National Economic Council

February 2006

REFORMING

HEALTH CARE

FOR THE 21ST CENTURY
My fellow Americans, 

America’s health care facilities and medical professionals are the best in the world. 

Keeping our Nation competitive requires affordable and available health care. Our 

government has a responsibility to provide health care for the poor and the elderly, and 

we are meeting that responsibility. For all Americans, we must confront the rising cost of 

care, strengthen the doctor-patient relationship, and help people afford the insurance 

coverage they need. All Americans deserve reliable, high-quality, and reasonably priced 

health care that will be there when we need it. 

To meet these challenges, my Administration has developed policies that will improve 

the Nation’s health care system by making it more affordable, transparent, portable, and 

efficient. We will strengthen Health Savings Accounts and continue to call on Congress 

to pass Association Health Plans, so all Americans can have the same advantages when 

buying insurance. We will do more to make insurance coverage portable, so workers can 

change jobs without having to worry about losing their health insurance. We will make 

wider use of health information technology to help reduce costs, save lives, and improve 

quality of care. And to stem frivolous and wasteful lawsuits that are driving too many 

good doctors out of practice, I am calling on Congress to pass medical liability reform 

this year. 

My Administration will continue to pursue innovative ways to make sure our health care 

system meets the needs of all Americans. These efforts will help Americans continue to 

benefit from the greatest medical system in the world. 

GEORGE W. BUSH 

THE WHITE HOUSE 

February 15, 2006 
The State of Health Care 

“Keeping America competitive requires affordable health care. Our government has a 

responsibility to provide health care for the poor and the elderly, and we are meeting that 

responsibility. For all Americans, we must confront the rising cost of care, strengthen 

the doctor-patient relationship, and help people afford the insurance coverage they need. 

“We will make wider use of electronic records and other health information technology, 

to help control costs and reduce dangerous medical errors. We will strengthen Health 

Savings Accounts – making sure individuals and small business employees can buy 

insurance with the same advantages that people working for big businesses now get. We 

will do more to make this coverage portable, so workers can switch jobs without having 

to worry about losing their health insurance.”

 – President George W. Bush, State of the Union Address, January 31, 2006 

Every American deserves reliable, high-quality, and reasonably priced health care that 

will be there when needed. This means health care has to be affordable, transparent, 

portable, and efficient. Health care in the United States is second to none, but it can be 

better. Our Nation’s health care facilities and medical professionals are the envy of the 

world, yet our system still has too many preventable medical errors. The cost of finding 

new health insurance locks some workers into their current jobs if they or someone in 

their family is chronically ill. 

 

0%

5%

10%

15%

20%

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Growth in National Health Expenditures as a Percentage of GDP

Source: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

Americans spend an increasing share of their income on health care. Health care 

spending in America has increased from 5 percent of GDP in 1960 to 16 percent in 2004, 

and is expected to increase to 18.7 percent in 2014. Insurance competition from HMOs 

and other types of managed care plans temporarily slowed the increase in spending 

1
during the 1990s, but since then, spending has continued to climb at a rate several times 

faster than either personal income or inflation. In recent years, insurance premiums have 

risen at double-digit rates. 

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Employee Share

Employer Share

Employer-Provided Health Insurance Premiums for Family Plans

(1988-2005, adjusted for inflation)

Source: Kaiser Family Foundation/Health Research and Eductaion Trust

Note: The following years were interpolated: 1989-1992; 1994-1995; 1997-1998.

This increasing burden of health spending on the U.S. economy is unsustainable. Higher 

spending on public programs like Medicare and Medicaid strains state and Federal 

budgets. Higher insurance premiums pose a challenge for employers and burden workers 

with higher health costs and lower wage increases. 

Only part of this increase in spending can be explained by changing demographics. A 

substantial portion is due to the direct and indirect effects of our insurance system itself. 

Health insurance gives people valuable protection and peace of mind that they will have 

help paying their medical bills should a major illness arise – but our tax system penalizes 

people who purchase routine care on their own. Over time, the percentage of health care 

paid by insurance has increased, while the percentage paid by consumers out of their 

pockets has declined – from over half (approximately 55 percent) to approximately 15 

percent of all health care spending. 

Because third parties such as insurance companies, employers, and government finance 

the vast majority of health care spending, most Americans do not know – and do not have 

access to information about – the cost of health care services before they decide whether 

or not to receive those services. 

