Asymmetrical Information

hi meagan,
"All of our citizens have enough food, clothes, and a roof over their head."

i wonder what kind fod, clothes, and roof some of them have...

"But I really don't understand the opposition to HSAs among single-payer advocates. It certainly won't hurt anyone, will it?"

as to why be wary of hsa--its the idea of looking for a private solution to what many perceive is an issue with a collective solution. since many folks want universal health care, this plan goes in the face of that, a la social security. in so far as it slows down what is looking more and more inevitable (the prescription plan debacle is pitched an example of the private system run amok)--i.e., universal health care, it hurts people who otherwise will not be covered till they get that universal health care.

I have an HSA--it's a good deal for me, my wife, and our one-year-old. It's true health insurnace, as opposed to having someone else pay our health care costs. And there is no more tax-advantaged investment than the HSA.

But I really don't understand the opposition to HSAs among single-payer advocates. It certainly won't hurt anyone, will it?

You've just answered your own question.

HAS's - while probably not the silver bullet that some of their proponents might hope - are along with Association Health Plans and allowing consumers to purchase insurance from other States without State-imposed unfunded mandats are part of a consumer-driven market model of health care reform which is at odds with the socialized medicine model. Simply put, anything that makes health care more affordable or otherwise improves it by using a market mechanism based on individual choice slows down the drive for having a government run system.

It certainly won't hurt anyone, will it?

Of course it hurts someone. When you pull the younger, healthier people out of the risk pool, what's left is a population that's more expensive to cover. Keep going down that road and you end up with decent health coverage for healthy people and none for sick people. To the extent that our current system works at all, it works by forcing cross-subsidies through group insurance coverage to get health care for people whom no sane carrier would choose to cover at the price they're paying. I don't know how the numbers would work out, but I'd be surprised if you didn't leave at least a quarter of the population with expensive health problems and no way of paying for them. You may find that an acceptable outcome, but if so, you ought to be willing to argue for it directly.

When someone with a cold comes in and asks for antibiotics, shouldn't any decent doctor simply refuse (and don't they, in fact, do so)?

I see something rather hypocritical in America's massive spending on end-of-life care. Americans are much more religious that people in Europe or Japan or other developed countries, yet we are much more insistent on preserving life regardless of the cost. By all rights, we should be more accepting of death, as to religious people like us that's far from being the end. Those atheistic Europeans, in contrast, believe that death brings oblivion - so why aren't they insisting on spare-no-expense prolongation of life?

When you pull the younger, healthier people out of the risk pool, what's left is a population that's more expensive to cover. Keep going down that road and you end up with decent health coverage for healthy people and none for sick people.
I don't know how the numbers would work out, but I'd be surprised if you didn't leave at least a quarter of the population with expensive health problems and no way of paying for them.

You have it exactly backwards. What you get when healthy people pull out is decent health coverage for sick people and none (that's worth paying for) for healthy people-- especially in New York and New Jersey. Most of the time when you get that, it's because there are laws (like in NY and NJ) that force plans to offer certain protection and force insurance companies to never turn down people with pre-existing conditions. That's what makes younger, healthier people leave the risk pool-- when the insurance costs so much because it's priced the same for people with pre-existing conditions as for them.

HSAs don't make this problem worse, and they in fact help it (though possibly not enough to make a real difference in the numbers that matter, since end of life care is indeed the issue.) They helpskeep people in the risk pool, and more importantly try to make insurance more about insurance against catastrophe rather than about paying $20 a month to the insurance company in order to get slightly less than $20 worth of service each month that you know you'll need anyway.

John Thacker, how does the existence of HSAs and high-deductible policies keep younger, healthier people in the risk pool for policies--typically group--that cover sicker people with pre-existing conditions and the like? Everything I've ever read on the topic indicates that the HSA/high deductible policy combination strongly tends to cherry-pick the best risks, leaving the poorer risks in the general pool and thus raising the average cost of covering the people in that pool.

The bit about how health insurance should function more as insurance against catastrophe is superficially attractive, but wrong. The problems start cropping up when you think about chronic illness, genetic susceptibility to illness, and other factors that make it relatively easy for insurers to figure out which people are going to cost them a lot of money. You might--might--be able, with sufficient regulatory oversight, to design a system that would do a decent job of protecting people who have the bad luck to end up with cancer when they don't have any major risk factors. But think about someone like a child who is diagnosed with diabetes, or anyone else with a medical condition that needs years and years of expensive treatment. Think about our hostess and all the other asthmatics. "The market will provide" just isn't as easy as it looks.

The problems start cropping up when you think about chronic illness, genetic susceptibility to illness, and other factors that make it relatively easy for insurers to figure out which people are going to cost them a lot of money.

Then why not talk about a solution to THIS SPECIFIC problem: i.e. taxpayer-funded, means-tested coverage for uninsurable people and leave everybody else alone? It is highly doubtful this category is going to encompass 25% of the population, but even then, why discard a mechanism that is believed to work for the other three quarters?

Health care costs are uncontrolled because the patient always has no idea what the cost of the service is until the bill arrives; further because no one may legally tell him in advance how much the bill will bill be if he pays it, or if insurance co A pays, or B pays it, or if Medicare pays it.

Sadly, the only way the lower medical costs is to eliminate medicare and all state or local programs tied into medicare because these programs make it impossible for doctors or hospitals to behave charitably or compassionately.

DaveL, you are aware that an HSA is an insurance policy, aren't you? I don't understand why you think HSA would remove anyone from the pool, when in fact the exact opposite is what's happening. People who previously would have gone uninsured can purchase an HSA for coverage against catastrophe (which as others have mentioned is what insurance is supposed to do, protect against unexpected events) and this ADDS to the pool.

Nearly everything I read from opponents of HSA's displays ignorance about what exactly an HSA is. The only difference between an HSA and a traditional policy is that the deductible is higher, and thus the premium lower, and you are allowed to set aside tax-free dollars to pay your claims until you hit the deductible. Once you've hit the deductible there is no difference between the HSA and any other policy. Like Jane said, getting people to spend that first $2500 of healthcare dollars more wisely can only have a positive impact on health care costs.

"....Do we have something better to spend our money on than being healthy?"

Absolutely!!! The cost of healthcare in the USA has gone waaay past the point of diminishing returns. I lived and worked in Mexico for about 5 years during the early 1990's. At that time, the average per capita cost (in US dollars)of Mexican healthcare was about *one-tenth* of the US figure, and yet the life expectancy of the average Mexican was only a year or two less than that of the average American.

Both of my children were born in Mexico by Caesarian (in a very good-quality, clean, upper-middle class hospital) for less than $3000 USD each -- including the obstetrician, the pediatrician, the O.R., a private room, and everything else!

"Given that Medicare has also done almost nothing to restrain these costs"

Well, they do pay under-market rates to providers.

End-of-life care expenses are complicated to unravel. Two examples from my family: 99 yo, Alzheimer's at middlin' level of advance, gets sick at nursing home, sent to hospital. Problem is chronic and likely fatal in 3-6 months. DNR order written, dies in a few days at moderate cost.

75 yo, still a practicing physician in good health, admitted to hospital with possible cogestive heart failure. Spends 6 months in hospital, 4 of it in ICUs, with a disease that was never really pinned down (SARS-like), got an infection during the stay that nearly killed him, etc. Died after 6 months when a DNR was written. Cost to medicare over $300-400k.

In both cases, treatment was eventually decided to be futile. In one case, the DNR was an obvious choice. In the other, it was only reached after every treatment option was exhausted.

