NCPA Says Criticism of HSAs Unfounded, Quality Health Care is Objective of Reform -- Not Raising Taxes

10/29/2003

From: Richard Walker or Sean Tuffnell, 800-859-1154, rwalker@ncpa.org

WASHINGTON, Oct. 29 -- Recent criticism of House-passed Medicare reform legislation championed by House Ways & Means Committee Chairman Bill Thomas (R-CA) has misrepresented Health Savings Accounts (HSAs) and the scholarly research relating to the accounts, according to Michael Cannon, senior fellow at the National Center for Policy Analysis (NCPA).

"Current Medicare reform should focus on lowering health care costs, not raising taxes," said NCPA Senior Fellow Michael Cannon.

Critics say the provision for HSAs would create unintended tax consequences and are unwise public policy. But that criticism is not supported by the realities of the ailing American health care system:

-- It is not unprecedented to allow tax-free deposits and tax-free withdrawals as HSAs do; in fact, that's the way health insurance has always worked.

-- Current tax law subsidizes third-party insurance and penalizes self-insurance through HSAs and other individual savings accounts, encouraging the HMO form of insurance. The HSA provision passed by the House creates a more level playing field.

-- Chronically ill enrollees gain the most from HSA plans because their financial exposure is limited.

In addition, HSA plans do not disproportionately attract healthier enrollees even when competing with managed care, and would not double health insurance premiums. In fact, HSAs could save the embattled employer-based system, which current Medicare reform efforts are trying to salvage, according to recent NCPA research: ( http://www.ncpa.org/pub/ba/ba454/ )

-- HSAs reduce the need for managed care rationing and help contain medical inflation by giving workers incentives to forgo unnecessary care.

-- HSAs reduce the number of uninsured, and are designed to be portable so that changing jobs no longer means losing coverage.

-- HSAs allow workers to save for post-retirement health needs, and eliminate waste and bureaucracy by giving patients a stake in the savings.

"The Thomas plan provides fundamental consumer-driven Medicare reform," Cannon added. "There's a greater need for health care reform than raising taxes."

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The NCPA is an internationally known nonprofit, nonpartisan research institute with offices in Dallas and Washington, D.C., that advocates private solutions to public policy problems. The NPCA depends on the contributions of individuals, corporations and foundations that share its mission. The NCPA accepts no government grants.



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