Favorable tax treatment of employer-sponsored health insurance has hidden from 

employees much of the growth in insurance premiums. This tax subsidy actually 

encourages insurance coverage of spending on routine care because out-of-pocket 

spending on health care is rarely tax-free. In addition, the tax code discriminates against 

those who do not have access to employer-sponsored insurance. This means many small 

2 
business employees, the self-employed, and unemployed Americans paying for health 

care and health insurance on their own do not receive the same tax benefits as people 

working for companies that sponsor insurance. 

Giving Americans the information and ability to make their own decisions will lead to 

better use of health resources. Some might suggest that the only way to reduce spending 

is through price controls and government rationing. On the contrary, there is strong 

evidence that consumers can and do make smart purchasing decisions when they have 

opportunity and information and are operating on a level playing field. 

The President supports empowering consumers to play a greater role in making health 

care decisions. In his State of the Union Address, President Bush proposed an agenda to 

make health care more affordable, transparent, portable, and efficient. With appropriate 

reforms, our health care system can supply affordable care to Americans while 

continuing to lead the world in cutting edge medicine. 

Making Progress for America 

Since taking office, President Bush has proposed and implemented commonsense 

reforms designed to reduce health care costs, expand health care coverage, and improve 

the quality of care. Many of his initiatives are predicated on the idea of returning greater 

control and choice to patients, their families, and their doctors. Health Savings Accounts 

(HSAs), established by the Medicare bill signed into law by the President in December 

2003, permit individuals to combine the security of a comprehensive health insurance 

policy that covers preventive care and larger medical bills with a tax-free account for all 

other health care expenses. HSAs provide Americans with more control over how their 

health care dollars are spent and empower consumers to take more control over their 

health. HSAs are making health insurance more affordable and are helping companies 

lower their health costs. More than three million Americans now have HSAs. 

The President has also implemented much-needed reforms to help speed the introduction 

of generic pharmaceuticals into the market. Generic drugs provide a more cost-effective 

way to deliver much-needed medicine to patients, but in the past, generics often faced 

obstacles to getting to the market. The President’s actions mean that generics are now 

much more likely to reach the marketplace without delay, saving American consumers 

billions of dollars each year. 

Through his Community Health Centers initiatives, the President has made access to 

primary and preventive health care services for vulnerable populations a priority. The 

Administration has funded more than 800 new or expanded centers, and will fund 

approximately 400 more over the next two years. New funding has allowed Community 

Health Centers to build the capacity to serve more than 3.5 million additional Americans, 

with nearly 2 million more to be served in the next two years. 

3
In 2004, the President launched an initiative to make electronic health records available 

to most Americans within the next 10 years. This technology will help to link together 

doctors, patients, and hospitals in seamless, digital environments, making it possible for a 

patient’s records to be transferred quickly and accurately and with all necessary privacy 

protections. The technology has already developed to the point that many hospitals and 

medical systems can track patient records, lab tests, drug administration, and follow-up 

care, but more must be done to improve consumer access to this technology. Widespread 

use of electronic health information will help Americans receive high-quality medical 

care, save lives, and prevent medical errors. The use of health IT by the Department of 

Veterans Affairs and the private sector has already led to significant cost savings, reduced 

errors, and improvements in quality of care. 

The President’s Vision 

In an ideal system, Americans would be able to choose their health care based on their 

individual needs and preferences. Information about the range, price, and quality of 

available health care options would be readily available and easy to use. Purchasing 

decisions would be made by consumers, not by employers, insurers, or the government. 

Health insurance would be portable (meaning you can take it with you when you move or 

change jobs) and affordable. Competition and market forces, rather than government 

price controls, would be relied upon to improve the quality and efficiency of health care 

and to reduce the growth of health care costs. 

The President’s reform agenda can make the health care system more efficient, while 

ensuring that it continues to lead the world in cutting-edge medicine. The President 

proposes to limit the unsustainable increases in our health care spending through 

initiatives that will inject consumer involvement back into the health care system. 

The President believes that empowering consumers is essential to improving value and 

affordability in American health care. Americans should be able to choose their health 

care based on individual needs and preferences. Americans should be able to easily 

obtain understandable information about the price and quality of health care. Medical 

providers and insurance companies have a responsibility to provide this information to all 

Americans prior to the time of service or treatment. 

The introduction of HSAs is leading to a major shift in health care in America. More 

employees are able to afford high-deductible health insurance combined with HSAs, 

allowing them to gain control over their health care dollars. In addition, HSA-based 

insurance allows more workers to have insurance for major medical events, which will 

reduce the financial burden currently carried by various government and non-profit 

entities. Expanding HSAs will strengthen the doctor-patient relationship and lead to 

better value in health care. 

