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States carry the load on health-care reform plans

GOV. ARNOLD SCHWARZENEGGER’S pushing a health-insurance plan to cover all Californians. Former Republican Gov. Mitt Romney collaborated with Democratic legislators to create an innovative plan that is ramping up to cover all in Massachusetts. Pennsylvania Gov. Ed Rendell’s touting 47 ideas to cut health costs and expand coverage. Governors across the country are watching those experiments play out.

The verdict’s still out on whether some of these proposals will become law — or really work. But they’re strong evidence that health care is rising fast to the top of the national political agenda, state by state.

President Bush added his own surprising entry to the sweepstakes in his State of the Union address Tuesday night. Bush proposed to create a standard federal tax deduction for health insurance. The tax break would go to those who buy their insurance in the individual market, as well as to the majority of Americans who get their insurance through an employer. It would amount to a tax increase for people whose insurance premiums exceed $7,500 a year for individuals and $15,000 a year for families.

The Bush plan would encourage more middle-income Americans to buy coverage.

The White House estimates about 3 million more people would buy if there were a tax break.

It also discourages the kind of soup-to-nuts coverage that helps drive health-care costs higher because individuals bear none of the direct cost.

The White House says the deduction cap on premiums could mean 30 million Americans with the most generous benefits would pay higher taxes.

That could include some highly paid execs, but also state employees, teachers and older workers in the auto and steel industries who still have first-dollar coverage of their health care. (The thinking is that when individuals have co-pays and annual deductibles, they’re less likely to seek health care they don’t really need.)

The Bush plan is modest, and it faces a frosty reception in the Democratic-controlled Congress. Some Democratic leaders are calling it a veiled plan to destroy the employer-based health insurance system. That sounds like an introduction to more Washington partisan gridlock on health-care reform.

The Bush plan is directed at fairness and flexibility. Right now, those who get their insurance through an employer have a hefty tax advantage. (Their employer gets a tax break, encouraging more coverage.) People who buy insurance on their own don’t get that break, but they should. The cap also provides an incentive for reasonable, but not excessive, health coverage.

That said, Bush has offered no panacea. Tax breaks and tax increases alone won’t cure what ails America’s health-care system.

That must include reforms in all parts of the system. That means holding doctors and hospitals to higher standards and reducing waste, mistakes and mismanagement.

It means freeing insurance companies from excessive regulation to make coverage less expensive and more portable.

It’s no accident that the states have taken the lead in health-care reform. The states are often the crucible of government reform.

If the Republican White House and Democratic Congress want to catch up, they better start talking to each other.

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