Nothing probably shows the potential of health savings accounts (HSAs) better than their enemies’ attempts to wreck them. An attempt to load on costly administrative requirements passed the House of Representatives but not the Senate. President Bush had threatened to veto it. Expect it to come back.

H.R. 5719 would have required every HSA transaction to be reviewed and verified as a legitimate medical expense. Currently, such expenditures are subject to an IRS tax audit, and many are made with a debit card that is only useful at a facility providing medical supplies or services.

A Wall Street Journal editorial called it “Health Savings Sabotage,” with a key player being Rep. Pete Stark (D-CA), who views HSAs as a “weapon of mass destruction.” While Democrats, including Barack Obama and Hillary Clinton, decry the high cost of medical care, including insurance overhead, “Mr. Stark and his friends want to impose the same bureaucratic overhead even on spending that consumers do with their own money” (Wall St J 4/19/08).

Cheating is a nonproblem, the editorial stated: “In any case if people cheat on their HSAs, they are only cheating themselves.”

Lobbying for the provision was EvolutionBenefits, which makes software used for “substantiation” of expenses in employer-owned Flexible Spending Accounts. H.R. 5719 would have enabled EvolutionBenefits to charge twice as much for administering HSAs.

“This is a near perfect example of the corruption of Washington,” writes Greg Scandlen. “A powerful member of Congress using his authority to benefit a single company at the expense of millions of consumers and taxpayers” (Consumer Power Report #123, 4/23/08),

“The message is clear,” writes Dan Perrin of the HSA Coalition, “we (the Democrats) think you cannot make your own decisions, so we are going to force you to pay a company to review your decisions and then we will give you access to your own money but only after we decide whether you made the right choice in the first place.”

Since HSAs were created in December 2003, 3.2 million accounts have been opened, covering 4.5 million Americans, one-third of whom were previously uninsured and bought coverage on their own. Thirty-three percent of new users are small businesses that previously had not offered coverage to their employees.

Consulting firm Watson Wyatt found that average health-insurance costs in the last two years rose 3.6% for employers who offered high-deductible accounts, versus 7% for employers who did not (Wall St J 5/1/08).

According to the U.S. Government Accountability Office (GAO), the number of tax filers reporting an HSA tripled between 2004 and 2007 (GAO-08-474R).

“The take-up rate is the fastest of any benefits innovation of our lifetimes, states Greg Scandlen. “Faster than IRAs, 401(k)s, and far faster than HMOs. The only thing that rivals it may be the conversion of HMOs into PPOs in the mid to late 1990s.”

“Which is probably one of the main factors in pushing H.R. 5719,” writes Frank Timmins. “HSAs are a threat to the SP [single payer] crowd. They need to slowly poison this baby before it grows to maturity.”

Additional information:

• “HSAs Have Dramatic Growth Spurt,” AAPS News of the Day 3/23/06.
• “Frequently Asked Questions (FAQs) on Consumer-Driven Medical Care.”
• “Tax-Advantaged Medical Coverage,” by Madeline Pelner Cosman, J.D., Ph.D.