President Lauds Benefits of Health Savings Accounts

Published April 1, 2006

President George W. Bush delivered a major address on health care to an audience at Wendy’s corporate offices in Dublin, Ohio on February 15. The president discussed the importance of Health Savings Accounts in controlling costs and improving quality in the nation’s health care system. The following is an edited version of the president’s address, with added subheads for ease of reading. The full text of the speech is available online at

Health care costs are rising sharply in America. If they continue rising the way they are, that will make us less competitive. Many Americans are worried that they’re not going to get the treatments they need. Small businesses, in particular, are struggling to pay for health care for their employees.

I believe the role of the government ought to be to empower consumers to make choices. And so let me talk to you about five ideas I have to make sure that health care is more available and more affordable.

Consumer Power

The first one is to expand health savings accounts. Traditional insurance today will cover most of your health care costs in exchange for a high premium payment up front. The costs are generally shared by you and your employer. You may also pay a small deductible and co-payment at the time of treatment.

What’s interesting about this system is that those payments cover only a fraction of the actual costs of health care, the rest of which are picked up by a third party, basically your insurance company.

It means most Americans have no idea what their actual cost of treatment is. Somebody else pays it for you. And so there’s no reason at all to kind of worry about price. If you don’t care what you’re paying, and the provider doesn’t have any incentive to lower [prices], the natural inclination is for the cost to go up–and the insurance companies, sure enough, pass on the increase in cost to you and your employer.

Increasing Popularity of HSAs

The combined cost of catastrophic insurance coverage and HSA contributions [is] usually less than traditional coverage. In other words, HSAs are making health care more affordable. Forty percent of those who own HSAs have family incomes below $50,000 a year. In the first year HSAs were available, more than a third of those who bought HSAs had been uninsured. As health care becomes more affordable, it makes it easier, obviously, for somebody who is uninsured to be able to pick up health insurance.

Over the last 10 months, the number of HSAs has tripled. The number of people who bought HSAs has gone from a million to 3 million.

Lower Costs with HSAs

One of the reasons I’m here talking about HSAs at Wendy’s is because you’ve decided to implement this product. You were facing double-digit increases in the cost of providing health care. You didn’t want to keep passing on the increasing costs to your employees. So [you] adopted HSAs. About 9,000 of Wendy’s full-time employees and their families have got HSAs.

At the end of the first year with HSAs, more than 90 percent of Wendy’s employees had positive balances in their savings accounts. Medical claims through this company have decreased by 17 percent since they’ve implemented HSAs. After more than five years of health care costs going [up] at double-digit rates, Wendy’s overall health care costs rose only by 1 percent last year. The savings have allowed Wendy’s to raise the company’s contribution to its employees’ HSA accounts.

It’s your money now. It goes in tax-free, it grows tax-free, and you take it out tax-free.

Necessary Tax Changes

[O]ne of the greatest obstacles to expansion of HSAs is the tax code. One problem is that under current law, employers and employees pay no income or payroll tax on any health insurance provided through the workplace; those who buy their insurance on their own don’t get the same tax break. The self-employed, the unemployed, and workers at companies that do not provide insurance are at a disadvantage.

The playing field isn’t level. And so I believe that one thing Congress needs to do is to give Americans who purchase their own HSA policies the same tax breaks as those who get their health insurance from their employers.

Another problem is that under current law, the amount you can put into your HSA tax-free is limited to the amount of your deductible. But sometimes your out-of-pocket expenses are greater than your deductible. That’s because on some catastrophic plans, there is an additional co-pay.

We can change that. We can raise the cap on the amount of money you put into your HSA so it remains tax-free, so that all out-of-pocket expenses can be covered.

Portability, Transparency

Today the savings in your health savings account are portable–you can take it [from] job to job. But the health insurance that comes with the account, you can’t take with you, because of outdated laws and practices that prevent insurers from offering portable policies. I believe that health insurers should be allowed to sell portable HSA [insurance] policies nationwide.

The second way to make sure health care is affordable and accessible is to increase transparency in our health care system. To be smart consumers, you need to be informed consumers. It’s hard to make wise choices unless you have information available. You need to know the quality of doctors and hospitals in your area; you need to know the full extent of procedures that someone recommends to you.

When you buy a new car, you have access to consumer research on safety, you have access to information on reliability, you can compare price. There’s performance data. You can become an informed consumer before you purchase your automobile. That same sense of transparency and information ought to be available in health care. A modern health care system recognizes that people ought to be encouraged to shop for quality and price. And so the health care industry and the insurance industry need to provide reliable information about prices and quality on most common medical procedures.

[W]hen you trust the American people to make wise decisions about their health care, positive things happen. Free markets and competition transform our world. They have the power to transform our health care system.