Is 2007 the “Year of the Possible?” Health care consultant Robert Laszewski cites the strong interest in health care reform and coverage expansion in the new Democratic-controlled Congress; state coverage initiatives that literally span the country from Massachusetts to California; and “odd couple” partnerships that have come together on new coverage initiatives. Examples of the last category include the AARP-Business Roundtable-Service Employees International Union combo and the Health Care Coalition for the Uninsured, which spans 16 groups from the U.S. Chamber of Commerce to Families USA.

It might seem that the coverage initiative set out by President Bush in his State of the Union address and outlined in a White House fact sheet would fit right into this pattern. After all, through his health insurance “standard deduction” proposal, the president would essentially cap the exclusion from income and payroll taxes of the value of employer-sponsored health insurance, at $7,500 for individual coverage and $15,000 for family coverage. The majority of health policy economists have long argued that this exclusion – estimated in a recent Health Affairs article to cost $208.6 billion in 2006 – goes disproportionately to better off Americans (among other problems), so capping it should be an idea with bipartisan legs – particularly since the administration proposes to use the tax savings to help the uninsured purchase coverage.

The details. So why has Bush’s idea generated such opposition among congressional Democrats and many health care advocates? As always, the devil is in the details, and critics point out that the Bush proposal contains some troubling details. To begin with, the administration is offering help to the uninsured through a tax deduction, a mechanism that is of the least use to those uninsured with the least income to tax in the first place. Moreover, the Bush plan would make premiums for nongroup coverage tax deductible for the first time, a change that the administration sees as leveling the playing field but critics see as further undermining an already stressed employer coverage system, throwing more people into an individual market marked by medical underwriting and high administrative costs.

Fiddling with the flaws. So in the year of the possible, is it possible to fiddle with the president’s proposal to meet these objections? Len Burman and Roberton Williams of the Urban Institute and Jason Furman of the Brookings Institution (“BWF”) provide one thoughtful attempt to do so. Their first recommendation is to turn the administration’s tax deduction into a progressive refundable tax credit or voucher, which would provide as much or more benefit to lower income families as to their higher-income counterparts. This recommendation has received broad backing from commentators across the political spectrum, from the Washington Post editorial page to Greg Mankiw, a former chair of President Bush’s Council of Economic Advisors.

BWF also suggest ways of dealing with the flaws in the individual market: “Eligibility for the voucher or credit in the individual nongroup market could be made conditional on insurers offering community-rated premiums (possibly adjusted by age) or some other mechanism that guarantees that people who are continually insured can purchase insurance at the same low rate as everyone else, even if they develop chronic health conditions. Alternatively, insurance premiums on qualifying nongroup insurance could be subject to a tax, the proceeds of which would be transferred to a state fund designed to make affordable insurance available to those with low incomes and those with chronic health conditions.”

Step in the right direction. Implementing these and the other BWF recommendations surely would not satisfy all critics of the administration proposal, and many of BWF’s ideas (such as eliminating the tax subsidies for health savings accounts that the Bush plan retains) would surely be anathema to the White House. Nevertheless, in the words of BWF – hardly a right-wing trio – “in some respects, the [Bush] plan is very innovative and a step in the right direction.” Given previous policy battles, the problems with the Bush plan, and widespread desire for a more comprehensive approach akin to the Massachusetts and California models, the skepticism of Democrats and advocates is understandable. However, BWF’s use of the administration proposals as a way to enrich the health care discussion is an approach in keeping with the spirit of “the year of the possible” that has much to recommend it.