New health savings accounts are now law, but the debate over their merit raged Wednesday at a hearing of the Senate Aging Committee.

The setting was somewhat ironic: While HSAs, which are tax-preferred accounts that accompany high-deductible health insurance policies, were authorized by last year's Medicare prescription drug law, Medicare beneficiaries are among the only Americans who cannot sign up for them.

The lead advocate for the new accounts was Treasury Secretary Snow, whose department is responsible for writing the rules to govern the interactions of the tax-free accounts and the insurance policies with which they are paired.

Snow called HSAs "a bold new concept" that will "empower the American patient to make choices" and could help dampen overall health spending.

But Aging ranking member John Breaux, D-La., a strong supporter of the Medicare drug law, said HSAs were one portion of that bill he vehemently opposed. "I think it's terrible tax policy and even worse public health policy," he said.

Snow defended the accounts' unprecedented tax advantages -- money goes in tax-free and, if spent on health care, comes out tax-free as well. "Anything that encourages the use of high-deductible health insurance is a step in the right direction," he said.

But Breaux said he is particularly unhappy that the plans will cost the federal government an estimated $16 billion over the next decade in lost tax revenue. "If it's such a good idea, why don't people just go out and buy it? Why do we have to subsidize it to the tune of $16 billion?" he said.

Snow and other backers, including John Goodman of the National Center for Policy Analysis, said the money will be well spent if, as they predict, patients hold down health spending by becoming better healthcare shoppers.

"Employees with personal accounts tend to reduce the number of physician visits, switch from brand-name drugs to generics and take other actions to reduce waste and inefficiency in healthcare consumption," Goodman said.

But Robert Greenstein of the Center on Budget and Policy Priorities agreed with Breaux that the policies not only will disproportionately help the healthy and wealthy, but also could undermine the availability of more comprehensive health insurance.

"If HSA use becomes widespread, as is likely, and premiums for the comprehensive coverage typically offered by employers today rise substantially ... many older and sicker workers ... would either have to switch to a high-deductible plan or become uninsured," Greenstein said.

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