NCPA - National Center for Policy Analysis


February 14, 2006

In his State of the Union address, President Bush devoted only a few sentences to health policy. But, to coincide with the speech, the Bush administration released a five-page document proposing health-policy reforms so sweeping and bold as to merit comparison to the scope -- though certainly not the content -- of Hillary Clinton's plan of a decade ago. If the White House is able to see its proposals through, it will leave a lasting and positive mark on American social policy, says John C. Goodman, president of the National Center for Policy Analysis.

One component of Bush's reforms is Health Savings Accounts (HSAs). The idea behind HSAs is quite simple, says Goodman:

  • Individuals should be allowed to manage some of their own health care dollars through accounts they own and control.
  • They should be able to use these funds to pay the costs of out-of-network doctors, diagnostic tests, and other procedures not covered by third-party, catastrophic insurance.
  • The accounts should be tax-free, and should eventually be available for non-medical purposes, letting individuals profit from wise decisions that allow them to reduce their health-care costs.

The logic of such accounts is that they bring health incentives in line with market incentives, explains Goodman. Right now, because consumers of health care don't control the dollars with which that care is purchased, they have little incentive to keep expenses down; HSAs provide such an incentive. The general principle is that people will not choose to spend a dollar on health care unless they get a dollar's worth of benefit -- and this will place downward pressure on both medical costs and insurance premiums, says Goodman.

Source: John C. Goodman, "BushCare - The answer to ClintonCare, and a very good one." National Review, February 14, 2006.


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