.

[. . . Yrs to Go]

The healthcare problem can not be fixed by tweaking the tax code. This is a plan designed to give the Republicans (of which I am one) the guise of "doing something" about our healthcare mess without actually doing anything about it (also falling in this category is tort reform and HSAs).

Just like the social security and medicare debacle, a real solution won't be found until people accept the inconvenient truth that they can not have unlimited quantities of service at affordable prices. We can either choose to do one of two things 1) pay even more or 2) ration care. Considering that neither option is currently acceptable to a majority of Americans, this problem will not get fixed until a meaningful chunk of the middle class lose their health coverage.

[samclem]

Originally Posted by 3 Yrs to Go

The healthcare problem can not be fixed by tweaking the tax code. This is a plan designed to give the Republicans (of which I am one) the guise of "doing something" about our healthcare mess without actually doing anything about it (also falling in this category is tort reform and HSAs).

Just like the social security and medicare debacle, a real solution won't be found until people accept the inconvenient truth that they can not have unlimited quantities of service at affordable prices. We can either choose to do one of two things 1) pay even more or 2) ration care. Considering that neither option is currently acceptable to a majority of Americans, this problem will not get fixed until a meaningful chunk of the middle class lose their health coverage.

3YTG,
Maybe the logic is contained in your answer. If the President's proposal changes the tax code in such a way that a meaningful chunk of the middle class lose much of their employer-sponsored health coverage, maybe there'll be enough discontent among voters to prompt a solution. If things have to get worse before they can get better, this could be the intent of the proposed plan.

Or, maybe not.

[Retire Soon]

Don't let President Bush fool you once again. With health care cost rising 15-20% a year, everyone will have a "Cadillac" insurance policy in 2 or 3 years. Especially with our health care system being drained by the hundreds of illegal aliens crossing our borders each day as our Commander in Chief looks the other way.

[Helena]

I don't like it


Plan would tax some benefits


" The basic concept of the plan is that employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free. Workers could be taxed if their coverage exceeded limits set by the government. But the government would also offer a new tax deduction for people buying health insurance on their own.

The plan is a startling move for a president who has repeatedly vowed not to raise taxes. And it is certain to run into opposition from business groups, labor unions and, most of all, the Democrats who now run Capitol Hill.

"It's a bad policy," Rep. Charles B. Rangel, D-N.Y., the chairman of the House committee that writes tax legislation, said in an interview Friday night. "We are trying to bring tax relief to the middle class. The president is trying to increase their tax liability. This proposal is inconsistent with what the majority is seeking in the House and the Senate."

White House officials say the health tax plan would neither increase spending nor reduce tax revenue. Supporters say it would expand coverage to some of the 47 million uninsured. But critics say it would, in effect, tax people with insurance to provide coverage to those without it. "


Link to entire article:

http://www.dfw.com/mld/dfw/news/nation/16513010.htm

[Helena]

Originally Posted by samclem

If the President's proposal changes the tax code in such a way that a meaningful chunk of the middle class lose much of their employer-sponsored health coverage, maybe there'll be enough discontent among voters to prompt a solution. If things have to get worse before they can get better, this could be the intent of the proposed plan.

Play that fiddle a little louder, Emperor.

[bssc]

The government does something similar with life insurance policies over a certain amount that the company provides.

The Feds need to balance the budget somehow.

[Helena]

Originally Posted by Helena

employer-provided health insurance, now treated as a fringe benefit exempt from taxation, would no longer be entirely tax-free.

What about other fringe benefits ?
Just think of all the revenue that could
be collected if they all were taxed !


Let's see... I get free coffee at work...
and how about the Christmas Party !


What about Dubya's fringe benefits...
what is the fair market value of all those
secret service body guards... and the
fair rental value of the White House
and Air Force One :P





Speaking of a tax on coffee...


nawww....



couldn't happen again



could it ?

[Hamlet]

I think the general idea for this bill is to start de-linking our health insurance and our employment. They want to limit the tax exempt status of employer-provided healthcare, while at the same time creating a very large personal tax deduction for personal healthcare insurance.

[modlair]

There seems to be too little specific information available to know completely what is being proposed, but here is a quote from the article that perhaps has some oblique ER significance:

"Without specifying the threshold Bush will propose, the official said the new policy would allow workers who either get their health insurance through their employer or who aren't insured to deduct the amount from their tax liability."

Operative word there is "workers". If this deduction is off "income", from whatever source (as opposed to wages), this could translate to an increase in the lower end threshold an ER type might use for Roth Conversions. Meaning -- if one follows the index funds only in taxable accounts approach, with their scarce 1.5% dividend, then the standard deduction, plus exemption, plus this new medical insurance deduction could increase how much income is tax shielded.

[crazy connie]

Show me these Cadillac plans--I am not seeing them out there. Is a Cadillac plan one that actually covers your illnesses? Insurance already doesn't cover things like tummy tucks, face lifts, etc. What his plan risks doing is penalizing small and medium sized businesses that have to pay more for insurance than big business because they don't have the same bargaining power.

Martha,

I know of 2 examples of "Cadillac Plans"
1. Execs who have special ins for life plans at Mega-Corp no deductibles, ultra high end hospital (Mayo vs Local Basic)
2. Successful small business who push thru many low wage jobs and have a plan that 90% of employees can not afford because monthly family plan is 20% of the wage paid, while the family (all the execs) give themselves a health care allowance to cover the premium. In fact it even included health spa treatments and repeated dry-outs for sister who enjoyed her booze during working hours. In the small company 5 people (all family) had the plan but 35 others had no employer health care.

[Helena]

What about those retirees who have 100%
of their health insurance paid by their [former]
employer ?

The part of the premium I pay out of my paycheck
for my employer sponsored insurance is paid before
taxes are taken... ie, it is tax exempt.

[Helena]

I don't like it.

What happens to those retirees whose
former employer pays 100% of their health
insurance ?

[SlowTwitcher]

"I think the general idea for this bill is to start de-linking our health insurance and our employment."

Along these lines, I was wondering if anyone feels the Health Savings Account
also will be employer's ticket out of the expensive health insurance game. Initially,
of course, they would contribute a 'match' to your HDHP to help you shoulder the
burden. Of course when times get tough, this match will be reduced or eliminated.
To me, it parallels equivalent of 401k's/403b's vs. pension. Your employer has a very
defined cost for your retirement ($0 if they wish).

Just one more reason to retire early and make this tax break work in my favor.

Any thoughts?

[danm]

De linking health insurance from employment is a good thing. Both the HSA and this put us on the road towards it. One a HSA gives the money to us, and it moves with us from one job to another. Two, since health plans are employer sponsored and tax exempt only under an employer, that fringe benefit encourages people to work for Da Man instead of themselves, and it encourages people to not move around so as to not lose insurance. Moving insurance money from those who have it to those who don't is also a good idea - it levels the playing field. Read "The Undercover Economist" for more discussion on this topic.

Sure I certainly don't want to pay more taxes either, but in the end these things should reduce the cost of health care. If they repeal the AMT this year that'll make up any shortfall in taxes 8)

[MasterBlaster]

Death and taxes...

Taxes are going to go up, better get used to it. It just remeins to be seen who pays what and where.

This is just one little blip on the road to a bigger government hand in your wallet.

It is inevitable.