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White House Makes Its Strongest Push Yet for HSAs

FEBRUARY 1, 2006 -- The ambitious proposal advanced by President Bush to expand health savings accounts represents the administration's strongest push yet to convince employers and workers to embrace "HSAs" as a way to get more for their health care dollar.

Unveiled Tuesday in the State of the Union Address, the proposal would improve the tax treatment of HSAs and make them portable, allowing workers to keep them when they change jobs or leave the work force. More details on the proposal will be released when the administration releases its budget Feb. 6.

Bush's HSA plan would allow premiums to be paid from the tax-free accounts. Also, the plan would permit an employer to put more cash in the accounts for a chronically ill employee, with the employer determining who those workers are and how much extra they would receive.

Other elements include making premiums for HSA-compatible insurance policies deductible from income taxes for individuals who purchase them on their own—rather than through an employer—and eliminating all taxes on out-of-pocket spending through HSAs.

National Economic Council Director Allan Hubbard said Wednesday that HSAs give consumers "more skin in the game" when it comes to determining how to spend their money on health care. Proponents of HSAs believe that traditional insurance, which requires monthly premiums, deductibles, and co-payments, rarely gets consumers as close to the cost of health care as an HSA does.

Democrats said Wednesday they were confident they could defeat the Bush plan.

At a Capitol Hill rally, Sen. Ted Kennedy, D-Mass., called the accounts a "fraud" that would do little to help sicker individuals get the health care they need, nor would they help the 45 million Americans without health insurance get coverage.

"Like his Social Security privatization fiasco, President Bush's health savings accounts are a gimmick that will only make a bad situation worse," Kennedy said.

Senate Minority Leader Harry Reid, D-Nev., emphasized Bush's lack of progress in overhauling the nation's health care system. He criticized Bush for not being "credible" when he spoke about controlling health care expenses in his speech Tuesday night.

"He keeps talking about how he wants to improve health care but it's been five years and we've seen no improvements," Reid said of Bush.

The Democrats also said they were surprised that Bush's talk made no mention of the new Medicare drug benefit or the problems some beneficiaries have experienced since it began Jan. 1.

"This is month two. What's going to happen this month to the people?" said Sen. Debbie Stabenow, D-Mich. Reid added that "ignoring the problem won't make it go away. We need to fix Medicare and we can do it now."

Hubbard said there were "a number" of things the president did not mention in his speech, adding that "an enormous amount of progress" had been made in smoothing out difficulties and that the benefit was working well. "A million prescriptions are being filled every day, and 50,000 new Americans are signing up for Part D every day," he said.

In addition to expanding HSAs to improve coverage, Hubbard said Bush plans to focus on ways to give consumers more information about the price of health care to help patients more carefully spend their health care dollars.

"This wasn't mentioned last night, but the president is going in the next couple of weeks to start taking about the importance of providers making information available to their customers ... about both quality and price, so people can become good consumers," Hubbard said in a conference call with reporters.

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