State of the Union: Bush hopes to ease healthcare cost burden with saving accounts, other proposals

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President Bush devoted more time to healthcare in his State of the Union address on Tuesday night than he has in recent years, and affordability of coverage is the main concern which the Administration will focus on this year, he said. Though Bush made reference to electronic medical records and health IT, his focus was on economics and expanding the use of Health Savings Accounts (HSA).

The issue of healthcare costs and reform certainly seems to be on the minds of a lot of Americans, so Bush's timing is good. According to a Wall Street Journal/NBC News Poll released just prior to Bush's address, 20 percent of Americans say the healthcare system in this country needs reform. Whether the Administration's proposals are embraced by citizens, healthcare providers, and vendors remains to be seen however.

Regarding HSAs, Bush said in his speech, "We will strengthen health savings accounts - making sure individuals and small business employees can buy insurance with the same advantages that people working for big businesses now get. We will do more to make this coverage portable, so workers can switch jobs without having to worry about losing their health insurance."

According to background information posted at, HSAs were originally authorized as part of the 2003 Medicare law. They can be used to pay for routine healthcare expenses, and are to be coupled with high-deductible insurance plans. Though HSAs are tax-free already, Bush will propose to provide even more tax incentives such as credits for low-income individuals to purchase insurance. The Administration's goal also will be to allow individuals who pay for their own insurance to dip into a HSA account to cover premiums and other out-of-pocket costs.

The Administration also hopes to prevent a "job lock" for Americans because HSAs are not currently portable. Bush's plan will make it easier for individuals to transfer their accounts from job to job more easily since they would be owned by the employee and thus could be taken anywhere. The proposal also would allow people to look across state lines for the best health insurance coverage for them.

More than 3 million people currently utilize HSAs, according to data from the America's Health Insurance plans group.

Another tactic, according to the White House, will be to allow small businesses to develop Association Health Plans (AHPs). The AHPs would enable smaller companies to pool resources to purchase health coverage, to give them the same buying power as big businesses and labor unions.

Medical malpractice has long been a rallying point for Republicans who blame many of today's healthcare woes on too many doctor-related lawsuits. Bush echoed this concern during his speech: "And because lawsuits are driving many good doctors out of practice - leaving women in nearly 1,500 American counties without a single OB/GYN - I ask the Congress to pass medical liability reform this year."

Of course, not everyone is totally in love with these proposals. Oxford Analytica, an independent strategic consulting firm, wrote in a Forbes editorial that although "HSAs might help to decrease health spending moderately in the short run and more over time. However, the president's reform initiatives are insufficient to stave off the incipient crisis in the current system." The firm called for more radical healthcare reform once politicians get past the November elections.

Even more critical was Congressman Steve Rothman (D-N.J.), who stated in response, "Health savings accounts are okay if you want to add it on top of your health insurance policy, but they don't help if you can't afford health insurance in the first place. HSAs are another attempt by the Bush Administration and Republican majority to give tax breaks to people who already have enough money to save for healthcare costs." Rep. Rothman went on to opine that HSAs won't help "the 46 million Americans who don't have any health care coverage at all."

Other organizations fear that having to go with high-deductible health insurance might reduce access to care for some individuals, especially those with low-income who might not be able to swing the deductibles. The organization Physicians for a National Health Program said in a statement, "These plans effectively penalize the sick for getting sick."

Regardless of the solution, statistics released by The Kaiser Family Foundation prior to Bush's speech make it clear why costs are a priority, and why the debate will continue:
  • Premiums for employer-provided health coverage rose 9.2 percent last year, and the average cost of plans families of four is now $10,880/year, up of 73 percent since 2000;
  • A larger portion of adults are concerned about the cost of healthcare than affording a rent or mortgage (22 percent), a terrorist attack (18 percent), or unemployment (16 percent). The largest cause of rising health costs, according to respondents to the Kaiser study, is high profits by pharmaceutical and insurance companies;
  • The number of employers now offering health coverage to workers has dropped 9 percent since 2000.