Reinhardt does the math on HSAs
Insurance: A Closer Look at HSAs
By Uwe Reinhardt
Health Affairs Blog
April 12, 2007
(In this article, Princeton economist Uwe Reinhardt takes a closer look at the financial impact of alternative scenarios for cost sharing under HSAs, which then leads to his comments about the policy implications of HSAs.)
Implication for Health Policy
Those who believe that our health system will never be efficient until patients feel serious fiscal pain as they suffer physical pain, so to speak, will find the preceding analysis reassuring. A Bloomberg wire service story reacting to the Remler-Glied article, for example, treated the low cost sharing reported by these authors as a newsworthy discovery of a “flaw” in HSA design, since if less is spent out-of-pocket, incentives to conserve costs under HSA plans must be weaker.
Rationing by income class: As my analysis illustrates, however, the very high degree of out-of-pocket spending visited on individuals and families by many of the HSA products now on the market guarantees that especially low-income Americans are very likely to tighten their belts und forego health care they would have wanted under the more comprehensive, conventional insurance products. This self-rationing by price is doubly guaranteed, because the tax-preference accorded to HSAs effectively makes health care more expensive for low-income persons than for high-income persons.
On the other hand, as Remler and Glied, and the present analysis, show clearly as well, the HSA/high-deductible construct is not likely to alter significantly the health-care behavior of high income people – for example, the readers of the Bloomberg news wire. For one, high-income individuals and families will be able to absorb high deductibles with relative ease into their higher incomes. Furthermore, as noted, the tax code actually makes health care cheaper for high-income families, relative to Americans with lower incomes. With the government picking up close to half of the health care cost of high income people under HSAs, it can be doubted that self-rationing of health care by price will play any significant role among such families if they were forced to switch from the comprehensive baseline policy to an HSA product. It is fair to wonder whether the advocates of HSAs, who usually live in high income brackets, are aware of this asymmetric impact of HSAs on the rationing of health care by price and ability to pay.
These are ethical policy issues that economists can identify but on which they cannot offer normative dicta. Policy makers, on the other hand, might wish to explore these issues further, before shifting the nation wholesale toward the HSA/high-deductible health insurance, as this product is currently designed.
http://healthaffairs.org/blog/2007/04/12/insurance-a-closer-look-at-hsas/
Comment:
By Don McCanne, MD
The numbers in Professor Reinhardt’s article cannot be disputed. (Use the link above to access the analysis.) The policy implications automatically follow.
The ethical issues raised require normative dicta and thus are beyond the realm of pure economic science. But health care reform advocates must interject ethics into the dialogue since the health of people is at stake.
Dr. Reinhardt’s objective analysis provides us with a more than adequate basis for booting from the forums on reform the HSA advocates who would require those feeling physical pain also feel fiscal pain. Once they are out of the way, we can then get serious about reform that actually benefits patients.