The Wall Street Journal-20080214-Incentive Is Treatment For Health Insurance Costs

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Incentive Is Treatment For Health Insurance Costs

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Your editorial "Equity and Health Care" (Feb. 4) correctly notes that President Bush's health insurance proposal would both decrease the regressivity of the current subsidy and remove the bias favoring employer-provided health insurance. However, you overlook an important aspect of the proposal.

Since Mr. Bush's health insurance deduction is a flat $15,000 per year regardless of the price of a medical insurance plan, all people (not just those with "gold-plated" policies costing more than $15,000 per year) will have an incentive to bargain for less expensive insurance. People will discover that bargaining for a policy that costs, say, $1,000 less will result in $1,000 of savings that can be spent on other goods and services.

Unlike the existing system, the amount of the health subsidy does not increase for any spending beyond the first dollar. Choosing a $1,000 less expensive insurance policy in the existing system leads to significantly less than $1,000 to spend on other things. The Bush plan is a commendable step toward reducing medical inflation by motivating consumers to bargain for less expensive medical insurance and services.

E. Frank Stephenson

Chairman

Department of Economics

Berry College

Mount Berry, Ga.