The Role of State Regulation in Consumer-Driven Health Care

In December of 2003 the Medicare Modernization Act (MMA) added section 223 to the Internal Revenue Code, creating a federal tax subsidy for money contributed to (and earnings accumulated on) health savings accounts, or HSAs. Though public attention was largely focused at that time on the provisions of the MMA creating the new Medicare prescription drug benefit, the MMA was also a major victory for advocates of “consumer-driven health care” who believe that HSAs have the potential to control the cost and improve the quality of health care in the United States, and perhaps even to increase health care access. Consumer-driven health care advocates believe that the key reason health care costs are out of control in the United States is that most Americans are too generously insured. They believe the solution is to increase consumer sensitivity to cost and effectiveness by making people spend their own money for health care.