February 14, 2006
My name is Al Hubbard and I am Director of the National Economic Council. It is great to be with you all today.
Dale, from Littleton Colorado
Could the health savings accounts be used by government employees,
congress and the administration? I use a HSA now, and like it. More
citizens would use them if congress and the government also came
onboard. The government and citizens should have the "Same Health
Plans", and the "Same Retirement Plans". Citizens have a hard time
understanding why government plans should be better.
I currently have an HSA through Aetna and like the plan as well. The HSA was offered to me through the Federal Employees Health Benefits (FEHB) program, which offers a fine health benefits package to federal employees in Congress, the Administration and other branches of federal government. It is necessary to have a comprehensive FEHB program as the government competes with the private sector for talented individuals interested in public service. We believe the HSA option will be very popular with federal employees, and that the adoption of HSAs by federal workers will serve to accelerate the awareness and popularity of HSAs throughout the economy.
Jennifer, from NC writes:
Are HSA participants covered under an individual or group catastrophic
insurance plan? i.e. Are riskscosts spread among a group or does
everyone have their own "customized" insurance plan?
Under the Presidents proposals, an HSA plan purchaser can be insured through an employer-plan as with traditional insurance. Individuals can also purchase insurance on their own. Costs are spread out amongst "the group" in both instances, but who is in the group varies. If its employer provided-based insurance, the group is fellow employees. If its individual insurance, the group is fellow enrollees covered by that insurance carrier.
Duke, from Corvallis, Oregon
I am a student at Oregon State University studying healthcare
administration. I am also taking my first health policy course at the
university. As students in health policy what legislative measures
should we be concerned, aware, and informed about that pertains to
affordable and accessible health care in the upcoming year. Secondly, as
college students and consumers of health care what are some benefits
from health savings accounts perhaps for us? From a health policy
standpoint, what implications positively or negatively do health savings
accounts have on the taxpayers?
HSA-insurance policies offer a great way for young people to acquire catastrophic health insurance relatively inexpensively. Because they are high-deductible plans, the plans are relatively inexpensive and the policies cover preventative care and provide catastrophic protection against large medical bills. With an HSA plan, you would never need to worry about being uninsured again between jobs, or if you were self-employed, or if you went to work for a small business that didnt offer traditional health insurance benefits.
We believe one of the most important attributes about HSA plans is the way they harness market forces to inject greater price and quality discipline into the market. HSAs also get back to the true principles of insurance similar to the structures of car insurance and home insurance. In addition, Health care costs are rising rapidly in this country, posing problems for businesses, families, and the government. One reason for this is that consumers have neither the incentives nor the ability to exercise the kind of restraining power we see in other markets. HSAs make us better stewards of our own money, and our own health. This will have a marked effect on future health care cost inflation.
Doug, from Holyoke, MA
Given that the problem with healthcare in this country appears to be
excess demand, why would health savings accounts do anything to help the
situation? How will they help to contain health costs? And, won't they
reduce the risk pooling now basic to group health programs, possibly
increasing the overall cost of health insurance.
Great to hear from a resident of the Bay State! To the extent there is an excess demand problem in health care in this country, it results because consumers dont see or bear the costs of the health care decisions they make. HSAs give consumers a vested interest in stewarding their health care dollars and their health care decisions. By putting the consumer back into his or her proper place of weighing costs and benefits, we will return price discipline to the health care market and reduce any excess demand. Also, HSAs dont reduce risk pooling, so there would be no reason for ERs to drop coverage.
George, from Gurnee, Illinois
I am self employed and pay all of my health insurance premiums. Because
I have developed a heart condition, I am considered uninsurable to be
able to change my current plan to a qualified HDHP.My question is: Why
can't an HSA be attached as an option to all health policies paid
entirely by self employed individuals? We can still opt for the high
deductibles ($2500 $5000 $10000) if we could benifit from the HSA
Unfortunately, thats how Congress wrote the law. A central design feature of an HSA and its associated HDHP is that they fit together. In effect, the HSA allows the individual or family to self-insure ordinary health care costs with the same tax benefits as if a very low deductible insurance policy had been purchased. The policy holder can then buy an HDHP with associated tax benefits to cover extraordinary costs. And one of the goals of this arrangement is to encourage people to buy HDHP plans instead of remaining uninsured and instead of buying more comprehensive coverage. We also hope that your insurer would allow you to raise your deductible to qualify for an HSA.
Randy, from Ashburn, Virginia
Mr. Hubbard, I'm 50 years old, recently retired from the US Navy and am
currently covered with TRICARE Prime for my medical benefits. Can you
tell me what the difference is between an HSA and an FSA and why an HSA
should be started? Thank you.