Insurance should be affordable and provide increased stability and peace of mind for 

working families across the country. The President has proposed the creation of 

4 
Association Health Plans (AHPs), which will allow employers, especially small 

businesses, to band together and purchase health insurance across state boundaries. By 

purchasing coverage for thousands of employees at a time across many different small 

businesses, association members can pay lower premiums for better coverage, as some 

large companies can today. 

Americans should not have to worry about changing doctors, learning a new insurance 

bureaucracy, having their premiums go up if a family member is sick, losing their 

insurance tax advantage when leaving employment-based plans, or being subject to more 

costly mandates. The President believes Americans should be able to purchase health 

insurance across state lines and take it with them wherever they go. 

President Bush continues to call for medical liability reforms that would help protect both 

doctors and patients. These reforms would reduce the likelihood that doctors and 

hospitals order more tests or procedures than are clinically necessary to help protect 

against liability claims. Such defensive medicine drives up health care costs but has little 

or no medical benefit. Medical liability reforms would protect a patient’s access to the 

courts but place reasonable limits on the extent of potential awards. 

Our government has a responsibility to promote access to quality affordable health care 

for the poor and chronically ill. The President’s proposals would provide important 

assistance to these vulnerable Americans, extending extra financial assistance to lowincome Americans; encouraging states and employers to help the chronically ill obtain 

affordable health coverage; and allowing individuals to purchase affordable insurance 

through their civic, community, and religious groups. Promoting these initiatives, and 

continuing to increase support for Community Health Centers, will ensure health care is 

available where it is needed most. 

Finally, President Bush believes that active prevention is critical to achieving a better and 

longer life, and should play a central role in any effort to control the costs of health care. 

He has therefore made the adoption of a healthy lifestyle a high priority and has 

encouraged Americans to take responsibility for making wise choices that point toward 

fitness and health. His Administration has worked to give all Americans the tools, skills, 

and motivation to improve their health and wellness. 

Achieving the Vision 

The President’s vision will be achieved through: 

• Leveling the playing field by making the same tax relief available to 

individuals and employers. Americans who purchase HSA-qualified insurance 

policies on their own should have the same tax advantages as people who obtain 

insurance through their employer. 

• Eliminating all taxes on out-of-pocket spending through HSAs. Americans 

with HSAs should be able to pay for all of their care tax-free. 

5
• Making health insurance portable. Americans should be able to own the 

insurance policy that goes along with their HSA, and keep it when they change or 

lose their jobs without worrying about paying higher premiums if they become 

sick. 

• Strengthening the buying power of America’s small businesses. Small 

businesses should have the same access to price efficiencies as large businesses 

when purchasing health insurance. 

• Passing medical liability reform. Limit costly and frivolous lawsuits that waste 

scarce resources, increase health care costs, and drive doctors out of business.

• Improving adoption of health information technology. Electronic health 

records that reduce costs and improve the efficiency and effectiveness of medical 

treatment should be widely used.

• Empowering consumers through information. All Americans should be able 

to obtain easy-to-understand information about the price and quality of the health 

care they receive from their medical provider and insurance carrier. 

• Providing affordable coverage for vulnerable Americans. Americans with low 

incomes and persistently high medical expenses should receive additional 

assistance.

• Promoting prevention, wellness, and fitness. The President encourages all 

Americans to lead a healthy lifestyle to prevent disease and improve their overall 

quality of life.

 

Equal Tax Benefits for Individuals and Employers 

The Federal tax code’s treatment of medical care has shaped the development of the 

private third-party system of financing health care in the United States. The tax code 

treats the self-employed, unemployed, and workers at companies that do not offer health 

insurance (most of which are small businesses) less generously than it treats workers at 

companies that do offer health insurance. Employer-based insurance receives a tax 

subsidy that individually purchased insurance does not. 

Proposal: Give Americans who purchase their own HSA policies outside of the 

workplace the same tax advantages as those with employer-sponsored insurance. 

Premiums for HSA-compatible insurance would be deductible from income taxes when 

purchased on the individual market. In addition, an income tax credit would offset 

payroll taxes paid on these premiums. This will level the playing field for those who 

currently do not have access to employer-sponsored insurance, including the selfemployed, unemployed, and workers for companies that do not offer health insurance. 

