In January’s State of the Union Address, President Bush called for expanding Health Savings Accounts (HSAs) as one sensible approach to curb rising healthcare costs. An HSA is a tax-favored healthcare-dedicated savings account that a patient controls. Combined with out-of-pocket requirements and a High Deductible (also called “Consumer Directed” Health Plan (HDHP)), these financing devices can provide comprehensive coverage. Federal 2006 HDHP family coverage guidelines call for deductibles of at least $2,100, with maximum out-of-pocket expenses of $10,500. To his credit, the President also proposed tax changes that would give individuals the same advantages employers already enjoy when they buy health insurance.
The main logic and “sell” of these plans is that HSAs and HDHPs give patients more “skin in the game,” more awareness of healthcare costs, and more control over healthcare spending. The increased involvement in healthcare decision-making encourages healthier lifestyles and smarter healthcare purchasing decisions. In turn, the changes in patients’ buying behaviors will drive down healthcare costs.
The reality may be somewhat different.
First, there’s little question that HSAs and HDHPs will become major forces in the health insurance market the same way that managed care did in the 1990’s. They’re less costly for employers than conventional plans, so there’s every reason to believe that the market will grow quickly. A recent Kaiser Family Foundation study found that 20 percent of employers offering health insurance already make HDHPs available. Nearly every major health plan now offers an HDHP. And the health insurance industry association, AHIP, claims that HDHP enrollment tripled in the last 10 months, to 3 million lives.
The deeper question is why. Are HDHPs becoming more popular because they urge patients to be more sensitive to cost? Or are they successful because, as the scale of healthcare cost has grown out-of-reach, skinnier benefits and higher out-of-pocket costs constitute a lower cost insurance alternative?
Both. Employers clearly see HDHPs as a less expensive way to continue offering health coverage. It’s also apparent that, when care costs employees more, they’ll ask more questions.
But studies also show that half of employers offering HDHPs do not help fund the HSAs. This may not be a problem for high-income or some middle-income workers. But if you’re low-income – one-quarter of workers make less than $18,800 per year and one-third of families make less than $35,000 – the increased out-of-pocket requirement can be onerous, especially if there’s a serious medical problem. Hospitals and many doctors are already experiencing rapidly increasing bad debt associated with these plans, because HDHPs without funded HSAs are, for many people, simply coverage that can’t be accessed.
How about information that helps consumers become better purchasers? There are good Web sites that help patients learn more about their conditions and treatments. But so far, even though inexpensive evaluation tools exist, consumers still can’t get much information on the pricing and performance of hospitals, doctors and drugs. It’s hard to be an effective shopper if you don’t know what things cost or how the vendors stack up.
Will consumerism significantly impact out-of-control health care costs? In truth, patients’ diagnostic and treatment choices represent a tiny portion of larger healthcare cost. The real money is associated with chronic disease and catastrophes. In those cases, healthcare professionals, not patients, guide the purchasing decisions. That’s exactly as it should be. But for consumerism to work, healthcare professionals must then be publicly accountable for their financial and clinical results.
More to the point, unless consumers have access to robust information about pricing and performance, mechanisms like HSAs and HDHPs won’t really impact cost so much as finance it, merely guiding how the money flows. Even Regina Herzlinger, a renowned conservative Harvard-based healthcare economist, challenged Mr. Bush on this. “Health savings accounts are being touted as a way to control costs, and I very much doubt that claim.”
The real roots of our healthcare crisis reside in the ways suppliers and clinicians are rewarded to deliver goods and services that are inappropriate, unnecessary and wasteful. Most healthcare experts agree that half or more of healthcare cost is due to these factors. Making healthcare affordable, stable and sustainable once again will require the infusion of skills and tools – compatible information technology platforms, clinical/administrative practice standards, pricing/performance transparency, payment that’s tied to outcomes – that other industries have long taken for granted. No matter how it’s pitched, consumerism just won’t get us there if these other components aren’t available to support the process.
When it’s more mature, healthcare consumerism will likely include the mechanisms that help patients become better buyers and impact cost. Until then, HSAs and HDHPs are less expensive, slimmed down, short-term solutions that can work well if you’re healthy or financially secure. But they’ll do little to address our rapidly collapsing healthcare system. And as a national solution, they’re inadequate and oversold.
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Brian Klepperis a health care analyst and commentator, He is Principal of Health Value Direct, a specialized health benefits consulting firm, and Managing Principal of Healthcare Performance Inc., a consulting practice based in Atlantic Beach, FL. He is a former CEO of the National Business Coalition on Health, which represents 5,000 businesses and unions and some 35 million covered lives. Brian is an active author and speaker, and has provided health care commentary to CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published articles on Kaiser Health News, Medscape, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally. He is a columnist for Medscape, focused on business of medicine and primary care, as well as a regular contributor to the Health Affairs Blog and other expert health care blogs. With his wife, he maintains Elaine’s Journey, which details their struggle against Primary Peritoneal (Ovarian) Cancer. He recently served on the American Academy of Family Physicians’ Primary Care Services Valuation Task Force, and is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He serves on the Board of the Consortium for Southeast Hypertension Control (COSEHC), dedicated to translational medicine for vascular disease. He is an Advisor to the Lundberg Institute, the Patient-Centered Primary Care Collaborative, which advocates for medical homes, and the Center for Value Health Innovation, which helps business identify and implement approaches proven to improve quality while reducing cost. In January 2011, with David C. Kibbe MD, he began a campaign, Replace the RUC!, that focuses on the most important driver of inappropriate health care cost. That effort has resulted in a lawsuit by six Augusta, GA primary care physicians against the US Centers for Medicare and Medicaid Services (CMS) over its longstanding inappropriate relationship with the AMA’s Relative Value Scale Update Committee (RUC). In is spare time, Brian is an offshore sailor. Contact him at 904.395.5530 (o), 904.343.2921 (c), firstname.lastname@example.org.