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Lewin Group Study of President Bush’s Health Proposal Finds Benefits To Some Uninsured and Reduced Tax Revenues To Government

January 29, 2007

Washington, DC – January 29, 2007 - President Bush’s health insurance proposal would save families money and reduce the number of uninsured, according to Lewin Group vice president John Sheils, but the major tax reductions would go to families with incomes above $50,000. The Bush plan would also increase the U.S. budget deficit by $61.8 billion in the first year. The increase in the deficit would decline over the following decade.

“The President’s proposal is designed to eliminate the incentives that encourage increased health care spending,” said Sheils. “And it achieves that goal – health spending could be reduced by about $24.5 billion in 2009.” Sheils estimated the impact of the President’s proposal using The Lewin Group Health Benefits Simulation Model (HSBM). HSBM is a micro-simulation model of the U.S. health care system designed to estimate the impact of alternative health reform models on coverage and expenditures for employers, governments and households.

According to Sheils, families would save an average of $732 in taxes, premiums and out of pocket spending. “Although the plan cuts costs for certain families, about 70 percent of the reduction in taxes would go to families with incomes above $50,000. Only 20 percent would go to currently uninsured people,” Sheils added. One key aspect of the plan is the number of uninsured who would be covered under this new plan. The Lewin Group study shows that the President’s proposal would reduce the number of uninsured – projected to be 48.4 million people in 2009 – by about 9.2 million people. One unintended consequence would force about 2.3 million workers and dependents to become uninsured, when they would lose employer coverage.

The Lewin Group study shows that the government stands to lose money because tax revenues would be reduced - tax filers would count employer health care spending as taxable income but would receive a deduction, whether they have employer coverage or private non-group coverage. Replacing the existing tax exclusion with the deduction would increase the federal deficit by $61.8 billion in 2009. This is an average federal expenditure of $6,720 per newly insured person. However, the impact on the federal deficit would decline from an increase of $61.8 billion in 2009 to a net reduction in the deficit of $45.3 billion in 2018. The net cost of the program over the 2009 to 2018 period would be $153.8 billion.

To view the analysis documents, please click on the following links:  plan analysis, detailed analysis tables, and summary description of the Health Benefits Simulation Model.

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