For Americans who are not working, especially early retirees, premiums for the purchase 

of non-group HSA plans would now be allowed tax-free from an HSA account. 

6 
Remove the Tax Bias Against Consumer-Directed Care 

The tax code currently subsidizes health care purchased through insurance but gene

does not subsidize health care paid for out-of-pocket. Th

rally 

is encourages excessive reliance 

by: 

•

• l allow 

 their HSA. The 

new proposal would also provide a credit for payroll taxes paid on all HSA 

contributions, not just r. 

ily has fallen ill, or be subject to more 

be able to find the best policy for them in any state, 

hey live. 

on third-party insurance for even predictable, non-catastrophic care, which in turn 

reduces consumer sensitivity to the cost of health care. 

Proposals: The President proposes reducing the tax bias against consumer-directed care 

Allowing Americans to cover all their out-of-pocket expenses through HSAs. 

The President proposes allowing Americans with HSAs and their employers to make 

annual contributions to their HSAs up to the maximum amount that their insurance 

policies require people to pay out-of-pocket for their health care expenses, not just 

their deductible, as provided under current law. This will allow patients to cover all

their out-of-pocket expenses under their HSA-compatible insurance policy, not just 

their expenses subject to their deductible. 

Eliminating all taxes on out-of-pocket spending through HSAs. This wil

patients to cover all their out-of-pocket expenses tax-free through

 contributions made through an employe

Portable Health Insurance 

Americans should have the option of taking their health insurance with them when they 

change jobs, move, become self-employed, or leave the labor force, and should be able to

shop for better insurance deals in other states. They should not be forced to change 

doctors, learn a new insurance company’s rules, lose their insurance tax advantage, face 

higher premiums because someone in their fam

costly mandates. Americans should 

and then keep that policy wherever t

Make Health Insurance Portable

Most health insurance is not portable today. Employer-based group insurance usually 

does not provide truly portable health insurance when employees change jobs or stop 

working. People changing jobs usually must change insurance policies to receive any 

ome hesitant to leave their jobs to work for an employer who does not 

ffer insurance, work for themselves, or retire. A less flexible labor market is a drag on 

health benefits from their new employer. State regulations and benefit mandates limit 

cross-state portability and increase costs. 

Lack of portability results in “job lock” – if anyone in the family is in less-than-perfect 

health, workers bec

o

economic growth. 

7
Proposal: Enable Portable HSA Insurance Policies 

New national Portable HSA insurance plans. Employers would have the opti

offering workers a Portable HSA insurance policy. Employees would own and 

control the insurance policy, just like they already own and control exis

• on of 

ting HSAs. 

•

 go, 

 based on their health at the time they changed jobs, left 

•

much to contribute to these plans, but whatever they contributed would be tax-free. 

llow Health Insurance to be Purchased Across State Lines

The policy would be exempted from onerous multiple state mandates. 

Lifetime guaranteed renewable premiums, always tax-free. Employees enrolled 

in a Portable HSA insurance policy could take the policy with them wherever they

just like they currently can with their HSAs. Their premiums would be tax-free, 

whether they changed employers or paid the premiums on their own. And their 

premiums would not go up

the labor force, or moved. 

Employer flexibility. Employers would have the option of contributing to new

employees’ Portable HSA insurance policies – no matter where the policy was 

originally purchased. Employers would have the freedom to decide whether or how 

A

ice. 

 only 

r health insurance because each state is a separate health insurance 

arketplace. 

es 

t 

f 

ninsured. They also make it very expensive for insurers to operate in multiple 

ates. 

pports permitting the purchase of health insurance 

pol

•

rcumstances, instead of being limited to only the policies available in 

• rance plans from 

different states, which will ultimately benefit consumers. 

One of the best ways to give more Americans access to quality, affordable, and portable 

health insurance is to remove the artificial regulatory barriers that limit access and cho

Currently, people can only purchase insurance offered in their home state and cannot 

shop for better deals in other states. Individuals and businesses in many states have

a few options fo

m

State rating regulations and benefit mandates are elaborate and costly. In fact, 20 stat

have more than 30 separate mandates each, and six states have more than 50. While 

benefit mandates make health insurance coverage more comprehensive, they also make i

more expensive by requiring insurers to pay for care that consumers previously paid for 

out of their own pockets or chose not to consume. Mandated benefits increase the cost o

basic health coverage, pricing insurance out of the reach of many Americans who must 

then go u

st

Proposal: The President su

icies across state lines. 

