A proven money-saver gets short shrift

is president of the conservative advocacy group Let Freedom Ring

If President Obama is serious about "bending the cost curve" on health care, as he says, then why is he trying to kill health savings accounts, one of the few proven methods of controlling health-care costs? The answer appears to be pure partisanship and politics.

A recent Aetna Inc. study found that employers who offer voluntary participation in health savings accounts (HSA) saw their annual health-care spending reduced 3.5 percent, and companies that switched to HSAs for all employees experienced an 11 percent cost reduction. This contrasts sharply with the industry average of a 15 percent annual increase in health-care expenditures.

Individuals with HSA coverage experience additional savings on their personal tax returns as a result of the accounts. Further, a Kaiser Family Foundation report found HSA-eligible plans cost an average of $1,324 less annually than all other types of insurance.

Despite these cost benefits, the future of HSAs is in jeopardy. All of the health-care bills making their way through Congress require minimum benefits in excess of the low premium, high-deductible plans associated with HSAs. These bills ignore that the insurance part of an HSA is only half of the package. The other part is a user-funded account that pays for eligible medical expenses up to the high deductible. The insurance is less expensive precisely because of the high deductible, but the insured still has coverage from the first dollar - an important, almost scandalous omission from the proposed health insurance "reforms." Insurers say they would be forced to stop covering such high-deductible plans, which would effectively eliminate HSAs.

Republicans enacted HSAs in 2004 as a way to increase consumer choices and control costs. Within a year, one million people, many middle-income earners, had enrolled in the program, and that number is about eight million today. Such accounts are typically administered by banks, and participants usually receive debit cards they can use for expenses.

HSAs are thus a hybrid of flexible spending accounts and IRAs that employers and individuals can contribute to on a tax-free basis for medical expenses or prescription drugs.

Under current law, consumers can accrue funds in their accounts from year to year and take them from job to job. Individuals can contribute up to $2,700 annually, while the maximum for families is $5,450 annually. The contribution limit increases by $700 annually for people 55 or older. Qualifying health plans have minimum deductibles of $1,050 for individuals and $2,100 for families. Higher deductibles that lower employer premiums and employee insurance costs are available.

"I think they're great," Andrew Field, owner of a 135-employee company, PrintingforLess, in Bozeman, Mont. When he switched from a Blue Cross plan to an HSA-eligible plan, his employees had trepidations, he says. But, he adds, they have since "really embraced it. People are taking a more active role in managing their health care."

Because HSAs place a consumer's money on the line, they encourage patients to scrutinize doctors' recommendations more closely and therefore help reduce costs associated with unnecessary procedures.

If the Obama administration is serious about reducing costs, it should reconsider its opposition to HSAs and embrace Republican efforts to expand their use.

The Patient Controlled Healthcare Protection bill would give consumers even more control over their health-care decisions than current law allows. Medicare, Medicaid, and SCHIP participants would participate in a personalized, high-deductible HSA. Republicans say they believe that HSAs will arrest the out-of-control costs of those programs and increase patient control of health decisions by curbing the say of insurance companies.

According to Rep. Louie Gohmert (R., Texas), people covered under the government health-care programs would have $2,500 deposited into an individual HSA under their control. Households with more than one participant would receive $3,500. As with private-sector HSA, participants would receive a coded debit card that could only be used for qualified medical expenses.

Such accounts would especially appeal to those in their 20s and 30s who likely would accumulate large balances in their accounts by the time they reach Medicare age.

"The plan provides patients both choices and security like never before, allowing the selection of the doctor you choose without an insurance company telling you a physician is not part of a plan," Gohmert wrote in the Sept. 8 edition of Human Events. "Additionally, the bill puts an end to 'gatekeepers' who tell you whether or not you may visit a particular specialist."

If Obama is interested in cutting health-care costs and increasing patient choices, and if he wants to show that he means it when he says that he is open to Republican ideas, he should embrace the effort to expand the availability of HSAs. They save money for employers and employees alike.