NCPA - National Center for Policy Analysis

CONGRESS GOT SOMETHING RIGHT!

December 7, 2005

Health savings accounts (HSA) allow people to purchase a relatively inexpensive, high-deductible insurance and deposit money into a tax-free account. In effect, they give Americans more control of their own health care, says Dr. David Gratzer, a physician and a senior fellow at the Manhattan Institute.

This is the second anniversary of the legislation that created the HSA, the Medicare Modernization Act of 2003, falls tomorrow, so it's worth celebrating HSAs -- and considering what needs to be done to make them better.

Gratzer recommends:

  • Allowing individuals to deduct from their taxes the premiums of high-deductible insurance when purchasing an HSA. Not only would this be fair -- it corrects the historic bias toward employer-based insurance -- it would make HSAs even more attractive.
  • Passing Rep. John Shadegg's Health Care Choice Act, which would allow out-of-state purchase of health insurance. Modeled after interstate banking laws, this legislation would create a national market for health insurance.
  • Making HSAs available to public employees. Despite the dire financial condition of most public plans, only the federal government and Arkansas offer HSAs.
  • Allowing individuals and companies to allocate a certain amount, pre-tax, into health care to be used for premiums or health accounts -- or both. Insurance companies will then design products with different mixes of health accounts and insurance.

Americans have cause to celebrate the first two years of HSAs. But with these steps, the third anniversary could be even bigger, says Gratzer.

Source: David Gratzer, "Congress Got Something Right!" Wall Street Journal, December 7, 2005.

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