At a time when national anxiety is rising over spiraling health care costs and the growing gaps in the nation's health insurance system, President Bush is offering seemingly minor reforms, which nevertheless could significantly change the private sector's approach to health insurance.

The change the president envisions is part of a broader ongoing effort to move the United States toward what he calls an "ownership society." The idea is to encourage Americans to assume more of the responsibilities and risks of their own financial security instead of relying so much on government- and employer-sponsored health and pension plans. (See related story in this issue, p. 230.)

Whether this transformation would help or hurt Americans' access to health care is a matter of fierce, and largely ideological, debate.

As described in his State of the Union address, the heart of Bush's approach is a health savings account -- an account that allows individuals to set aside money tax-free for initial health expenses, provided that they also buy high-deductible or "catastrophic" health insurance plans for high-cost health crises. Although Congress passed the accounts as part of last year's sweeping Medicare reform bill, they have until recently been largely obscured by the continuing controversy over the legislation's prescription drug component for the elderly.

But many believe that the creation of these accounts – the culmination of a more-than-decade-long crusade by conservatives -- could have a sweeping impact on the non-elderly. "It was the most important part of the [Medicare] bill, more important than the drug benefit itself," said Henry Aaron of the liberal-leaning Brookings Institution. "I would think the benefits managers in every corporation ought to be looking hard at this."

Some leading Democrats in Congress also consider health savings accounts dangerous: Already, Senate Minority Leader Tom Daschle, D-S.D., and Sen. Edward Kennedy, D-Mass., have introduced legislation to repeal the HSAs as part of broader bills to redo much of last year's Medicare legislation – bills that Bush warned in his State of the Union he would veto.

Fundamentally, HSAs are designed to encourage Americans to pay for at least $1,000 in health care expenses with their own and employer-contributed cash, and to let insurance cover any further costs. This approach, many economists say, would make health insurance more like the traditional model of insurance -- the kind people have for their car or home -- in which predictable, routine costs such as replacing the tires aren't covered, but major, unpredictable events such as collisions are.

The idea itself isn't new. Since 1996, small businesses and the self-employed have been able to use similar accounts, known as medical savings accounts. And since mid-2002, new IRS regulations have allowed employers to experiment with using tax-free spending accounts before their health insurance plans kick in.

But HSAs go well beyond both precursors by making the plans available to everyone and by making the accounts more attractive in a variety of ways.

Under the new law, employers and workers can set aside enough money in these accounts to cover the entire cost of the deductible for a catastrophic insurance plan: This year, contributions can be as high as $2,600 for an individual and $5,150 for a family -- with those over 55 eligible to make additional catch-up contributions of up to $500 (rising to $1,000 by 2009).

And although all other tax-subsidized savings accounts -- such as individual retirement accounts or education savings accounts -- allow either contributions or withdrawals to be exempt from taxes, HSAs break new ground by allowing both contributions and withdrawals to be tax-free, so long as the money is used to pay for health care expenses.

Those willing to pay taxes and a penalty could use the money for anything they liked. Unspent balances would build over time; for those in good health, that could mean a hefty sum of money by the time they qualify at retirement for Medicare. Although individuals can't put more money into an HSA once they qualify for Medicare, they can use money left in an account to defray health care costs that Medicare doesn't cover. When an HSA holder dies, the money can be passed along to a spouse's account tax-free, or to heirs, after taxes.

HSAs have many advantages over their predecessors, including lower minimum deductibles and lower penalties for non-health-care-related withdrawals.

To create further incentives for catastrophic insurance, Bush proposed in the State of the Union that premiums for this insurance be fully tax-deductible. That change would "supercharge HSAs and make them an even more attractive option for millions of Americans, including the uninsured," said Greg Scandlen, director of the conservative Galen Institute's Center for Consumer Driven Health Care, in a statement after Bush's speech.

