Hello and welcome to Cato Daily Podcast for January 24th.

I'm Anastasia Yglova, your host.

A new health care proposal was among the chief elements of the President's State of the Union

address last night. President Bush's plan includes reforming the tax code so that all Americans, even those without

employer-sponsored health care plans, get the same tax breaks for health insurance.

The proposal has at least one supporter, Cato's

director of health policy studies, Michael Cannon, our guest on today's program.

Tell me about the president's proposal last night.

Well to understand the president's proposal last night.

Well, to understand the president's proposal, you have to understand that the federal government

has really been monkeying with the American people's health care decisions through the

tax code for the past 60 years.

It encourages Americans to purchase health insurance through their employer because doing so is tax-free.

It encourages them to purchase more insurance than they would otherwise because doing so is tax-free.

And once Americans are so heavily insured, they are less cost-conscious when they go out and purchase

health care.

They focus less on value and on the cost-effectiveness of the care that they purchase.

And so that's really given us the health care system that we've got where we don't have a lot of information

about prices and quality because consumers don't demand it.

It's given us runaway health care spending and health insurance

premiums that are rising faster than wages. So what the president is trying to do

is correct the problems that the tax code creates. He doesn't go all the way to correcting them, but he would go

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