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POLICY: HSAs now will cure uninsurance! And monkeys will fly out of……

Some how or other even though Reggie Herzlinger is apparently having some doubts about how effective HSAs are going to be, the movement is throwing up new intellectual champions. The latest is R. Glenn Hubbard of the AEI who has somehow managed to become Dean of the Columbia Business school in his spare time. He wrote this as part of his latest article in the National Review Online

Critics from the left sometimes say that HSAs put more of the onus of health costs on individuals. Tell that to the 46 million Americans who currently don’t carry any insurance. By making such insurance for major medical events — such as emergency hospitalization and chronic illness-more affordable, HSAs and other consumer-driven health-care policy ideas broaden access to essential health care. That will help millions of Americans get the health care they currently can’t afford.

Is he really saying this? Is he really saying that cheaper insurance products will reduce uninsurance? Let me repeat something in a way that’s simple enough even someone from Columbia business school can understand it.

We have had “cheap” high deductible insurance products for years and years. I personally have had one off and on since 1998 and they were around for long before that. And as the old high deductible “major medical” policies were around when health care was cheaper, and therefore were less expensive than they are now, according to Hubbard’s logic we should never have had any uninsured in the first place. And yet in California we have more than 6 million uninsured who somehow have failed to buy one. Is it possible that price isn’t the only issue here?

The only difference with HSAs for insurance is that they allow people to put money away to spend tax-free on medical care. But guess what? The people who don’t have insurance in general have low incomes, and are unlikely to have spare money to put away in their HSA. And for that matter many of them don’t have spare money to buy insurance policies. And even if they do, they may not buy one if it’s not compulsory.

And let’s not start on his (and other HSA advocates) inability to do basic math….something else I assumed was tested on the way into business school, but apparently not in the Dean’s office.

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10 replies »

  1. I’ve seen ads on TV for Caduet. It has two ingredients. One is Amlodipine and the other is Atorvastatin. With my RxDrugCard I can get 30 tablets of Amlodipine for $9 and 30 tablets of Simvastatin for $9. I’ll bet they are charging more than $18 for this new drug! Don’t pressure your doctor into giving you something just because it’s new. Do your homework. Find a drug card like I did at http://www.rxdrugcard.com. I think that RxDrugCard.com is the best drug card available for prescription discounts.

  2. Eric
    You have had high ($5000) deductable health insurance within the past 10 years??!! In Missouri and Illinois such a product was unavailable, that is until HSAs came about. The value of HSAs in covering the underinsured is questionable at best, but if they improve the availability of these major medical policies and thereby move back a little to the original function of insurance, perhaps some good can come of them.
    For what it is worth, it seems futile to attempt to address the problem of the uninsured by incentives. Most are uninsured because they do not respond to incentives in the first place. Mandatory coverage is the only way to make sure all are covered, paid for in the most part by dropping state barriers to competition by commercial insurers and including a substantial portion of the underinsured in the federal/state programs.
    Of course the entire discussion above strikes me as mental masturbation as the “system” won’t really become more rational until the push for change overcomes the interests of the stakeholders (the insurance industry, Big Pharma, integrated health systems etc… the so called medical-industrial complex). HSAs were allowed to pass because were not percieved as harming those interests. However, as more companies opt out of the highly profitable low deductable plans and overall utilization , both necessary and unnecessary, decreases I believe you will hear of a “backlash” ostensibly by consumer organizations but driven by those same stakeholders.
    Thoughts?

  3. Mom,
    You are failing to realize how much your plan actually costs you over a year’s time. And, you also fail to realize that you have an extremely low decutible at only $100.
    If that is your employer’s plan, and I can only assume that is it from your comments, your employer is being taken to the cleaners.
    Your drug card could cost you somewhere between 15 and 40 bucks a month… regardless of whether or not you even use it. Paying retail isn’t the problem; paying too much over a calender year is the problem. Look at it this way. If you had a drug card, and it costs you $400 a year just to have the option of PAYING additional COPAYS at the pharmacy, and you only get a couple of prescriptions a year, why bother? Over a year’s time you will spend much more if you have the drug card. ALso, with your HSA plan, ALL of your expenses, including your drugs, are applied to the deductible.
    Health insurance and benefits are two different things. Once you understand that, you’ll understand why employers are being hung out to dry by buying ridiculous plans that most of their employees don’t utilize. THAT is why your premiums have gone up so much. Your employer needs to take a look at a different plan.

  4. I had to go with an HSA this year. I was forced to go this route because my fortune 100 company has increased my insurance premiums by 500% in the last 10 years. That’s right! $85/mo then — now over $450/mo for $100 deductible coverage. The HSA option is only $300/mo — so I opted for it and dropped all the savings into the HSA account. Well it’s March and I’m already into half of the account for the year! To have NO prescription coverage is ridiculous. A generic prescription for my child cost me $45 the other day. I hate paying retail. The law changed for 2006 making a plan UNQUALIFIED if there was any prescription drug coverage. What a crock. But it is rather surprising. Something from this administration that doesn’t encourage people to give their money to Merck, Phizer and the like… they must not have received their payola the month that law was written.

