Health savings accounts tied to prescription drugs

House Republicans say a key issue to their support of the final Medicare prescription-drug bill is the creation of health savings accounts for individuals.

The House attached to its Medicare prescription-drug bill a separate proposal that would create private tax-free accounts individuals could use to save for their health costs, but it isn’t included in the Senate version.

In a July 18 letter to conference members charged with crafting the final Medicare bill, 26 House Republicans said inclusion of such accounts in the House version “was crucial to many members’ support of that bill” and “will be an important factor” in whether they support the final conference report.

The Republicans’ letter said creating such savings accounts will hold down medical inflation — and thus the cost of Medicare — by “injecting price-sensitivity into the decisions of tens of millions of health care consumers.”

People with the health care accounts will be able to save for their retirement health care costs and choose what’s best for them. But since they will have the responsibility of controlling the money for their own health care, they will likely choose wisely how to spend it, proponents say.

“Individuals are somewhat accountable for their health care,” explained Sen. John Ensign, Nevada Republican, a strong supporter of the accounts. “People would go to the doctors they want to go to, but not just for any willy-nilly reason.”

The letter — which was signed by Reps. Ed Royce of California and Paul D. Ryan of Wisconsin, among others — also explained that by giving Americans younger than 65 “greater control over their medical coverage and care than most Americans have ever known” the accounts will “create an enormous constituency for future Medicare reforms based on patient choice and competition, rather than rationing and controls.”

The House proposal would create two types of accounts for individuals that would allow people to save for health care costs.

Health Savings Accounts would be for people who have health insurance plans with deductibles of at least $1,000. Participants could make tax-deductible deposits and employers could make tax-free contributions to the accounts. The money would accrue tax-free and could be used tax-free for medical costs.

The other type, Health Savings Security Accounts, would be available to people who do not have health insurance, or those whose plans have deductibles of at least $500. Individuals, employers and family members could also contribute to these plans.

Account funds could be used for diagnosis, treatment or prevention of disease; prescription or over-the-counter drugs; long-term care services or long-term care insurance; and health insurance for the unemployed. HSSA money could also go toward Medicare expenses, like premiums and deductibles.

The proposal would cost an estimated $174 billion, but Republican aides noted that the money would come from the funds Congress and the president have set aside for future tax cuts.

While Medicare conference Chairman Bill Thomas, California Republican, sponsored the saving accounts proposal, Senate Democrats strongly oppose including the proposal in the final bill. They argue the money should instead be used to beef up the Medicare bill’s prescription-drug benefit, which they say is inadequate.

The conference will not likely deal with the health accounts issue until the fall. Before they left for August recess, conferees approved a few portions of the legislation, including Medicare regulatory reform.

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