Health care reform is said to figure prominently in President Bush's upcoming State of the Union address. And those calling for a nationalized health care system have already begun to re-energize their efforts. Bush should build his health care reform agenda on the same free-market principles that gave birth to health savings accounts (HSAs) two years ago.

Most Americans don't know much about HSAs -- how they work or what makes them so innovative. But I predict that this is about to change -- because HSAs are one of the most important innovations in the history of American health care.

Indeed, they have the potential to eliminate the uninsured crisis while drastically cutting medical costs and improving service.

HSAs were passed into law under the 2003 Medicare Modernization Act. These special interest-bearing, tax-free accounts can be opened by anyone who purchases a low-premium, high-deductible insurance policy.

The insurance policy itself covers unseen medical catastrophes. Meanwhile, the money put into the HSA account can be used for routine health expenses -- from contact lenses to office visits -- with unused savings accruing from year to year.

HSAs put health care choices back into the hands of consumers for the first time in years. What's more, they're designed to lower the cost of insurance for many Americans who otherwise could not afford medical coverage. How?

By giving the unemployed and self-employed an alternative to our current system of health management organizations (HMOs), which offered them a stark choice:

Pay an exorbitant monthly premium of more than $150 a month for an individual and upward of $500 for a family, for insurance you might never use -- or go without and risk financial disaster. No low-cost middle ground was available.

Big companies have long covered their employees' health insurance in exchange for a federal tax break. But health care costs have been climbing so high, they're making labor increasingly expensive, thus putting downward pressure on hiring and wages.

Employer-sponsored health insurance may have worked in an era of lifetime job security, but it makes less sense as our labor force grows more flexible.

Few people spend their entire working lives at the same company anymore. It's not even a reliable system for those who do have steady jobs. In good economic times companies compete for employees with supplemental benefits, but in leaner years they will inevitably cut back.

The solution is to give individuals the tax break while deregulating the market for health insurance. That's just what HSAs do. It's no wonder that more than 1 million Americans have already opened HSAs, with more and more signing up every day.

The best news? About 40% of plans are being purchased by individuals who were previously uninsured.

And while early critics worried that HSAs would be used only by the young, healthy or well-to-do, the numbers don't bear out these fears. About half of HSA buyers are over 40; a fifth are over 50.

Twenty-nine percent of account holders earn less than $50,000 a year. Evidence suggests many new HSA buyers have chronic health troubles.

Early HSA adopters were often self-employed or worked for small businesses. But more and more large companies are offering the accounts to employees. The businesses save on health care costs and frequently sweeten the deal for workers by contributing matching funds. Next year, a third of employers will offer HSA plans.

Health savings accounts were part of the Medicare Modernization Act, which is best known for creating the new Medicare drug benefit.

Unfortunately, all of the best market-oriented aspects of MMA are under attack.

A bipartisan move is afoot in Congress to reverse the MMA's "noninterference clause," which bars the government from setting drug prices for seniors. If successful, the move would usher in nationwide price controls and eventually put a big damper on drug development and availability.

HSAs are also being attacked by those who favor socialist health care. Union leaders claim HSAs are unfair because they will shift more responsibility for health care onto the individual. More troublingly, the President's Advisory Panel on Tax Reform recommended abolishing HSAs as a way to simplify the tax code.

Meanwhile, in some highly regulated states such as New York and Massachusetts, the accounts remain unavailable to individual insurance buyers. And while HSA contributions are not subject to federal taxes, California makes its citizens pay taxes on them.

One policy proposal that could smooth some of these bumps is the Health Care Choice Act, a bill sponsored by Rep. John Shadegg of Arizona. Currently, you may only buy a health insurance policy licensed in the state where you live.

Shadegg's bill would do away with the local monopolies that account for huge disparities in the cost of insurance. Consumers could shop for HSAs nationwide.

Health care reforms introduced under the MMA still require a few fixes. But HSAs are already delivering tangible benefits at lower cost.

In fact, they're increasing the number of insured Americans so dramatically that I wouldn't be surprise if they catch on like wildfire. And they're only two years old. By this time next year, HSAs could be a household name.