New Approach to Medical Bills Does Little to Help Most Needy

January 30, 2006 – In his State of the Union Speech tomorrow night, President Bush will propose a new approach to dealing with soaring costs associated with health insurance. But the proposal he will make does little to make insurance more affordable at the consumer level, and does nothing to address the underlying causes for the steep rise in insurance prices. Those who don’t have insurance for affordability reasons, or who can’t get it because for some reason they have been declared uninsurable will find virtually no light at the end of the President’s tunnel.

Soaring costs for medical insurance are one of the primary reasons that many employers have stopped offering it. It’s also the reason that even large companies have moved away from traditional health plans and forced their employees into more restrictive plans that also force the employees to share a part of the cost.

Under the current IRS rules, consumers can only write off medical expenses if they exceed 7.5% of their adjusted gross income. The President’s proposal will ask that this number be reduced. He will also propose that anyone leaving a job to start a new business, or to join another company, be allowed to take their insurance plan with them at no additional cost. Unlike current COBRA coverage, which expires in 18 months, the President’s plan would not cap the amount of time that a person could keep their policy.

In addition to these items, the President will also suggest that use of Healthcare Savings Accounts be expanded. These accounts allow anyone who purchases a bare-bones insurance policy to set aside a portion of their income in a tax free account. This account can be used to pay uninsured medical expenses.

But the plan falls short in a number of areas. The overall goal of the plan is to make medical coverage available to more people. That’s a good thing. But it does this by shifting even more of the cost burden away from employers and onto consumers, without addressing any of the underlying causes for cost increases in healthcare. In short, it’s an attempt to place a Band Aid on a hemorrhaging artery.

Businesses may very well like what the President has to say. In the short run, the plan will allow them to do more to contain the costs associated with offering insurance to their employees. But without some serious attention, within five years it is quite likely that business’s insurance costs will begin rising again.

Some consumers will also like portions of the plan. The expansion of tax deductions and Healthcare Savings Accounts will benefit those who are forced to pay for their own insurance policies. But the plan does absolutely nothing for people who can’t afford insurance in the first place.

Moreover, those who have been deemed uninsurable will still find it almost impossible to get health insurance even if they can afford it. And insurance companies are declaring people uninsurable at record rates, regardless of age. Even children can find themselves in this class.

ACCESS is particularly concerned with both the cost and availability of health insurance. Unexpected medical bills and job loss are the two most common reasons for personal bankruptcy in the United States. While the President’s plan may help some people, it will do little to impact those who are most in need.

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