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HealthBiz: Bush plan banks on HSAs

Posted - Sep. 16, 2004 at 1:20 p.m.



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Sep 16, 2004 (United Press International via COMTEX) -- EDITORS NOTE: This is the second part of a two-part HealthBiz series on the healthcare proposals by the presidential candidates. This report examines plans put forth by President George W. Bush.

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WASHINGTON, Sept. 16 (UPI) -- President Bush is banking on the success of health savings accounts -- which have shown a surprising surge in early popularity among insurers -- if not yet employers.

Bush had entered the presidential campaign dragging along his old policy bag of tax credits and association health plan proposals. Those proposals, and his touting the Medicare Modernization Act -- which brought prescription drugs to the health insurance program for seniors -- turned out to be not as hardy as the full roster of ideas put forth by Democratic contender Sen. John Kerry, D-Mass.

So, on Sept. 2, Bush returned to the HSA concept -- included in the new Medicare law passed last December -- and decided to build on the early momentum exhibited within the industry.

Since his early days as president, Bush has pushed for a refundable tax credit for low-income wage-earners to use to buy health insurance if they do not have employer-based coverage. The maximum credit would be $1,000 for individuals and $3,000 for families.

The idea went nowhere in Congress, however, which criticized it for many reasons -- including that it didn't provide enough money to do the job.

The new twist in the tax credits under the Bush plan is they also could be used to set up HSAs to offset high-deductible, catastrophic health plans combined with a tax-free status and eligibility for yearly rollovers.

The credit could be used to pay for the insurance premium or people could split it up and use part to fund their savings account.

Bush also proposed granting a tax credit to a small business that contributes to an employee's HSA. One criticism of HSAs is employers are not required to contribute to them -- as they are to health reimbursement accounts -- so fewer people would choose them.

A small business under the Bush plan would get a $500 credit for a worker with family coverage and $200 for an individual HSA. This credit also would be available for the self-employed.

The plan would allow taxpayers to take an above-the-line deduction on their returns in conjunction with HSAs -- if they purchase a high-deductible policy, such as a $1,000 deductible for individuals and $2,500 for families. The above-the-line feature means it could be used by taxpayers who do not itemize their deductions.

An analysis by the American Enterprise Institute showed the plans would cost the government about $125 billion between 2006 and 2015, but would reduce the number of uninsured by 5.7 million. About $88 billion of the spending would go to help people who already have insurance, the AEI actuarial panel noted.

The concept of association health plans involves small businesses and industry groups joining to offer insurance to workers. There is support but also much opposition to this idea on Capitol Hill and the outlook for passage is not favorable at this point.

Bush also has proposed spending $4 billion, in the form of grants, to allows states to create insurance-purchasing pools and allowing people to purchase individual health policies across state lines. The idea is to promote competition among insurance companies to reduce costs.

The AEI panel said the costs of AHP, purchase pools and across-state purchasing would have a minimal impact on the federal budget and reduce the number of uninsured by only 1 million.

The contrasts between the Bush and Kerry plans are clear and stark. Kerry would spend anywhere from $653 billion to $1.5 trillion, depending on estimates, on plans that focus on a major increase in the Medicaid program and federal reimbursement to employers for catastrophic health costs for employees. About 27 million uninsured would gain coverage under Kerry's plans -- some 18 million via Medicaid.

Bush would spend about $129 billion, but would provide insurance coverage only for some 7 million Americans. There would be no expansion of government entitlement programs in the Bush plan -- it relies heavily on the tax code and the private sector.

There also are some similarities in the healthcare ideas of both candidates. Both would aim a lot of resources at people who already have insurance -- trying to answer the worry and concern in middle America over rising healthcare costs and whether families will be able to continue to afford coverage.

Recently released Census Bureau statistics show the number of uninsured has risen to 45 million. Since 2001, some 5 million working Americans have lost health insurance coverage -- either their employer dropped it or they couldn't afford the cost increases passed on to them by their companies.

Judy Xanthopoulos, an independent consultant and principal at Quantria Strategies in Washington, was one of the AEI analysts. She said the Bush plans are "much more targeted -- they push people toward certain policy types" -- mainly the HSA format.

Xanthopoulos said she would expect if Bush's proposals are passed into law the biggest uptake would be among the low-income, who could use the tax credit for an HSA policy.

Bush talked about the differences between his plans and those proposed by Kerry during a speech Thursday in St. Cloud, Minn.

"When it comes to healthcare, we have a difference of opinion, and it's a big difference of opinion in this campaign," Bush said. "My opponent wants government to dictate. I want you to decide, when it comes to healthcare.

"We need to expand tax-free health savings accounts. These are important for our consumers. These are (a) tax-free way to save for your own healthcare needs. Small businesses will be given tax credits that encourage them to put money into health savings accounts for their employees. We want more people to have their health savings accounts, so they make decisions based on the advice of their doctor, not somebody working at a distant HMO," Bush said.

Voters in November have two choices of direction when it comes to healthcare policy and though the details often are confusing, the plans are distinctly Republican and Democratic. One proposes private-sector tax initiatives and the other calls for the federal government to shoulder more of the healthcare cost burden.

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E-mail ebeck@upi.com

Copyright 2004 by United Press International.

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