HEALTH PLANS: In Defense of HSAs, by Langdon Alger

THCB is pleased to welcome a new contributor, writing under the nom de plume Langdon Alger. Langdon works for the Feds, and THCB duly notes that Langdon has expressed the usual disclaimer of government employees who speak their own minds, namely that “the views in this [post] do not necessarily represent those of my organization.” So just to really stick in certain of THCB’s contributors’ craws, today we turn over the mike to someone who thinks HSAs will be modest in their impact (as does THCB) but that what impact they will have will be good (not something you hear much on this station, where the prevailing tune is far more like this!) Here’s Langdon’s piece:

Much has been said on the issue of Health Savings Accounts (HSAs) and despite all the criticism–much of which I agree with–I still find HSAs an attractive option. As a young, healthy, and well-informed healthcare consumer, a High Deductible Health Plan (HDHP) with an HSA is obviously a good deal for me, but I still believe it will provide a net benefit to our healthcare system.

First, I fundamentally believe that healthcare and health insurance should be two separate entities. Doctors and hospitals provide healthcare; employers, the government, and the market provide health insurance. If people prefer managed care, they’ll make that choice, but I should have the option to choose insurance coverage that matches my needs. No other insurance industry provides such ridiculously low deductibles for such expensive coverage without exorbitant cost to the individual. Avoiding the “adverse selection death spiral” is entirely up to the health insurance industry providing value to its customers.

Two of the major criticisms of the HSA model are that it simply splits the risk pool and it shifts costs from employers to employees. I concede that both points are obviously true, but I think that both the magnitude and the significance of each effect are not as dire as critics would have us believe. Concerns over splitting the risk pool really lie in the fundamental issue of who should pay for what in healthcare. How much should we subsidize the heavy users of healthcare? A couple of thousand dollars per year less than we do now. That’s all HDHPs change in the world of health insurance. Insurance ends up being less expensive and a few more people get coverage. Are overall healthcare costs reduced? Absolutely, but maybe not by any significant margin. HDHPs and HSAs aren’t designed to address top dollar spending in healthcare, but that certainly doesn’t mean they don’t add value to the system. As far as shifting more healthcare costs from the employer to employee goes, this is an inevitable trend as long as healthcare costs rise faster than salaries and the health insurance industry continues to be dominated by the employer-sponsored model. HSAs don’t change a thing here.

One concern raised in this Blog is whether employers would want to adopt this system since they have to contribute to the HSA account in addition to the insurance premium; individuals with low healthcare costs might actually increase their spending on healthcare, given that they have a cash account to pay the costs. This should hardly be an issue since, from the employer’s perspective, the cost of HDHP including an HSA contribution is usually lower than traditional insurance or a managed care product (i.e. the employer cost shifting.) And it can still be a good option for employees since having an account actually makes preventive care even more likely (lowering long term costs), while the roll-over provision of the HSA eliminates the incentive to overspend each year.

One critical area of rising healthcare costs that HSAs do have the potential to reduce is prescription drugs. My employer spends upwards of 30% of total premiums on prescription drugs so there is obviously room for significant savings. Consumer choice and market price pressure are a great threat to the prescription drug industry if people begin to realize they can get drugs to cover their needs at a fraction of the price (often hidden in premiums) they pay now. How many people take name-brand heartburn, blood pressure, pain, allergy, cholesterol, or antidepressant medications and countless others that have inexpensive alternatives? Consumers have no concept of price transparency and value in the prescription drug market.

And finally, are HSAs just another tax break for the affluent? Hardly. Given that the maximum annual deposits are currently $2600 a person, the accounts are really aimed more at the middle class.

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  1. After years of the credit card/banking industry giants, Chase, Bank of America, and Citgroup,”raping” the American public….finally our fair lawmakers have decided to at least listen to complaints and call these bastards to task.
    A Frontline television show, a whole year ago, was detailing how the governmental office that controls the national banking industry, are nothing but patsies. The tv program showed with examples exactly how our governmental office…whose job it was to answer consumer complaints against national banks….purposefully LOOK THE OTHER WAY!
    The show didn’t say why, but we all know why. The office was getting paid-off!
    It is time to start marching on Washington, DC in mass. It is time to start sitting before congress and telling our griefs to the law makers who have their overseeing offices “look the other way.”
    Our lawmakers can put price controls on this industry who is superinflating prices! They won’t. Our lawmakers can make this whole industry behave in a business-like fashion and stop the squelching of competition. But they won’t.
    Why not? Maybe because the US population hasn’t faught hard enough to be heard.
    It is like the Revolutionary War all over again. England is the US health care industry.
    If we don’t fight for our country, we’ll see it sucked away!
    It’s time to stand up in mass!
    It’s time.

