HSAs -- A Balanced View

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  • 02/21/2006

Smart thinking from Bob Goldberg, CMPI’s new Vice President for Strategic Initiatives …

Meet the challenge
By Robert Goldberg
Published February 21, 2006
The Washington Times

Democrats are gearing up to make health savings accounts and Medicare battering rams against the Republican Party in in the midterm Congressional elections. Liberal think tanks and congressional Democrats first attacked the Medicare drug benefit as a “a complex program that does nothing to bring down the costs of soaring drug costs.” Now, they are trashing health savings accounts as a tax shelter for the rich without offering an alternative of their own.

They don’t have to. The Bush administration and congressional Republicans have done a poor job responding to criticisms of the Medicare drug benefit and HSAs. Conservatives and think tanks have largely stood on the sidelines as the beating has taken place. Many think they are standing on principle, but in fact it reflects a lack of vision on their part.

The fact is, most conservative think tanks and conservatives frame Medicare and health insurance in terms of reducing health-care costs. As a result, they cede the moral high ground on the health-care issue that is all about coverage and quality of care. Similarly, as I have argued before, conservative griping about the cost of the Medicare drug benefit has blinded Republicans to the fact that Medicare modernization is counterweight to single payer health care.

Liberals complain that even if HSAs become the norm, they won’t slow health-care costs because 80 percent of all health-care spending is incurred after the high deductible ($2,100) is met and would still be generated by consumers using insurers’ money instead of HSAs. That’s true. Then again, the same thing is even more true about single-payer systems or managed care plans where the out-of-pocket cost are nearly hidden.

In either case, it’s the 20 percent of people with chronic illness that generates 80 percent of the cost. Medical progress, not administrative machinations, will reduce the cost of disease.

Conservatives are doomed to lose the HSA debate because they regard them largely as cost cutting tools. To the extent that anxiety about health care coverage is at the heart of uneasiness about a vibrant economy, it behooves the Republican Party to retool their health-care message in general and their HSAs policy in particular.

Republicans must commit to expanding and protecting medical insurance for all Americans. HSAs should be hailed as one way for achieving that goal. Last year, people with incomes of $35,000 or less per year were the fastest growing segment of HSA-eligible health insurance plan purchasers. Sales to this segment grew 104 percent over 2004. MIT economist Jonathan Gruber estimates that more than 1 million working class people will lose their insurance as a result of HSAs being offered. He doesn’t explain why. Maybe the 1.5 million lower-and middle-income people, who were previously without insurance were too stupid to follow an MIT economist’s theory. They actually obtained obtain insurance that included well baby visits, prescription drugs, ob-gyn care and other medical care for about $125 a month, less than what they paid last year.

To continue to boost and maintain insurance coverage among low and middle income Americans, the Republicans should introduce legislation that allows employers to put the full amount of the deductible into HSAs in order to eliminate any out of pocket cost. Working-class and poor families should receive pre-funded debit cards for HSAs with the full deductible amount as well.

The Department of Health and Human Services could help people comparison shop by posting Medicare prices for every single service. It could work with WebMd and other private health-information services to share news about who is doing a good job delivering medical care. Further, since most people rarely spend more than a small percentage of their account, the legislation should allow unused funds — as well as any additional monies contributed by the individual to be used tax free to pay for health care premiums during periods of unemployment as well as any deductibles or co-pays.

Third, HSAs must be compared to liberal efforts to prop up a single-payer and an employer-based health system that is providing less coverage for more money each year. Liberals are responsible for the loss of health care coverage in America. Now they shriek that HSAs would leave less money for subsidizing the increasingly expensive health insurance demands of labor unions, demands that send jobs overseas. Meanwhile, HSAs are giving more working class people more coverage they can keep and call their own for less money.

HSAs are not for everybody or a panacea. They’re only part of a long-term effort to expanding access to health insurance. But if Republicans frame the HSA debate in terms of coverage, they can stop playing defense on health care. First, they have to get passionate about the value of medicine and not what it costs.

Robert Goldberg is vice president for strategic initiatives for the Center for Medicine in the Public Interest.


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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