When “W” is spelled “Hillary”

I’ve written about screwy incentives distorting health insurance before, but it’s apparently going to be in the news a lot in the next week as President Bush prepares to address the topic in his State of the Union address. As with most of his proposals over the last few years, I’m less than optimistic that he has the leadership fortitude to get real reform passed. At this point, I barely expect any reform to pass, even if it appeals to the misguided warm and fuzzy crowd. If this story is accurate, the president might test my least optimistic suspicion:

President Bush is weighing proposals for new tax breaks for health care costs, which will be a major topic of next week’s State of the Union address, a top economic adviser to the president said Tuesday.

“People are very, very frustrated about the cost of health care,” said Allan Hubbard, director of the National Economic Council.

Hubbard told reporters at USA TODAY and Gannett News Service that the tax code offers advantages when a company buys health coverage for its employees but doesn’t do the same for employees who have to buy coverage on their own.

Somehow I’m not surprised that the solution will be new tax breaks instead of fixing the underlying problem built into the tax code. One idea is to start taxing employer-provided health benefits, but President Bush and his economic team rejected that idea. But will the administration come up with a structural solution?

“The president’s very concerned about the unfairness of the tax code,” Hubbard said.

“Tax reform is not off the table,” Hubbard said. “At the same time, it doesn’t have the priority that health care does right now.”

The implied answer is clear: where it should be about tax reform, the answer is always targeted breaks. Apparently, President Bush has the courage to ease the symptoms. While it’s certainly possible that new tax breaks could alleviate the health care “crisis”, something new will appear in its place until the tax code is fixed. Remove the government from the pushing its “this is good for you” influence and let the free market decide.

Prior posts.