  2. If you want to be in support of traitors, that’s your business. However, you also then should be kicked out of our country or else hung for the same treason that is being committed. You see, the Bush/Republican/Frist HSA law has a smoke screen. The screen worked on you! You actually think this is a good law. All the while, though, underneath in the dark shadows the REAL law is ruining our country and setting it up for takeover through the health care back door. If you don’t believe me, read the following truth. It is a example, a micro-economy that is what is indicative of what is taking place throughout our land. Read it and fear that someday you will be living and working under the communism that traitors in our very own country are turning us all over to. The reason they are doing it is plain and simple….selfish greed.
    1984—Bain Capital, LLC was founded by:
    1. the now governor of Massachusetts, Mitt Romney, elected in 2002;
    2. Eric A. Kriss, who was Secretary of Administration and Finance in Romney’s cabinet (January 2003 – October 2005);
    3. A now-deceased accountant and former presidential candidate, Thomas Coleman Andrews. Of special note: Thomas took only his own state of Virginia and also Tennessee in that 1956 race.
    Bain Capital grew with the help of an El Salvadoran billionaire’s money and managed 17 billion dollars before their recent acquisition. Since 2005, Bain now has a China division and hired a manager directly from China. Bain has started hardcore China investment in the USA with the Haier takeover attempt of Maytag.
    Dec 8, 2003:
    Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush and are designed to help individuals (of note: also corporations) save for future qualified medical and retiree health expenses on a tax-free basis.” Effective January 1, 2004, the HSA replaced the MSA signed by Bill Clinton.
    HSAs are set up to undercut corporate social security deposits and allows corporations to keep that money tax free.
    Bill Frist, of Tennessee, was holding office in the US Senate during this law’s enactment and helped bury the change in the MSA law. Some say that Kriss wrote the HSA clause.
    March/April/ June 2004:
    Bain Capital, LLC (former owner, but owner of Alliance Laundry during this period) changed the health benefit for Alliance Laundry of Ripon, WI union to include health savings accounts. Workers wages were frozen or near frozen and all future wage increases were to be put into individual HSA’s that are owned by the COMPANY. Workers had to accept, otherwise their jobs were going to Mexico. Contract was extended from 3 to 15 years by using the same Mexico lever by later company owner.
    Local health insurance, Network Health Plan, part of the health care conglomerate, Affinity Health Systems, sold high deductible health insurance policies to Bain, while the Affinity conglomerate’s care facilities started raising prices 50% per year thereafter. Alliance Laundry workers pay the regular uninsured price for health care out-of-pocket and pay out of stressed income because the only Affinity insurance benefit is a discount from Affinity super-inflated prices.
    I’ll give an example: The Creatinine lab, in June 2006, was $13.80 discounted to $7.92 at UW-Madison, while at Affinity the Creatinine lab, in Dec 2005, was $33.62 discounted to $12.29. Twelve dollars and twenty-nine cents is close to the uninsured price at UW! (There are other get-rich issues like the fact that Affinity/Network deduct $12.29 off the lifetime maximum insurance, so a patient pays two times–once in cash and the other time in lost future discounts from super-inflated prices. This is what is called “benefits.” I call it a bogus bunch of nonsense. ) Only Affinity facility and Affinity-contracted costs like UW go into figuring the HSA deductible for release of wages from the HSA. Dental, eye, medicine, and non-Affinity can’t be withdrawn from the HSA. Payment for these types of medical come out of stressed fixed income directly from the worker’s pocket.
    Blackstone, a Bain-like, purchased The Hospital Corporation of America (HCA)’s rival, Vanguard Health Systems, for $1.75 billion.
    Texas Pacific Group, another Bain-like, snapped up Iasis Healthcare for $1.4 billion.
    Late 2004 through much of 2005:
    Bain Capital, LLC sold Alliance Laundry to competitor firm, Teachers’ Private Capital, the private equity arm of the Ontario Teachers’ Pension Plan. After the sale, Bain helped China Haier try to invest in Maytag and ruin rival Canadian Ontario Teachers. Fortunately for Alliance Laundry, Bain’s and China’s Maytag bid failed. Whirlpool purchased Maytag. Haier Group of China, therefore, is not ‘ruling’ in the whitewares market.
    Also failed, the plan to do an”Alliance” trick on Maytag—-to put all of their workers on fixed incomes and start a big, fat HSA tax free pie that will one day revert back to the company, in this case owned by China.
    Bain earned $450 million from the sale of Alliance, earned commission from China for the Maytag bid, plus made valuable contacts for China’s future investment cash. Bain hired a permanent manager for their new China division directly from China. Some market watchers are saying that China’s investment cash and activities are a thousand times more threatening than the Japanese threat was during the 80’s.
    (What is significant here is that Bain Capital is a ruthless business that thinks nothing of inviting foreign dollars into the USA (Canada and also China) to dominate a market area as long as they (Bain) are profiting from it for themselves. Bain also thinks nothing of gutting out lowly American workers, trapping them into lifelong fixed incomes and crappy benefits…high insurance deductibles and never-pay-out HSA’s. Bain’s tactics in business are not normal capitalism. They are similar to Hitler himself. If one looks at Bain’s recent Michael’s purchase, one can see that Bain directly targets the major players in a market segment that is being pursued by foreign companies. Bain, especially now with their China connections, is a national threat to the US economy.)
