Medicare Compliance & Reimbursement
HSAs May Foul Up Comprehensive Plans' Risk Pools
The White House has been extolling health savings accounts since President Bush's State of the Union Address, calling them "an important step in restraining health care inflation." In contrast, opponents who dispute HSAs' benefits denounce them as a political diversion that could ultimately threaten comprehensive plans' viability by shifting more of the health care cost burden to consumers.
"The president's prescription for our ailing health care system is, astoundingly, to encourage the further deterioration of private insurance coverage for those in the middle class who have become increasingly worried about holding onto their current policies," warns James Mongan, Partners HealthCare president and CEO, in a recent commentary entitled "A Second Opinion on the President's Prescription." The president's health care diagnosis treats the alleged symptom of "too much health coverage" instead of the more distressing problem--the "huge gaps in coverage that most of us worry about," he asserts.
Critics worry that HSAs will attract only the young, relatively healthy, high-income beneficiaries--such as doctors, lawyers and high-level executives--who can afford high-deductible plans' increased out-of-pocket costs. HSAs are "yet another soothing ointment for the rich and healthy, and a poison pill for the poor and sick," Mongan says. By pulling the healthy population away from comprehensive private plans, HSAs threaten to erode plans' group rates and drive up premium costs for the low-income benes who can least afford it.
HSAs' Simplicity Hides Fundamental Flaws, Opponents Charge
HSA supporters tend to highlight the coverage and fringe benefits that HSAs provide, such as tax breaks and spending reduction, but downplay the coverage that HSAs will take away: comprehensive plans' stability and consumers' hard-earned income, Mongan points out.
HSAs and consumer-driven health plans propose to lower health care spending by encouraging benes to stretch out the value of their health care dollars. By forcing benes to pay for more health care services out-of-pocket, the government hopes that benes will forego "frivolous" procedures and make more cost-efficient decisions about the types of coverage and services their money buys. But there are two critical flaws in this philosophy, according to Mongan.
"First, a golfer's desire for an MRI to diagnose the cause of an achy knee may or may not be frivolous, but a basic medical intervention for a sick child is unlikely to be frivolous--or the reason for rising health care costs," illustrates Mongan. The second flaw lies in the fact that 70 percent of the nation's health care costs result from only 10 percent of its citizens, he says. Individuals who fall into this 10 percent have more at stake than their health care costs--in many cases, their lives are on the line.
"Someone who is told that he or she has lung cancer is not likely to be a cost-conscious shopper," Morgan notes. Any significant cost savings that CDHPs and HSAs might affect would end up having little impact on the 70 percent of costs that come from seriously ill people, he explains.
In addition, CDHPs don't help consumers to make better health care choices, according to Margaret O'Kane, president of the National Committee for Quality Assurance. Because plans don't measure their clinical care quality, employers and consumers know what they're paying but not necessarily what they're buying, she notes in a recent opinion piece called "Consumer Driven Plans Don't--Yet."
"Caveat emptor may work in a used-car lot, but it's far too risky an approach to buying health-care coverage," O'Kane criticizes.
States Throw Caution To The Wind
Consumers have been relatively slow to adopt HSAs and high-deductible CDHPs, but not enough to stop plans, employers and anyone else who can reap immediate cost savings from offering them. Many states have begun experimenting with legislation that encourages consumers to use HSAs. So far, more than a dozen states have introduced some form of the American Legislative Exchange Council's model Health Savings Account Act, which extends HSA tax breaks to benes' state income tax in addition to their federal income tax. Five states enacted similar legislation last year, and Florida and South Carolina have both proposed legislation that would offer HSA-like plans to Medicaid recipients.
Bernie Horn, the Center for Policy Alternatives' senior director, disagrees with states' efforts to upsell HSAs, citing cost problems similar to those Mongan notes. "You're taking the healthiest people out of the [risk] pool," Horn cautions in a recent statement. "Why would a state want to increase its own costs?"
Despite critics' warnings, HSA proponents continue to maintain a stiff upper lip. "The best health care system is bottom-up, not top-down," ALEC asserts.
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