Health Savings accounts the latest in health plan options

Cox News Service
Tuesday, January 31, 2006

WEST PALM BEACH, Fla. — We're going to start hearing a lot about health savings accounts. They'll be a cornerstone of the large health care section in tonight's State of the Union Address, and Congressional majority leaders support them.
So what are they, and why do we need another jagged acronym in a health insurance landscape that's already loaded with traps and trolls?
HSAs are shorthand for three things. They're high-deductible health plans. They're a cost-saving strategy popular with employers and insurers. And they're a philosophy of insurance counter to the prevailing principle of spreading financial risk through the largest possible group.
The health plans require deductibles of at least $1,050 for individuals and $2,100 for families. In exchange, they offer lower premiums and the opportunity to save tax-free for health care expenses. Employers stock the savings accounts in similar health reimbursement accounts, but only HSAs are portable from job to job.
They're a good deal for people in high enough tax brackets to benefit, who can afford to pay the deductible and fill the savings account. They're also good for people who don't spend much on health care. But spoilsports say a system with 46 million uninsured has bigger priorities than people who don't use health care.
So high-deductible plans are touted more as a cost-saving strategy. The most obvious cost savings is for employers, who shift costs they once paid as premiums into deductibles paid by employees. But long-term, proponents say, people will spend less money out of their own savings than they were spending on the insurance company's tab.

The 2004 Economic Report of the President concluded there is so much wasteful health spending because Americans have too much health insurance. High-deductible plans give us financial incentive to ask, "How much will this cost?" and "Is there a better way?" They even promise to help by arming us with new information on costs and quality.

It's true that people aren't aware enough of prices or quality. And people in high-deductible plans are more cost-conscious, a McKinsey & Company survey found last June. They're more likely to ask about cost, look for treatment alternatives and choose a less expensive treatment, although it's not clear whether the plans affect those decisions or they just attract more cost-conscious people.

It isn't because enrollees are happy with the health plans' info on costs and quality, McKinsey found. That's nowhere near adequate. Even so sophisticated a customer as former President Clinton chose a hospital with above-average death rates for his heart bypass surgery.

But although enrollees spend less money on health care, Rand Health has found they're just as likely to cut down on necessary care as unnecessary care. So while they buy generic drugs and recover from colds without seeing a doctor, they'll also stop taking the blood-pressure medicines that prevent strokes and skip the diabetic checkups that avert amputations.

Since people with chronic conditions spend about 75 percent of U.S. health care dollars, the HSA goal of less care is different from better or even cheaper care. More preventive care and behavioral education is a better way to reduce their expensive complications.

The 19 percent of Americans who do 82 percent of the spending won't even be dissuaded by high deductibles, which they'll clear anyway. They'll just be spending their own money instead of their health plans', effectively subsidizing everyone who gets tax breaks on HSAs.

The philosophical point behind HSAs is that it's wrong for the healthy to subsidize the sick, as we do now on the assumption that any of the healthy could just as easily become sick. It sees spreading risks among large groups as a form of socialism to be ended, leaving each to pay according to his or her health.

Research shows HSA enrollees are indeed healthier than average, a trend that eventually could leave sicker people sharing only each other's risks. So the policy question is: Do we want to assume the financial risks of health calamities on our own, or do we want to share them, even by paying more when we're healthy?

When politicians give us more control over our money, they're also giving us less security from financial ruin. It's a question of priorities. If you think company pensions and Social Security intrude on your right to save your own retirement money, you're going to love Washington's plans for health care.

When politicians give us more control over our money, they're also giving us less security from losing it. This has happened before. Companies are phasing out pensions in favor of employee-funded 401(k)s. HSAs would allow them to do the same with health insurance.