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February 22, 2006


WASHINGTON -- Healthcare will account for 1 in 5 dollars spent in the
United States by 2015, and health savings accounts are unlikely to
help much in containing costs, government analysts said Tuesday.

The U.S. healthcare bill is expected to reach $4 trillion by that
year, according to an annual forecast by the National Health
Statistics Group at the federal Centers for Medicare and Medicaid

At that point, health spending will consume 20% of the country's gross
domestic product, up from 16% today, with the government paying about
half of the tab, the researchers predicted.

Although the new Medicare drug benefit may help tame the growth of
prescription costs, the government economists and actuaries who
compiled the forecast said they weren't expecting much from health
savings accounts, which the Bush administration has touted as a key
means to control spending.

"The net impact on cost containment is likely to be far smaller than
that seen from the massive shift toward managed care during the
mid-1990s," they wrote in the online edition of the Journal of Health
Affairs, which published the forecast.

The new Medicare drug benefit, on the other hand, appears to be
curbing the escalation of prescription costs even though more people
are getting needed medications. That is because the insurers offering
Medicare drug coverage negotiated better-than-anticipated discounts
with pharmaceutical manufacturers, the analysts said.

The forecast projects a 7.2% average annual increase in healthcare
costs over the next decade -- well above the 5.1% growth rate
predicted for the overall economy.

John Poisal, deputy director of the National Health Statistics Group,
said the continued escalation in costs was fueled by consumer demand
for an ever-increasing array of new medical techniques and

"It's consumption and investment," Poisal said. "But primarily it's
about consumption."

President Bush has promoted health savings accounts as an antidote to
unchecked spending. The accounts allow families to save money tax-free
to pay for health expenses that are not covered by special high-
deductible insurance plans.

The accounts are part of a trend toward so-called consumer-driven
healthcare. The idea is that consumers will spend less if they bear
more of the expense.

About 3 million Americans -- less than 2% of those in private health
plans -- are enrolled in plans that qualify for health savings
accounts. It is too early to tell whether the accounts are working as
billed but they are unlikely to attract enough consumers to make much
difference over the next decade, the government analysts said.

"Given the small number of people affected, we don't expect the effect
to be huge," said Sheila Smith, an economist and coauthor of the

The analysts' cautious outlook for health savings accounts echoes
statements of some economists and public policy experts who doubt that
consumer-driven healthcare can deliver on its promise.

"It's hard to see where we will see sustained savings," said Paul
Fronstin, an economist at the Employee Benefit Research Institute, a
Washington think tank.

Even if health savings accounts were to grab a large share of the
market, they would be unlikely to achieve the cost reductions that
managed-care plans such as health maintenance organizations and
preferred provider organizations squeezed from physicians and
hospitals in the 1990s, experts said, because individual consumers
lack the same purchasing power.

"The people who think [health savings accounts] are the magic bullet
need to think this through," said Bob Laszewski, an insurance industry
consultant. "It's almost a no-brainer to say they'll have nothing
close to the leverage managed care had."

Even proponents of consumer-driven healthcare agreed with the
forecast's outlook for health savings accounts.

"I wouldn't argue with their assessment," said Devon Herrick, a senior
fellow at the National Center for Policy Analysis, a Dallas-based
think tank and one of the earliest promoters of consumer-driven
healthcare. He said federal rules had hamstrung insurance companies'
ability to offer the accounts with features that would make them more

Copyright 2006 Los Angeles Times