HEALTH SAVINGS ACCOUNTS….The current healthcare panacea on offer from our friends in the conservative movement is something called a Health Savings Account. The idea is fairly simple: instead of a standard insurance plan, you get one with a high deductible, say $2,000. This plan costs (roughly) $2,000 less than a standard plan, so you take that dough and put it into an HSA. Then you use the HSA to pay your medical bills until you reach your deductible. If there’s money left in your HSA at the end of the year, you can keep it.
In theory, HSAs motivate people to spend money on healthcare more carefully, and in the long run this helps reduce overall healthcare spending. In reality, the evidence on this score is pretty thin. What’s more, it turns out that the vast bulk of healthcare dollars are spent on people who are extremely sick and quickly blow past even a large deductible anyway. Since HSAs don’t affect that spending at all, it means that, at best, their effect on the total cost of healthcare is probably pretty negligible.
Still, for some people HSAs are pretty alluring. After all, if you’re relatively healthy, there’s a good chance there will be money left in your HSA at the end of the year. Jonathan Cohn explains in a good article about the history and use of HSAs in The New Republic this week:
In their defense, HSA enthusiasts point out that people with serious medical problems are free to stick with traditional insurance. But, by luring healthy people and their premiums away from traditional insurance, HSAs would still drain money from the existing system, leaving the unhealthy to make up the cost. And, sure enough, it’s healthy people who seem to be rushing into HSAs the fastest. When Humana Inc. began offering HSAs to its workforce in 2001, the employees who chose it were “significantly healthier on every dimension measured,” according to a study published last year in the journal Health Services Research. And the anecdotal evidence certainly backs that up. Articles quoting enthusiastic HSA enrollees, which seem to appear in some local newspaper almost every day now, inevitably feature people like the 20-year-old worker at a Seattle drive-in restaurant who recently told the Seattle Post-Intelligencer, “If you’re a pretty healthy individual, and you don’t need to go to the doctor or expect that something might happen, it’s a good plan.”
Adverse selection is a bitch, isn’t it? There’s nothing wrong with trying to get people to take their own healthcare more seriously (though Cohn points out that this is easier said than done), but any healthcare proposal that’s designed to appeal more to healthy people than to sick people is fundamentally flawed. After all, the whole point of healthcare is to take care of sick people.
The bottom line is that if HSAs are a better deal for healthy people, then inevitably they’re a worse deal for sick people. And if you take healthcare seriously, it’s sick people you should be concerned about. In the end, HSAs are a feeble effort to paper over problems with our current dysfunctional healthcare system, and not a very good one at that.