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(Reuters) - Republican Representative Paul Ryan, an outspoken opponent of President Barack Obama's healthcare reform, proposed a plan on Tuesday that could effectively dismantle the way most Americans get health insurance by reducing incentives to join employer-sponsored plans.
In a speech at Stanford University in California, Ryan said the government should replace the income tax exclusion for people who get employer-sponsored healthcare and replace it with a refundable tax credit that they could use to purchase coverage on their own. Some 170 million Americans are now covered through the workplace.
Ryan argued it would give consumers the needed incentive to demand better value out of their healthcare.
"Giving patients and consumers control over health care resources would make all Americans less dependent on big business and big government for our health security; give us more control over the care we get; and force health care providers to compete for our business," Ryan said.
Ryan has already proved an influential voice in the national healthcare debate with a prior plan to privatize the government's Medicare program for the elderly. His new proposal, which quickly drew fire from Democrats, also could play into a congressional "super committee" that is trying to develop a plan by late November to reduce U.S. deficits.
"It's a political non-starter in the current environment ... It's politically unsustainable in the current world and the policy is unworkable in the repeal world," said Chris Jennings, a healthcare adviser to Democratic President Bill Clinton and now president of Jennings Policy Strategies.
The proposed change could encourage people to drop their employer-sponsored plans companies and shift to the individual market where policies can be expensive.
A new report on Tuesday showed the cost of health insurance is still climbing for companies and workers, with family premiums growing this year at a pace triple that of 2010.
"When you break everyone off individually, you diffuse the bargaining power and you have to go and buy insurance on your own," said JoAnn Volk of Georgetown University's Health Policy Institute. "Most Americans, it's hard to imagine they would accept a wholesale change to the employer-based system."
A similar proposal to end tax breaks for employer-sponsored healthcare hurt Senator John McCain's 2008 run for president against Obama. Ryan's proposal has little chance of advancing in Congress before the 2012 presidential and congressional elections.
"Republicans voted to stick it to seniors by ending Medicare, increasing costs and putting insurance companies in charge, and now they're trying to stick it to the middle class by putting millions of Americans at the mercy of insurance companies," said Nadeam Elshami, a spokesman for House Democratic Leader Nancy Pelosi.
Ryan's earlier plan to privatize Medicare, a popular healthcare program for the elderly, contributed to Democrats scoring an upset victory in a special House election this year in a traditionally Republican district in New York.
But Ryan, chairman of the House Budget Committee, noted in his speech that the Republicans picked up a seat in a more recent New York special election. Republicans also held a seat in a special election in Arizona.
"We should not fear false attacks again in 2012," Ryan said.
Reporting by Donna Smith and Alina Selyukh in Washington; Editing by Eric Walsh, Michele Gershberg and Bill Trott