So, when it comes to end of life cases: Who decides? What are the criteria? Any system Congress sets up will be designed by lawyers, not doctors and ethics experts. It will be bureaucratic, impossible to navigate without legal help and be stupid beyond belief. The HillaryCare experience showed us that. (Less than 10 practicing physicians had a hand in drafting that idiocy.)

Both Kevin and Jane miss another point about HSA's, namely, letting patients control their own money should inject competition into the process. And that should help patients spend less because producers will lower prices as a response to competition.

Liberty Lover

HSAs are an excellent step in the right direction for a more consumer-friendly health care system, but only a step. As both a provider of services (a surgeon) and a consumer (an HSA customer who has had a few operations), I think they work reasonably well. However, I do not rush myself or my children off to see a physician with a sore knee, a cough, or an obvious viral problem; I save money by practicing some common sense. Those "high volume" users of medical care who are essentially healthy do not come out ahead with an HSA.

What galls me, however, is that even though I can choose to purchase an HSA, I am not allowed to pick and choose what kind of things I want covered. For example, my state requires that I have chiropractic care covered by my policy; that, IMHO, is a good massage at best and quackery at worst. Why must I pay for coverage anything that can be considered "alternative" care?

Then why not talk about a solution to THIS SPECIFIC problem: i.e. taxpayer-funded, means-tested coverage for uninsurable people and leave everybody else alone?

Let's think about that one. Think about the number of relatively common condition that involve high levels of medical costs over long periods: cancer, heart disease, diabetes, MS, etc., etc., etc. Even in a best-case private insurance scenario, think about how hard it would be to create a regulatory system that ensure that people who contracted such conditions didn't lose their coverage in fairly short order. And think about the means-testing part. How many people are capable of spending tens of thousands, hundreds of thousands, or more dollars per year on medical treatment? You can make the argument that it's fair for people who are unfortunate enough to get sick to have to impoverish themselves to pay for treatment, but you can also argue that we're all better off pooling medical risks across the population so that we all have the security of knowing that a nasty diagnosis won't force us to sell the house.

As to 25%, I don't know the exact number, but I think you'd be surprised how many pre-Medicare age people would be uninsurable if health insurance were individually underwritten.

I think what you're suggesting could, in some alternate world, be part of a rational solution to the health-care problems we have. But HSAs plus Medicaid doesn't even come close.

DaveL, you are aware that an HSA is an insurance policy, aren't you? I don't understand why you think HSA would remove anyone from the pool, when in fact the exact opposite is what's happening. People who previously would have gone uninsured can purchase an HSA for coverage against catastrophe (which as others have mentioned is what insurance is supposed to do, protect against unexpected events) and this ADDS to the pool.

No. An HSA is a tax-favored savings account. It's paired with a high-deductible health insurance policy, but the HSA part is not insurance. And the relevant pool isn't everyone with insurance, it's the group of policyholders across which risk is shared. If you think insurance companies are pricing their high-deductible policies higher than necessary in order to produce a cross-subsidy to help with the costs of covering the higher-risk people in other groups of policyholders (e.g. a typical employer group), I'm about 99.5% sure you're mistaken. Correct me if I'm wrong, but that's not consistent with anything I've every heard about insurance company pricing.

Look, I'm sympathetic to the idea that it would be better to pay costs of routine health care directly rather than routing them through an insurance company (or government) bureacracy. But when I read stuff produced by people who have looked closely at the practical aspects, I come away with the impression that (1) people are dumb enough about getting preventive care when they have to pay for it out of pocket that covering stuff like annual physical exams tends to save insurers money by catching problems that people would otherwise have let slide until they got a lot more expensive, and (2) the whole medical billing and payment system is so closely tied to third-party payers that trying to pay out of pocket isn't going to simplify things any and may make them worse.

I understand that HSAs can be a good deal for lots of people. If you can get an HSA and you don't expect to need a lot of health care, go for it. But recognize that as national health-insurance policy, HSAs are making things better for people for whom the current system generally works OK at the expense of exacerbating structural issues relating to how high-cost medical care gets paid for. Maybe it's good to accelerate the collapse of the current system so that we can get on to something that works better, but given the Administration's and Congress's recent health-policy successes (Medicare Part D, anyone?), this doesn't really seem like the ideal time to make the whole system collapse.

So when would be a good time to solve the problem? When health care costs hit 20% of GDP? 30%? 40%? I'd rather we start working on it now before it bankrupts the country and saps all of the budget away from education.

I for one have an HSA and high deductible health plan for myself and my family. I think it's the way to go. Health insurance needs to go back to being just that - insurance. Having a chronic condition won't bakrupt you with an HSA, it just means a little more out of pocket. Instead of a $1,000 deductible like traditional insurance, you would then have a $5,000 deductible. So it would cost you another $4,000 (pretax however). Not enough to bankrupt you, especially if you've been saving for several years. Maybe you'll have to sell the SUV or go without cable and Cafe Latte's, but you'll still survive. By the way my employer saved so much by switching to an HSA/high deductible plan that they now contribute ~ $2,000 to my HSA yearly. That's money that builds up until it's needed and means at worst if I get MS or something it would only add $2,000 out of pocket (pretax) compared to what we used to pay.

We need to get away from this idea of everybody being entitled to everything all the time whenever they want it. That attitude has brought us to where we are now with 45 million and rising with no coverage at all.

HSAs sound a lot like the kind of health plan I was bewailing not having access to a couple of months ago. As a grad student, the school I work at has 3 plans. Basically, all three pay for basic services at the school clinic, but are absolutely *horrible* at catastrophic coverage. The most comprehensive tops out at $50,000. Bear in mind, these are plans specifically designed for a population of young, healthy adults. Almost any conceivable medical disaster would threaten the $50,000 cap, while nondisastrous day to day care costs nothing near the premiums, so you get shafted at both ends.

If Kevin Drum is so darn scared of HSAs, I wish he'd try to shoo one my way.

When you pull the younger, healthier people out of the risk pool, what's left is a population that's more expensive to cover

People aged 18-25 are the poorest demographic in America, and the healthiest. People aged 65 and older are the richest demographic in America, and the unhealthiest. How does it make sense to force poor, healthy people to fund rich, unhealthy people's medical care?

So when would be a good time to solve the problem? When health care costs hit 20% of GDP? 30%? 40%? I'd rather we start working on it now before it bankrupts the country and saps all of the budget away from education.

I would too. I just doubt that the current crew in DC is capable of it.

Having a chronic condition won't bakrupt you with an HSA, it just means a little more out of pocket. Instead of a $1,000 deductible like traditional insurance, you would then have a $5,000 deductible. So it would cost you another $4,000 (pretax however). Not enough to bankrupt you, especially if you've been saving for several years. Maybe you'll have to sell the SUV or go without cable and Cafe Latte's, but you'll still survive. By the way my employer saved so much by switching to an HSA/high deductible plan that they now contribute ~ $2,000 to my HSA yearly. That's money that builds up until it's needed and means at worst if I get MS or something it would only add $2,000 out of pocket (pretax) compared to what we used to pay.

That assumes that (1) you can continue in an employer-sponsored HSA/high-deductible policy setup even if you suffer from a chronic condition, and (2) moving people into HSAs doesn't accelerate the collapse of the employer-based health insurance system. I don't think either assumption is necessarily correct. If you're disabled and can't keep working, you've got a maximum of three years of COBRA coverage, and then you're on your own until you're broke and Medicaid kicks in (with limited coverage and limited choices). You don't have that high-deductible policy anymore, and nobody's going to sell you one when you're already sick. And employer-based coverage is already creaky as hell. Maybe the HMOs and PPOs can survive losing their profitable members to HSA setups without pushing their prices up to levels that employers will no longer pay, but I wouldn't bet the farm on it. Nor would I bet that employers can universally move their workforces into HSA/high-deductible policy setups.

