Democrats take aim at health accounts

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A battle is brewing in Congress over a key piece of the Bush administration's strategy to lower health care costs, as Democrats plan to roll back a Republican-backed expansion of health savings accounts.

The accounts, which were introduced in January 2004, cover nearly 5 million people and are thought to hold as much as $5 billion in investments.

Health savings accounts (HSAs) allow contributors to save money tax-free for medical expenses. They carry higher deductibles than traditional health insurance plans in order to encourage consumers to become more involved in their own health care decisions and thereby spend less on medical services.

Health economists say the United States spent nearly $2 trillion on health care in 2005, by far the most of an industrialized country. Health care spending is projected to reach $4 trillion a year by 2015.

Speaking yesterday to a group of business leaders in the District, a Democratic aide to Rep. Charles B. Rangel, New York Democrat, chairman of the House Ways and Means Committee, staked out the Democrats' intention for health savings accounts this year.

"There is not a whole lot of affection for the health savings account provisions passed last year," said Jon Sheiner, legislative assistant to Mr. Rangel. "We as Democrats are not going to be supporting health savings accounts, and we will try to turn around those provisions snuck in last year."

Democrats question whether HSAs will lead to the savings touted by proponents and fear that they will leave sick people financially vulnerable while shutting out people with chronic or pre-existing conditions.

Democrats were particularly irked when, during the final hours of Republican control of Congress last year, Republicans passed legislation that increased the amount of money people can contribute to the accounts and paved the way for one-time, tax-free transfers into HSAs from IRAs.

Annual contributions used to be limited to the deductible amount for each health plan. Last year's bill expanded contribution limits for everyone to $2,700 for individuals and $5,450 for families.

The Bush administration in 2005 made expanding employer and beneficiary contribution levels for HSAs a priority in its health care agenda. Today, 47 million Americans have no health insurance primarily because of the escalating costs of medical services, which caused health insurance premiums to increase 7.7 percent last year, double the rate of inflation.

An aide to Sen. Orrin G. Hatch, Utah Republican, a key figure on health care policy on Capitol Hill, said Republicans would firmly oppose rescinding the HSA provisions enacted last year.

"I can tell you right now that there will be a serious fight from Senate Republicans if there is any effort to roll back those provisions," said Brendan Dunn, legislative assistant to the Judiciary Committee, of which Mr. Hatch is a member.

Business groups will vigorously oppose any attempts by Democrats to rescind the new contribution limits and tax-free transfers to the accounts.

"For businesses, these plans mean that more employees can get insurance coverage as a third of all new health savings accounts were opened by individuals who had no previous insurance," said David Merritt, a project director at the Center for Health Transformation, a D.C. health care consulting group.

"These plans have delivered significant declines in health care cost trends, making American businesses more competitive."