Health Savings Accounts for Everyone
If HSAs Were Universal It Could Raise the Cap to $7,350 and Drive Competition
Health-care reform is progressing under this administration;
- The individual mandate is nullified.
- The administration has permitted more low-cost "limited duration" insurance plans, and more small businesses now have access to association health plans.
- The next step should be to expand and improve health savings accounts.
Health savings accounts put consumers directly in charge of their health-care purchases. This drives competition, which leads to lower prices for everyone.They also allow people to set aside money tax-free to pay for health expenses.
The ACA and most of the proposals that followed, stressed making insurance more affordable, mainly through subsidies but subsidizing premiums artificially props up coverage that typically minimizes out-of-pocket payment. This is counterproductive. Patients with such coverage don't think of themselves as paying for services. The process also shields medical providers from competing on price.
Rather Than Subsidizing Premiums, Policies Should Focus on Reducing Medical Care Costs by Generating Patient Competition
Doing so is the most effective pathway to affordable, high-quality care. If the market should encourage patients to consider the price of the medical care they consume and to equip them with the tools to do so.
- Outpatient nonemergency care, which forms the bulk of health expenditures, is amenable to price-conscious purchasing.
- Almost 60% of all health expenditures for privately insured adults under 65 and almost 40% of the elderly's expenses are for outpatient care, according to a 2012 report from the IMS Institute for Healthcare Informatics.
- Prices rapidly decrease when patients pay out-of-pocket for procedures like Lasik corrective vision surgery and MRI or CT screening. Data from MRI and outpatient surgery confirm that prices fall almost 20% when patients are motivated to shop around.
Since HSAs Reward Saving, They Are Very Effective At Pressing Prices Downward
- Spending reductions averaged 15% annually, according to a 2015 Bureau of Economic Research paper, when workers were given high-deductible plans and personal medical accounts.
- When HSAs were added to high-deductible plans, savings increased to up to double the savings that high-deductible plans alone produced.
- More than one-third of the savings reflected price-conscious decision-making (corroborating prior studies, these reductions occurred without harming patients' health.)
By increasingly choosing HSAs when given the opportunity, American consumers are approving their value. By the end of 2017, there were at least (See Devenir Report) 22 million health savings accounts in the U.S., up 11% year-over-year. This isn't a tax benefit for the rich: Median household income for HSA holders is $57,060, and two-thirds earn less than $75,000 a year. The challenge now is to expand HSA use and fully leverage its power to reduce health-care prices.
- Passing this legislation would make HSAs universally available. The accounts should not be connected to specific insurance deductibles which are counterproductive requirement that limit the possibility of HSAs with tailored or direct-payment plans.
- To maximize consumer power on prices, restrictions on full HSA participation by seniors on Medicare should be removed.
- Motivating seniors, the biggest users of health care, to seek value is crucial to driving prices down.
- New legislation should raise the maximum allowable HSA contribution to match total possible out-of-pocket spending under—$7,350 for individuals in 2018.
- Account holders should be allowed to use their HSA funds to pay for the care of elderly parents. And the accounts should be fully owned by individuals … which includes abolishing more restrictive variants tied to employers and eliminating expiration or forfeiture due to arbitrary "use it or lose it" deadlines.
- When account holders die, they should be allowed a tax-sheltered rollover of their HSA funds to all surviving family members, not only spouses.
HSAs have also been a valuable vehicle through which employers offer effective wellness programs and medical screening. Yet the ACA currently limits financial incentives from employers, like deposits into employee HSAs. The administration should abolish this rule.
The administration seeks to change the tax code to encourage more people to sign up for HSAs. Today's unlimited income exclusion for employer-sponsored health benefits is harmful, because consumers are rewarded for spending more on health care which reduces concern for price and value. Beyond capping any total health expense deduction or exclusion, the tax code must also limit eligibility to HSA contributions and catastrophic coverage premiums.
Increasing the supply of medical care by eliminating anticompetitive barriers would make HSAs even more effective, as patients need enough choices to compare.
- Despite widely recognized doctor shortages, scope-of-practice limits on nurse practitioners and physician assistants prevent competition with doctors for simple primary care.
- Archaic nonreciprocal state licensing restricts telemedicine.
- State certificate-of-need requirements limit competitive technology.
- Scandalous contractual gag clauses prohibit pharmacists from telling patients that medication may be cheaper if purchased outside insurance.
Health savings accounts are not appropriate for every patient. But they represent a powerful tool to lower prices and improve access to quality care for everyone. And those are goals that everyone can share.Source: Scott W. Atlas, Stanford Univ.