February 17, 2006

Health Savings Accounts: Giving Consumers Control of their Health Care Dollars

COLUMBUS, OH – Congresswoman Deborah Pryce (R-Upper Arlington) today submitted the following editorial:

The many problems facing our nation’s health care system are well-documented. Far too many Americans remain uninsured, and the extraordinary costs of health care in all facets of the system remain a vexing issue for consumers, providers, and policy makers. Small businesses continue to struggle to provide health care coverage for their employees, and 60% of our nation’s uninsured are employed by small, independently owned businesses. And while Congress will continue to work to address all of these issues, I am pleased to report on a success story in the effort to expand access to affordable coverage to more Americans.

Last week, President Bush was at the Wendy’s corporate headquarters in Dublin to promote Health Savings Accounts (HSAs). HSAs were created by Congress as part of the Medicare bill signed by President Bush in 2003, and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. Users of HSAs pay no tax on the money they deposit into the accounts, the money earns interest, and withdraws are tax free if used to cover medical expenses. If you have no medical expenses over the course of the year, the funds in the account carry over to the next year and continue to earn interest, and money accrued in an HSA can be bequeathed to your heirs upon death.

Since the creation of HSAs two years ago, over 3 million Americans have embraced them, and that number is expected to reach 14 million by 2010. Currently, 40% of those who have HSAs have yearly family incomes below $50,000, and in the first year that HSAs became available, more than a third of those who bought them had been previously uninsured. While highlighting the apparent success of HSAs, President Bush came to central Ohio to advocate making them more available and affordable to more Americans, and chose Wendy’s as the venue, where more than 9,000 of the company’s employees have bought HSAs.

For years, the CATO Institute – a libertarian think tank and opponent of excessive taxation – has suggested that Congress eliminate the mandatory income tax deduction from our paychecks, believing that in doing so, Americans would be outraged by the amount they pay in taxes each year and demand significant tax reform. CATO argues that because our money is automatically withheld from our paychecks and we never really see it, we acquiesce to excessive taxation.

Many see traditional health insurance programs in this same light, and believe the lack of market forces in the system is contributing to the overall escalating cost of health care; because we simply pay our premiums, small co-pays upon visiting the doctor, and the insurance provider pays the bill, we pay little attention to price tags, and American consumerism is thwarted.

HSAs, by contrast, work because they are predicated upon consumerism. For many routine medical needs, HSA users can shop around for the best treatment for the best price, and health care decisions are made by the patient and their doctor, not by third party insurance companies. And as consumers begin considering costs in their decision-making process, the market reacts, and costs come down. These are not profound, Earth-shattering concepts, but principles that have been operating successfully throughout our economy for centuries, but vacant from our health care system.

Opponents of HSAs argue that the program is somehow inherently flawed because it is not a viable option for everyone. It is true that to qualify for an HSA, your current insurance must have a high deductible -- $1,050 for individuals, and $2,100 for a family. But in a nation as diverse as ours, with millions of families each with unique health care needs and differing abilities to pay, HSAs have proven to be a financially prudent option for millions of American families, and yet another means of obtaining coverage where none existed previously.

Are HSAs panaceas to all that ails are health care system? No. Are HSAs the best product for every American? Certainly not. But as HSAs have helped millions of Americans afford health care coverage, have given families greater control of their health care dollars, and have shown an ability to drive down health care prices, they should be promoted as an option for any American who wants them.