How Much More Cost Sharing Will Health Savings Accounts Bring?
By Dahlia K. Remler and Sherry A. Glied
Health Affairs
July/August 2006
Proponents of health savings accounts (HSAs) contend that they will reduce medical expenditures. In practice, however, the effect of HSAs, and the high-deductible health plans that must accompany them, will depend on the actual provisions of those plans and of the plans they replace. We show that typical plans in the market today already contain substantial cost sharing.
We find that many HSA/high-deductible arrangements would actually reduce cost sharing for many groups. In particular, the group responsible for half of all medical spending would see no change or a decline in cost sharing at the margin and on average.
http://content.healthaffairs.org/cgi/content/abstract/25/4/1070
Comment:
By Don McCanne, MD
The rationale given for health savings accounts (HSAs) with HSA-qualified high deductible health plans (HDHPs) is that the HSA controls excess health care spending by making the patient sensitive to the costs while the HDHP simultaneously provides protection against catastrophic financial loss. Does it work?
This study demonstrates that insurance products have already evolved into models that create price sensitivity through deductibles and coinsurance.
For the 80 percent of individuals who use 20 percent of health care services, the HSA component provides about the same amount of financial disincentive to care as do our other current insurance products.
Much more important is the maximum out-of-pocket (OOP) spending that is required before the HSA-qualified HDHP provides “100 percent coverage” of all remaining costs (though only theoretically). Once the maximum is reached, price sensitivity is removed from the 20 percent of people who use 80 percent of our health care services. Obviously then, under the HSA/HDHP model, price sensitivity has almost no impact on much of our health care spending. In fact, the coinsurance of current PPO-type coverage actually may provide greater cost sensitivity for the larger medical bills since the maximum OOP spending is frequently greater or even without limit.
So what would you have to do to create HSA/HDHP cost sensitivity for where the real spending occurs? You would have to establish a very high OOP spending maximum before 100 percent coverage kicks in. Even then, a sick person wants relief, not discounts. The problem is that anyone who needs a significant amount of health care would then be exposed to catastrophic losses. The model doesn’t work.
The good news is that the policy community understands the fatal flaws in the HSA/HDHP model. Now we need to get the politicians to quit flogging that dead horse and get on with real reform. Maybe we can convince them that we’re serious – this November.