Government

State of the Union message: Bush seeks insurance tax deduction

The president also said he supports making job-based health coverage taxable.

By Doug Trapp — Posted Feb. 11, 2008

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President Bush used his last State of the Union speech to restate his existing health care proposals, including tax deductions for health insurance spending, health insurance pools for businesses, medical liability reform and wider use of health information technology. Bush also challenged Congress to address the long-term solvency of entitlement programs, such as Medicare.

Reaction to the president's speech was muted. With Bush offering no significant new proposals for what could be a very partisan election year in Congress, medical organizations took the opportunity to restate their goals and concerns.

American Medical Association proposals align with some of the president's ideas, including passing medical liability reform and limiting the tax break for job-based insurance to fund tax help for those who buy coverage in the individual market. Bush would allow individuals to deduct up to $7,500 of their health insurance spending and families to deduct up to $15,000, while counting employees' health insurance as taxable income. The AMA proposal, however, favors a sliding-scale system of tax credits weighted toward people earning less.

Democrats reacted coldly to the president's tax deduction proposal last year. They held no hearings on it after Bush unveiled the idea during his 2007 State of the Union speech.

On Medicare, Medicaid and Social Security, Bush said spending is growing faster than the nation can afford. "We all know the painful choices ahead if America stays on this path: massive tax increases, sudden and drastic cuts in benefits, or crippling deficits." He urged Congress to come up with a bipartisan solution.

AMA President Ron Davis, MD, said the Association is committed to making sure a 10.1% Medicare physician pay cut does not take effect on July 1 so that physicians will continue to participate in the program. "Congress made a promise to America's seniors to provide them with health insurance through Medicare, but that promise means little if seniors can't get in and see the doctor," he said. The Senate Finance Committee is working on what could be an 18-month payment solution and was scheduled to hold an initial hearing two days after Bush's speech.

Annual threats to cut Medicare payment for physicians are discouraging medical students from becoming family doctors, said James King, MD, president of the American Academy of Family Physicians, in reaction to Bush's speech. "Today, our nation is grappling with a primary care physician shortage that is predicted to worsen with time."

The American College of Emergency Physicians was looking forward to hearing more details about how the president would achieve his vision for health care and was disappointed that Bush did not offer them, according to an ACEP statement.

The Democratic response -- delivered by Kansas Gov. Kathleen Sebelius -- urged Bush to reconsider his opposition to a Democratic plan to reauthorize the State Children's Health Insurance Program for five years. Congress, instead of a five-year renewal and expansion of SCHIP with a cigarette tax increase, adopted an 18-month SCHIP extension that continues to cover about 6 million children through this year.

"Governors in both parties and a large majority of the Congress are ready, right now, to provide health care to 10 million American children, as a first step in overhauling our health care system. ...[S]ign the bill and let's get to work," Sebelius said.

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External links

President Bush's 2008 State of the Union address (link)

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