NCPA - National Center for Policy Analysis


July 21, 2004

Last year Congress passed a law that created tax-free Health Savings Accounts (HSAs). Now a large number of Americans and employers are depositing money into accounts that are used to pay for routine medical care, says Investor's Business Daily.

Should patients' health-care needs exhaust their HSAs, they move on to their traditional insurance plans. These plans generally have high deductibles -- $1,000 in most cases --which means their premiums are much lower than plans with no or low deductibles. It's becoming obvious that HSA legislation should have been passed and signed long ago, says IBD:

  • People who didn't have insurance have been setting up the accounts almost as fast as people who did -- 43 percent to 57 percent, according to the National Center for Policy Analysis.
  • Nearly half (46 percent) of HSA buyers are from families with incomes below $50,000.
  • More than a third (38 percent) live in homes that have a market value of less than $125,000.
  • Age fears are also proving to be unfounded: Seven of 10 HSA buyers are over 40.

Unless reversed by a future Congress or White House, HSAs are going to fundamentally change our health care system -- and for the better, says IBD.

Health-care decisions will be returned to individuals -- where they belong. And system overuse, a key factor in medical care inflation, will be alleviated. Because they'll be spending their own money, HSA holders will think twice about scheduling doctor visits or taking medical tests that just aren't that necessary.

Those who want government to make our decisions are never happy when market solutions are applied. Too often they work. The early returns suggest this is the case with HSAs, the best prescription yet for what ails our troubled health-care system, says IBD.

Source: Editorial, "System Recovery," Investor's Business Daily, July 21, 2004; and Laura Trueman, "Health Savings Accounts: Myth vs. Fact," Brief Analysis No. 479, July 19, 2004, National Center for Policy Analysis.

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