People aged 18-25 are the poorest demographic in America, and the healthiest. People aged 65 and older are the richest demographic in America, and the unhealthiest. How does it make sense to force poor, healthy people to fund rich, unhealthy people's medical care?

To some degree, that's a valid point. OTOH, people over 65 are basically out of the general risk pool because they're on Medicare, and a major chunk of the 18-25 group is either still on their parents' coverage, covered by student health insurance, or uninsured, so I don't know how much cross-subsidy they're paying. I think it's more a matter of people in the 25-45 group subsidizing the 45-65 group, give or take, and all of the healthy folks subsidizing the diabetics, cancer patients, etc. There are lots of ways you could slice and dice it and lots of fairness arguments you could make, but the bottom line is that if you take too many healthy people out of the pool, you get to a point where nobody can pay the average cost of the medical care consumed by the people remaining in the pool, and then the whole thing collapses. And before you do something that pushes this rickety system closer to collapsing, it might be good to have a plan for what comes next.

And before you do something that pushes this rickety system closer to collapsing, it might be good to have a plan for what comes next.

It might. However, it might also be better to try SOMETHING than to do nothing when you know that status quo is not acceptable.

If HSA turn out to be an awful program, how long will it take to get rid of them? If universal coverage - and its attendant bureacracy - turn out to be an awful program, how long will it take to get rid of that? (Think the Spanish-American War tax that is still on your phone bill or the Rural Electrification Board [which, btw, cannot even take on "broadband-ification", we need another agency for that] - just two example off the top of my head)

Which do you want to try first?

DaveL wrote:
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"No. An HSA is a tax-favored savings account. It's paired with a high-deductible health insurance policy, but the HSA part is not insurance. And the relevant pool isn't everyone with insurance, it's the group of policyholders across which risk is shared. If you think insurance companies are pricing their high-deductible policies higher than necessary in order to produce a cross-subsidy to help with the costs of covering the higher-risk people in other groups of policyholders (e.g. a typical employer group), I'm about 99.5% sure you're mistaken. Correct me if I'm wrong, but that's not consistent with anything I've every heard about insurance company pricing."
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Yes, the actual account is not an insurance policy, but you can't get the account without the policy, so for all practical purposes calling an HSA an insurance policy is correct. There is no need to play semantics. My point still stands, selling HSA's is adding people to the pool, not removing them as you suggested. The relevant pool of policyholders is growing, so despite the lower premiums, there are sufficient funds available to pay for the cost of higher risk insureds. You seem to be operating under the assumption that the cohort of insureds is static, so that when the healthier ones get HSA's, it is just pulling funds out of the pool. This ignores all of the new policies being sold to people who were previously uninsured because rates were too high for traditional plans.

I'm a health actuary and I've been pricing HSA's and their predecessor MSA's for the last 4 years. Our loss ratios have not deteriorated as a result of selling HSA's as you seem to be suggesting they would. We sell more HSA's now than any other type of plan, and all of these additional sales (to typically very healthy people) subsidize the high-cost insureds. The death spiral scenario you describe is not happening, I can assure you that my fellow actuaries and I are not that short-sighted.

We had an HSA last year, a $2,000 deductible. The trick with HSA is that on a "normal" policy, each person has a $1,000 per person. On a HSA, you have to meet the total $2,000 deductible. We are retired and use my wifes retirement health coverage. This year they upped the premium (HSA and "normal")for the same coverage. We had to drop the HSA and go to a even higher deductible to be able to pay for the premimums.

Our loss ratios have not deteriorated as a result of selling HSA's as you seem to be suggesting they would. We sell more HSA's now than any other type of plan, and all of these additional sales (to typically very healthy people) subsidize the high-cost insureds. The death spiral scenario you describe is not happening, I can assure you that my fellow actuaries and I are not that short-sighted.

Are your high-deductible policies replacing other policies that your company sold, or are you taking those "typically very healthy people" from other carriers? If it's the latter, then your company is improving its risk pool at the expense of other carriers, which doesn't say much about what HSAs do to the system as a whole (or about whether your company will want to keep covering those high-cost insureds in traditional policies). The issue isn't what the HSAs do to the people in them, it's what they do to the people outside. HSAs can be great for some insureds and some carriers and still be poison for the system as a whole.

And if you're selling HSAs to existing customers instead of more expensive policies with lower deductibles, why? Do you make enough administering the HSAs to make up for lower premiums on the insurance piece? How do the economics work for the company?

And as for the "not that shortsighted" part, I would have thought that you'd be focused on developing and selling products that are profitable for your company, not protecting the health of the system as a whole. If your company ends up with a large chunk of a much-expanded market for high-deductible policies and is profitable as hell, would you be fired if a bunch of other carriers go broke and the number of people who can't get health insurance goes way up?

Given that the great majority of the population takes the standard deduction in their income tax filings how will giving them a tax deduction that they can not use make it better for them?

I think HSA would actually help us move towards a decent Nation Health Care system. The problem with finding a functional NHC system is determining what should be covered, HSA will help us to figure out what should be covered and what shouldn't.

The HSA, I think, has two primary functions. It acts as a subsidy for the healthcare industry, and it encourages consumers to take an active interest in the workings of the healthcare industry.

DaveL,

HSAs themselves are generally administered by banks, not insurance companies. I presume the insurance companies make money just as they do in ordinary insurance, by collecting more in premiums than they pay in claims.

spencer:

From the IRS website:

You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.

Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.

Emphasis added

I do think it would make much more sense to just allow medical expenses to be deducted when we file our taxes, but perhaps HSA encourage us to think more about what kind of deductable we want when buy insurance.

HSAs pull the insurance companies out of healthcare. Insurance companies are the primary reason healthcare costs rise - they are all public companies that have to show growth to their shareholders. Doctors and allied healthcare professionals are being squeezed out of business by insurance companies. Tkae out the insurance companies and let these people earn livings.

The problem I have with HSAs is that the use-it-or-lose-it structure forces you to make a fairly elaborate calculation of the probability distribution of your health care expenses and your marginal tax rate for the upcoming year and appropriately discount the risk of undercontribution against that of overcontribution.

It's the sort of thing that belongs in security analysis, not in a front-line health care plan.

hi all,
"And before you do something that pushes this rickety system closer to collapsing, it might be good to have a plan for what comes next."

that solution is likely to be a national health care system with lower overall costs. the question is raised ehy there is less heroic end of life care. could it be because a centralized system has made choices on where it will allocate scarece resources, and allocated them elsewhere?

JSinger

I think you are confusing HSAs with FSAs (flexible spending accounts). HSAs do not evaporate at the end of the year like HSAs.

JSinger,

HSAs are perpetual and can be used for retirement if you keep it long enough. No "use it or lose it"

I switched to a HSA over a year ago from a traditional insurance plan. Being self-employed, I've paid for my own coverage for the past 5 years. So far, I'm fairly happy with the arrangement. My savings balance rolls over, I can use it or not use it and I make the decisions about when I need medical care or not. I negotiate "cash" fees with my providers, most of whom are happy to get payment upfront without months of waiting and piles of paperwork, so they are very willing to deal on fees.

I dumped my traditional coverage after a two year series of price increases that raised my premium by over $100 a month, even though I rarely used my coverage.

