The Truth About Health Savings Accounts

[deminks]

http://thinkprogress.org/2006/01/30/the-truth-about-health-savings-accounts/

President Bush will use tomorrow’s State of the Union address to promote “health savings accounts” as a solution to America’s health care crisis. Multiple studies have shown that HSAs are likely to increase the number of uninsured and increase health care costs, all while costing taxpayers tens of billions of dollars. In other words, President Bush is proposing to do for health care what he’s already tried with Social Security — placing more of the cost burden on individuals, while making the system more attractive to the wealthy but less effective for ordinary Americans who need health coverage most.

HSAs WILL UNDERMINE EMPLOYER-BASED HEALTH CARE SYSTEM: The current policy of promoting high deductible plans (including the proposal for a new tax deduction for individual high-deductible policies) will weaken the employer-based health care system by providing employers who are already seeking relief from high health care costs with an excuse to drop coverage altogether, sending employees to the individual market. This market cherry-picks the healthy and creates barriers to coverage for the sick. In other words, this policy undermines the purpose of insurance (whether health, homeowners, car, or any other type), which is to pool risk.

This last sentence is very important. It means that Americans really need more insurance in order to make a bigger pool, not less insurance as the village idiot wants. Much more at the link.

[davekriss]

1. Scary

THe difference between what my insurance plan can bargain for and pay and what I'd have to pay out of a health savings account is 3x or more.

The dirty little truth the Republicans won't tell you is that all their plans to control health care costs amount to this: Get the vast unwashed masses to stop accessing healthcare (they think of us as "useless eaters" anyway, except when young enough to be "cannon fodder").

Not in the country club class, all with great healthplans (or money to render moot)? Die. That's the dirty little truth behind so much of "compassionate conservatism".

[Telly Savalas]

2. A model to illustrate this.

Let's say the odds are 1 in 100 that you're going to need to pay $5,000 for an expensive medical procedure in a given year. The other 99 times out of 100 you need to pay nothing.

Under the concept of pooling risk, a group of 100 people would each pay a bit more $50 for the year to establish a fund that would payout that $5000 to a person who needs the procedure.

Under Bush's plan, each person would be obligated to save up the entire $5,000 in order to be prepared if the expensive medical procedure is needed.

Which approach makes more sense?

(Of course this is a gross simplification, but the underlying principles hold true.)

Now what moderate Democrats like Conyers and Kucinich are proposing is that there be one giant public fund to pool everybody's risk, like they do in every other Western democracy. This makes much more sense than having a bunch of smaller private funds which have more administrative overhead and fight to keep high risk individuals out of the pool. It's a shame that the conservative Democrats and ultra-conservative Republicans are so fixated on maintaining an inefficient system which doesn't provide comprehensive coverage.

[Radio_Lady]

4. The dirty little secret is that health accounts don't work. Who can

predict if they will be ill? When we used them back in the 1990s, the money that we put into them was mostly LOST.

This president is mad. Who is going to accept this stupid plan? I thought privatization of Social Security was idiocy. This is worse. Let's hope it goes down in flames. We can assist with our "verbal kerosene" attacks.

[Telly Savalas]

5. Yeah, a health care savings account gives you two options

1. Save up tons of money that in all likelihood you won't need.
2. Don't save enough money, and if you're hit with a catastrophic health problem, you're financially doomed and don't get care.

This idea is so stupid the only possible explanation for it is that Bush is proposing it so that the invasion of Iraq will look like a sound policy in comparison.

[cornermouse]

9. One serious illness and you could be looking at a $100,000 bill

easily. I don't know many people who have that much cash in the bank.

[Atman]

6. We use ours regularly

I actually like it, but I don't see how it is supposed to help the un- and under-insured. Just today, I went for a dental appointment. Cost me $150 out of pocker, after insurance. No problem, I just sumbit a receipt to the HSA and it is repaid within about a week. But the idea that a low-wage worker is going to have $150 bucks laying around to pay up front and then have to file paperwork and wait for a week to get it back? This plan is purely for people who already have money and insurance, it does nothing to help low-wage workers needing health coverage.

[RB TexLa]

10. You are thinking of FSA's

Flexible spending accounts for unreimbursed medical costs and a separate one if wanted for daycare and/or elder care. These are the ones that have the commonly referred to as "use it or lose it" aspect to them. The money put into a HSA is not lost it remains in the account and incurs interest.


FSA's are great for daycare because you know what you are going to spend on it a week, month, and year and you can have it held out of your paycheck pretax and have just reduced your daycare bill by your marginal rate. The unreimbursed medical one is the tricky one, but use it or lose it protects your employer, if someone selects to have $2,500 held out over the year they can have $2500 in covered un reimbursed expenses in the first month when $200 has been held out. The employer gives them the $2500 and the remaining $2300 ideally will be held out of their checks over the next 11 months. This is a great deal as the $2500 is being paid by you with pre-tax dollars once again lowering your cost of whatever unreimbursed service you bought by your marginal tax rate. Now the problem for the employer is say you got the $2500 and then you quit your job for another one, or just quit however it comes about your former employer is out $2300. The "use it or lose it" is somewhat set up to protect them against this, if this happens when an employee from time to time the over estimations on the part of the other employees can offset their loses on the deal. This is why it's rare for smaller employers to offer FSA's or if the do they set the limit very low, they chose how much you can have held out of your checks over the year and thusly limit their exposure.

The people who get the most benefit out of FSA's other than for daycare are people who have maintenance drugs they know they are going to be getting month in and month out. They have a fixed cost and are able to estimate better than those who are in good health and have no idea what type or when they will have unreimbursed medical costs.

[bballny]

3. I use HSA's

As an independent businessman I use HSA'a and let me tell you I am spending close to $12,000 per year on healthcare. I do write off my premiums on my business but it is still $12,000. My deductible is $2,000 and ny out of pocket is $2,000. Both kids are combined but if my wife and I each claim it is $8,000 out of pocket. This is what Bush thinks is a good idea. I pay $512 a month to blue cros and an additional $135for dental. here is the future.

[baldguy]

7. The only thing that makes insurance work.

The idea that we're all in this together. Allowing the young, the rich & the healthy to "opt out" of the system - that would leave the old, the poor and the sick chasing an ever-shrinking amount of money & resources.

Most of the other members of the civilized world realize the health care is a right. Of course, that means the GOP wants to make it a privilege in America.

[Lydia Leftcoast]

8. As a self-employed person, aged over 50, I had two options:

1) A traditional insurance plan with a $1,000 deductible and 20% copays thereafter for $272 a month

2) A health savings account with a $2,400 deductible and $253 per month. But if I want to save up the money for the $2,400 deductible and get the full tax advantages, my monthly costs go up to $453 per month.

Two lousy, lousy choices. :grr:

[Yollam]

11. Health savings accounts are the exact OPPOSITE of what we need.

We need a tax increase on upper incomes to pay for SINGLE PAYER NATIONAL HEALTH CARE LIKE THEY HAVE IN EVERY OTHER CIVILIZED COUNTRY ON EARTH.

If people had enough money to save, our national savings rate would not be at -1% right now. People would not be draining equity from their homes to just keep up their living standards. The fact is, the bottom half of Americans are NOT doing well financially, and Bush's prescription is for them to save money that they don't have. BTW, his friends gouging us for gas is NOT helping!