President Bush emphasized proposals designed to cut the cost of health care in his State of the Union address on Jan. 31–including proposals to expand Health Savings Accounts greatly–but analysts said the proposals are not new and are unlikely to pass Congress.
The National Association of Insurance and Financial Advisors took heart as well at what the president did not say. Specifically, NAIFA noted that the president did not touch on tax reform proposals suggested by a bipartisan panel last year that would have limited inside build-up on life insurance and annuity products.
In a statement, NAIFA noted that the tax reform panel’s final report proposed a direct tax on the cash values that accumulate in permanent life insurance and annuity contracts, also known as inside build-up. “This direct tax would discourage Americans from purchasing the only products guaranteed to last a lifetime,” NAIFA officials said.
While President Bush did not indicate he will pursue fundamental tax reform in 2006, NAIFA is by no means claiming victory–the president could raise the issue again in his annual budget message, scheduled forFeb. 7, NAIFA officials said.
The president also called for a review of the programs that will be crucial to helping the “baby boom” generation in their retirement years, but he appeared to play them down in the view of analysts rather than admit his failure to alter the Social Security program, primarily through creation of so-called private accounts.
The American Council of Life Insurers, however, offered its support for the president’s call to review those programs.
Regarding retirement security, the president noted that the first of the baby boom generation will turn 60 this year, including himself and former President Bill Clinton.
“The retirement of the baby boom generation will put unprecedented strains on the federal government,” Bush said. “By 2030, spending for Social Security, Medicare and Medicaid alone will be almost 60% of the entire federal budget.”
As a result, he added, future Congresses will be forced to deal with these huge expenses by drastically cutting spending in other areas of government, or by reducing benefits paid to the elderly.
Noting that Congress declined to act on his Social Security reform proposals in 2005, the president called on lawmakers to help establish a commission to study the impact the baby boom generation will have on Social Security, Medicare and Medicaid.
“This commission should include members of Congress of both parties, and offer bipartisan solutions,” he said. “We need to put aside partisan politics and work together and get this problem solved.”
Frank Keating, ACLI president, said Bush “is on the right track in calling for a review of the issues our nation will face prompted by the upcoming retirements of 78 million baby boomers.”
Among the proposals the ACLI will be promoting in 2006, Keating said, would be helping Americans obtain annuities, which he said are “the only financial product that can guarantee an income throughout retirement no matter how long a person lives.”