Bush Does Health Care

| Thu Jan. 19, 2006 3:25 PM EST

According to the AP, it looks like President Bush will go after health care in his State of the Union address to Congress on January 1st, and propose to expand "health savings accounts." A few months ago, Jonathan Cohn wrote a long article on the problems with HSA's in the New Republic, which is very much worth reading.

The basic problem here is pretty clear: Any health care plan with a high deductible that allows a person to save $2,000 a year, tax-free, in a bank account to pay for out-of-pocket costs is going to attract a lot of very healthy people (who can save the money) and very few less-healthy people. But if all the extremely healthy people start fleeing from traditional insurance en masse, that means premiums will shoot up for everyone else. (South Africa tried to experiment with HSAs and ended up with a lot of similar problems.)

Basically, HSAs are a "clever" idea in theory, and no doubt a lot of economists are enamored of some of their features—like the fact that they promote "cost saving" by deterring patients from going to the doctor "too often"—but it's not even close to a serious attempt to fix the United States' dysfunctional health care system.