NCPA - National Center for Policy Analysis


February 9, 2006

In his State of the Union address, President Bush proposed to gradually change the way U.S. health care is purchased. For individuals, his proposals to expand Health Savings Accounts (HSAs) offer immediate relief from the high cost of health care and the means to gain more control over medical decisions. For the United States, the president's proposals offer an opportunity to rein in the rising cost of care, say researchers John F. Cogan, R. Glenn Hubbard and Daniel P. Kessler.

Besides correcting a fundamental flaw in federal health policy, the president's plan would also expand the number of people covered by HSAs and the amount that can be contributed to these accounts, say the researchers.

The President's plan would:

  • Allow individuals who purchase a qualifying health-insurance policy on their own to set up an HSA and make tax-free contributions to the account.
  • Allow contributions to HSAs to cover coinsurance and deductibles.
  • Create a refundable tax credit to low-income persons to encourage them to purchase insurance and set up an HSA.

The president recognized in his remarks that expansion of HSAs is only one tool among many to help ensure that our country's health system remains vibrant. Congress should also consider his proposals to make insurance more portable, test innovative methods of covering the chronically ill, and make the liability system fairer and more predictable, say the researchers.

Health-care spending accounts for about one-sixth of U.S. economic activity, and resolving our long-term fiscal challenges requires reducing health-care costs. The challenge of reforming our health system will only grow more difficult the longer we delay, say the researchers.

Source: John F. Cogan, R. Glenn Hubbard and Daniel P. Kessler, "Not a Panacea . . ." Wall Street Journal, February 9, 2006.

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