Dems try to do to HSAs what they did to Social Security plan

The ink has barely dried on the president’s request to boost spending on tax-free health savings accounts, but unions and congressional Democrats already have started invoking a political comparison to last year’s Social Security privatization drive.

Expanding the accounts, called HSAs, is one of the White House’s highest-priority goals for this year, though advocacy groups have criticized HSAs for shifting more of the nation’s mounting healthcare costs onto employees. While Congress has yet to consider President Bush’s expansion plan, Democrats have taken up the same critical brush they used successfully to tar Social Security private accounts as a giveaway to the banking industry.

Rep. Charles Rangel (N.Y.), ranking Democrat on the House Ways and Means Committee, seized upon HSAs’ appearance in the State of the Union address to point out that — like Social Security accounts — HSAs would have little benefit for those with low income.

“It will go the same way Social Security [did],” Rangel said. “He’ll send it to the committee, we’ll discuss it. …” Noting that 48 million Americans cannot afford health coverage under traditional insurance plans, Rangel said that “a lot of those people can’t set aside money because they don’t have enough income to take a deduction.”

The AFL-CIO, which poured money and resources into last year’s winning battle against Social Security reform, is taking a similar approach to lobbying against HSA expansion, estimated in Monday’s White House budget proposal to cost more than $50 billion over the next five years.

“We see a direct parallel between Wall Street pushing private accounts carved out of Social Security and advocating HSAs as an alternative to employer-provided health insurance,” said Brandon Rees, the director of the labor giant’s investment office.

AFL-CIO President John Sweeney went on the offensive last week in a letter to the chairman of the HSA Council, a banking-industry coalition formed to promote and lobby for greater use of the accounts. Sweeney urged the bankers to abandon their “inappropriate” efforts on behalf of HSAs, which were created by the 2003 Medicare drug-benefit bill.

Banking lobbyists attributed the Democrats’ and unions’ concerns, and their Social Security comparison, to a desire to reap political benefits from killing another White House-backed proposal.

“We’re involved in a lot of fights in Washington. We know how the game is played,” said American Bankers Association (ABA) President Ed Yingling. “We think HSAs are a good idea, and we’ve seen that they will help small businesses afford healthcare plans when they otherwise might not be doing it.”

Scott Talbott, senior vice president of government relations for the Financial Services Roundtable, echoed Yingling’s dismissal: “From a political standpoint, it’s bipartisan. The whole connection to Social Security is a red herring.”

The ABA, along with its banking-insurance subsidiary, launched the HSA Council to educate lawmakers on the accounts. Though the potential profits to be made from managing new HSAs is undeniable, bankers are striving to downplay the financial returns they might make should Congress embrace the White House plan.

“We will get paid, but this isn’t about a moneymaking proposition,” said one financial-services lobbyist. “Our guys aren’t licking their chops and saying, ‘Oh, this is a pot of gold, thank you, Congress.’”

Banking lobbyists said a more apt counterpart for HSAs than Social Security private accounts would be individual retirement accounts, or IRAs, an alternative to defined-benefit pensions that help workers save for retirement.

“This is a big step,” said Ike Jones, a lobbyist for America’s Community Bankers. “HSAs are like IRAs that you can use for medical expenses.”

But Democrats can try to make political hay from that comparison as well; several have made the argument that HSAs encourage employers to exit the traditional health-insurance system, just as IRAs are an incentive to abandon traditional pensions.

“He’s talking about encouraging employers to drop health insurance,” Rangel said.

In the Senate, such swift Democratic blowback signals that, in a tense election year, even an innocuous-sounding pitch for an existing program could turn into grounds for a filibuster. Senate Finance Committee Chairman Chuck Grassley (R-Iowa), who removed an extension of White House-backed tax cuts after grappling with rebellious GOP centrists on his committee, sees the writing on the wall.

“It’s all very good policy, but if they aren’t reconciliation-protected, we’ll have a hard time passing [HSAs],” Grassley said late last month.