I still bristle with anger over the medical insurance industry, but there seems to be no way around it since one does need security in case something genuinely catastrophic happens. I resent insurance paperpushers and executives who have never been to medical school getting more of my health care dollars than those actually providing my medical care. As far as I am concerned, the CEO of any health insurer shouldn't be making any more than the top cardiologist in this country. This is people's health and lives we are talking about here. Health insurance should be a non-profit industry with salary caps.

No idea how to get italics, the lines will have to suffice
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Are your high-deductible policies replacing other policies that your company sold, or are you taking those "typically very healthy people" from other carriers? If it's the latter, then your company is improving its risk pool at the expense of other carriers, which doesn't say much about what HSAs do to the system as a whole (or about whether your company will want to keep covering those high-cost insureds in traditional policies).
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Some of the HSAs replace other policies, most of them are new sales. It's not true that all of these are being cherry-picked from other carriers, a large percentage of them are people who were previously uninsured. And if we are taking them from other companies, I don't see what's wrong with that. Do you think there shouldn't be any competition or market forces in the insurance industry?
I fail to see why you think this hurts the system as a whole. The high-risk policyholders we insure are better off, they get lower rate increases because the overall health of the pool improved. Should the people who left another carrier to buy a cheaper HSA from us be forced to pay a higher premium because they happen to be with a company who didn't offer an HSA? The only people who might be harmed are those who are uninsurable in the private market due to a chronic condition. HSA's won't help them, but neither does any other proposal I've heard. HSA's wil bring down the cost of medical care, which helps everyone. As far as continuing to cover the high-risk insureds, that is not an option we have, we can't cancel someone's policy because they get cancer. But selling more policies to healthy will allow us to subsidize their claims and keep their premiums reasonable.

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The issue isn't what the HSAs do to the people in them, it's what they do to the people outside. HSAs can be great for some insureds and some carriers and still be poison for the system as a whole.
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Poison? Would you prefer that all of those previously uninsured, young, healthy people buying HSA's were not in the pool at all? Or would you tax them to subsidize the richest but most unhealthy demographic in the country?

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And if you're selling HSAs to existing customers instead of more expensive policies with lower deductibles, why? Do you make enough administering the HSAs to make up for lower premiums on the insurance piece? How do the economics work for the company?
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We don't make anything administering the HSA. We price to a target loss ratio, so we can get the same margins on a lower premium. Making the insured responsible forthe first couple thousand of claims has the effect one would expect on utilization. Even if the claims were not any lower, giving up some margin for growth can be good for the long-term profitability of the company.

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And as for the "not that shortsighted" part, I would have thought that you'd be focused on developing and selling products that are profitable for your company, not protecting the health of the system as a whole. If your company ends up with a large chunk of a much-expanded market for high-deductible policies and is profitable as hell, would you be fired if a bunch of other carriers go broke and the number of people who can't get health insurance goes way up?
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This doomsday scenario does not fit with the economics of the health insurance industry. Assuming that the logical end of this is a couple of large carriers insuring only the healthiest of risks is inaccurate, but I do recognize that without relaxing the underwriting standards, there may be more people who are uninsurable. HSAs on their own are not the savior of the system, but they are a step in the right direction. To prevent what you describe I would prefer to see an expansion of state risk pools (you can't really "insure" someone with a chronic condition, you can charge them a premium and pay their claims, but it's not really "insurance"), funded by carriers who write business in each state and reasonable premiums charged to those in the pool. A number of states have such pools now, and as a cost of doing business in the state carriers have to contribute to it.

Sandra, we all need food to live, should we not allow restaurants and grocery stores to turn a profit either? Or why just the insurers, why not the doctors as well, after all, this peoples health and lives we are talking about. It's cold where I live, how dare some clothing company make money when I can't survive without a winter coat!

How many people do you think will subject themselves to 5+ years of struggling through actuarial exams is they couldn't make really good money pricing insurance? So when the supply of health actuaries dries up how do you propose we price it, holding a moist finger to the wind?

Where would you set this "salary cap" on health insurers? Who gets to decide what is the "fair" wage for the CEO of a health insurer? Surely you've considered these things since you think this is what the health care industry needs.

Sorry for the typos, too lazy to proofread

Above, Dan asks:

How does it make sense to force poor, healthy [young] people to fund rich, unhealthy [old] people's medical care?

The answer, of course, is that the old people vote.

What nobody has commented on so far:

HSA's are a subsidy to the upper-middle-class at the expense of poor workers. The tax benefits of having an HSA grow as your marginal rate does; and it's unlikely that somebody living paycheck to paycheck would be able to save any money in one anyways, even if the 15% marginal rate savings were 'worth it'.

I have one, and it's NOT worth it - the fees and pain-in-the-ass quotient more than make up for the tax savings (FSA was a bit better). But I've got no choice. Hooray for the market.

the fees and pain-in-the-ass quotient more than make up for the tax savings...

This is manifestly NOT true, or you wouldn't have an HSA, you'd just have a high-deductible insurance policy and pay your bills out of an ordinary bank account. Or you'd pay the high price of a full-coverage policy.

MD, would you like to clarify why you think HSAs are a subsidy? A subsidy would imply that money is being taken away from poor workers and given to the upper-middle-class. How is this happening?

Are you aware that the maximum contribution to an HSA is about equal to the deductible on the insurance plan, up to a max of $5450, so assuming you have no medical expenses for the whole year the most tax savings you'll get (if we're talking upper middle class with a marginal rate of 25%) is $1300?

Are you also aware that your theoretical paycheck-to-paycheck person would save a significant amount on their monthly premium (actuarially they would save an amount equal to the expected change in claims given the change in deductible) by getting an HSA, and thus would be able to contribute something to the account?

As far as having no choice, I call BS. If you have one through your employer you are free to opt out and get your own coverage. No one can force you to have an HSA if you don't want one. How is an FSA better, since you lose any money you don't spend? Unless you are a better actuary than any of us, you're not going to predict exactly how much you'll need, so you'll either throw money away or just buy unnecessary stuff at the end of the year (essentially throwing money away).

It's becoming increasingly clear to me that many opponents of HSAs don't know much about how HSAs work or about the health insurance industry in general.

For the vast majority of Americans under 50 who are basically healthy the combination of an HSA and a high deductible catastrophic insurance policy is your best bet. The reality is for most men under 50 a checkup every 5-10 years or so is all you need. For women under 40 whose prior pap smears have all been normal a visit every 2-3 years is adequate - Megan's right on this. (I know if I were female and knew I could safely skip a pap smear I'd be all over that)

The reason we spend so much more on our health care than other countries is simple - we consume more health care. More blood tests, more MRI's and CT scans, more procedures, more trips to specialists. It's true that a good chunk of money is spent on the end of life, but I doubt that there's much money to be saved there. Sure there's a few clear-cut cases of medical futility, but most of the time we just don't know if grandma's going to die this time. She might just pull through with a couple days of ICU ventilator support and some big gun antibiotics. There's very few of us willing to nobly forgo treatment just to save society a couple 100 grand.

For other routine care, our 3rd party payer system encourages utilization by shielding patients (and doctors) from the marginal costs of care. For example, let's say you're a basically healthy 35 year old guy and you develop some mild rotator cuff tendonitis playing softball on the weekend. You come into my office to get it checked out. There's two ways we could treat this: 1) I could diagnose it with a simple history and examination, tell you to ice it, lay off the softball for a few weeks, pop some OTC ibuprofen, and give you a printout with a few simple home exercises - cost=maybe $100. 2) We go full court press, start with an exam, plain film xrays, prescription brand name anti-inflammatory drugs, referral to a physical therapist, you might even insist on an MRI and a cortisone injection if you're the impatient type - cost=$2 grand or more. In both cases, your shoulder is likely to get better just as quickly. Which treatment are you going to choose if you have an HSA vs a 3rd party payer picking up the tab?