This would allow Americans to buy the best health insurance for them, based on 

their own ci

their state. 

This proposal would allow competition among health insu

8 
A Level Playing Field for 

• s 

•

mall employers than to large employers – costs that insurers pass on to 

, and the resulting 

Small Business Employees 

Small businesses are the growth engine of our economy, but they are at a real 

disadvantage in providing health benefits for their workers. Partly because they buy 

coverage for relatively small numbers of workers at a time, small businesses pay much 

higher costs for similar health benefits than large employers or labor unions. One sick 

worker can lead to a large premium increase for a small business employer. 

Small businesses are less than half as likely as large employers to offer health benefit

to their workers. While 95 percent of employers with more than 50 employees offer

health benefits, only 43 percent of employers with fewer than 50 employees do so. 

Small businesses pay as much as 30 percent more than large employers for similar 

health benefits. According to the Government Accountability Office, insurers incur 

higher marketing, underwriting, and administrative costs when providing health care 

coverage to s

small firms. 

Large employers and unions are able to pool their employees and members together 

across state lines, enjoying economies of scale, purchasing clout, and regulatory 

efficiencies. By contrast, small employers have to try to purchase health benefits for far 

fewer workers at a time on a state-by-state basis. As a result of different benefit 

mandates and policy approval processes across the 50 states, small businesses generally 

are not able to join together across state lines. It is expensive and difficult to develop an

insurance policy that meets the requirements of many different states

costs from this complexity tend to make such policies unaffordable. 

Association Health Plans (AHPs)

Proposal: The President’s proposal would make it easier for small businesses to 

provide health care for their employees by allowing small businesses to form 

Association Health Plans. AHPs let small businesses join together through their bona 

fide trade and professional associations to purchase health coverage, giving them the 

same advantages of economies of scale, administrative efficiencies, and negotiating clo

enjoyed by big businesses and labor unions. By purchasing coverage for thousands of 

employees at a time, association members would pay lower premiums for better 

coverage. Strong, bipartisan AHP legislation has passed several times in th

ut 

e House of 

ep esentatives (most recently in July 2005) and is pending in the Senate.

Medical Liability Reform 

e 

R r

President Bush continues to call for proven reforms to make the medical liability system

more fair, predictable, and timely. Skyrocketing medical liability insurance rates force 

physicians to restrict their services or close their practices. To avoid frivolous lawsuits, 

medical providers often feel compelled to practice “defensive medicine” – ordering 

unneeded tests and procedures solely to guard against potential malpractice claims. Th

cost of a broken legal system also gets passed on to patients through out-of-pocket 

9
payments and insurance premiums. Medical liability reforms would secure an injured 

patient’s ability to get quicker compensation for economic losses, while reducing junk 

wsuits and excessive jury awards that jeopardize patients’ access to care. 

to make 

e 

ding 

ome Senators have thus far prevented the Senate from 

llowing the House’s example. 

Health Information Technology 

ill help 

onstrate the power of health IT to reduce costs and errors and 

prove quality of care. 

tion has taken numerous steps towards fulfilling his health IT vision,

inc i

•

• IT projects to assess and develop solutions to 

key imp

o the same 

o ation criteria to ensure health IT investments meet 

o

lth information to follow patients no matter where they 

receive care. 

alth 

e 

la

Proposal: The President calls on Congress to pass proven liability reforms 

the system fairer and more predictable while reducing wasteful costs. The 

President’s strategy for addressing the medical liability crisis includes common-sens

reforms such as: (1) reserving punitive damages for egregious cases where they are 

justified and limiting non-economic damages to reasonable amounts; (2) ensuring that old

cases based on old claims cannot be brought to court many years later; and (3) provi

that defendants pay judgments in proportion to their fault. Although the House has 

passed these reforms three times, s

fo

In 2004, the President launched an initiative to make electronic health records available 

to most Americans within the next ten years. Realizing the promise of health IT w

transform our health care system by lowering costs, reducing medical errors, and 

improving quality of care in a more efficient and hassle-free environment. Greater 

reliance on electronic health records means that information needed to treat patients 

effectively will be a few computer clicks away, no matter where the patient is receiving 

care. The Department of Veterans Affairs, as well as some private health care systems, 

has already begun to dem

im

Action: Through the President’s leadership over the past two years, the 

Administra

lud ng:

Establishing the position of the National Coordinator for Health Information 

Technology within the U.S. Department of Health and Human Services (HHS); 

