Tuesday, January 23, 2007

New Health Care Proposal

The President is proposing a new plan for health insurance. Here's my understanding: the current tax code encourages people to get health insurance from their employer (we pay taxes on income but not insurance--so instead of asking for a raise and buying our own insurance, we'd rather have tax-free insurance as a fringe benefit that our employer pays for). In other words, there's no incentive whatsoever to pay for your own insurance.

In the President's plan, individuals would receive a tax break allowing them to buy their own insurance. The tax break is the same no matter how expensive the health care plan. Hence, if you purchase a plan that's less expensive than the size of your tax break, you get to keep the difference. Thus people are discouraged from purchasing expensive health care plans (which is a good thing). The result of all of this will be fewer uninsured Americans.

Obviously the plan is a lot more detailed (and complicated!) than that, but the above is my current understanding of what's being proposed.

Economist Arnold Kling--not the sort of guy who is easily impressed--writes: "I would grade this as 'A+'."

The editors at National Review write: "If enacted, it would be the boldest free-market health-care reform ever, and the biggest step toward tax reform in years."