POLICY: HSAs, what are they really?

Buried in this somewhat balanced article about HSAs which postulates that the healthy & wealthy may get most out of health-savings accounts, is this gem from a leading “free-marketer” and HSA advocate:

John Goodman, the president of the National Center for Policy Analysis in Dallas and an advocate of HSAs, said that the tax incentives are appropriate because the accounts serve two purposes. “This isn’t just a savings account,” he said. “It’s self-insurance for health care.”

Meanwhile, veteran Democratic Congressman Jim McDermott tells the other side of the coin. But it’s the same coin.

A bedrock principle of this nation is to pool our resources and share the risk, because it benefits us all. That’s why we collectively support police and fire departments, national defense and a host of other essential services. The alternative would turn back the clock to the early 20th century, when people were wiped out by one moment of misfortune.

Is HSA any different? No. HSAs would accelerate a trend that has seen the percentage of employers offering health insurance drop 15 percent during the Bush Administration. A HSA would be an incentive for employers to transfer more of the burden to the individual. The outcome is inevitable, even for forward thinking, employee-focused, responsible corporate citizens. How long can they last when the competition abandons providing health insurance?

So the left and the right agree—HSAs et al move us to self-insurance or self-pay for health care and away from the idea of pooling. Of course rational people think that for health care with its uneven distribution of risk and costs, that’s nuts. The right (or at least the honest right) just thinks that it’s all OK. But at least we’re all agreed on what it is.

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  1. Tom,
    I certainly understand your frustration and struggle to be optimistic! And the Marie Curie quote is beautiful.
    There are several things I see happening in the world today that give me much more hope for a better world than I had just a year or two ago. For example, consider the following observations.
    1. Thanks, in part, to the Internet, the world is “flattening” (see Thomas Friedman’s fine book, “The World is Flat”), which enables people from all over to communicate with each other efficiently and inexpensively. The whole blog and wiki phenomenon is case in point. This means the “little guy” can be widely heard and global virtual communities are springing up all over. As such, it is much more difficult for the powers-that-be to silence the masses. And as Lappe’ discusses, grass roots movements are growing every day, and many of them are focused on the kinds of positive social change we’re discussing. This is very encouraging!
    2. At the same time, our country’s decent into ever-increasing political and corporate corruption is being exposed at a rapid rate. It’s becoming ever-more difficult for people to delude themselves that American Democracy is democratic! This opens the door for increased societal self-awareness: Looking at ourselves objectively in the mirror reflects things about our society that echoes the negative view so much of the world has about the USA. This is motivating people to question the direction of our society and to call for change.
    3. The healthcare crisis and our planet’s deterioration is exposing things about our political-economic priorities, focus and beliefs that are, simply put, shameful!
    I’ve long recognized that we would continue to deceive ourselves, remain ignorant, and be driven by fear and ego until things got so bad that we could no longer allow these “restrictors” to our social development to corrupt and demoralize us. This is only human nature. When a culture praises material wealth and power of the individual above one’s compassion for community, and when it links one’s possessions and socioeconomic status to one’s intrinsic worth (e.g., the “value” of a human being’s “essence” is largely defined by what the person owns and controls), then that culture is in deep trouble … as we are now.
    But when things get bad enough, and when knowledge of the situation replaces ignorance and self-deception, which are happening now, then there is opportunity for meaningful and sustainable change in people’s focus, beliefs and behaviors. While it’s unfortunate that pain, dread and disgust are requisite motivators, I’ve never been more encouraged and am fully committed to the fight for change.

  2. I tripped over this, and it seem apropos:
    “You cannot hope to build a better world without improving the individuals. To that end, each of us must work for our own improvement and, at the same time, share a general responsibility for all humanity, our particular duty being
    to aid those to whom we think we can be most useful.”
    — Marie Curie

  3. We agree mom & apple pie are great; the question is how all these things, which require stunning changes in behavior, will come about. Lappe’s “relational self-interest” sounds at least on the surface like like what Pope John Paul II called “solidarity” — an attitude that rejects both the glorification of self and free-riding. Either way, a genuine conversion of individuals is required, which is why I am not sanguine about the prospect of finding Real Solutions(tm).
    I think what has destroyed community in the USofA are television and air conditioning. Outlaw both and the visions of Lappe and Karol Wojtyla will be halfway realized within a few years. Oh, and blogs: we’ll have to outlaw blogs too. Rats.
    And the trouble with THIS is that a democratically-governed society willing for its own good to outlaw vices like television or air conditioning won’t find it necessary to do so, and a society unwilling to do so must be autocratically ruled in the end. So take your pick: do the hard work of converting one heart at a time, or live with a dictator…
    But now we’re pretty far afield.

