FROM THE OFFICE OF PUBLIC AFFAIRS

June 25, 2004
JS-1749

The Honorable John W. Snow
Town Hall Meeting on Health Savings Accounts (HSAs)
Miami, Fl
June 25, 2004

Thank you, Governor Bush, and thank you all so much for having me here today. It's great to be here in Miami to talk about what is truly one of the top issues facing Americans today: access to affordable health care.

Many of the people here today are from the small-business community, and there's a good reason for that: Because it's small business that is left standing by the door, hoping to get in, in today's health insurance market.

In America's smallest firms, you tend to have too few employees to create a good risk pool, and you're also subject to a long list of state mandates on coverage that were intended to protect consumers but can have the effect of pricing you right out of the market. You've been left with a terrible choice: expensive top of the line coverage for your employees, or no coverage at all.

Because rising health care costs are a burden on you, they are a burden on the economy. After all, you are the ones creating the jobs and growing the economy.

Health care costs can provide a disincentive when it comes to hiring additional employees. That's not good for our economy. And if you've made hard choice to not offer health care, it reduces your ability to hire the best employees and effectively compete – at home and internationally. And that's not good for our economy, either.

Then we look at the big picture, of what rising health-care costs are doing to our Federal budget and deficits… and we realized that the very future fiscal condition of this country will be driven almost entirely by rising health care costs, for example, those associated with Medicare.

The problems we face in this area are sobering, to say the least. And I expect we will talk about them in detail today. But I'm delighted that we have a solution to talk about as well.

HSAs are a break-through new idea to help address the underlying problem of the affordability of health-care coverage.

Think of them as super-charged IRAs for health care. Created by the Medicare bill signed by President Bush on December 8^th, HSAs are a product that is designed to help individuals take more control over how their health care dollars are spent and save for future medical and retiree health expenses on a tax-free basis. 

I'm pleased to say that HSAs can help small-business owners, their families and their employees. The ability for both individuals and employers to contribute to the accounts provides a lot of options, and a lot of flexibility for a small group struggling to keep costs reasonable for both parties.  Employer contributions to employee HSAs are not subject to FICA taxes, and individual contributions can be deducted on their taxes.

If you or someone you know is not currently working, HSAs offer a benefit as well.  You do not have to be employed or have income from working to have an HSA.  If you are age 55 or older you can put an additional $500 in "catch-up contributions" into your HSA this year.  And next year this rises to $600.

Among its many benefits, an HSA puts you in charge of their health care purchasing decisions, and that's one of the reasons why I think they are historic. Many of us find traditional health insurance plans frustrating because there are so many rules about what is covered and what is not. For those who are covered under an employer's plan and are therefore one step removed from the plan purchase, the rationale behind coverage options can be a real mystery. To the consumer at the bottom of this structure, it feels like decisions about their health are being made by several other parties… not by you.

If an individual is using an HSA, health purchasing decisions are made by you, the patient, in conjunction with the counsel of your physician. And that's something a lot of people have been asking for.

In other words, HSAs have the potential to engage us, as consumers, to be wise shoppers. Americans are wise shoppers for everything else, and we need to add health care to the list of products that every American understands and can make their own smart choices about.

HSAs also give consumers the opportunity to budget for their health expenses over many years. Money that is not spent in one year can roll over to the next, indefinitely. It's something that makes a lot of sense and will prove to be empowering for consumers.

Treasury is working hard to get the word out – that can be the hardest thing to do with a new product like this. So I encourage all of you to try HSAs and to recommend them to your families, colleagues, and trade associations… so they can tell their members.

At the Treasury Department we're also making sure that the right tools are in place to help make HSAs easy to establish for consumers, trustees and custodians. Today, for example, Treasury and the IRS issued a model application document that can be used to establish HSAs. The forms are being released in proposed form in order to give the public the opportunity to comment on the content before being issued in final form.

However, banks and other prospective HSA trustees and custodians can incorporate language from this into their current paperwork and begin using those documents immediately. We look forward to hearing any comments that interested parties may have and finalizing these documents.

We still need other reforms to address the issue of health-care costs, like Association Health Plans and medical malpractice reform. And we won't stop fighting for any of those; it's too important not to. But in the mean time, HSAs are a terrific new option; one that I encourage all Americans to try.

Thank you so much for having me here today.