HSAs May Be Health Care's Remedy

America spent more than $1.9 trillion on health care in 2004, representing about 16% of our nation's gross domestic product -- nearly double what most industrialized countries spend. Health care spending has been growing at more than twice the rate of inflation.

American households spent a record $236 billion in 2004 on out-of-pocket medical expenses, including co-payments and deductibles. And of course, many households -- more than 40 million Americans -- have absolutely no health insurance.

No financial issue in America, including budget deficits, trade deficits and potential stock market declines, has the potential to so completely undermine our economic system. Our future depends on finding a solution. Health savings accounts, which are expected to be a major topic of President Bush's State of the Union address tonight, could help provide a cure for this health crisis.

How We Got Here

For the past 60 years, health insurance has primarily been offered through employers. That started in World War II, when wages were fixed, so employers offered health insurance to compete for workers. By the 1950s, the cost of health insurance had become a deduction for companies, though it is still not deductible for employees. Health care packages were then sweetened with promises of retiree health care -- a cost to be deferred into the future.

Now we're in that future. And the costs are staggering, making our products uncompetitive in the global economy. Last year, General Motors (GM Quote) is reported to have spent $5.2 billion on health care for its employees and retirees. That adds $1,525 to the price of every car it sells!

The soaring costs have set off a vicious round of job losses, pushing those without private health insurance into expensive emergency rooms. The unemployed and the very poorest patients are covered by state Medicaid programs. But low-wage workers who are not covered by their employers are faced with staggering medical bills and even bankruptcy.