  5. Ron, what’s funny is that I reckon you and I would typically agree on many issues. I just don’t support your view that HSA are the Ultimate Panacea. I don’t think anyone in this world is smart enought to figure out the Ultimate Panacea to anything.
    But c’mon resorting to name calling to establish your point?

  6. Sorry John C, tax free HSAs are the Ultimate Panacea. I’m amazed how “One Size Fits All” with these accounts. I am understating the magic of the HSA if I refer to them as simply Silver Bullets, Whinchester Silver Tips. I work people into the value of the HSA by informing them that the HSA is the doorway to the 21st Century Financial Service Sector.
    That S-CHIP of yours sucks. The government terminates all children on their 19th birthday even if they have been diagnosed with uninsurable conditions. So John C, don’t give any parents any ideas on health insurance until you smart up a bit.

  7. I am not a fan of HSAs as they are being heralded as the ultimate solution. As far as the issue of the uninsured goes, you have to look at who it is that is uninsured (I won’t even get into the dispuated 40 million figure). Primarily young (<30) and low income (although working).
    You can easily make a huge dent in the number of uninsured by simply aggressively enrolling those people who already qualify for Medicaid, SCHIP, and Medicare. The problem is that states are reluctant to expand enrollment because of the increased costs. Plus the process to enroll in these programs is a nightmare! Is is easier to buy a house than to sign up for some of these programs.
    After enrolling everyone that is currently eligible, than you can talk about expanding coverage, say 150% of FPL or you can go totally nuts and allow those at 200% FPL (which is $40k for a family of 4) to enroll.

  8. “But, as we have discussed on the blog many times, the issue over the long term is the control of healthcare costs, which can only come with decreased healthcare utilization.”
    I believe decreased physician compensation and decreased administration expenses would be two other ways to decrease the cost of healthcare, the latter of which you touch on in the rest of your post.
    The reason I called it a “toilet” (tongue-in-cheek as it was) is because putting more money into the system through tax credits, tax exemptions, etc. isn’t fixing the problem. The healthcare system as it stands is basically a bottomless pit that will absorb any money put into it. When do you have “too much” healthcare? It’s not a smear on the people in that industry, I myself am one of them, but it is a smear on a system that has been planned worse than the city of Houston. It’s just a mishmash. People accept that the computer business had to standardize on the PC and Microsoft OS, but to do the same in healthcare is heresy somehow. That’s why adding more tax incentive is just flushing more money into a system that will eat up whatever you will give it. In my truly humble opinion.

  9. Spike- by describing the healthcare system as a ‘toilet’, I believe you are ‘smearing’ all of us in the system, including the consultants who advise companies about it…
    All sides have a tendency to confuse different issues in the the current healthcare debate– I encourage our host and commenters to define the question they are addressing- because the question can help determine the answer.
    If the issue is merely to get more care for the ‘uninsured’, then I maintain that the fastest, simplest way to do so would be for healthcare providers to be tax-credited for care for the poor uninsured. Different incentives could benefit those working in underserved areas more.
    But, as we have discussed on the blog many times, the issue over the long term is the control of healthcare costs, which can only come with decreased healthcare utilization.
    Health savings accounts that encourage employer participation are a tiny step in the short term, but would have a larger impact in the long term.
    Deductibility of health insurance for individuals would also help.
    Reducing mandates (health care choice act) will also help.
    Reducing the overwhelming regulation caused by medicare– which affords overpayment for some services and gross underpayment for others would be a big help in actually creating competition.
    Mandating personal responsibiltiy in exchange for government support will have a big impact.
    Eliminating billions in corporate welfare to insurers (medicare advantage and part D) and big pharma and huge corps (part d) will also make a significant impact.
    Making insurance truly insurance and not an all inclusive resort will help.
    Increasing competition between providers (much like other industries) will also help a great deal.
    Beware the panacea of ‘evidence based medicine’. The essential conclusion reached in the July 13, 2005 JAMA is once again important as the findings of the ‘WHI’ study that said hormone replacement therapy is bad is now being contradicted by a new study in this week’s Journal of Women’s Health.

  10. Not only that, but obviously the people who are uninsured are the least likely to gain from a tax-exemption on healthcare expenses. They don’t pay much in income taxes as it is. Because they don’t have income.
    Now a tax credit… hmmm… that would actually be helpful. But it would also send more money down the toilet that is our current healthcare system.
    Also, on Reggie… I’m not sure she was ever saying HSAs would reduce costs, I thought focused factories were her solution to that. She had a whole chapter on the 80/20 rule in Market Driven Healthcare, didn’t she?

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