Conservatives expect great things from the new accounts. Once individuals have to spend their own money for health care, they'll become more cost-conscious and discerning consumers. That would force doctors and hospitals to disclose prices, and it would increase demand for better consumer information about the value of various health care procedures and who offers the best quality care.

"I think the market will respond in a way that we haven't seen yet," said John Goodman of the National Center for Policy Analysis, the Texas-based free-market think tank that originated the idea behind health care savings accounts about 15 years ago. "Once you have billions and billions of dollars in the hands of consumers, health care will begin to take on the character of a true marketplace. Up until now, it has been more like a medieval guild."

And because he who pays the piper calls the tune, conservatives argue that HSAs will help wrest health care decisions away from large, unaccountable bureaucracies -- be it employers or insurers -- and reduce the call for national health insurance. HSAs, wrote former House Speaker Newt Gingrich in the Atlanta Journal-Constitution late last year, are "the single most significant transformation that can be made in saving the country from skyrocketing health costs and steadily increasing calls for taxpayers to finance more and more of the health care system through higher taxes."

Most liberals, however, fear that HSAs would do little to expand coverage, but would instead benefit the healthier and wealthier at the expense of the poorer and sicker.

Like other "ownership society" proposals, this one comes in the form of a tax deduction, which is, by definition, more valuable to those in higher-income brackets. In a 2003 commentary for the Tax Policy Center, Urban Institute scholars Linda Blumberg and Leonard Burman calculated that a $4,500 HSA contribution would offer a deduction worth $1,575 to a household in the top income-tax bracket -- and less than half that amount to a moderate-income family, if indeed the middle-income family could afford the contribution in the first place.

The hope is that employers would seed employees' accounts with the savings the employers would reap from the lower premiums of catastrophic plans. But just how much employers would save, and how much savings they would pass along to employees, are among the experiment's many unknowns.

Liberal analysts are also dubious about the accounts' ability to curb costs. Even if HSAs could make consumers more cost-conscious on small-ticket items, that isn't likely to make much of a dent in national health care spending, because the bulk of health care expenses are incurred by a comparatively small share of the populace who suffer catastrophic illnesses or accidents. Insurance would still have to cover such illnesses or accidents. "For the vast majority of health care spending, [HSAs] would not change incentives in the slightest," Aaron said.

The accounts could also unravel the broad pooling of health risks that has been the hallmark of the employer-sponsored system. Given a choice between cash-plus-catastrophic and a more comprehensive health insurance plan, goes the argument, the young and healthy would take the money and run. This would leave the older and sicker workers in the comprehensive plans, and these plans would eventually collapse from spiraling costs.

The specter of collapse could inspire employers to offer HSAs as the only option, or perhaps -- if Bush's proposed tax deductions for catastrophic premiums become law -- let employees try their own luck in the individual health insurance market. If employers do feel compelled to offer all their employees enough cash to cover deductibles -- the low-cost, low-risk workers along with high-cost, high-risk ones -- HSAs could actually wind up costing some employers more than traditional insurance. That's because the old system averages out costs and risks over a broad group, said Dallas Salisbury of the nonpartisan Employee Benefit Research Institute in Washington .

Blumberg says that HSAs, when taken together with other Bush health care proposals, such as allowing individuals to earn tax credits for buying health insurance and letting small employers self-select into "association health plans," would take a toll on the ability of the health care system to spread risks. "All of these policies are directed toward increasing the segmentation of risk," she said. "That means individually rating people based on their personal situation rather than as part of a more heterogeneous group. That will make it more difficult over time for people to continue to purchase the comprehensive policies we're used to as a country."

Americans also may not be easily lured away from the security of cradle-to-grave coverage. "In theory, [HSAs] could sweep the nation, but only if people can live with a high deductible," Salisbury says. "Employers and unions and workers historically have not been enthusiastic embracers of catastrophic insurance."

But as employers and employees alike face increasingly tough choices about how to cope with a relentless rise in health care costs, that calculus could be ch