Providing support for several health 

lementation issues such as: 

harmonizing standards to allow different health systems to speak 

language and seamlessly share health information when needed; 

developing certific

proper standards; 

o addressing privacy and security issues; and 

developing models for a national Internet-based system that allows 

electronic hea

In conjunction with these efforts, the Administration has established the American He

Information Community (AHIC), a committee comprised of both public and private 

stakeholders called to recommend solutions to help realize the President’s goal. Th

10 
AHIC is allowing major government health care players – such as the Centers f

Medicare and Medicaid Services, the Department of Veterans Affairs, and the 

Department of Defense – to join with doctors, nurses, technology vendors, consumer 

organizations, insurance companies, and state and local government interests, to unify 

behind a

or 

 common framework for implementing a nationwide electronic health records 

stem. 

Informed and Empowered Consumers 

f 

ke 

rs, 

 of 

t 

mmarize more effective approaches to care based on empirical clinical studies. 

-understand information about the price and quality of the 

hea 

•

rt 

plex procedures and meaningful quality 

• efits 

to 

press for this information to be made available to employees and members. 

Affordable Coverage for Vulnerable Americans 

 in the Nation’s poorest communities have better access to 

rimary and preventive care. 

efundable Tax Credits for Low-Income Americans to Purchase HSAs

sy

Americans generally have only limited information on the expected cost and quality o

health care and very little meaningful information at the provider or treatment level. 

Insurance companies and physicians generally do not provide per-service prices or ma

this information available to patients. Quality information for institutional provide

particularly hospitals, is available only in a handful of states. Medicare now pays 

hospitals more if they report data on a set of ten quality measures. A growing range

medical specialties have begun developing evidence-based practice guidelines tha

su

Proposal: All Americans should be able to obtain from their medical provider and 

insurance carrier easy-to

lth care they receive.

The President urges insurance companies and medical providers to make health 

care prices and quality information readily available to consumers. In the sho

term, the emphasis would be on disclosure of per-service prices for the most 

common services and procedures. Soon thereafter, consumers would be able to 

obtain all-inclusive prices for more com

information for each medical provider. 

The President has directed Medicare and the Federal Employees Health Ben

program to demonstrate leadership in making price and quality information 

available. The President is also asking employers and insurance companies 

President Bush believes it is crucial that those Americans in greatest need have access to

high quality and affordable health care. He has worked to strengthen the safety net for 

low-income Americans and the chronically ill, make affordable coverage more widely 

available, and ensure that those

p

R

credits that can be used to offset the cost of health insurance premiums. These credits 

Low and moderate-income Americans may need additional assistance in finding 

affordable health insurance. One way to provide assistance is through refundable tax 

11
will help many low and moderate-income Americans purchase insurance on their own if 

they cannot purchase insurance through an employer. 

Proposal: The President proposes giving low-income families a refundable tax 

credit to reduce the cost of their HSA-compatible insurance policy and/or fund their 

HSA account. 

• A family of four making $25,000 or less will be able to receive $3,000 from the 

Federal government to help them buy an HSA policy that covers their major 

medical expenses and preventive care. 

• These families will have the flexibility to put up to $1,000 of the money directly 

into an HSA to pay for doctor visits, medicines, and other routine medical 

expenses. What the family does not spend can be saved in the account and carried 

over to the following year, earning interest tax-free. 

Grants to States for Aiding Chronically Ill Residents

By design, health insurance is intended to spread the risk of high health costs across a 

wide pool of people. However, people who are already chronically ill and who are not 

part of an employer or public pool must bear the full burden of their expensive health 

care by paying high premiums (or, in some cases, must go without insurance). It is 

common for the chronically ill to be offered only individual insurance policies with riders 

that exclude coverage for their known illnesses. One study found that 12% of people 

applying for individual insurance were turned down altogether because of their bad 

health. This also has negative consequences for healthy people seeking individual 

insurance, since the cost to insurers of evaluating individual health and avoiding high-risk 

individuals leads to higher administrative costs and, therefore, higher premiums. 

Improving the availability of health insurance for chronically ill individuals would help 

both ill and healthy people who want to buy individual insurance. 

Some states have responded to the problem of the uninsured chronically ill by passing 

laws that require insurance companies to charge the same premium for healthy and ill 

people, a practice known as “community rating.” This has had the unintended negative 

consequence of raising premiums for low-risk purchasers, leading to higher rates of 

uninsured people in those states. Other states have established high-risk pools to insure 

the chronically ill who have been denied coverage in the individual market. Currently, 32 

states have risk pools, but they cover less than 200,000 individuals. While the best of 

these pools have the potential to cover a larger number of the chronically ill, there are 

other innovative approaches that could provide better coverage at lower cost. 

