Liberals Mount Offensive Against Health Savings Accounts

By Christine Hall | July 7, 2008 | 8:29 PM EDT

( - Liberal interest groups are trying to torpedo a plan to add health savings accounts to Medicare drug legislation as a House-Senate conference committee starts negotiations this week.

Under the plan already passed by the House, workers and employers would be able to save money in expanded Medical Savings Accounts (renamed "Health Savings Accounts") and new "Health Savings Security Accounts" (HSSAs).

The new accounts would allow anyone who is uninsured or has insurance with deductibles of at least $500 ($1,000 for a family) to contribute up to $2,000 annually ($4,000 for a family) to the tax-deductible account.

The deductible contribution phases out for workers with adjusted gross incomes above $75,000/$150,000.

But from the perspective of the political left, the GOP plan would deny the government tax revenue ($174 billion over 10 years, according to the Joint Tax Committee), become a tax shelter for high-income workers, provide incentives for employers to switch to high-deductible insurance plans and drain healthy workers out of the traditional health insurance pool.

"Employers would find these [accounts] attractive because they could scale back their health coverage, which would be cheaper for them," said Edwin Park, senior health policy analyst for the Center on Budget and Policy Priorities

Park believes employers would switch from traditional health plans to savings accounts, put only a modest contribution into the accounts and assume employees could make up the difference with their own tax-deductible contributions "to offset the higher, out-of-pocket medical costs they would otherwise face."

Meanwhile, low-income workers, who don't pay income taxes, wouldn't benefit from tax-free savings accounts, Park said. And people in the lowest 10 to 15 percent tax brackets would be able to offset out-of-pocket costs at just 10 or 15 cents to the dollar, making the accounts worth more to people in higher tax brackets.

The House GOP plan would create "substantial winners and losers," Park charged.

But the savings accounts were a principal selling point for some House conservatives in supporting the House bill, which passed by just one vote on June 26. In fact, 19 House Republicans voted against the $400 billion expansion of the Medicare entitlement program.

"People everywhere are saying they want more choice and they want more control over the money that's being spent on their health care," said Grace Marie Turner of the Galen Institute. Health savings accounts are a part of consumer driven health care, says Turner.

Savings accounts will put patients in charge of how their health-care dollars are spent, she said, so that someone can "decide to call a nurse instead of going to a hospital emergency room in the middle of the night."

Opponents of existing Medical Savings Accounts (MSAs) and the new proposal "are really not looking at the data," said Turner. "A great majority of the people who have obtained medical savings accounts have previously been uninsured."

"They don't have any evidence," agreed the Cato Institute's Tom Miller; "they just do their hypothetical fears. Someone actually might get something they paid for - we can't have that happen in health care," Miller quipped.

Expanding MSAs so that everyone can participate is a crucial reform, the two analysts agreed.

The House Ways and Means Committee estimates that 40 million people would take advantage of the savings accounts within 10 years.

But Miller cautions that tax-deductible savings accounts, even if the plan isn't watered down in conference committee, won't fix a flawed and bankrupted Medicare system.

The House Medicare drug bill is only good "by standing it next to the Senate bill," said Miller. "There [are] about five pages out of a 747-page document that might be passably decent.

"There's always this...perpetual dream," Miller explained, of savings accounts being able to survive as an island oasis while Medicare starts to run huge deficits by 2018 (as its actuaries have projected).

"All that money you accumulated becomes a sitting target and...becomes 'here's some money up for grabs, let's take it back,'" said Miller. "You can't compartmentalize and think you've sealed off a virtuous sector of the health care industry."

But it's controversies over means testing, the role of private drug insurance and coverage for rural areas and federal retirees that will likely be the bigger fighting points for Democrats.

Sen. Ted Kennedy (D-Mass.) and other Senate Democrats on Tuesday fired off a letter to President Bush outlining Democratic essentials for the Medicare conference bill.

"We will not support any conference report that will come back from conference which will effectively intimidate or coerce our seniors who are in Medicare to leave Medicare," Kennedy told reporters at a Capitol Hill news conference, referring to the House plan to let seniors leave traditional Medicare for competing plans offered by the private sector in 2010.

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