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Baucus: GAO Report Proves Expanding HSAs Will Not Lower Health Care Costs

By CQ Staff

September 11, 2006 -- Recent findings from a Government Accountability Office (GAO) report concerning health savings accounts are evidence that such accounts will not decrease health care costs or improve health care quality, Sen. Max Baucus, D-Mont., said Monday.

Health savings accounts, or HSAs, are tax-free accounts funded by individuals or their employer. Funds can be withdrawn without penalty to pay for health care services not covered by high-deductible health plans sold in conjunction with the accounts. Money paid by individuals into the accounts can be deducted from taxable income.

The GAO report, released on Friday, found that while health plans associated with health savings accounts attract enrollees with generally higher incomes—a common complaint about the plans—the data it examined on age differences were "inconclusive."

Critics say that HSAs attract healthy young people and wealthy Americans who use fewer health care services, leaving traditional plans with more costly enrollees who drive up premiums. But proponents say that such plans will help consumers of all ages comparison shop for care based on price and quality, which in turn will help reduce health care costs. GAO, however, did not find that to be the case in questioning members of focus groups.

"Few participants researched the cost of hospital or physician services before obtaining care, although many participants researched the cost of prescription drugs," the report found.

In a statement, Baucus said that while GAO "had found that some Americans do find HSAs useful for both health care and tax purposes," early trends identified in the report "indicate that further expanding HSAs likely will not have the desired effect of lowering health care costs and ensuring quality care for a significant number of people." Baucus added, "Based on GAO's findings right now, I would have to caution against counting on HSAs to advance real health care reform."

President Bush has urged Congress to enact tax breaks he has proposed as part of a plan to expand participation in health savings accounts.

Baucus said he has asked GAO to keep track of HSA trends and report them annually to Congress.

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