There are a lot of differences, but the most important difference is that you have to use your FSA amount in full every year. With an HSA, you can build up your health care savings balance year after year. The HSA is much more flexible, and much more beneficial to you.
Marc, from San Diego
Most American's struggle to make a down payment for a house, save for
their childrens education, or save for their own retirement, so how will
the be able to now shoulder Health Savings accounts, instead of relying
on their employers for health insurance?
An HSA is not really an alternative to employer-based health insurance, because employers can offer HSAs to their employees. We believe more and more employers are going to turn to HSAs, and as they do so, much of what they save will be paid to workers to help them build up their HSA balances. Overall, we believe, and experience has shown, that HSAs save the employers money, and save employees money, leaving more money in their pockets to save for other purposes like their kids college education.
wendy, from texas writes:
Do you really believe for the average American Family, earning about
$45,000 per year, with no health benefits from employers, that this will
help one iota. The answer has to be in more plans available to
individuals and families that leverage costs like group health plans do
with contracted prices and help paying the high premiums.
Just because a family does not have health insurance, it doesnt mean they dont have health care costs and worries. HSA plans, especially with the additional tax benefits the President has proposed, can reduce a family's true health care costs after tax, and will greatly reduce the worry that comes from lacking health insurance. The President has proposed to allow a family to buy an HDHP and pay no income tax, and get a tax credit for the payroll taxes they paid on the amount of the cost. In addition, he has proposed a generous refundable tax credit for very low income families, so they can afford to buy an HDHP.
Eric, from Seattle, Washington
As a former representative of a large insurance provider, and one of the
nations largest banks, I am very verse in the aspects of Health Savings
accounts, and Health Insurance. Most people, however, are not. Where
are the public educationinformation programs to bring this vital
program (Health Savings Accounts) greater exposure and notoriety? And
how can I help? Gregory-Eric
The President and the members of his Administration are spreading the message almost every day. We have a web site and materials explaining how HSAs work. Were seeing stories written almost every day on HSAs. But, ultimately, the most effective way to increase their exposure is through word of mouth. And thats why it is so important that the Federal workforce have HSA plans as an option there are a lot of federal workers. And thats why it is so important that large companies take a look at HSA plans. As more people sign up for HSAs, and prove for themselves the advantages, we believe the word will spread very rapidly. Already, 3 million HSA plans have been sold, and were just getting started.
Thomas, from Apple Valley, Ca
I have a question about the healthcare spending program, where employees
can basically have a savings account for medical expenses. I have
utilized this program for the last couple of years and the hardest thing
to determine is the amount to be deducted each year. The big negative
thing with this program is that whatever monies that is in my account
after the year is over, I lose. The big question is why do I have to
lose those monies instead of carry over for the next year?? Why can't
the account carry over to the following year, when as you know that
medical costs are rising and insurance costs are going up and covering
less. In the near future could it be rolled over, perhaps set a limit
for this account??
A real flaw of many of the older programs is just what you describe you set aside some money, but if you dont use it, you lose it. Thats one aspect we remedied with HSAs. You put the money in when youre ready, and it grows year after year if you dont spend it. And the money you put in is income and payroll tax free, as are the earnings, and theres no tax consequence for making a withdrawal as long as you spend the money on health care.
John, from Washington DC
Critics say that HSAs only help the wealthy and healthy. How can HSAs
help individuals and families with fixed incomes that cannot afford to
put money into a health savings account? Thank you Mr. Hubbard.
HSAs can help just about anybody with health expenses which is just about everybody. If you dont have an HSA, and you dont have insurance, then youre paying for your health care costs in after-tax dollars. If you have traditional health insurance, then youre paying the premiums with tax-free money, but youre probably paying a lot in premiums. HSA-plans let you pay your out-of-pocket expenses with tax free dollars, and the insurance that you buy is much less expensive because it is a high-deductible plan.
Lisa, from Pennsylvania writes:
For those of us living from paycheck to paycheck and who cannot afford
health coverage to begin with,how in the world are we to put any money
While I recognize that it is often difficult to put aside money for health care costs, the Presidents proposals this year provide tax incentives to help you do it. Money contributed to an HSA is already deductible form your income taxes; the President has proposed to provide you with an additional tax credit to offset your payroll taxes. Similarly, the President has proposed to allow you to deduct your premium costs for an HAS-compatible policy from your income taxes and would provide a tax credit to offset your payroll taxes.
