Health Savings Accounts & the State of the Union
Last year nearly a million more people were uninsured compared to the year before. The employer-based system that most people of working age have relied on since the 1950s is unraveling at the seams. Each year for more than a decade the percentage of employers offering health benefits has declined. The only reason the situation doesn’t look worse is that the government is picking up the slack – through Medicare and Medicaid and through the coverage provided to public employees.
The dilemma of the uninsured reverberates throughout the economy, as the cost of their care is borne by taxpayers through government programs or through cost shifting by physicians and hospitals to privately insured patients. Cost shifting, in turn, forces insurance companies to raise premiums. As premiums rise, fewer employers offer coverage. Some companies have been pushed to the brink of bankruptcy by rising health care costs, like General Motors which laid off 25,000 workers.
In his State of the Union address tonight President Bush is expected to propose using the free market to increase access to health care and reduce costs. His plan would expand health savings accounts (HSAs) for basic medical care coupled with private health insurance coverage for “catastrophic” expenses. Would HSAs solve the problem? The answer is no. HSAs could be a disincentive to preventive care, especially for low-income people who might “save” their funds against the risk of future needs. In the long run, costs would be higher because people who forgo prevention would have illnesses diagnosed at later stages. Private insurance companies would bear the burden, increasing their incentive to exclude the sick or anyone at risk of getting sick. Further, not everyone would be able to purchase a catastrophic plan because private insurers would continue to discriminate on the basis of age, social class, race or family history, just as they do today. As one insurance company explains the rules:
Premiums and ultimate offers are determined by the age, sex, location and health factors of each person or family to be insured – just as with any other “individually underwritten” coverage. Depending on the laws in your state, coverage for certain conditions may be excluded or modified, a higher premium may be charged, or coverage could be completely denied.
Further, people are not capable of making decisions about health care based on costs. They don’t shop around for health care in the same way they shop for an automobile, a television set or a good cup of coffee. The health care services they consume are determined by an intermediary, their physician. Certainly, patients do have more information available to them than in the past, and HMOs have taken some of the decision-making power away from doctors. Yet physicians still make most medical decisions – what tests to order, when a patient should be admitted to a hospital, what drugs to prescribe and whether surgery should be performed. A woman who is diagnosed with breast cancer is unlikely to shop around for the cheapest surgeon or try to save money by agreeing to a lumpectomy but not radiation. The fact that there is an expert intermediary between the product and the consumer changes the nature of the transaction. HSAs have been around for a decade and have yet to catch on with the public. HSAs will do little to solve the problem of rising costs and certainly will do nothing to increase coverage for the uninsured.
Jill Quadagno is the author of One Nation, Uninsured: Why the U.S. Has No National Health Insurance. Read her previous posts on OUP Blog HERE.