Bush's health plan as starting block

For Democrats in Congress, two facts stand out over the next two years: The top economic concern of Americans is the rising cost of healthcare, and doing something about it will need the president's cooperation. Any solution will need two-party action.

That was hardly the mood, however, after President Bush proposed his most innovative idea in Tuesday's State of the Union speech. In fact, the Democrats' rejection of his plan to fix the tax code to favor the uninsured could mean the majority party in Congress simply wants healthcare to be campaign fodder for the 2008 election.

Or not.

Getting to yes on some sort of healthcare reform will mean Congress must recognize the veto pen that Mr. Bush still wields until 2009 and thus negotiate with him. And doing so means looking beyond the details of this new proposal and dealing with the basic Bush markers in this debate:

1. Individuals must retain the freedom to choose their type of healthcare, and that requires a market-based approach in which patients and their healthcare providers have maximum say.

2. States such as California and Massachusetts are proving to be laboratories for providing universal health insurance, and a grand federal solution can wait for those models to show promise.

3. The current, limited federal hand in healthcare is in need of reform, and any action there must be revenue neutral.

The details of Bush's proposal – which have been kicking around Washington for more than a decade – are simple: Federal tax policy should not support the kind of excessive health insurance enjoyed by some 30 million Americans that leads to an overuse of medical services and an inflation of costs. And it should reward the uninsured if they buy health insurance. ( See related news story.) 

The plan would also correct a fundamental unfairness: Healthcare insurance that is now provided as compensation to workers by an employer is not taxed, while anyone who buys insurance on their own receives no tax break.

Making such fixes to the tax code may be inadequate to many Democrats who want a nationalized (and thus rationed) healthcare system like those in Canada, Europe, and Japan, but they are difficult to reject as starting points for joint action.

The president's solution is to provide a tax deduction of up to $15,000 for any family who buys health insurance (and $7,500 for individuals), with those limits indexed to inflation. Spending more than those amounts on health coverage would be taxed.

With such tax incentives, an estimated 3 million of the 47 million Americans without insurance might be able to afford coverage. That's a start as more states move toward providing universal insurance – moves that Bush would support by shifting some federal money to those efforts.

Tweaking this Bush approach may be necessary as its full impact is studied. But ignoring it, as key Democrats have said they will do, means the national dialogue on healthcare will only be delayed another two years. It shouldn't take another election to again send the message that delay is unacceptable.