Health savings accounts for poor tested

By KEVIN FREKING, Associated Press Writer

The popularity of health savings accounts for the poor will be put to the test in Indiana under a program approved Friday by the Bush administration. Under the plan, someone making $20,000 a year could get health coverage for about $19 a week.

Bush has long pushed health savings accounts as a way to slow the rising cost of medical care and extend basic coverage to the uninsured.

Under the Indiana program, eligible residents can pay up to 5 percent of their incomes into state-subsidized “Personal Wellness and Responsibility Accounts” that cover their initial medical expenses up to $1,100. Once that deductible is reached, private insurance purchased by the state kicks in.

Eligibility is limited to adults with incomes below twice the federal poverty level. The poverty level is now $10,210 for an individual and $20,650 for a family of four.

The waiver is the first of its kind for the Medicaid program, a state-federal partnership that provides health coverage to the poor and disabled.

Indiana officials said they’ve already received inquiries from more than 1,000 people interested in applying.

The program will be monitored closely because of the philosophical divide among lawmakers about the value of health savings accounts for the poor. Many say such accounts work best for healthier and higher-income people with low medical expenses.

Judith Solomon, senior fellow at the Center on Budget and Policy Priorities, said she doubts that many people making $10,000 a year can afford to pay $500 for health insurance. She said that about 50,000 people lost Medicaid coverage in Oregon after that state got permission to raise insurance premiums to $20 a month.

“You can say it’s better than nothing, but I just don’t see how many of those folks will be able to afford it,” Solomon said.

Indiana has allocated up to $114 million for the program in 2008 after its legislature voted to raise state taxes on cigarettes from 55.5 cents to 99.5 cents a pack.

The state is encouraging employers to contribute to their workers’ accounts. Any money left at the end of the year can be rolled over to offset the following year’s contributions if the beneficiary obtains certain screenings and services that help prevent illness.

“This is a big step forward that will lead to approximately 120,000 uninsured Hoosiers having the peace of mind of health insurance,” said Indiana Gov. Mitch Daniels, a Republican who once served as Bush’s director of the Office of Management and Budget.
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