NCPA - National Center for Policy Analysis


September 20, 2004

As of January 1, 2004, all nonelderly Americans in principle have access to tax-deductible health savings accounts (HSAs), from which they can pay incidental medical expenses directly. These accounts must be combined with high-deductible health insurance. President Bush has endorsed measures that would make this consumer-directed health care more widely available.

Among the measures President Bush has proposed:

  • Making individually-paid premiums for HSA plans tax deductible.
  • Refundable tax credits of up to $1,000 per individual and $3,000 per family for low-income purchasers of health insurance -- meaning that families would get the full value of the subsidy even if they do not owe any income taxes.
  • Allowing one-third of the tax credit for low-income families to apply to HSA deposits; for example, that families qualifying for the maximum credit of $3,000 could apply $2,000 to premiums for the HSA plan and use the remaining $1,000 to fund the HSA account.
  • A tax credit (a dollar for dollar rebate) for small businesses that contribute to the HSAs of families (the first $500) and individuals (the first $200).

President Bush also supports the creation of a national marketplace in insurance, allowing consumers to shop all over the country to get the best coverage at the most affordable prices.

Under "federally chartered health insurance," insurers could meet one set of federal regulations and offer their products in all 50 states. Under a state-chartered approach, consumers in any state would be able to buy insurance approved for sale in any other state. Expanding his previous proposal for Association Health Plans (AHPs), the president proposes allowing small firms to band together and buy health coverage in the national market through their associations and other organizations.

The White House estimates that between 11 and 17 million people will become newly insured (on net) under the president's plan.

Source: John C. Goodman (NCPA president), "Bush Health Plan: Consumer-Driven Health," National Center for Policy Analysis, Brief Analysis No. 486, September 20, 2004.

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