Bush touts health savings accounts

Wednesday, February 1st 2006, 1:24 pm
By: News On 6

WASHINGTON (AP) _ President Bush's proposals to entice more people into health savings accounts are designed to slow soaring health care costs, particularly for low-income workers, administration officials said Wednesday.

But Democrats on Capitol Hill said the accounts will mostly benefit people who can afford to save, rather than those struggling from paycheck to paycheck.

``As with many things in this administration, it doesn't help (those) who need the help,'' said Senate Minority Leader Harry Reid, D-Nev. ``And it helps people who are already being helped.''

For some, health savings accounts offer the potential of saving money on health care. But there's a catch: To qualify, a person also must purchase a separate health insurance policy with a high deductible. The Bush administration said Wednesday that it wants to increase the tax advantages associated with owning such policies, plus make the policies more flexible so that people can take their insurance coverage with them when they move to another job.

Al Hubbard, the president's National Economic Council director, addressed one of the Democrats' chief criticisms of health savings accounts _ that they don't help the poor.

``Some people say, 'well, HSAs are just for the rich and the well. As it turns out, of the 3 million people who have taken up HSAs, 37 percent were previously uninsured, and 40 percent earned less than $50,000 a year,'' Hubbard said. ``Obviously, HSAs are very attractive to people on the lower side of the income scale.''

Enrollment in the high-deductible insurance plans has tripled over the past 10 months. Bush seeks to keep that rate going by letting consumers put enough money in the accounts to cover all their health insurance costs, not just the deductibles, as provided by current law. This would allow them to set aside more money tax-free.

He also seeks to make the accounts more attractive to the poor by proposing refundable tax credits. A family of four making $25,000 or less would be able to get a refundable credit of $3,000. The money obtained through the credit would allow the family to buy a compatible insurance plan, plus the family could put as much as $1,000 into an account for routine medical expenses.

The president also supports allowing employers to make higher contributions to health savings accounts for the chronically ill. Under current law, employers must contribute the same amount to each employee's account.

Sen. Mike Enzi, R-Wyo., chairman of the Senate Health Committee, said he would work to pass changes to health savings accounts. He said he believed that changes designed to make the accounts more attractive to low-income families would ``build acceptance from both sides of the aisle.''

However, the ranking Democrat on the committee, Sen. Edward Kennedy, D-Mass., has been a vocal critic of the accounts.

``It's basically a fraud for average working families in this country,'' he said. ``We're going to do everything we possibly can to defeat it.''

The health savings accounts are particularly attractive to healthy Americans betting that they won't get hit with significant medical expenses any time soon, said Drew Altman, president and CEO of the Kaiser Family Foundation, a health research group.

``This is an option that can be a real good deal for many, many millions of people, but it's not for everybody, least of all people who are chronically ill and low-income,'' Altman said.

The main attraction of a high-deductible plan is the lower premium and a tax break. The trade-off is that when people do have any significant medical expenses, they have to pay more out-of-pocket before their insurance kicks in. The plans connected to the health savings accounts have minimum deductibles of $1,050 for an individual and $2,100 for a family.

By comparison, deductibles for the most common type of health plan for workers averaged $323 for individuals last year and $679 for families, according to Kaiser.

Individuals or employers can set up health savings accounts. Contributions to the account are free from federal taxes, as is any income that accrues. The maximum amount that can be contributed to an HSA this year is the amount of the deductible or $2,700 for individuals and $5,450 for family coverage, whichever is less.

Unlike flexible savings accounts, there is no ``use it or lose it rule.'' Any balance remaining at the end of the year can be carried over to the next. Also, the money in the account can be invested in stocks and bonds, just like an Individual Retirement Account.