Take another example - let's say you're 50 lbs overweight, your diet consists of twinkies and KFC, and your favorite activity is sitting on the couch watching Cops reruns. Lo and behold, you develop type 2 diabetes. We could treat this by diet, weight loss, and exercise, or we could treat it with medications that cost $100 a month or more. Which treatment are you going to choose if you have an HSA vs a 3rd party payer picking up the tab?

How about this: generic OTC ranitidine or omeprazole for my heartburn/reflux, or prescription Nexium for $5 a pill?

Likewise with most things like sore throats, sinus infections, bronchitis, colds - lay off the cigarettes, pop some OTC decongestants, have a bowl of chicken soup, and wait for it to get better. It's going to 99% of the time whether you see the doctor for that useless antibiotic rx or not. Sadly, in most cases the doctor writes the rx because a) it's quicker and easier for him to do so than to take the extra time to explain why you don't need it, and b) there's a good chance you'll throw a hissy fit if you don't get it, and it's just not worth the hassle.

You also cut out a lot of admin costs by paying directly - the doc gives you a bill, you pay when you leave with a check or a debit card from your HSA. No back-office mployee to submit a dozen claims forms for a dozen or more companies, no insurance company bureaucrat sitting on the claim for 6 weeks trying to find a way to weasel out of payment.

Now it's true that some people are just going to get a long-term chronic disease through no fault of their own, and HSA's are not going to cover the costs of years of treatment. We could probably do better for those people by enrolling them in a means-tested sliding scale Medicare plan, financed through a payroll tax. Save money on the other end by extending the automatic Medicare enrollment to age 70 or 72 or so, forcing them to spend down their (hopefully large) accumulated lifetime HSA before they enroll. Note this also gives older people an incentive to exercise, not smoke, lose weight, insist on generic drugs whenever possible, etc. If you stay healthy and get lucky you hit 72 and get to cash out your HSA and spend it on whatever you want.

I'd means-test the automatic elderly Medicare enrollment too; am I the only one who thinks it's crazy to tax the poor schmuck working the oil pit at Jiffy Lube to pay for medical care for some retired executive sitting on millions in assets?

If you're going to argue HSAs will cost more in the long run by discouraging routine preventive care, I need to see the studies showing that. If anything, the best way to save health care dollars is to encourage people to smoke, get fat, and drop dead of a heart attack at age 55. Beyond the occasional pap smear, immunizations, cholesterol and BP check, mammogram and colonoscopy, preventive care consists of: don't smoke, don't get fat, exercise regularly. You don't need a doctor to tell you to do that.

A single payer system sounds like a great idea, and before I went to medical school (early Clinton years) I used to think it was the only solution. Unfortunately as Americans I think we're far too selfish and impatient to put up with a Canadian style system. If we did, mark my words, here's what would happen: costs would quickly skyrocket as people started demanding their fair share of "free" healthcare. Politicians would try to cut costs by rationing, instituting red tape to discourage expensive tests like MRI's, and cutting payments to doctors. The top-notch doctors, frustrated by the high volume and low pay, leave the system and set up a parallel private cash-only system. Waiting times for those stuck in the public system go up as fewer docs remain to take care of them. Rich people get their MRI or hip replacement in 2 weeks, average joe waits 6 months. If that's what you guys want, hey let's go for it. I know, we could make all private care illegal, but we're already heading for a physician shortage, and I don't think reducing the financial incentive to become a doctor is going to help matters.

Crap that was long, but I needed to get that off my chest. Maybe I need my own blog.

The Board for a non-profit I volunteer with recently looked at an HSA plan to see if they could lower the 16% increased cost in health insurance that is hitting this year. The HSA plan cost less than the current health insurance, but the employees would have had to pick up the deductible. But the Board could have paid the deductible amount into the HSA, in which case the insurance coverage to the employee would have been the same under the HSA as under the existing plan.

But because the organization couldn't absorb the 16% increase, what ended up happening was the Board switched to a plan that slightly increased the deductible of each employee but still was not an HSA.

The key factor NOT being discussed here is the most imortant item: locus of control.

Supporters of state-run single payer programs push the egalitarian aspects of a nationalized system, and ignore its deleterious effects on liberty. Their main goal is not health care per se, but control of a large segment of society.

If their real motive was in fact making health care services available on a national level, the mechanism that causes the least harm would be preferred. HSAs are a nice example.

But they are less interested in health care than in grabbing power, so they will oppose all efforts to secure health care that are non-statist, and attempt to paint those who disagree with a broad brush of "greed" and "self-interest". Why utopians cannot learn the lesson of their repeated failures is beyond me, however.

I should also point out that if the Board contributed the deductible to each employee's HSA plan, the overall cost to the Board would have been the same as the 16% health insurance increase the Board was facing.

The fundamental idea behind HSAs is not to provide better healthcare, it's to provide less healthcare. Conservatives want you to think twice before spending a hundred bucks for your regular pap smear.

Didn't take long for Our Man Drum to descend into parody that time, did it?

as to why be wary of hsa--its the idea of looking for a private solution to what many perceive is an issue with a collective solution. since many folks want universal health care, this plan goes in the face of that

Are you a different cas than the one that used to dwell here, or has that cas moved to a new home where he has no conservative-leaning friends to act as a counter-soundingboard to a diet of liberal-speak?

The corollary to what you just stated is that a lot of people also do NOT want a collective solution, at least not of the type you propose. They apparently don't enter into your reckoning? With logic like that, are you surprsied that nobody else wasted time responding to either of your posts?

i wonder what kind fod, clothes, and roof some of them have...

Bluntly, in most cases as much food, clthing, and roof as they are willing to budget or otherwise delay gratification for in relation to the many non-essential purchases that also consume income. A few really are unavoidable charity cases, but not many. I have known many low income people -- many of the same smoked or had cell phones, some were single mothers who permitted themselves to be bedded a man who was mainly in it for the sex. I have known one case of grinding poverty, and that was a failure to exercise good financial principles when income was available, not a complete lack of it.

Generally these are not problems solvable by socialized anything. They require individual reponsibility and initiative to self improve, bolstered with community-by-community measures to assist and help -- accompanied by a healthy realization by all parties involved that a man's lot if he won't work at a minimum level necessary to sustain his own consumption is, in fact, starvation.

MD,

You are probably wrong that HSA are a subsidy to the upper-middle class at the expense of the poor. It is a subsidy to the healthcare industry, paid for by people who choose not to have HSAs.

What would matter here is what a person's health care cost is as a percentage of taxes paid. More specifically, what is the percentage of total taxes saved for each filer?

The people getting the most saving are the ones with the highest tax rates. But if health care is a small part of their expenses, then they are still subsidizing others.

> When you pull the younger, healthier people out of the risk pool, what's left is a population that's more expensive to cover.

No, the other population is just as expensive to cover as it was when the "younger, healthier people" were included.

The goal of an insurance scheme is to charge each person just a tad over said person's expected claims during the period covered. (The "tad" is to cover adminstrative costs.) The sole benefit to participants is the reduction in variance - each pays his/her average costs, not a roll-of-the-dice sum which may be significantly smaller or greater.

