Bush Health Insurance Proposal

The Bush administration is proposing to change the tax treatment of health insurance. Employee health benefits would become taxable income (i.e. a tax increase - gasp!), but people who have health insurance would get a deduction ($7500 for individuals, $15ooo for couples). You get the same deduction whether you get insurance from your employer or buy it individually and no matter how much is actually paid for the insurance. The idea is to "level the playing field" by removing the tax advantage to employer provided insurance and to give consumers more incentive to take into account the costs of the care they purchase. Essentially, the "problem" this would solve is over-consumption of health care by people with good (i.e. low deductibles and copayments) employer-sponsored health insurance. Whether that's really a major problem seems to be the source of some disagreement among economists. Economist's View has a good roundup from the econo-blogo-sphere, and Mankiw finds supportive analysis, but the (leftish) Economic Policy Institute is critical.