Monday, April 17, 2000

For a while last week, squabbling among George W. Bush’s economic advisers threatened to block the health-care plan he proposed in a speech delivered in Cleveland’s predominantly Democratic West Side.

For months, Mr. Bush’s frustrated health-care advisers had been pushing the Texas governor to come out with a market-oriented health-insurance plan that would stand in sharp contrast to the government-controlled nostrums offered by Bill Clinton and Al Gore. But Mr. Bush’s team of economic advisers at California’s prestigious Hoover Institute fought it. “They didn’t want to do anything,” a key Bush health-care adviser told me.

“Bush was on the phone to Frist [Sen. Bill Frist, Tennessee Republican], then he was on the phone to Hoover. It looked like we wouldn’t have any plan at all right up to the 11th hour,” the adviser said. At the core of the opposition of the Hoover advisers, who had helped Mr. Bush design his tax-cut plan, was its cost: another $40 billion or more, further shrinking the surplus needed for Mr. Bush’s tax-cut plan.

But in the end, Mr. Bush overrode his Hoover think-tank advisers and agreed to a bipartisan tax-credit plan similar to the one being sponsored by Republican Sens. Frist, Jim Jeffords of Vermont, John Breaux of Louisiana, and House Majority Leader Dick Armey.

The issue of how to begin offering health insurance access to some of the 44 million Americans who do not have it has long been a vexing one to Republicans. Al Gore and the Democrats want the feds to create another huge bureaucratic entitlement. Mr. Bush wanted a plan that would use the power of the free market to provide diverse plans at affordable prices with no additional bureaucracy.

Mr. Bush’s plan calls for a refundable tax credit of up to $2,000 per family earning $30,000 a year or less (and $1,000 for individuals earning $15,000 or less) for people who do not qualify for Medicaid and do not have employer-paid health plans. The tax credit would allow them to buy health-care plans that would cover an estimated 90 percent of their health-care costs. As their incomes rise, the share of the cost covered by the credit would decline.

Another component in his plan would help small businesses buy health-insurance plans that won’t drive them into bankruptcy. Small businesses pay on average about $4,300 per family policy, while major corporation plans, which can spread costs among a large pool of people, spend on average just $3,521, according to the National Federation of Independent Business.

Mr. Bush’s plan would let small businesses group together across interstate lines to buy cheaper trade-association health care plans and thus cut their costs, making health insurance more widely available. About 60 percent of all workers who do not have health insurance are employed by small businesses of fewer than 100 people, or are self-employed.

Mr. Bush would also expand the widely used Flexible Savings Accounts and Medical Savings Accounts used for out-of-pocket medical costs to supplement high-deductible health-insurance policies.

More than 22 million people are enrolled in FSAs, allowing them to save part of their pretax wages to meet out-of-pocket medical expenses such as eye or dental care. But the law requires that any unused money must be returned to the employer at the end of each year. The Bush plan would let up to $500 of FSA funds be rolled over from one year to the next.

He would make MSAs, which expire this year, permanent in law; and he would lift the cap on the number of accounts, thus making these cost-cutting plans available to anyone who wants them.

Other initiatives aimed at lower-income workers would encourage homeownership by offering the working poor a year’s worth of Section 8 rental subsidies as a down payment for a home of their own; another would give $1 billion in tax credits to banks to match the savings of low-income depositors. The funds could be used to start a business or to pay for an education.

Overall, Mr. Bush’s plan has received rave reviews from conservatives such as Stuart Butler, chief domestic-policy analyst for the Heritage Foundation.

“I’d give them a B grade. The basic idea is that we’ve got to make it possible for low-income people to save like middle-class people, to have a stake in a home that will encourage work and get them on the first rungs of the economic ladder,” Mr. Butler said “You can quibble about the details, but the basic approach is correct.”

John Goodman, president of the Dallas-based National Center for Policy Analysis, was ecstatic over Mr. Bush’s health-care tax credits, an idea he has been pushing for years. “This is a bold plan. Low-income families would get twice as much under the Bush plan than under Gore’s approach, which would expand government,” Mr. Goodman said.

“This is a step toward fundamental reform. The current system is based on employer-provided health care, and Bush’s plan provides a generous subsidy for individuals to buy their own plans,” he said.

Last year, some people wondered if Mr. Bush’s “compassionate conservative” claim was a code word for moving a little to the left. But with these proposals, he seems to be moving social-welfare policy more toward the marketplace.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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