Tuesday, January 23, 2007

W Care

At first glance, from an accounting standpoint, Bush's health care plans make a lot of sense. I'd need to read more about it, but the basic idea is to make it a standard deduction for anyone who has health care, while making the benefit itself taxable. For singles, that's an extra $2,350 a year; for married people, an extra $4,700 a year.

Note: On re-reading what I wrote, I realize I calculated improperly... that extra is a reduction to your income. If your tax rate is 25%, you'd save $1,175 in taxes for having insurance, minus the $550 below paid out for the benefit I receive. This makes a lot more sense: A savings of about $525 in taxes for a middle-class family [assuming 25% tax rate is middle-class] for having health insurance. For those on the lowest end of the scale, the savings is greater (%-wise): Let's say a combined income for a newly married couple of $25,300. Right now, they'd have a standard deduction of $10,300, and 2 exemptions for $6,600, leaving them with a taxable income of $8,400. Their tax would be $843. After this change, however, the deduction would make their taxable income $3,700, meaning their tax would be just $373 - a savings of $470. This will allow people to get at least very basic health insurance. Better yet, if they had perhaps a few hundred dollars to put into health insurance and can now add this savings in, they can get somewhat better health care. The initiative calls to help make health plans more affordable as well, and expand Health Savings Accounts (HSAs) which are excellent and provide even further savings to people.

Let's say your deductible is like mine, and comes out to about $2,200 a year. I now would save $4,700 while paying out an extra $550 or so a year - a net savings of $4,150 (I'm sure I'm missing something there). According to the memo I'm reading, 80% of employer-given policies would save money on taxes; the other 20% would lose a bit.

On second thought, they're probably taxing the % the employer pays, which is a LOT more - almost double what I'm getting from the deduction... but that doesn't make sense, because most plans are structured like mine, and it talks about getting lower premiums for the 20% getting hurt by this. Anyone have a clue as to how this would work? I'm thinking now that my first analysis was closer, which would be great for everyone, and make a LOT more sense than universal health care - which ties up a lot of money into beauracracy, among other issues that I'm not getting into here. It also seriously preempts Hillary's plans for 2008 by proxy - more Americans would benefit from this plan than hers, including helping most of all those on the poorer end of the scale.

The final paragraph on the subject is also huge:
There Are Many Other Ways That Congress Can Help. We need to expand Health Savings Accounts, help small businesses through Association Health Plans, reduce costs and medical errors with better information technology, encourage price transparency, and protect good doctors from predatory lawsuits by passing medical liability reform.
Amen to all of those. More on the State of the Union when I have a chance to actually read some details...