Saturday, August 4, 2007

Republican presidential candidate Rudy Giuliani should have spent less time generating buzz for his eagerly anticipated health-care speech and more time working out the details. His speech, delivered Wednesday in New Hampshire, was long on rhetoric and embarrassingly short on specifics. Instead of cost estimates, Mr. Giuliani offered a “vision” and a promise to provide details in the fall.

He did say that the centerpiece of his proposal would be a $15,000 tax deduction for families and $7,500 for individuals to help the nearly 45 million Americans without health insurance obtain coverage. The tax deductions would also serve as an inducement for those who are currently insured through their employers to seek health insurance in the private nongroup-insurance market. Extolling the virtues of free-market solutions and criticizing Democrats for offering “socialist” alternatives, Mr. Giuliani asserted, “I believe we can reduce costs, expand access and improve the quality of health care by increasing competition.” The key to reform, he argued, was to “empower all Americans by increasing health-care choices and affordability.” He promises to “provid[e] American families with expanded low-cost insurance options”; and he pledges to “push for innovative solutions to reduce health costs centered on individual empowerment.” While we agree with his emphasis on free-market solutions, we would have preferred fewer buzzwords and more details.

With employer-subsidized, group-rate, health-insurance premiums for families now approaching $13,000 per year, Mr. Giuliani argues that regulation must not deny access to affordability. “If a state’s mandates prevent affordable health-care coverage,” his Web site declares, “citizens should be allowed to purchase coverage through interstate markets.”

How much family coverage his $15,000 tax deduction can purchase is open to question. Married couples with two children earning less than $42,850 this year will owe no income tax, so the $15,000 tax deduction will be essentially meaningless to them. For similar families earning $60,000, $90,000 and between $120,000 and $150,000, a $15,000 tax deduction increases annual after-tax income by $2,250, $2,450, and $3,750, respectively. In a world of $13,000 annual family health premiums, there would be little incentive for workers to replace heavily subsidized employer-provided health insurance with insurance purchased on the open market.

Mr. Giuliani must not have done the math. After using part of the $2,250 tax savings of the $15,000 tax deduction to purchase an “affordable” health-insurance policy, Mr. Giuliani explains, a middle-class family earning $60,000 — that’s 30 percent higher than the 2005 median household income — can invest whatever funds are left over in a health savings account. Good luck. They’ll need it.

For the 50 percent of households earning less than the median income, who are thus unable to take meaningful advantage of the $15,000 tax deduction, Mr. Giuliani offers vouchers and tax credits — without any details or cost estimates. Let’s call his plan “a work in progress.” It needs a lot more work.

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