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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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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! THE EXACT… Read more »

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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… Read more »