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Health savings accounts look like brain wave of the future
Barone analyzes the Presidentís plan to promote HSAs, and finds a parallel in the evolution of the now ubiquitous 401K retirement accounts.
Bush administration officials and some conservative thinkers hope that health savings accounts can change health care finance in a way similar to the way Section 401(k) changed pensions. Health savings accounts allow holders of health insurance policies to retain money they do not spend. Typically, such policies have high deductibles. Policyholders pay for routine and predictable medical expenses out of their own pockets, but they are insured against catastrophic expenses.
The Medicare/prescription drug law of 2003 contained provisions allowing health savings accounts -- one reason the Bush administration and most congressional Republicans supported it. Now the administration wants to strengthen HSAs by making premiums on these policies tax-deductible.
This is an attempt to reverse the effect of the World War II decision to make health insurance policies deductible to employers and tax-free to employees. This tended to tie health insurance to employment and has made individuals dependent on large organizations. Since third parties pick up the tab for most health care spending, consumers tend not to be cost-conscious, and the result has been above-inflation cost increases for health care.
Will health savings accounts be an entering wedge to produce a more market-oriented health care sector? Democrats fear that, and Republicans hope so. I confess that I am not sure. What is clear is that health savings account-type policies have been rapidly growing since passage of the 2003 act. There are now 3 million people with health savings accounts, and big employers in increasing numbers are offering high-deductible policies. The employee gets to choose whether to pay more for more coverage or to pay less and be able to keep what he doesn't spend.
Baroneís op-ed is measured in its analysis and he is right to point out that it is too early to weigh in with a final verdict on the power of HSAs to leverage wholesale health care reforms. But the early evidence is promising, and HSAs are a welcome addition to a debate where new ideas have been sorely lacking in recent years.
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