Proposal: The President proposes providing $500 million per year to encourage up 

to 10 states to test innovative methods for covering their chronically ill residents. 

The Secretary of Health and Human Services would award these grants through a 

competitive process. States could build on their existing high-risk pools or test other 

innovative approaches such as risk-adjusted subsidies or plans designed to manage 

chronic illnesses like diabetes. 

12 
Allow Employers to Make Higher HSA Contributions to Chronically Ill Employees

Under current law, employers must contribute the same amount to each employee’s HSA. 

This prevents employers from providing extra help to their chronically ill employees, 

who are more likely to use their HSAs to pay for out-of-pocket expenses. 

Proposal: The President proposes allowing employers to make greater 

contributions to the HSAs of chronically ill employees. Employers could also 

contribute more if the employee had a chronically ill family member. This will help 

employers address concerns employees have about switching to HSAs from traditional 

insurance. 

Allowing Individuals to Purchase Insurance through Organizations They Already 

Know and Trust

Most Americans with health coverage purchase it through their employers rather than as 

individuals. The reason is simple – cost. Individually purchased insurance is more costly 

because people are unable to join together to negotiate better rates and save on 

administrative and other expenses. 

Employers purchasing coverage group people together, pooling their risk and increasing 

administrative efficiencies, which result in lower costs. Big businesses and labor unions 

take this a step further by pooling people together across state lines, further increasing 

savings. Non-employment-based groups providing insurance to individuals cannot do 

this effectively under the rules in many states. Further, because each state’s rules are 

different, it is difficult to design a policy that would allow individuals to get group rates 

across state lines. 

Traditional AHPs will let employers pool together across state lines to buy health 

coverage in large groups. However, those health benefits are linked to the employer – if 

the worker changes jobs, he or she has to change health plans. And not all employers can 

or will choose to offer health benefits, even with the savings allowed by AHPs. 

Proposal: Expanded AHPs. Expanded AHPs address the needs of vulnerable 

Americans by allowing bona fide civic, community, and religious groups to purchase 

health coverage for their members, giving individuals and their families the ability to 

pool together to buy health insurance outside of their workplace. Giving people more 

choices to buy insurance at group rates from organizations they already know and trust 

will help many Americans purchase quality, affordable, and portable health insurance. 

Increased Funding for Community Health Centers

The President believes that access to primary and preventive health care services is 

critical, especially in poor, medically underserved communities. Since taking office, the 

President has worked to expand the number and reach of Community Health Centers. 

Community Health Centers play a central role in meeting this need and making health 

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care available to low-income Americans. The centers provide primary and preventive 

health services to individuals regardless of their ability to pay. They are located in 

medically underserved urban and rural areas where there often is little access to basic 

health care services, and these centers primarily serve low-income individuals, migrant 

farm workers, the homeless, and children. 

Action: Expanding Community Health Center capacity. President Bush recognized 

the needs of the medically underserved, and his Administration has funded more than 800 

new or expanded centers and will fund approximately 400 more in the next two years. 

This has already allowed community health centers to build capacity to serve more than 

3.5 million additional Americans, with nearly 2 million more to be served in the next two 

years.

Ensuring the Poorest Communities Have Better Access to Care

It is vital to enhance medical care in poor communities, where access to regular care is 

often hardest to come by and where basic primary and preventive services can do an 

enormous amount to raise standards of living and well being. 

Action: Establishing Community Health Centers in poor counties. To make sure 

access to health care is available where it is most needed, the President has set out to 

establish a Community Health Center or rural clinic in every high-poverty county in 

America that can support one. The President’s FY 2007 budget proposes to establish 80 

such centers or clinics in poor counties not now served. 

Promoting Prevention, Wellness, and Fitness 

Active prevention is critical to achieving a better and longer life and should play a central 

role in controlling the costs of health care. President Bush has made the adoption of a 

healthy lifestyle a high priority and has encouraged Americans to take responsibility for 

making wise choices that improve our fitness and health. His Administration has worked 

to give all Americans the tools, skills, and motivation to lead healthier lives. 

Five chronic diseases – heart disease, cancer, stroke, chronic obstructive pulmonary 

disease (such as bronchitis, emphysema, and asthma), and diabetes – account for more 

than two-thirds of all deaths in the United States. In addition to claiming more than 1.7 

million American lives annually, these diseases hinder daily living for approximately one 

of every 10 Americans. 