If someone is paying more than her expected costs so that someone else can pay less, that's not insurance, but a subsidy program. For some reason, the folks doing ths subsidizing won't voluntarily participate once they figure this out.

Subsidy schemes require coercion when there are too many folks on the gravy train.

What I know about the insurance industry, Aaron, is that they are public companies whose goal is not to simply make a living but provide enough of a growth rate and high enough profits to make Wall Street analysts happy. This is not the same thing as someone needing to make a living, even a good living that they earned by working hard in school.

anonymouse pulls out the old excuse for wisdom wherein he tells of how the poor people he knows are really poor because of their own decisions and while he's willing to concede that there might be some small number of people who are REALLY poor it's just a tiny number because of course we all know that the people he knows represent all poor people because there are enough jobs that pay good enough for everyone. At least according to the Book of Mouse.

Once again another thread displays the complete and utterly blind faith on the part of some people that the market can solve everything.

I'd guess (but not bet) that most people who favor HSAs are people who have been fortunate to be healthy, or fortunate to be healthy long enough to save up the deductibles. My wife and I are healthy people but in the past couple of years have seen a hernia operation (which wasn't caused by anything identifiable -- that is, it wasn't brought on by over-exertion) and now potentially an extended hospital stay due to preterm labor. While 10 to 20 thousand dollars in medical bills wouldn't bankrupt us, it would put a serious dent in our efforts to fund our retirement. I'd much rather spread the insurance risk among a very large population and pay less for our health insurance. Even if it means subsidizing less healthy people. I might have thought differently two years ago.

Weren't any of you guys reading the prior posts? Steve S. gave about the best synopsis of I've heard yet on why our health system has gotten to where it is and how HSA's solve the problem. I also agree with his proposed solution. I also went through medical school in the Clinton era and initially thought they were right. After 10 years in practice I've seen how that wouldn't work and I think Steve hit the nail on the head there as well. I switched to an HSA for my own health plan because I think that is the right solution to health care. It's changed how my wife and I approach our own health expenses and its made us much wiser consumers. The rest of the country needs to do the same or we'll end up breaking the 20% of GDP mark in no time.

Well, Jim S, are you agreeing with Sandra that the health insurance industry needs salary caps? If you think a specific company is making too much profit, then they must be charging excessive premiums, and by doing so they won't keep anything but the most unhealthy risks who cannot leave for a better rate. I can assure you that a company doing that would not be in business very long. Why is it bad thing for them to make money? There is competition in the insurance industry, and health insurers are only charging what the market will bear.

No one has said "the market can solve everything". You'll notice I said earlier that I'd favor an expansion of state risk pools, funded primarily by a premium tax on all health insurers that write business in the state. There is not an effective market solution for those with chronic conditions who are uninsurable in the private market. But should our policy be driven by a small segment of the market at the expense of everyone else? We can come up with solutions like HSAs that will help the majority and still address the problems of the poor and unhealthy in other ways. No one would suggest that HSAs are the panacea of American health care, but they are a step in the right direction.

Jim Bim, I'm sorry to hear about your medical problems, but you are mistaken if you believe someone with an HSA needs 10-20 thousand dollars for medical bills. The annual deductibles are typically around $2500 for an individual and $5000 for a family. Another thing you are missing is that if you'd had an HSA for those years you were healthy, you would have been able to save tax-free dollars to pay your deductible now. Spreading the insurance risk among a large pool, paying less for insurance, and subsidizing the unhealthy are all goals that are synonomous with those of HSA supporters. What we are trying to show you is that HSAs can help us get there.

The entire system stinks and needs to be overhauled

"Take another example - let's say you're 50 lbs overweight, your diet consists of twinkies and KFC, and your favorite activity is sitting on the couch watching Cops reruns. Lo and behold, you develop type 2 diabetes. We could treat this by diet, weight loss, and exercise, or we could treat it with medications that cost $100 a month or more. Which treatment are you going to choose if you have an HSA vs a 3rd party payer picking up the tab?"

I'll hazard a guess answer to this question. With an HSA, what most likely will happen is they will not get treatment and not follow a program of exercise, diet, and weight loss. Oh they will exercise for a week or two - and thats it. They will just ignore the problem, and when something really bad happens in 5 years as a consequence, they will pay the $2500 deductable that year and cost the system hundreds of thousands of dollars. This example answer is a large reason I am skeptical of HSAs. I don't people always make the best decisions. I don't think non-doctors make the best decisions about proper medical care.

Right now, I feel there are huge incentives for doctors to prescribe courses of action that will maximize their profits and minimize their liability. For insurance companies, there is a huge incentive to maximize profits. For patients, we want the best care, period.

There is no market mechanism in place to provide an acceptable level of care that would minimize overall costs applied to a case by case basis, but thats what we want as a nation. Do HSAs provide this?

I think that Steve S made a very good point: "If you're going to argue HSAs will cost more in the long run by discouraging routine preventive care, I need to see the studies showing that". Well this argument goes for both sides. Do HSAs allocate medical care more efficiently by discouraging some routine medical care? There should be a study on this, in fact many studies. Proponents/Opponents of HSAs are essentially talking out of their ass until this most critical point is determined.

HSAs: Are they good? Well, it seems like they would incentivize people to neglect routine medical care to near term maximize savings. I don't think anyone can really argue with this assessment. This would have two likely effects, that of lowering immediate costs at the expense of larger longer term costs. However, we don't know if the short term savings are larger or smaller than the long term costs. I don't see any references to studies here about this point. Until some studies are done, and HSAs have been around long enough to get good data by now, encouraging them on a national level is a continuation of the current policy of lurching from one crappy solution to the next, hoping something really works this time.

I do recognize that as long as optimal medical care and optipmal profits are less than completely aligned, we as a nation are going to have issues with medical care.

I don't see a huge difference in medical care choice between someone with an HSA and someone who chooses not to carry any insurance at all, because they expect to get medical care in emergencies and some govt program to take care of large medical emergencies anyway. For some non-trival percentage of our population, this is the current state of affairs.

With this in mind, We could probably learn lots simply by examining data on people without insurance. When do they choose to pay for medical care? Are their choices ones that would lower overall, long-run system costs? Also, we could look to the VA, they have really changed their program to become one of the best in the US. What are they doing? This information, combined with the studies on HSAs that we need would make a huge difference in this conversation we are having at this blog. Its not like we don't have information (or at least the data) out there about what works and what doesn't work. We just haven't looked at it and made an informed decision. At least in this forum.

Another issue I haven't seen addressed here is that people without insurance typically pay far, far more for medical care than people with insurance. How does this apply to people with HSAs?

Aaron, perhaps I should have been more specific. I am 100% in favor of HSA's and truly believe that introducing Americans to the cost of health care and having them be active participants in their health care is a must. However, as others pointed out, the Health Insurance industry is business, beholden to their shareholders and the greed of their CEO's. I don't have a problem with profit, what I have a problem with is those profits going back to shareholders and 20 million dollar executive salaries while patient claims are denied and compensation to hospitals and care providers is being cut. To be more blunt: the person paying for the coverage is being denied coverage and providers of the services are being denied fair compensation so that insurers can meet their numbers and the executives can make their bonuses.
That my friend, is pure profiteering.

With tip of the hat to Hunter S. Thompson, the Health Insurance Industry is is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good people die like dogs. There's also a negative side. At least pharma can say they plow some of their enormous profits back into research...

Do I think insurance is the entire problem with health care? No. Lawyers, malpractice insurance, excessive jury awards and the foolish meme of people thinking doctors are Gods and everyone has the right to a good outcome for every medical problem are just as much of a problem.

mickslam, I have a couple of responses for you.

