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No Free Health Care, Says Bush Economic Advisor

FEBRUARY 14, 2006 -- Allan Hubbard, director of the president's National Economic Council, said Tuesday that the biggest factor driving health costs is the "perception that health care is free."

Because the nation's health care is primarily a third-party-payer system in which insurance—not the doctor or the patient—pays the direct bills, Hubbard argued that Americans use health services as though they were free.

Speaking at a breakfast with reporters Tuesday morning, Hubbard made the administration's argument that the nation's health care costs could be reduced if Americans paid more out of pocket, and therefore would more carefully consider some of their choices.

The administration hopes to achieve a health system that gives consumers a bigger stake in their health care decisions mainly through the expansion of health savings accounts (HSAs), which were created in the 2003 Medicare drug law (PL 108-173). The accounts allow people who sign up for high-deductible health plans to contribute and withdraw funds to cover health care costs tax-free. The idea is that once patients are forced to pay more costs out-of-pocket, they will begin to comparison shop and request quality data, eventually driving down the costs of health care.

Bush's budget request seeks to expand HSAs by raising the ceiling on contribution amounts and allowing premiums to be paid from the accounts. The president also has proposed giving businesses the option to offer portable HSA plans that would allow workers to use them even if they switch jobs.

To the argument that the high deductibles required under the law means only wealthier people will sign up, Hubbard said, "Critics forget the high deductible plans are cheaper. . . . It's unfair to compare HSAs to low-deductible plans."

Hubbard could not offer an estimate of the savings that could be achieved from Bush's plan—which would cost $29 billion over five years—but said, "We'll know it's working when growth starts to slow."

About 3 million people have enrolled in HSAs and Hubbard—who participates in one himself—said the changes proposed by Bush would bring enrollment up to 21 million by 2010.

Though, he added, "I actually think it would expand faster than that." But Hubbard noted that the need for more data on the cost and quality of health care is imperative for the system to work.

HSAs and the issue of price transparency were part of Bush's remarks Wednesday when he traveled to Dublin, Ohio, to discuss his health care agenda.

"The president wants to make sure that consumers are informed, because that will help make health care more affordable and accessible," White House spokesman Scott McClellan told reporters Tuesday. "He wants patients to have information on prices and quality of care. And he has called on health care and insurance industries to make that information available to consumers."

Hospital industry executives met with administration officials Tuesday at the White House to discuss price transparency issues, according to several health care sources. A White House spokesman did not return a call placed for comment.

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