President to seek tax breaks on health costs

By Amy Goldstein, Washington Post | January 25, 2006

WASHINGTON -- President Bush will propose that Americans be allowed to take tax deductions on more of their out-of-pocket medical expenses, as part of an initiative the White House contends will rein in soaring health costs by shifting responsibility toward individuals, according to congressional and other sources familiar with the administration's thinking.

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Sign up for: Globe Headlines e-mail | Breaking News Alerts The new tax breaks for personal health spending, to be included in the 2007 budget Bush will release in less than two weeks, is designed to help the uninsured and to allow people with insurance to write off a greater portion of the money they spend on copayments, deductibles, and care that is not covered. Under current tax rules, people can write off medical expenses only if they exceed 7.5 percent of their adjusted gross income.

The president also plans to call for an expansion of health savings accounts, an idea long favored by conservatives and approved by Congress slightly more than two years ago, in which people who buy bare-bones insurance policies are allowed to put money into tax-free accounts for their medical expenses.

Bush also intends to propose changes to allow people to keep their insurance, without extra cost, if they change jobs or decide to start a business, building on a decade-old law that was designed to make health coverage more ''portable."

The three proposals -- and possibly others -- are part of a renewed effort by the White House to tackle medical costs, a theme administration officials yesterday said Bush intends to emphasize in his State of the Union address next week. The health initiative also represents one of the few areas in which the president will try to create domestic policies through what he said will be an austere budget.

Part of the initiative recycles proposals the White House could not push through Congress, including tighter limits on malpractice suits and changes that would allow small businesses to band together to buy insurance in ways that bypass state insurance rules.

But the new components would propel the nation's healthcare system in a direction that many Republicans and business groups embrace: lightening the burden of insurance cost on employers to some degree, while creating financial incentives for patients to restrict how much care and medicine they use.

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