Your first scenario may well be true, being on the hook for the first few thousand dollars of medical care wil not incent everyone to change their behavior. But compare that to the current situation; what happens now is exactly what you describe, except the insured doesn't pay the $2500 deductible. It might not seem like much but it is at least an incremental improvement.

When you say "For patients, we want the best care, period," well that sounds great, but do you have plan to pay for it? Like someone said above, Americans want good, fast, and cheap, but right now we can only get two out of three.

As far as HSA studies are concerned, I can tell you without getting into specifics that yes, my company has done plenty of studies (we've been selling HSAs since day one), and yes HSAs do have a significant impact on utilization.

The differences between someone with an HSA and someone without insurance are that the person with an HSA will not go bankrupt if they have a catastrophic medical emergency, and when they have routine medical expenses they will pay the negotiated rate for those services, which is usually much cheaper than what an uninsured person will pay. Also, the person with an HSA is able to pay for the services with tax-free dollars, giving them an immediate 25% (or whatever their marginal tax rate is) discount over the uninsured, in addition to the discount the insurance company negotiated. I think it's very inaccurate to compare these two groups and say they are the same.

Sandra, your anti-capitalist rhetoric might rally the troops at the Daily Kos, but I'm not buying it. If you have a problem with the health insurance industry, keep this fact in mind: millions of Americans (and more every day) are now getting cheaper health insurance because the "greed" of my company's CEO made sure that we would have an HSA product on the market on day one. The most unhealthy, high-risk people we insure are getting lower rate increases due to the subsidy that the favorable experience on our HSA products allows(which we sell more of than any other product now).

It does no one any good for you to rail against the evil insurance industry because there are some unethical people who try to avoid paying claims. For every person you'll find who could not get the care they needed I'll show you a hundred who had an emergency and the insurance company was there to cover it.

How would you decide what is "fair" compensation for the health care providers? In the area I live brand new multi-million dollar hospitals are popping up left and right, I think the providers are doing just fine. Do you have any idea how highly regulated the health insurance industry is? If you think we are engaging in "profiteering" you are sadly mistaken.

I work for one of the biggest health insurers in the country, and I can tell you that we work hard to provide an excellent product for our customers, and there is no cold-hearted greed motivating the decisions we make as a company. Do we make money? Yes, we make a lot of it. Why is that wrong, provided that we are charging actuarially correct rates (we are), we pay our claims (we do), and our customers are happy (they are)?

Aaron,

thanks for the kind response.

"When you say "For patients, we want the best care, period," well that sounds great, but do you have plan to pay for it? Like someone said above, Americans want good, fast, and cheap, but right now we can only get two out of three."

I wasn't really looking at what was possible, only what the motivations of the three primary groups of actors. I guess I wasn't that clear, but I was trying to point out that we have three groups with different motivations, but no group that has any motivation of providing low cost, high quality health care. There simply isn't market motivation for this in our current structure. The insurance companies don't really have a motivation to keep costs down, but rather to maximize profits. Given the structure of the rest of the market, low cost quality care isn't a likely outcome.

What are some of the outcomes of our current market structure? Cures will be less rewarded than recurring treatments that mitigate symptoms. (As Jane and others like to say here about economic growth, even small changes in this focus results in large changes over time) Large expensive (and highly profitable) treatments will be preferred over lower cost, but less effective treatments that could open up potential lawsuits. Preventitive medicine will be less supported due to people changing companies. End of life care becomes a huge part of our medical budget.

The issues above are the ones that really, really add to the cost of medicine in the US. I don't see how HSAs directly address any of these issues. They encourage healthly people to skimp on medical care, but as I've heard in other places, who goes to the doctor unless they have to already?

I've always thought a good way to decrease costs here in the states is have the government create a basic, but largely comprehensive insurance plan, and then require every insurer to have this plan as one of the options for people tchoose from. They can offer other plans, no problem, any other plan they want. They just have to offer this one. Kind of like an index fund on the S&P 500, but with health care instead of stocks. You can imagine what might happen with this, and wonder why we don't have something like this already. Its a simple law.

mickslam, I think you and I are closer to agreement than it may seem. I agree with your assessment about a market system leading to a preference for recurring and/or expensive treaments, but I think this is only true for providers. From the insurance company's standpoint, preventative care and cures for chronic conditions would be ideal! Illness that results from a lack of preventative care and incurable diseases are not things an insurance company wants to pay for. Insurance should protect from unforeseen hardship, not predictable things like the overweight slouch who develops type II diabetes. Nothing would make my job easier than pricing policies for people who took care of themselves, and a health care system that developed cures for expensive-to-treat diseases. HSAs can contribute to the first one, as for the second I don't really have a solution.

The idea that HSAs encourage people to "skimp" on medical care is a bit too cynical, in my opinion. I think they encourage people not to spend needlessly on health care, and to take better care of themselves to avoid some of the routine expenses. To give an example, let's assume your auto insurance paid for new tires when you needed them. Would taking that away encourage people to drive on threadbare tires and put themselves in danger? Or would it encourage them to stop peeling out every time they pull away from a red light? Undoubtedly there would be some who did the former, but I think they would be the minority. There will always be people who do not act in their own best interest, but I don't think we should set policy based on them, at the expense of everyone else.

Rather than a government plan, I would prefer to see a mandatory minimal amount of health coverage with tax-deductible premiums, and a subsidy for the most impoverished people to help pay for it. This would go a long way to preventing the poor who are uninsured from waiting until they are extremely ill and going to the emergency room (where medical care is most expensive of all), only to have the hospital eat the cost (or in actuality pass it on to all of us) because they don't have the means to pay. With a larger pool of people insured, many on plans with moderate-to-high deductibles, we could make huge inroads into the overall cost of health care and avoid many of the more serious health problems that result from a lack of preventative care. There would have to be some relaxation of underwriting standards in the private market for such a thing to work, and we still would probably need high-risk pools for the people with chronic conditions (because as I said before, you don't "insure" someone with cancer, you just collect a small premium and then pay their claims). There's a number of other policy consderations that would be necessary to make such a system work, and to tell you the truth it is not something I've fleshed out completely in my own mind, but I think it's a step towards a better health care system.

(As an aside, I'd also prefer to get rid of employer based health insurance and have everyone buy individual or family policies on the private market. This would definitely require less stringent underwriting or guaranteed issue.)

Steve S. said,
"For example, let's say you're a basically healthy 35 year old guy and you develop some mild rotator cuff tendonitis playing softball on the weekend. You come into my office to get it checked out. There's two ways we could treat this: 1) I could diagnose it with a simple history and examination, tell you to ice it, lay off the softball for a few weeks, pop some OTC ibuprofen, and give you a printout with a few simple home exercises - cost=maybe $100. 2) We go full court press..."

When I was in Kaiser with the same diagnoses (although mine was from... optimism... in the weight room) I got treatment 1, and it worked fine.

HMOs are a great idea, if they're run like Kaiser, but unfortunately, they aren't. They now have a terrrible reputation, but if I had the opportunity, I'd rejoin Kaiser.

So, let's try HSA's. Maybe they'll work better.

Aaron, Steve S, Mickslam et al
A most facinating discussion. I think that Steve's post was simply brilliant and Aaron pretty much has this deal buttoned down - but Mickslam sure makes some good points.