  4. Well, Tom, how’s this for a start:
    > what health and well-being are
    How about defining the objectives of healthcare reform as being:
    1. Increasing the percentage of patients/people who:
    • Are better* after receiving care than before care was rendered
    • Fare better* long-term compared to how they would have done without the care
    • Take better* care of themselves.
    * “Better” means:
    •Reducing the frequency, severity and duration of a person’s physical, emotional, and behavioral problems
    •Increasing a person’s sense of well-being and quality of life (e.g., having a more positive emotional state, having greater physical comfort, being more productive, being able to act more independently, etc.)
    •Not adding new problems that worsen a person’s well-being/quality of life (e.g., medical mistakes, medication side effects, adverse effects of surgery, etc.).
    2. Reducing the cost of healthcare by continually:
    •Reducing the number of unnecessary, inappropriate and ineffective tests, treatments and other interventions
    •Decreasing the number of expensive tests, treatments and other interventions that have lower-priced yet equally effective alternatives
    •Increasing the efficiency by which care is given
    •Improving people’s ability to avoid illness and to manage their health problems.
    > what makes the world better and by corollary which causes are worthy
    I think the world would be better if people were more focused on what Lappe’ calls “relational self-interest,” as opposed to service for others without regard to self-preservation and self-gain, on the one hand, and self-centered selfishness, on the other. A person guided by relational self-interest:
    • Reflects the belief “I want to live well and fully in a community that works.”
    • Focuses on “all I care about—family, faith, career, justice, and other important matters.”
    • “Develops from dialogue and interaction with others.”
    • “Develops reflection, empathy, critical thinking, knowledge, and hope.”
    • “Offers recognition, visibility, and meaningful relationships.”
    • “Increases self-respect and respect from others.”
    • “Permits unlimited creativity; shapes community life in ways that benefit long-term community health” (pages 45-46).
    > whether commitment can ever be demonstrated through coercion
    Nope. But I don’t see harm in large financial incentives for sincere effort and quality performance.
    > degree of maternalism proper to the state
    From a business perspective, it would include having the government encourage organizations to use of a “socially responsible investment” model in which business decisions are made through strategies that have a beneficial affect on society, such as focusing on continuous quality improvement and affordable access to care for all people. This model has actually been shown to make good economic sense in different industries based on strong evidence from numerous studies showing that it ultimately results in better financial returns and outperforms competitors. The Domini 400 Social Index (DSI 400) – the gold standard of socially responsible funds – has outperformed the S&P 500 on a total return and risk-adjusted basis every year since its inception 15 years ago.

  5. > To me, this is all about human nature
    > and boils down to two things, our
    > country’s [Focus and Beliefs]
    We are in complete agreement about this. And if we could agree on what health and well-being are, what makes the world better and by corollary which causes are worthy, whether commitment can ever be demonstrated through coercion, and the degree of maternalism proper to the state, then we’d agree on nearly everything. And who knows? We might already. But there is little agreement generally…
    Thanks for the pointer to the book; I shall have to read it.

  6. “…rugged individualism vanished replaced by the coroporatism deal that lasted till the late 1970s and is still predominant in our organization of most shared services”
    “Our culture is being eroded by promising Free Cookies”
    “Congressional budget bill that authorizes a kickback for alternative energy producers”
    “…the mercantilist booty-capitalism that we’re in now”
    Frances Moore Lappe’, in her book “Democracy’s Edge,” presents an insightful perspective on such things.
    To me, this is all about human nature and boils down to two things, our country’s:
    1. Focus. What things do we focus on most strongly in our society? Where is our attention focused when we look for solutions to our problems? What are our true priorities, motives, goals, and objectives?
    2. Beliefs. What do we believe is the measure of a “successful” person or company? What do we belive makes our lives “worthwhile?” What are our beliefs about “deservingness?” What do we believe about things that makes us feel powerful, courageous and hopeful … or weak, fearful and hopeless?
    With respect to healthcare, if our country focused first and foremost on ways to improve the health and well-being of all people, and if we believed success is measured by our degree of commitment to this worthy cause, I bet we’d develop the strategies and find the resources to cure the healthcare crisis … and make the world a better place in the process!
    Steve Beller

  7. Last week Time magazine had an article about a little known clause in a Congressional budget bill that authorizes a kickback for alternative energy producers which is a sham. It pays these guys millions to spray some chemical stuff on coal dust and coal leftovers to make an alternative energy. The problem is, it is just a way to subsidize some rich individuals as the product is useless. The article stated that the money wasted is enough to provide healthcare to the poorest 10 million or so Americans. So, whatever your point of view, there is plenty of waste in our government to provide good healthcare to the poorest and to encourage the rest of us to help ourselves with a good tax break.

  8. Matthew:
    You can go join the US Army and deploy to Iraq and at the same time you would be recouping some of that $200 billion in the form of E1 pay and also display your rugged individualism in the sand box. You would be welcomed with open arms.

  9. OK. For my rugged indivdualism I volunteer to take over my own defense from the invading Iraqi army should they show up any time soon. So I want my share of the $200 billion we’re pissing away there back.
    That was our 19th century culture Tom, and as soon as enough people got the vote (here and in Europe) the so called rugged individualism vanished replaced by the coroporatism deal that lasted till the late 1970s and is still predominant in our organization of most shared services.
    Of course the mercantilist booty-capitalism that we’re in now is a third phase, that is less sustainable than the previous two (I hope!)

  10. The bedrock principle of this nation (I do not know where Jim McDermott is from) has been called Rugged Individualism, and on a political level this is expressed with a strong bias towards subsidiarity — Federalism is a particular example of this. For McDermott “collectve support” always implies “coerced support”. But this notion is far from universal in our society: witness volunteer fire departments. Our culture is being eroded by promising Free Cookies — just like ancient Greece.

  11. Goodman is actually mispeaking. HSAs are not “self-insurance” mechanisms. They are savings mechanisms.
    If the concepts of “savings” and “insurance” have any distinct meanings at all, then we must say that one is not the other, and, more specifically, that savings is storing up personal wealth for the future while insurance is paying someone a fee for taking on the risk of losing wealth that has been stored in the past.
    HSAs are the former applied to healthcare.
    As far as “pooling” goes…theoretically there should be a way for an individual to gain through trade with a larger group or organization which collectively faces a different aversion to risk; theoretically an “insurer” could facilitate that trade while keeping with the spirit of individual liberty and ownership that is the hallmark of consumer-driven health policy; theoretically there should be a way to define the property rights of risk such that a version of Goodman’s “HSA-style-self-insurance” is tradeable among individuals; again, in theory.
    Trapier K. Michael