President Bush's proposed 2007 budget would allow federal workers' largest health insurer to launch a new high-deductible plan, called a health savings account, that the White House predicts would save billions of dollars but also increase burdens on consumers.
Many Americans first heard about these accounts in the president's State of the Union address Jan. 31, and, like most health care options, they are complex.
Such accounts first became available to federal workers in 2003 but haven't been widely used - only about 3,900 out of millions of federal employees chose a high-deductible plan as of March 2005, according to the Office of Personnel Management.
However, that number could grow significantly should Congress allow BlueCross BlueShield, which insures more than half of the federal work force, to start a health savings account plan.
The health care industry once thought managed care was the way to control costs. Health maintenance organizations would decide what was necessary for patients. But many Americans didn't like insurance companies telling them what to do.
Health savings accounts grew out of this. They're promoted as a way to put health care decisions in the hands of consumers.
The plans expose enrollees to more of the true costs of care. While a typical insurance plan masks these costs - requiring a $75 co-pay, for instance, for an emergency room visit - someone with a Health Savings Account might face a bill for more than $1,000 for the same service. Facing that, the theory goes, patients might reconsider whether they need to make the trip to the ER. They might decide, instead, to see their primary care doctor the next day.
But some experts question whether the savings will be as great as the president's budget team expects.
"People in these plans are going to stop and say, 'Does it make sense to get a brand-name drug when you can get a generic one for less?'" said Paul Fronstin of the Washington-based Employee Benefit Research Institute. "It's going to result in some savings, but not big savings because once a patient hits their deductible, there's no more incentive to do that."
Using hypothetical figures, here is how these accounts work:
An enrollee would pay a lower premium every year, $740 instead of $1,300, for example, which would be deducted from the enrollee's paychecks. Enrollees would be responsible for paying for care up to an annual deductible, $1,200, except for a physical, which is free. After reaching $1,200, patients would generally shoulder between 10 and 20 percent of the cost.
In exchange, the employer deposits a set amount, say $600, in an enrollee's health savings account, usually at a bank. At the end of one year, if the enrollee never withdraws money for medical services, the $600 stays there, accumulating interest tax-free, and the employer deposits another $600.
The plans can be lucrative for healthy people - and cushion someone who has a major medical expense after 20 years of excellent health - but would not be appropriate for people who are chronically ill.
Fronstin said the biggest drawback is consumer confusion. The plans are so new that patients don't know much about where to get cheap drugs or which hospitals offer the best care.
"People don't have enough information on cost and quality to make responsible medical decisions," he said.
The advantages are that the money stays with workers when they change jobs or enroll in Medicare. People also can withdraw money from the accounts for a far wider range of procedures than typical insurers might cover, giving participants the flexibility to do what they want.
"It gives consumers discretion," said Walton Francis, an expert on federal employees' health benefits author of Checkbook's 2006 Guide To Health Plans for Federal Employees. "Both as to what services they want and how much they want to spend for them."
President Bush has proposed that civilians and soldiers get equal raises next year for the first time in his administration, but the raise is what some Democrats and employee unions are calling insufficient - 2.2 percent.
That's likely to stick, said a spokesman for Rep. Tom Davis, a Virginia Republican who is chairman of the House Government Reform Committee and a key player on federal employee issues.
"The chairman thinks that what the president proposed is the best we're going to get in this budget year," said Robert White.
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