A Primer on HSAs (Health Savings Accounts) in time for Bush's SOTU

[swag]

From the "Drug Bill Debacle" blog. Good reading for anybody wanting to understand what Bush is touting tonight.

http://www.tpmcafe.com/story/2006/1/31/133736/774

HSA's were created by the Medicare Modernization Act of 2003 (the same bill that brought the drug debacle). You can't just go down to your local bank and open an HSA -- you have to be enrolled in an HSA-qualifying plan, or a plan with a high deductible (known in the healthy policy world as HDHPs). For an insurance plan to be eligible, the deductible must be at least $1,000 for an individual and $2,000 for a family. Except the market rate for most of these plans is about twice that -- $1,901 for single coverage and $4,070 for family, according to research by Kaiser. Be wary of Republican claims that you can save away all this money "tax-free"! That's only true if you spend it in the right place (health expenses) -- otherwise a penalty will erase any tax benefits.

Bush wants you to think that this new way of saving money for health expenses will transform health care. The evidence doesn't support these claims. Just in time for SOTU, the Commerce Department released a report that found Americans' savings rate is at its lowest since the Great Depression. Further, recent reports found that almost half of the HSA's already created are empty. As Ezra pointed out, that means even more windfall for the credit industry as Americans look to credit cards to charge their now majority out-of-pocket health expenses. Charged health expenses are no different than premiums -- if they can pay it later, why would Americans suddenly become hawk-like protectors of their dollars?

In order to transform our system into a cost-efficient paragon of free-market goodness, HSA's will need widespread adoption. But industry predictions are modest -- only 15 million Americans, or about 10 percent of all those insured, are expected to have them in five years. In the meantime, premiums will continue to increase at double digit rates, and politicians will have long turned to other proposals to stem rising health costs.

Besides paltry savings and low adoption rates, HSA's simply cannot make Americans spend less on health care. That's because only 20% of patients incur 80% of health costs. That 20% will blow their deductible regardless of whether it's $500, $1000, or $5,000. A higher deductible won't change their spending habits at all.

HSA's are complicated policy that Americans will struggle to understand. The administration has an uphill battle to fight, especially with the complete mess they made of the Medicare Drug Benefit. Democrats, however, have it easy. All they need to say is "Small fixes won't work", and "Don't let Bush make your insurance like the Medicare Drug Benefit!"

[RobertSeattle]

1. Conservative Myth: Competition/Free Market means lower prices

There is nothing in economic theory that forces this so called "competition" or "free markets" to cause lower prices. It could just as easily raise prices. Capitalists will charge the highest prices they can get away with - duhhh.

[rodeodance]

2. my concern is that Dems will use energy fighting back at this (which they

should)--but in the process, not present anything viable (or will be prevented from doing so in this Repug Congress).

[The Whiskey Priest]

3. HSAs have proved a clunker when offered

the people can see through them.....they are a large scam....Newt's Golden Rule baby