updated 2/6/2006 8:53:20 PM ET 2006-02-07T01:53:20

People would assume more responsibility for the costs of their health care under President Bush's budget proposal. He would help them make that transition by increasing tax cuts for health savings accounts.

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The administration also wants to trim Medicare spending by $35.9 billion over five years. Under that scenario, Medicare spending would grow at a rate of 7.7 percent — instead of 8.1 percent, as currently projected.

In pushing health savings accounts, the Bush administration says people will become more responsible shoppers because they'll have to pay the initial costs of their health care. They'll look harder to find a generic drug rather than a brand-name, or they'll think twice about seeing a doctor if they're not that sick, said Roy Ramthun, the president's health adviser.

"We know Americans spend their money differently than they spend somebody else's money," Ramthun said. "We're starting to see evidence over the last several years that people behave a little differently when they have a higher deductible and they're looking at spending their money. They think about what health care they actually use."

To open a health savings account, consumers also must buy a high-deductible insurance policy that requires individuals to pay for at least $1,050 in medical expenses; families have to pay the first $2,100. Some policies carry even higher deductibles. After the deductible is met, then insurance would kick in.

Video: Savings account answer to health care woes? Bush wants to let consumers put enough money in their accounts to cover all their health insurance costs, not just the deductibles, as provided by current law. This would allow them to set aside more money tax-free.

The move to trim Medicare spending also reduces government liability. The administration stresses that the program would continue to grow — but at a rate the country can afford.

"If we take incremental steps now, steady steps now, we can make the program sustainable without having to go to drastic changes in taxes or drastic changes to benefits," said Mark McClellan, administrator for the Centers for Medicare and Medicaid Services.

Health care providers view the administration's proposal in starker terms. They say the changes could spell the difference between operating at a profit or operating at a loss.

The changes would trim payments to hospitals by $8 billion; to suppliers of medical equipment such as wheelchairs and oxygen tanks by $7 billion; and to nursing homes by $5 billion. Other providers that would take a hit in their reimbursement rates include ambulance companies, home health providers and hospice programs.

Chip Kahn, president of the Federation of American Hospitals, said hospitals have been losing and will continue to lose money caring for Medicare beneficiaries. At the same time, there is increasing demand on hospitals to pay for health information technology, provide care for the uninsured and shore up capacity to respond to threats from flu pandemics, bioterrorism and natural disasters.

The administration's proposal "is the wrong policy at the wrong time," Kahn said.

"Hard choices had to be made, and this budget reflects our effort to make those in the wisest way," said Mike Leavitt, the secretary for Health and Human Services.

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