Byline: William Neikirk and Judith Graham
WASHINGTON _ Al Meginnis signed up for a health savings account and an accompanying high-deductible health insurance policy last year, and so far he has been pleased.
'I jumped at it because it made a whole lot of sense,' said Meginnis, director of Lutheran Social Services' Behavioral Health Service Center in Elgin, Ill. The account also covers his wife and son and is less costly than traditional health insurance, he said.
Meginnis said he's saving $2,400 this year on premiums alone and added he has saved even more by being more of a health consumer. He said the Web site of his health-care company, United Healthcare, provides estimated prices for various services. 'I can figure out pretty easily what it's going to cost to do something before I decide to do it,' he said.
Once he rejected an orthopedist's recommendation for more than $600 in physical therapy for arthritis in his knee after questioning whether the therapy would help him. A second orthopedist recommended a 'wait-and-see' attitude on physical therapy but also prescribed a brand-name painkiller that would cost $50. He asked for a generic version and saved $40.
But when it comes to health care, Meginnis is more willing to embrace new ideas than other employees at Lutheran Social Services. The agency dropped its traditional health insurance plan last year and converted to a vanguard product _ a health savings account paired with a high-deductible health plan _ in July to reduce escalating health-care costs.
Larry Lutey, the agency's vice president of human resources, said many employees' 'don't like the HSA, to be quite frank,' because it's a new way of thinking about buying medical services and workers think it costs them more. 'If my position had been an elective one,' he added, 'I would have been voted out of office this year.'
Lutey said employees are unhappy with HSAs because 'it feels like they're paying more up front. The perception is, this is a very expensive type of plan. Even though there is money in (employee) accounts to cover these expenses, people end up feeling they're paying more out of pocket.'
In an era of surging health-care costs, health savings accounts have grown rapidly since Congress began encouraging their use in 2004. And now President Bush wants to give them a big boost with generous tax incentives and favorable regulation, with the aim of overhauling traditional health insurance in America.
Like the 1,400 workers at Lutheran Social Services, the nation and Congress are deeply divided over whether HSAs are one way to help fix an ailing health-care system. Critics say they favor the healthy and the rich at the expense of the sick and the poor, while proponents say such claims are overstated, even inaccurate.
Health savings accounts allow people to salt away a specified amount of money each year tax-free, while it gains interest, to pay for relatively routine medical bills. The savings accounts must be coupled with a high-deductible health insurance policy, usually with the deductible starting at about $1,000. More companies are offering such accounts these days, and many employers are contributing to their employees' accounts.
HSAs shift more of the burden of health-care costs to consumers, who then may have an incentive to curb such costs because they are spending their own money rather than that of their employer or an insurance company. But once the high-deductible policy kicks in, the system works more like traditional health insurance.
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'It takes the insurance companies out of the middle of it, and we contain our own costs,' said Rep. Anne Northup, R-Ky., a member of the House Appropriations Committee. 'That's very important.' But she conceded that consumers need more information to shop for cost-effective care, and Bush is pressing health-care companies to provide that data.
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Democrats are linking the president's proposals to his failed Social Security privatization plan and his beleaguered Medicare prescription drug program.
'Underlying all of this is (Republicans') main purpose of trying to get rid of entitlements,' said Rep. Pete Stark, D-Calif., a member of the House Ways and Means Committee. 'They would like to turn Medicare into a voucher.'
Rep. Henry Waxman, D-Calif., added, 'The president's health savings account plan combines the worst elements of the president's failed Social Security privatization plan and his Medicare prescription drug fiasco.'
But Rep. Sam Johnson, R-Texas, a Ways and Means member and sponsor of a Bush-like plan to expand health savings accounts, said some but perhaps not all of the president's plan could win congressional approval this year. One key Senate GOP staff member said there is a 50-50 chance the plan could pass, but said Republicans might have to tilt the legislation to provide bigger tax incentives for low-income Americans in order to attract Democratic votes.
A major question is whether Bush's proposals will erase the public's doubts about HSAs.
About 3 million people currently are enrolled in HSAs out of the 245 million Americans covered by health insurance, and Johnson said the accounts do tend to be more attractive to healthy workers. Many analysts doubt there will be significant health-care savings because once a deductible is met, consumers have less incentive to save money.
Bush said he wanted to 'level the playing field' between traditional health insurance and HSAs. He would allow people who buy HSA-related high-deductible policies outside their workplace to deduct the premiums from their income taxes. Also, they could get a tax credit to offset payroll taxes paid on these premiums.
The president also has proposed that those with health savings accounts and their employers make annual contributions to cover out-of-pocket costs, not just the amount of the deductible, as under current law. These out-of-pocket expenses would be tax-deductible, but they would be limited to $5,250 a year for individuals and $10,500 for families.
To answer charges that HSAs do not benefit low-income people, Bush has proposed a 'refundable' tax credit to help uninsured Americans purchase high-deductible policies in connection with HSAs. The maximum credit would be $1,000 for one adult, $2,000 for two adults, and $3,000 for two adults with children. The credit would phase out for individuals earning $30,000 or more and families earning $60,000.
The president's proposal would allow policyholders to take their insurance to another employer if they change jobs, and it would allow them to purchase HSAs across state lines, which the White House said would greatly increase competition. Bush's plan also would allow companies to make higher contributions to the HSAs of chronically ill employees.
Karen Davis, president of the Commonwealth Fund, a health-policy organization, said she thinks HSAs have problems. Many people will delay getting care to save money, she said, adding, 'When you have high deductibles, it reduces the uses of both essential and less essential (medical services).'
Health-care companies offering HSAs dismiss such claims. UnitedHealth Group, for instance, said a 2005 study found their enrollees used more preventive services than those in traditional plans.
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Sherry Gini, director of human resources for Goldberg Kohn, a Chicago law firm, said 37 of its 175 employees have signed up for an HSA plan. Attorneys liked the tax savings, she said, but in some cases the paperwork proved too burdensome, and employees have found the cost of prescription drugs to be much higher.
Scott Spiker, chief executive of Chicago-based Destiny Health, said Bush's proposal to allow companies to sell across state lines would give a strong push to expansion of the accounts.
But Brian Diedrich, senior managing director of employee benefits at Mesirow Financial, a Chicago-based financial firm, said unless companies put money into their workers' accounts, they will not buy into the plans.
'I think people are very much in love with the (traditional health insurance) system,' he said. 'We're a long way from moving to a consumer-directed health-care system.'
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(Neikirk reported from Washington, Graham from Chicago.)
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