Bush Tries to Make HSAs Appealing to Chronically Ill

As part of its push for Congress to expand health savings accounts as a brake on the rising cost of health care, the Bush administration now says the program may even work for chronically ill individuals.

In recent comments to health care professionals, insurers, and business leaders, President Bush and senior members of his administration said they view the expansion of health savings accounts (HSAs) as one key to gaining control of ever-rising health costs. Their latest comments on HSAs—including a video presentation by Bush—came during the April meeting of the World Health Care Congress (WHCC).

Signed into law in December 2003, HSAs provide tax-free savings accounts to pay for health care expenses. The accounts are usually accompanied by employer-sponsored, high-deductible insurance policies that cover preventive care and larger medical bills. The administration estimates that since January 2004 more than 3 million Americans have enrolled in HSAs.

The accounts, the White House maintains, provide a lower-cost alternative to traditional insurance plans for large and small employers, which have seen double-digit increases in insurance premiums in recent years.

Critics, including many in the mental health community, say HSAs siphon off the healthiest patients from health plans' risk pools, thus increasing the costs for those remaining in traditional plans. Individuals who stay in traditional plans are likely to include those with mental illness and other chronic medical conditions, because HSAs do not account for their needs.

Many others with chronic illness are not covered by an employer or public risk pool and must pay the full burden of their care through high premiums or go without insurance.

The Bush administration now aims to integrate chronically ill individuals into HSAs.

Overhauling System Daunting Challenge

The effort to overhaul the U.S. health care system for those with chronic illness— in addition to the general population—is “the biggest challenge in health care,” said Allan Hubbard, Bush's top economic advisor, during the WHCC. This 2 percent to 5 percent of the population has predictably high health care costs and is more likely to spend the maximum allowed under high-deductible HSAs to pay for their out-of-pocket expenses. The high cost of care for chronic illnesses removes any economic advantage for those with such conditions to choose HSAs over traditional insurance plans because they likely will have to pay the entire high deductible every year with little employer assistance.

The Bush administration would address the situation of those with chronic conditions through a proposal it has submitted to Congress to allow employers to contribute additional funds—which are all tax-deductible for employers—to the accounts of employees who have chronic health conditions or who have family members with those conditions.

Currently, any employer contributing funds to employees' HSAs must contribute the same tax-deductible amount to each employee's HSA account. The law prevents employers from providing extra help to their chronically ill employees, according to administration officials.

Under the existing HSA program, employers can fund none, some, or all of their employees' annual deductible, which may be up to $5,000 for individuals and $10,000 for families.

APA has no official position on HSAs, and its membership is split on whether HSAs will help or hinder coverage for those with mental illness, according to the Department of Government Relations. Although APA assesses HSA proposals on a case-by-case basis, it is concerned that insurers may use HSAs as a cover to withdraw mental health coverage in standard policies.

Pilot Test Coming

Another Bush administration proposal to increase the access of those with chronic illness to HSAs would provide $500 million annually to two states to test “innovative methods for covering chronically ill residents,” Hubbard said. The grants would be awarded annually to two states by the secretary of Health and Human Services.

States' past efforts to help those with chronic illness include the creation of high-risk pools to insure people who might otherwise be denied coverage. The Bush administration maintains that other approaches could provide “better coverage at lower costs,” and it aims to use the grants eventually to help 10 states either build on their high-risk-pool programs or try other approaches to providing insurance for those with chronic illness.

Proposals to provide for the chronically ill within the HSA system are likely to fall under increased scrutiny in the coming months since Bush said that HSAs are the “centerpiece of our health care reform agenda.”

Such changes are needed, Treasury Secretary John Snow told WHCC attendees, because the current rate of increase in health care costs is“ unsustainable.” The administration will continue increasing the tax-deductible amounts for employees in HSAs to boost participation to 20 million by 2010, he said.

Related legislative plans supported by the Bush administration are for measures to curb “junk lawsuits” against health care providers and bills to allow small-business groups to pool their insurance risks for lower rates.

Hubbard said that the 15 percent of the population who consumes 60 percent of the country's health care resources need comparative data on health care costs and quality to make decisions about where to seek treatment and how much to pay for it. He urged medical, hospital, and business leaders to devise a system to provide such information without a government mandate.

“If you don't do it, we will go to Capitol Hill and force you to do it,” Hubbard told the health care decision makers at the meeting.“ We would prefer that the health care community figure out to do it.”

Some physicians counter, however, that medical groups are unlikely to develop a true qualitative comparison system that includes physicians because there are too many variables in each patient's and each group of patients' cases to compare outcomes.

Rep. Pete Stark (D-Calif.) said the push to provide consumers with comparative quality information on health care professionals has limited applicability because most patients only seek treatment for emergencies, which does not allow for careful comparison. He also echoed sentiments on the complexity of comparisons between physicians and other health care professionals.

“I think we have a long way to go before we'll have them agree to line up to be ranked in any way that would be accessible to most of us,” Stark said.

Mark McClellan, M.D., director of the Centers for Medicare and Medicaid Services, told WHCC attendees that his agency aims to change Medicare's current system of “payments only based on volume, not on effectiveness,” in part through a voluntary program for physicians to report on three to five quality measures by 2007.

Information on the Bush administration's health care overhaul plans is posted at<www.whitehouse.gov/infocus/healthcare/>.▪