HSA deductions

The Bush administration has a new proposal that should really help alleviate the high cost of health insurance .. for rich people:

At the cost of $25 billion over ten years, the President’s budget seeks to expand enrollment in Health Savings Accounts by allowing HSA participants to claim a tax deduction for the premium costs of high-deductible health insurance policies that they purchase in the individual health insurance market. Analysis by M.I.T. economist Jonathan Gruber, one of the nation’s leading health economists, finds that because of its adverse effects on employer-based coverage, this deduction would likely cause the ranks of the uninsured to increase by 350,000.

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Four likely effects of the deduction stand out: 1) it would further enlarge the tax benefits that HSAs offer to high-income individuals who purchase insurance in the individual market, despite the fact that the tax benefits HSAs offer such people are extremely generous under current law and these people do not need additional government subsidies to be able to afford insurance; 2) the deduction would induce more employers to drop coverage or not to offer it in the first place; 3) as a result, it would likely increase the ranks of the uninsured; and 4) it would increase budget deficits even as it made the problem of the uninsured worse.

The Bush administration: increasing budget deficits even as we make the problem worse.