Health savings accounts, accompanied by high deducible health plans, are designed to lower your costs for health care. The President has proposed a tax credit to help low-income individuals and families purchase an HSA-compatible health insurance policy. Some of that credit could also be placed into an HSA and then used for routine medical expenses.
Taryn, from Mount Pleasant, MI
As a senior in college graduating in December, i am soon to be removed
from my parents health insurance plan. How as a young American am I
supposed to afford health insurance on my own strait out of college?
As a graduating senior, Im pleased to report to you that the job market in this country is very promising for you. But of course, for many people just coming out of college, their first job sometimes comes with a modest wage. And, of course, you have to set priorities as to how you want to spend what you earn. But if you choose to buy health insurance, and I encourage you to do so, then we are doing everything we can to make it affordable for you through the tax benefits associated with HSAs and the relatively low costs associated with HDHPs.
HSA-insurance policies offer a great way for young people to acquire catastrophic health insurance at a reasonable cost. Because they are high-deductible plans, the plans are relatively inexpensive. With an HSA plan, you would never need to worry about being uninsured again between jobs, or if you were self-employed, or if you went to work for a small business that didnt offer traditional health insurance benefits.
Furthermore, with the Presidents proposals, you would be allowed to save tax-free in a health savings account, which you would own and which could be used to pay your medical costs. Unused money in the account could be carried over to future years, and could grow tax-free, thus providing you with a solid base to pay any future medical costs.
Mark, from Andover, KS
I work for a small firm. We still have a group health insurance plan
though it has been difficult since the group is so small. Last year my
employer instituted a high deductible plan with an HSA. The deductible
is 5,000 which is the ammount we can put in the HSA. After the
deductible is met the coverage is 80 and employees pay 20. The problem
being is your family has enough illness to reach the deductible you
don't have any savings set aside to pay the 20. Why are the allowable
savings amount so low? I have a family of four on the plan and the
amount is the same for me as it is a single person. That doesn't make
First, a clarification. Current law allows a maximum annual HSA contribution up to $2,700 for single plans and up to $5,450 for family plans. But that contribution will be limited to the deductible if the deductible is less than these limits. Second, we fully agree that these HSA contribution limits are unfair for ill people who spend above their deductible. That is why the administration has proposed in our 2007 budget to raise these contribution limits to the plans out-of-pocket maximum (which currently cannot exceed $5,250 for singles or $10,500 for families). This will allow spending above the deductible to receive the same tax preferences as spending below the deductible and spending on insurance premiums.
Jason, from Cleveland, Ohio
Dear Mr. Hubbard: How come the United States is the only developed
nation without universal health care? It seems as though it works fairly
well in other countries such as the UK, Germany, and Canada. Do you see
a time when America does have a universal health care system?
I certainly hope not. Universal health care does have some advantages, but quality of care and cost effectiveness dont rank among them, which is why, for instance, those Canadians and Europeans who have the resources to do so come to the United States for the care they need rather than wait months or years as their conditions deteriorate. Also, as we see in the United States with Medicare and Medicaid, the costs of universal care in Europe and Canada are soaring, leading to further cut backs in services, increases in fees, or greater taxpayer subsidies. This does not look to us to be a prescription for success, but for real difficulties.
The administration believes that it is important to provide a health care safety net for the poor, elderly, and disabled. We do this through programs such as Medicare, Medicaid, SCHIP, and community health center funding. We also believe that individuals should have the freedom to choose the health insurance products and health services that best suits their own needs and preferences, without them being dictated by big government.
One recent survey found that over half of patients in Canada and the United Kingdom had to wait longer than a month for a specialist appointment, compared to less than a quarter of patients in the United States. When people have choices within a market-based system, competition works to make that system better. We are proposing policies that will further help improve the value and affordability of health care and insurance within our system, while preserving greater choices and lower taxes than in other countries.
Cliff, from Brimfield, Ohio
Director Hubbard: How does this Health Savings Account work? Does one
put money into an account that has some tax purposes to it? Thank You
Health savings accounts allow Americans to save tax-free dollars in accounts to pay for their health care expenses. These accounts are required to be accompanied by high deductible comprehensive insurance policies that cover preventative care and larger medical bills. Similar to individual retirement accounts, you own your HSA and control the money inside of the account. You can invest the money, and the earnings also build up tax-free. When you incur health care expenses, you can withdraw money from the account tax-free and use it to cover those costs. Any money that you do not use in a particular year carries over to the next year.
The President has proposed to build on the current HSA structure with additional tax advantages. He has proposed to give individuals income tax credits that would offset payroll taxes paid on HSA contributions or on the premiums for HSA-compatible health insurance policies. He has also proposed to allow an income tax deduction for those same insurance premiums.
