APRIL 13, 2006 -- President Bush on Thursday urged Congress to enact tax breaks he has proposed as part of a plan to expand health savings accounts (HSAs) that Bush and other proponents say would lower national health care costs.
Speaking to the National Small Business Week Conference in Washington, D.C., Bush touted HSAs as a cure for burgeoning health insurance costs shouldered by small businesses. The administration says its expansion proposal would lower health care prices by forcing consumers to make more informed, cost-conscious decisions.
Making premiums for HSA-compatible insurance policies deductible from income taxes would remove one obstacle to increasing use of the accounts, Bush said, adding that income and payroll taxes on health insurance provided through the workplace are already waived.
"So Congress needs to end the discrimination in the tax code and give Americans who buy HSA policies on their own the same tax breaks that those who get their health insurance from their employers" receive, Bush said.
He also called on Congress to eliminate taxes on out-of-pocket spending through HSAs. The tax code limits the total tax-free HSA contribution.
Bush included both tax measures in his fiscal 2007 budget proposal. They are part of a package aimed at increasing participation in HSAs. The accounts, which were created in the 2003 Medicare drug law (PL 108-173), allow individuals who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. The administration says once patients are forced to pay more costs out of pocket, they will begin to comparison shop and request quality data, eventually driving down health care costs.
To that end, the Bush administration has said it will push legislation requiring hospitals and other health providers to disclose their prices if those groups do not take steps on their own to do so.
"Small businesses can save money under this plan," Bush told the conference audience, hosted by the U.S. Small Business Administration.
Given budget pressures, it seems unlikely Congress will pass added tax breaks for HSAs this year. Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, has said he doesn't expect his panel to mark up White House proposals to expand tax breaks for HSAs, citing the lack of a filibuster-proof majority to support them
Not everyone is convinced Bush's plan will accomplish its goal of lower costs. Some critics say greater transparency in pricing and quality will not translate into lower costs.
"[I]t is unreasonable to expect that information on costs and quality will cause health markets to perform like markets for other goods and services," Commonwealth Fund President Karen Davis and senior program officer Sara R. Collins wrote in an analysis of price transparency. "Patients will never have as much information about the care they need as the physicians who care for them."
The Commonwealth Fund also criticizes Bush's logic that making patients more responsible for paying their bills will make them more careful consumers. Americans already pay more out of pocket than people in countries with lower health costs, Davis and Collins wrote.
On Thursday, Bush claimed that cash contributions into HSAs plus the premium for the linked health insurance plan are "generally less than third-party-payer systems."
Bush also took the opportunity Thursday to stump for the Medicare prescription drug benefit, which has been the target of criticism from Democrats and moderate Republicans.
"This is a good deal for American seniors," Bush said. "And we're working hard to make sure that American seniors realize there is a fine opportunity for them to improve their lot in life."
The drug program, launched Jan. 1, has caused headaches for the administration. Numerous proposals to change it have been introduced in Congress. Among them have been several attempts to delay the May 15 enrollment deadline.
"People continue to be paralyzed by the array of confusing private drug plan choices and anxious that they will be locked into a plan that does not meet their needs," Robert M. Hayes, president of the Medicare Rights Center, said in a statement Thursday that urged an enrollment extension until Dec. 31, 2006.
Beneficiaries who enroll after May 15 will have to pay higher premiums, which escalate with each month they delay.
Some lawmakers also want to allow seniors to switch plans after the enrollment deadline if they are unhappy with their initial choice. Seniors can change plans only once and must do so before May 15. Dual eligibles—beneficiaries who are eligible for both Medicaid and Medicare but have been shifted to Medicare for their drug coverage—can change plans on a monthly basis.
Though Bush did not mention it Thursday, he has said repeatedly he does not believe the enrollment deadline should be extended.
Separately Wednesday, AARP released a study that found 78 percent of seniors enrolled in the drug program are happy with it, with only 20 percent of respondents saying they did not feel they were saving money.
Sixty-three percent of those who already had prescription drug coverage felt the Medicare plan was saving them money over their old plan, the report said.
AARP's Medicare Rx Plan, administered by UnitedHealth Group, is one of the health plans offered to Medicare beneficiaries. AARP officials have said money made from health plan sales is used to fund services for AARP members.