To all of you I ask this - what role does Human Genome research have on this subject? Last week it was announced that we now can identify the gene for diabetes and for some time we have been able to identify the gene for heart attack. This research continues apace and some say it is entirely possible that in 10 years we will know so much about genetic code that eveyrone will be uninsurable using current individual medical underwriting standards. What then? How do we medically underwrite when in fact everyone has a "chronic" condition? And, if we can't medically underwrite - what choice do we have but guarantee issue for all (the US Senate has voted 98-0 to forbid genetic information being allowed to determine qualification for health coverage and IBM - a large and very influential employer - has announced that they will never consider it). And, if we have GI - what possible incentive will people have to take care of themselves? Can we build a price mechanism based upon lifestyle choices? In fact, aren't we really just headed down the road to national mandated coverage (not single payer - think privatized social security)with some sort of large deductible to "encourage" people to take care of themselves and/or have to pay the first large chunk of heroic end of live care? Just wondering.

I'm a federal employee, and I seriously considered the HSA/high deductible option a few months ago when open season came around.

I finally decided against it because the premiums were about 10% higher than the same company's HMO plan. I figured that if I were going to risk a "doughnut hole" situation (being on the hook for the difference between the HSA balance and the deductible), I should at least save money over a first-dollar plan.

Maybe next year the premium picture will be different, but I have to ask why anyone would go through the hassle of setting up/monitoring/funding an HSA when there are no savings up front.

anonymouse pulls out the old excuse for wisdom

Well, at least mine has the benefit of an excuse. Where's yours, be it wisdom OR excuse? It seems to be an article of faith in your camp that the POV I expressed is wrong, but only because it provides the minimum threshold rationale for social engineering. Be nice if, for a change of pace, you would ever attempt to demonstrate (a) the empirical need for said engineering and (b) the sustainable benefits provided thereby.

Whether you like or even accept the fact, a lot of undeserving people will take advantage of a generous policy to the destruction thereof, unless you know of a way to target the few who have truly been hit by the metaphorical truck while identifying and exluding the freeloaders. Again, it would be nice if you would ever address any of these issues in a civil way, and thereby show your own basis.

As opposed to your current policy of being a hit-and-run pompous twit.

Once again another thread displays the complete and utterly blind faith on the part of some people that the market can solve everything.

Case in point.

"do WE have something better to spend the money on that being healthy"

well, if it were "WE", I might agree with you. But it isn't. Increasingly, it's the young single, couple, or family that is being asked to spend its money on keeping OTHER (and older) people healthy.

*I* have something better to spend my money on than YOUR health, or the health of a baby boomer. I value my retirement, my college education, my child's education, my home business more.

You are smart enough to know that there is no "we" and there is no "spending" without denying something else that money. This tradeoff isn't the one I'd pick.

Aaron,

I agree, I am not against HSAs, I just haven't been convinced that they are more than a very, very small improvement over our current situation, and one that likely has unintended negative consequenses that none of us here has seen.

" I would prefer to see a mandatory minimal amount of health coverage" This is what I proposed as well, I just phrased it a little differently. I think the tax-rebate is probably unimportant, for as I read yesterday, about 50 million people in the US don't pay taxes at all, so for these, most likely to be uninsured, it will make no difference to them, none at all.

There is another component to the plan that would greatly help the mandatory minimum insurance plan. Create a futures/forward contract on the payout of the risk associated with this insurance. This would allow insurance companies that take on large companies to perform the same actuaral analysis they currently perform to structure plans, but instead, relate it to a common benchmark instead of attempting to design a plan to minimize their losses. They could buy/sell risk to bring their expectations in line with whatever they want. Ok this is a little out there, but these are huge pools of risk that currently do not have a way for risk takers to mitigate that risk in anyway other than raising rates. I think the seperation of the risk taking side of insurance from the administrative side of insurance would be overall a good move on our part.

Aaron, you work for a health insurance firm?

Richard,

Ealier detection would reduce costs because treatments would be implemented earlier. The information would lead to better treatment options as well.

But there is a simple market solution, people would get insurance prior to genetic testing. If the genetics of the parents are known, rates may vary based on the probablity of transfering a genetic condition however. The difference will only be large if the probability of a genetic condition is almost certain. That is something couple should consider when deciding to have children anyway.

It is unlikely that society would allow for genetics to be used to determine prices though. We value diversity too much to allow a practice that would likely pressure certain people not to have children.

This is kinda depressing:

'UnitedHealth Group, the largest provider of the savings plans, says that of the 24 million people insured under its various types of policies, 654,000 now have health savings plans. But so far, only about half have started setting aside money, a spokesman, Daryl Richard, said.'

I don't have a choice about participating in my HSA - it is the only plan the company offers, and they do not offer the ability to opt-out and receive the premiums ourselves.

And yes, it's a subsidy to upper-income taxpayers, because the US government is foregoing those taxes, and it's foregoing far more from wealthy workers than from poor workers. Those foregone tax dollars are made up for by higher rates overall (on us, or on our future citizens). Hence - subsidy.

Oh, and before that smug jackass Aaron comments again, yes, I know how an HSA works; I'm contributing the maximum; and last year we blew through the deductible despite having started on the plan in September. The _only_ difference between this and the HMO plans at previous jobs is the pain-in-the-ass-quotient. With the FSA, I could spend all the money whenever necessary, and not have to incur large personal expenses while waiting for my contributions to 'catch up'. With this HSA, I've had to ration spending out of the account, which has meant carrying significant expenses out of my own pocket which were supposed not to be. In the meantime, our doctors keep sending us nasty notes because the structure of payment under this plan keeps making us look like we're stiffing them (my choice is either to go back to the office after the insurance company processes the claim, just to pay the bill, or wait for the next bill to get mailed, at which point we've fallen into "31-60 day" territory).

Like I said, pain-in-the-ass-quotient very high.

If I didn't use health care, I'm sure I would like it. Then it would be, as it is for some of my coworkers, just a savings account.

Wow, what an insightful addition to the debate MD. I had no idea we'd be elevating our discussion to such a distinguished and intelligent level. Insults aside though, I will have to point out that despite your apparent confidence, you are mistaken about how HSAs work.

First of all I'd note that since you "blew through the deductible" you are better off than you'd be without an HSA, since the money you used was pretax.

You are also incorrect to state that the only difference between an HSA and an HMO is a "pain in the ass" factor, and this belies your previous statement about knowing how an HSA works. You clearly do not understand how to use the HSA if you think you need to "ration" the spending. Any out-of-pocket expenses you incur because your claims are exceeding your contributions can be reimbursed from the HSA as soon as you have more funds in it. You won't have any out of pocket expenses beyond your deductible, and the higher deductible is reflected in the premium savings. If you don't want nasty notes from the doctor, then why not just pay the claims up front, and reimburse yourself from the HSA later? It seems like your only complaint is about the claims you've had to pay, when it should be obvious that with a higher deductible that will be the case. That is the point of an HSA, after all.

As for it being a "pain in the ass", well most of us with HSAs would disagree. You get a debit card or a checkbook with the HSA, and you swipe it/write a check when you see the doctor, it's as simple as that.

Your only problem seems to be that you had to spend money on healthcare. Since that is the very reason we have HSAs, I don't see what you have to complain about.

To your previous comment: I was not aware that we had indentured servitude in the US, I was under the mistaken impression that if you were not happy with the benefits given to you by an employer that you were free to find work elsewhere.

And do I even need to point out the logical error in your "subsidy" claim? So the rich get more of a tax break from an HSA, but they will pay less of the future taxes that must be made up later? Try to explain to us how that will work, and see if you can do it without calling names like an 8-year-old.

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