Although these chronic diseases are among the most prevalent and deadly health 

problems facing our Nation, some of them are preventable. Effective measures exist 

today to prevent or delay much of the chronic disease burden and curtail its devastating 

consequences. Families can take simple, affordable steps to incorporate physical activity, 

good nutrition, and behavior changes into their daily routine. President Bush has worked 

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to make sure the Federal government does its part to help and encourage such prevention 

through fitness and wellness. 

Action: The President’s Challenge Program Promotes Vigorous Physical Activity. 

2006 marks the 50th anniversary of the President’s Council on Physical Fitness and 

Sports, which serves to promote, encourage, and motivate the development of physicalactivity, fitness, and sports programs. President Bush reinvigorated the Council through 

the President’s Challenge program, which inspires Americans to be physically active. 

• The President’s Challenge program aims to motivate Americans to start and 

maintain a regular regimen of physical activity. The program’s Presidential 

Active Lifestyle Award recognizes youth and adults who engage in 6 weeks of 

physical activity for at least 5 days per week. An interactive Web site, 

www.presidentschallenge.org, allows participants to work towards the award and 

become Presidential Champions by accumulating points for participating in a 

wide range of physical activities. The program also recognizes achievements in 

physical fitness by school-aged children and schools that offer the highest quality 

physical education in each state. 

Action: The President’s HealthierUS Initiative Promotes Healthy Choices and 

Prevention. In 2002, President Bush launched the HealthierUS initiative to promote four 

key objectives for a healthier America: increased physical activity, responsible dietary 

habits, increased use of preventive screenings, and making healthy choices. 

• Steps to a HealthierUS. Through the Steps to a HealthierUS program, local 

communities receive funds to implement chronic-disease-prevention efforts 

focused on reducing the burdens of diabetes, obesity, and asthma and addressing 

three related risk factors—physical inactivity, poor nutrition, and tobacco use. 

Forty cities and tribal entities around the country now implement community 

action plans supported by the program. 

• Getting Physically Active. The President has sought to promote physical activity 

and fitness by spreading the message of fitness and encouraging Federal agencies 

to do the same. 

• Eating Responsibly. The President has worked to promote healthy diets as 

critical to health and fitness. The Administration released the 2005 Dietary 

Guidelines for Americans – a science-based blueprint for promoting good 

nutrition and health that focuses special attention on developing healthy diets for 

children. The Web site promoting the guidelines, www.MyPyramid.gov, has 

received more than 1 billion hits in the year since its launch. In addition, the 

National School Lunch Program provides meals to nearly 30 million children 

each school day in nearly 100,000 schools nationwide, and the President’s 

HealthierUS School Challenge encourages these schools to take a leadership role 

in promoting healthy eating and active lifestyle choices. 

• Preventing Disease through Screening and Testing. Screening for just a few 

key health indicators can help prevent serious chronic disease and identify areas 

for improvement in diet and behavior. The Administration has been committed to 

supporting testing and screening activities, including screening programs run by 

the Centers for Disease Control for heart disease, stroke, diabetes, arthritis, and 

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cancer. The President’s 2007 budget devotes more than $1 billion to these efforts. 

The Medicare program now also works to promote screening and prevention, 

including a one-time “Welcome to Medicare Physical Examination.” 

• Making Healthy Choices. President Bush believes the key to healthy living is 

making healthy life decisions like avoiding tobacco, drugs, and the abuse of 

alcohol. The Administration has worked to help states develop policies to limit 

the use of tobacco by the young, vigorously promoted efforts to discourage and 

prevent the use of illegal drugs, and helped families and communities encourage 

children to make simple but critical healthy choices every day – like wearing a 

bike helmet, washing their hands, or standing up to peer pressure to behave 

irresponsibly. 

Action: Spreading the Message of Fitness and Prevention to All. President Bush 

supports innovative approaches to getting the prevention, wellness, and fitness message 

to Americans, and particularly to our citizens who bear the heaviest burden of chronic 

disease – African Americans, Hispanics, American Indians, and Alaskan Natives. 

Through targeted health-promotion and disease-prevention initiatives, such as HHS’s 

diabetes prevention efforts run by the Centers for Disease Control and the Indian Health 

Service, communities can create local partnerships to overcome barriers and help 

individuals enjoy longer lives. 

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