    Late 2005:
    Bill Frist sells his stock in HCA, and is now under investigation for insider trading, but no media company is reporting the investigation proceedings/results. HCA, the Hospital Corporation of America, is one of the largest private operators of health care facilities in the United States. The company runs 190 acute care, psychiatric and rehabilitation hospitals, along with some 80 ambulatory surgery centers, in 20 of the Unites States. It also has facilities in Switzerland and Britain. Most recently, HCA just walked into Kansas and gobbled up the majority of their health care systems. HCA was started by the Frist family in Tennesse and who were good friends with originator of Bain, Thomas Coleman Andrews. Bill Frist and Bain Capital are connected.
    April 2006:
    The Massachusetts legislature approved a bill that would require all residents to purchase health insurance or face legal penalties.
    Then Gov. Mitt Romney (R) signed the bill which would require all uninsured adults in the state to purchase some kind of insurance policy by July 1, 2007, or face a fine. Their choices would be expanded to include a range of new and inexpensive policies — ranging from about $250 per month to nearly free — from private insurers subsidized by the state. (Remember that Romney has connections to Bain, and Bain has connections to Tennessee, who has connections with the Frist, a Republican family.)
    $385 million of federal tax revenues will pour into Massachusetts each year to purchase “Affinity-type” insurance (bogus crap) coupled with HSAs which will help the uninsured and underinsured people pay super-inflated prices which are discounted to the uninsured price. The Massachusetts uninsured and underinsured will all eventually be on fixed incomes like Alliance Laundry workers paying out of pocket anyway because the HSAs can’t be effectively touched.
    May 2006:
    Vermont’s governor signed a bill that would make the state the second in the nation with near-universal health-care by extending coverage to as much as 96 percent of its residents by 2010. (Purchasing bogus insurance that does nothing effectively is not universal health care. The real name is “everyone-must-buy-health-insurance or “everyone-must-feed- Bain and Bain-likes.)
    Howard Dean is the Democratic National Chairman. Howard Dean is a pure idiot who sees Republicans making out like bears and wants a piece of the golden pie for himself. Howard Dean is really copying treason, is being used and manipulated by traitors, and is too stupid to know it.
    July 24, 2006:
    Biggest leveraged buyout in history—the purchase of HCA for $33 billion dollars.
    Owners of HCA will be: Henry Kravis, George Roberts (first cousins in Kohlberg Kravis Roberts & Co.); BAIN CAPITAL, LLC; Merrill Lynch; and also THOMASE F. FRIST, JR. (brother to Bill Frist), quietly and hardly mentioned after the big three during the news releases.
    (With stressed incomes come account receivable defaults. Non-medical businesses will be failing left and right. And guess who’ll be waiting to gobble them up with all that China money? Bain who has hired a permanent China division manager now in anticipation. This is the very beginning of America being sold to China. Mitt Romney, a presidential candidate in 2008, all those at Bain, and the Frists should be hung for treason. They are traitors to America. When China takes over all those American businesses, they will also take over wages being put into HSAs, will be receiving tax deductions and credits, and will be getting a real sweet deal for themselves ’cause America is too encumbered with idiots, greedies, and traitors.)
    July 31, 2006:
    Sen. John Kerry proposed requiring all Americans to have health insurance by 2012, “with the federal government guaranteeing that they have the means to afford it.”
    (Kerry is Dean’s twin idiot.)
    Summary article found in Forbes.com July 2006:
    “Health Is Wealth Parmy Olson, 07.24.06
    Hospital operator HCA is set to be bought by a private equity consortium in one of the largest leveraged buyouts of all time…The buyers, according to the Wall Street Journal, include Kohlberg, Kravis Roberts, Bain Capital and Merrill Lynch, along with members of HCA’s management. The family of U.S. Senate Majority Leader Bill Frist, a former stakeholder whose relatives founded HCA, is also part of the consortium. The group is paying a relatively slim premium of about 6.5% over the hospital chain’s closing stock price of $47.87 on Friday. Merrill, Bank of America Corp., Deutsche Bank and J.P. Morgan are understood to be helping to finance the bid.
    Based in Nashville, Tenn. Hospital operators like HCA have been struggling to beef up their profit margins thanks in part to new restrictions from Medicare, the rising cost of labor and medical technology, and the growth of uninsured patients.
    Even so, some believe that HCA’s buyers could see a leveraged buyout pay-off without too much trouble. The suitors will be hoping that the aging American population continues to prompt higher spending on health care, and that the government eventually resolves the problem of uninsured patients.
    Private equity groups have been sitting on a veritable cash mountain over the last 18 months and are now vying for increasingly large targets. Globally, 2,700 funds are raising half a trillion dollars in cash to invest.”