Healthcare Today Medicare and Insurance

Bush Health Plan Stumbles in Government Test

Within days of President Bush promising to expand tax-free savings accounts to make healthcare more affordable, a government report suggests that the new plans run counter to hopes of lowering America's medical bills.

Looking at Federal employees who enrolled in a companion piece of insurance, known as high-deductible health plans, the report found that such coverage attracted younger and wealthier government workers at the expense of older and less affluent ones, which could drive up costs overall.

Government employees also had little information on the costs of different medical options under these plans, making it hard to comparison shop for cheaper care.

That the President-backed initiative appears to be stumbling at the government level drew immediate criticism over expanding them further.

"This report screams 'buyers beware,'" announced Democratic Congressman Pete Stark of California, who has been a vocal critic of Bush's plans to reshape healthcare.

"The President's health savings account plan combines the worst elements of the President's failed Social Security privatization plan and his Medicare prescription drug fiasco," added Henry Waxman, another Democratic Congressman from California.

The audit, conducted by the Government Accountability Office, is an early stumble for consumer-driven insurance plans, which are meant to promote more frugal health spending. Those who sign up for this type of coverage pay lower monthly premiums, but face higher initial costs for visiting doctors and receiving care.

To defray out-of-pocket expenses, people can purchase health savings accounts, tax-free, to fill the gaps in coverage. This insurance package has been championed by President Bush and others as way to cut medical costs and to stem the tide of Americans who are uninsured.

But in the first year that Federal employees tried out this coverage, the GAO found some potentially counterproductive trends. The average age of those who took part in high-deductible plans and health savings accounts was 46, which was 13 years younger than the average enrollee who stuck with traditional insurance. These participants were also better off financially, with nearly 43 percent of those enrolled in the new plans making at least $75,000 a year, compared to 23 percent who made just as much and had any type of insurance.

This is a key point of contention from critics, who fear that the new offerings will mainly appeal to the young and wealthy, leaving the old and less affluent to drive up costs with traditional insurance. Information about the quality and cost of medical care was also "limited and varied" under the three largest high-deductible plans, the GAO report found.

"This raises some real flags about how well these will control costs," said Sarah Collins of the Commonwealth Fund, an advocacy group that has studied the new insurance policies.

John Dicken, who led the audit for the GAO, said that it will take several years to determine if these initial trouble spots drive up government medical spending.

"It is too early to look at costs and expenditures," he explained in an interview. Overall, Federal employees expressed the same level of satisfaction with either the new or old plans, he said.

In a letter to the GAO, Linda Springer, who heads the personnel office for the Federal government, said that report raises important concerns about high-deductible plans drawing the young and wealthy at the "expense of our traditional insurance plans."

"We will have to follow this over time," she wrote.