Jones, from Washington writes:
What is Health Savings Accounts? Who is eligible and what are the
Health savings accounts were established in the Medicare bill that was signed into law by President Bush in 2003. HSAs allow Americans to save tax-free dollars in accounts to pay for their health care expenses. These accounts are required to be accompanied by high deductible comprehensive insurance policies that cover preventative care and larger medical bills. Since January 2004, it is estimated that more than 3 million American have enrolled in HSAs and the accompanying health care policies. About 31 percent (of the 3 million enrollees) are newly insured.
Everyone is eligible to take advantage of these accounts and the accompanying high deductible health plans. The President has proposed a number of measures to increase the tax advantages of HSAs. These proposals are projected to increase the number of Americans with HSAs from the 14 million to 21 million by 2010, a 50 percent rise.
HSAs would help to put consumers in charge of their health care. We all see that health care costs continue to rise rapidly in the United States. Empowering health care consumers to play a more direct role in their health care decisions would help to stem this trend. A health care system that is more market-oriented and consumer driven will help control costs and result in health care that is more affordable and accessible.
Andrea, from Texas writes:
I am all for a Health Savings Account. However, if I should die, where
would that money go??? Thank you Andrea Davis New Braunfels, Texas
You should choose a beneficiary when you set up your HSA. If your spouse is the designated beneficiary, it will be treated as your spouses HSA after your death. If your spouse is not the designated beneficiary, the account stops being an HSA, and the fair market value of the HSA becomes taxable to the beneficiary in the year in which you die. If your estate is the beneficiary, the value is included on your final income tax return. These types of details are discussed in IRS Publication 969, available at www.irs.gov.
Sue, from Orlando, Florida
How do healthcare savings accounts provide bigger "relief" than would a
cap on frivalous lawsuits, incentives for cheaper drugs, and using
technology to help drive down medical costs?
Health savings accounts are a significant help, but they are not only way to slow down the staggering growth of health care costs. A health care system that is more market-oriented and consumer driven something that the Presidents HSA proposals are designed to achieve will help control costs and result in health care that is more affordable and accessible.
The other items that you mentioned are extremely important, and they are part of the Administrations overall health care agenda. The President has called on Congress to make the medical liability system fairer and more predictable while reducing wasteful costs. The Administration is also working to expand the use of health IT to lower costs, reduce medical errors, and improve the quality of care. In 2004, the President launched an initiative to make electronic health records available to most American in the next 10 years.
Becky, from Suwanee, Georgia
What happens when someone's healthcare saving account goes empty and
they are in terrible need for continuing medical treatment (unable to
HSAs can only be opened and contributed to by people with major medical health insurance. HSA-qualifying insurance could have a deductible and out-of-pocket maximum as low as $1,050 for single plans. After reaching the designated spending level, the insurance would pay for necessary care. The beauty of HSAs is that they the associated insurance premiums are lower than traditional insurance, allowing even more people to purchase insurance and peace of mind against catastrophic health events.
Tom, from Atlanta, Georgia
How can health savings accounts help lower income employees seeing that
they will not be able to save very much into these accounts? Especially
with the rise of healthcare costs each year. Their account could be
wiped out with the cost of one ultrasound. Will the government put some
sort of matching percent into these accounts to help those that can't
save much in one of these accounts?
The President has proposed a refundable tax credit for low-income individuals and families to purchase high-deductible health insurance plans. A portion of that credit could be used to fund a health savings account. Contributions to HSAs are currently tax-deductible from your income taxes, and the President has proposed a tax credit that would offset the amount of payroll taxes paid on those contributions.
Many businesses contribute to their employees accounts, and the President has proposed allowing businesses to make higher contributions to the accounts of chronically ill employees, trying to ensure that there is assistance for vulnerable Americans.
Mac, from Geogia writes:
Why not just say that health care is a fundamental right (like, say,
free elementary education) in this country? It's beautiful to me that
people come to America and are guaranteed a free public education. I
don't think there is anyone who would say that any person for any reason
should be left to suffer without health care, so why don't we, as a
country, just pay for it together? Why do we make it so complicated and
The government provides a health care safety net for the poor, elderly, and disabled. Of the almost two trillion dollars of annual health care spending in the U.S., the government now pays for almost half. If the government were to take over financing another trillion dollars of health care for the non-poor who currently buy their own health care and insurance, there would have to be a massive tax increase. A tax increase of this size could significantly damage the economic growth that is so important for creating jobs and wealth for the American people.
Thank you very much for all of these very interesting and perceptive questions. It has been a pleasure visiting with you.