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Bush Promotes Health Savings Accounts

He Says Plan Would Cut Insurance Costs and Increase Patient Responsibility

By Michael A. Fletcher
Washington Post Staff Writer
Thursday, January 27, 2005; Page A02

President Bush laid out a plan yesterday for reducing the nation's spiraling health care costs, proposing tax credits to encourage expansion of health savings accounts and calling for allowing small businesses to pool together for health coverage across state lines.

Speaking before an audience that included Maryland Gov. Robert L. Ehrlich Jr. (R) at the National Institutes of Health in Bethesda, Bush said market forces hold the key to moderating the cost of health insurance, which is strangling many working families and small businesses, resulting in 45 million Americans going uninsured.

Sen. Edward M. Kennedy (D-Mass.), who opposes the president's tax-credit proposal, favors a Democratic plan to expand health care coverage.

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The main element of Bush's plan would be health savings accounts, which allow people to save money tax-free. The accounts are used for medical expenses up to a preset deductible amount, and once that threshold is met, insurance takes over. Any money not used can roll over from one year to the next, and the cost of the policies is usually lower than that of traditional health insurance plans.

"Health savings accounts all aim at empowering people to make decisions for themselves, owning their own health care plan, and at the same time bringing some demand control into the cost of heath care," Bush said. "Our view is that if you're a consumer of health care and you're in the marketplace making health care decisions, it is more likely that there [would] be more cost control in health care than a system in which the consumer of health care has his or her health care bills paid by a third-party provider."

The accounts have been controversial, and many health economists question whether they will lead to the savings proponents claim and whether they will leave sick people more financially vulnerable.

The concept is a component of Bush's vision for an "ownership society," which seeks to reduce the cost of government entitlements. The administration pushed for inclusion of health savings accounts in the 2003 Medicare prescription drug legislation.

As the president appeared in Bethesda, the White House released a fact sheet laying out an array of government grants and tax credits that would help poor families fund health care savings accounts.

Under Bush's proposal, a family of four earning less than $25,000 a year would receive $1,000 a year toward their accounts. The families also would be eligible for $2,000 in refundable tax credits, which would go toward purchasing their health insurance policies -- which the White House said average $3,300 a year. Families choosing traditional insurance would be eligible for $3,000 in refundable tax credits to put toward their plans.

The Bush proposals, which arose during the 2004 campaign, are likely to be included in any tax legislation the president sends to Congress, said Trent Duffy, a White House spokesman.

Bush also pushed for legislation that would allow small businesses to pool together across state lines to buy affordable health insurance. "The principle behind association health plans is that the more risk you're able to spread amongst beneficiaries, the lower your cost of health care," he said.

Saying he "will continue to promote an adequate safety net for our children," Bush promised to expand the number of community health centers where poor people can receive basic medical care. He also called for a $1 billion effort to enroll more children in government-funded health insurance programs, which are underutilized in many states.

Some congressional Democrats were unimpressed, saying the health care crisis has only worsened under his watch.

"Three weeks ago, senior citizens were saddled with the largest Medicare premium increase in history. Every family is facing higher co-payments and deductibles. Labor negotiations are exacerbated as employers try to shift more health costs to workers, or drop health benefits entirely," Sen. Edward M. Kennedy (D-Mass.) said while touting a Democratic plan to expand health care coverage. "The Republican policies of un-benign neglect are no longer sustainable."

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