[Congressional Record Volume 152, Number 33 (Wednesday, March 15, 2006)]
[Senate]
[Pages S2206-S2207]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ALLEN:
  S. 2424. A bill to amend the Internal Revenue Code of 1986 to 
increase the contribution limits for health savings accounts, and for 
other purposes; to the Committee on Finance.
  Mr. ALLEN. Mr. President, I rise today to speak about the growing 
success of Health Savings Accounts (HSAs) and legislation I have 
introduced to expand Health Savings Accounts.
  In a positive action, Congress created Health Savings Accounts as 
part of the Medicare Modernization Act (MMA). Health Savings Accounts 
are an alternative to traditional health insurance--a savings product 
that offers a different and attractive way for consumers to pay for 
their health care. HSAs enable an individual to pay for current health 
expenses and save for future qualified medical and retiree health 
expenses on a tax-free basis.
  An individual must have coverage under an HSA qualified health plan 
to open and contribute to an HSA. HSA qualified health plan premiums 
generally costs less than traditional health care coverage. Therefore, 
an individual can put the money he or she saves on insurance into a 
personal Health Savings Account.
  I've always described myself as a common sense Jeffersonian 
conservative, which means I trust free people and free enterprise more 
than a meddlesome, burdensome government and that's why I'm such a 
strong advocate for Health Savings Accounts. Individuals own and 
control the money in their HSAs. Unlike a Flexible Spending Account, 
funds remain in the account from year to year, just like an IRA. There 
are no ``use it or lose it'' rules for HSAs. HSAs can become, over 
time, a strong, affordable health insurance product providing a savings 
``nest egg'' for health care expenses.
  In addition, HSAs allow individuals to make decisions on how to spend 
their money without relying on a third party. More specifically, the 
individual makes decisions about how much. money he or she wants to put 
into the account, whether to save for future medical expenses, or pay 
expenses that health insurance plans may not cover.
  The individual also decides what types of investments to make with 
the money in the account that will allow the account appreciate and 
grow in value. I want to make clear right here that the individual does 
not have to invest their money if he or she doesn't want to. This is 
only an option. The bottom line is that Health Savings Accounts give 
people the freedom to make the health care choices that best fit their 
needs and that best represent Mr. Jefferson's ideals and my own.
  Now, there are critics of health savings accounts. However, there is 
convincing evidence that HSAs have proven effective in controlling 
health care costs and providing an affordable option for Americans 
without health Insurance coverage.
  Critics who claim that rich people gain most from the tax breaks of 
HSAs should look at the facts. Of the 3 million Americans who have 
enrolled in HSA plans, 32 percent were previously uninsured, and the 
uninsured are not typically wealthy. Critics suggest HSAs will drive up 
the cost of premiums. However, a recently released study from the 
Deloitte Center for Health Solutions showed HSA qualified plans had a 
2.8 percent annual premium increase, compared to 8 percent for all 
other plans. This low rate of increase is another reason HSA qualified 
plans are affordable to those with lower incomes.
  Another common criticism of HSAs is that the tax break benefits are 
``too generous.'' But the President's proposal offering both a tax 
deduction and tax credit for money used to fund HSAs is no more 
generous than current tax benefits for employer-sponsored health 
coverage. However, our laws and proposal only level the playing field.
  Proponents of HSAs do not pretend that HSAs are going to ``fix'' the 
entire health care system, although they may go a long way toward doing 
so with more individual responsibility and opportunity. HSAs are an 
additional option--one that is affordable and chips away at part of the 
problem: the millions of uninsured Americans. Individuals need health 
insurance, especially for costly medical services, not only tax 
deductions for out-of-pocket spending. It is the combination of two 
products--the HSA and HSA-qualified health insurance plan--that has 
allowed over one million previously uninsured Americans to afford real 
health coverage.
  I am very pleased to see the positive results of Health Savings 
Accounts. But we cannot let this momentum slow down. We must do more to 
promote HSAs and give individuals more control over their health care 
needs--and that is why I am here today. I am introducing legislation 
that would increase the maximum amount individuals can contribute to 
their HSA.
  Under current law, an individual's contributions are limited to the 
lesser of the amount of the deductible or $2700 for self-only coverage, 
($5450 for family coverage), for 2006. Under this proposal, a person 
could contribute--without paying income or payroll taxes on the 
contribution--up to the plan's out-of-pocket maximum, which is higher 
than the deductible. So for an individual, the maximum out-of-pocket 
for 2006 cannot exceed $5250 or $10500 for a family. It is important to 
note though, that each HSA qualified health plan sets their own limit 
on out of pocket expenses, therefore, for an individual their out-of-
pocket expenses may be lower than maximum $5250 but more than the 
current limit of $2700. Nevertheless, this legislation allows 
individuals to save more money for their current and future health care 
needs and I am proud to be introducing it.
  Moreover, this proposal will remove the tax bias against consumer-
directed

[[Page S2207]]

health plans. Today, the tax code subsidizes health care purchased 
through insurance but generally does not subsidize health care paid 
out-of-pocket. This encourages excessive reliance on insurance for even 
predictable, non-catastrophic care, which in turn reduces consumer 
sensitivity to the cost of health care. My proposal would help improve 
the efficiency and slow the growth of our nation's health care 
spending.
  Studies estimate that the average retiree will require hundreds of 
thousands of dollars of savings for out-of-pocket old-age health costs. 
HSAs provide strong tax incentives to encourage such savings. On a side 
note, I have introduced legislation, the Long-Term Care Act that 
compliments this HSA proposal. Under the Long-Term Care Act, we would 
allow individuals to use their 401(k) savings to pay for long-term care 
insurance. Both proposals provide commonsense approaches that will 
encourage individuals to plan for their future health care needs and 
reduce individuals' reliance on programs such as Medicaid.
  HSAs have proven to be an effective health cost containment tool. 
While there is a cost to the federal government associated with the tax 
benefit portion of HSA plans, we must weigh that cost against the cost 
of doing nothing and allowing cost shifting to those with insurance. 
Our health care system needs to switch to a preventive care system, 
which will keep future health care costs down rather than our current 
costly reactionary system. If we continue down our current path and 
make no significant changes to our health care system, the unfunded 
liability of entitlement spending will reach $26 trillion by the year 
2030, consuming the entire federal budget. We're at a crucial point, 
and I believe my legislation, and HSAs in general, offer a step in the 
right direction for personal responsibility in fostering affordable 
health care and savings.
                                 ______