NCPA - National Center for Policy Analysis


February 1, 2006

President Bush pledged Tuesday to slow the rising cost of health care by making it easier for individuals and small businesses to buy insurance, mainly by encouraging the use of tax-free health savings accounts.

In his State of the Union address, Bush discussed a strategy that could require individuals to pay a larger share of their medical expenses but would offset the cost with tax deductions.

  • According to a White House outline, people who buy high-deductible insurance that can be linked with a health savings account should be able to deduct from their taxable income the cost of the policy.
  • The President also proposes to allow higher annual contributions to the accounts and to let employers offer "portable" health savings-linked insurance that workers could take with them if they changed jobs or retired.
  • Bush also revisited previous health care proposals that Congress did not pass: allowing small companies to lower their costs by banding together to buy insurance; limiting awards in malpractice cases; and offering up to $3,000 in annual tax credits to help lower-income people buy insurance, so long as they buy high-deductible plans with health savings accounts.

"We will strengthen health savings accounts by making sure individuals and small-business employees can buy insurance with the same advantages that people working for big businesses now get," Bush said.

Joseph Antos of the American Enterprise Institute, a Washington think tank, said the proposals would level the playing field between those who buy their own insurance and those who get it tax-free from their employers.

Antos said high-deductible insurance, coupled with more information on the cost and quality of care, would make people better health care consumers. "This is a first step we must take if we expect to see people getting greater control over the health care they use," he said.

Source: Julie Appleby, "Bush touts tax-free health savings accounts; Says individuals, small businesses would be helped;" USA Today, February 1, 2006.


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