Your Humble Blogger hasn’t read the State of the Union address yet, and perhaps I will and perhaps I won’t, but I’ve been meaning to mention something about Health Savings Accounts, which I understand Our Only President continues to push, although he didn’t make so much of a big deal about them in the speech. The idea of the HSA is to move from an insurer-based system to a savings-based system, where a larger proportion of health costs will be borne by the patient, out of savings, rather than by the insurer, out of premiums.
It seems to me that it’s instructive to think about grasshoppers and ants, here. If you give people the option of a good HSA (and I’m leaving aside the likelihood that the HSAs offered will, in fact, be lousy scams), a decent old-fashioned pay-per-service insurance policy, or an HMO, a grasshopper will look at his immediate interests, which involve paying as little out of pocket as possible. Well, the best solution there is to get the HSA, which should have the lowest premium, and then underfund the actual HSA. That leaves the grasshopper with more pelf in his pockets, immediately spent on whiskey, she-grasshoppers and song, and then if he gets sick, well, he’ll be dead and/or impoverished, but then that’s what being a grasshopper is like. The ant will look at the long-term chances, and be willing to pay more in the short term for better insurance in the long term. Depending on how that’s set up, it’s possible that will be the HSA combined with overfunding the account, but then it’s possible that will be the high HMO premiums and unlimited HMO care (depending on your HMO and where you live). Either way, the ant isn’t spending any less money in the short-term, nor is the ant getting any better care.
So, how are these really helpful? Well, the people who are already getting extraordinary care have the possibility that, forty years from now, they’ll get a windfall when they are allowed to use the accumulated HSA to buy a new air car. Grasshoppers, who are probably uninsured now, get to pay small premiums for health insurance they can’t afford to use. The idea of our insurer-based health care system, it seems to me, is that when grasshoppers get sick, we aren’t going to let them just be sick, so lets, um, encourage them to have health insurance by not giving them much choice about it. Because otherwise, the hospitals are going to give free care to grasshoppers, and that screws up the economics. Or they aren’t going to give free care to grasshoppers, and we’ll have sick grasshoppers all over the place, and that screws up the property values.
And, of course, an ant with no capital is a grasshopper, not by temperament, but because you can’t save up nothing all summer and have something in the winter. And, as I am by temperament a grasshopper, I will point out that the ant can save up all summer and get squashed when the leaves fall. The idea of putting money away, tax-deferred, is lovely, but the idea that I will someday get that money, or that the money will be useful if I do get it, or that the 2045 health care system will be so much like our present one that my plans for those expenses are sensible, well, that all strikes me as quaint and provincial. All of which is merely to point out that any system which ignores grasshoppers is just silly; there will always be grasshoppers, by temperament or by circumstance. We can, and undoubtedly should, encourage people to be ants, but then we should encourage people to be law-abiding charity-giving educated civic participants, too. This is one liberal who doesn’t believe in the perfectibility of human nature, not to put money on it.
So. Even though I think a well-designed, honest, careful and moderate HSA system (unlike any I can imagine Our Only President and his cabal of incompetents and crooks proposing, or the corrupt Republican Congressional Leadership passing) has some theoretical merit, I stand opposed to it on the grounds that as a shift from an insurer-based system to a savings-based system, it seems to be unable to deal with those who do not have savings, for whatever reason. Now, I’m agin the insurer-based system for a variety of reasons, mostly that it appears to this grasshopper to be entirely unsustainable over more than a generation, but fundamentally, the answer cannot be a shift to savings accounts, tax-free or no. My own preference would be a state system, for all the problems inherent in that. I know that’s not popular, and I accept that. But neither is the insurer-based system popular, right?
chazak, chazak, v’nitchazek,
-Vardibidian.
Correct me if I’m wrong. Seriously. But my sense is that health services as a system are based on these facts: 1) some people will need expensive care and some won’t, and 2) we don’t know which is which. This is the kind of situation that insurance is designed for, yes? Insurance (or a state system, which is basically insurance without insurance companies) lets us average the risk out for everyone.
Seems like HSA’s give that up. I guess they’re based on the idea that we pump extra money into the system across the board (such that the least common denominator is still sufficient for the people who do need expensive care) and then the people who don’t need it get to take the money back out again. Or is the idea that, sooner or later, everyone needs expensive care?
Or is the idea that the risk is predictable, such that the people who expect to need expensive care can save more?
I’m not buying any of these.
insurers. on a technicality, a friend was forced from one agent to another with the same health care plan. said plan took the opportunity to drop said friend because of an ongoing non-generic pharmaceutical requirement.
health savings. before they were HSAs, hospitals referred to this financial vehicle by its more common names, house and income attachment. say, if we’re going to make everybody pay for doctors with pocket money, we should make sure there’s no loophole for medical needs in the bankruptcy law.
state run system. you were saying something about that. i’m sorry, i couldn’t hear you, my ears are stuffed with $100 bills.
I think that part of the idea is that everybody will need expensive care sooner or later, so instead of viewing health insurance as a form of social insurance, where the group averages out the risk for everyone, it’s averaging out your risk over time. Viewed that way, it’s more like car insurance, where the idea is not that you will take out more than you put in, but that you would rather pay a hundred dollars every three months (or whatever) than pay $1500 every four years. Or something. Actually, I can’t figure out car insurance, either.
Anyway, the idea is not that if you are healthy, you get the money back, because like an IRA, there are substantial penalties for taking it out. No, the money will roll over (unlike the old MSAs, where the money went poof!) until you need it or you die. If you die with a lot of money in your HSA, you win! The money can then be converted to cash, and you can be buried with it.
Or, honestly more likely, you can then leave the money to your relatives tax-free, thus allowing affluent people to never pay any taxes ever. But they haven’t announced that part yet.
The other thing to keep in mind about the whole health insurance debate is that much of that portion of the Right which is arguing from actual theory rather than greed is basing their ideas on the Moral Hazard idea. That is, the idea that if poor people have access to good health care that they will wallow in it like the pigs they are, rather than making sensible choices the way rich people do. No, seriously. Well, and I’m overstating it, but generally, there’s this game theory idea that makes a lot of sense from a game theory perspective that by transferring costs from the insurer to the patient, the patient will naturally keep a sharper eye on her own budget and not fall for expensive, useless pretty health care.
There is something to this. I suspect that it is true that if we shift costs to individuals, there will be a fair amount less health care. So if the problem with our health care system is that there is too much care, then this would be a sensible way to decrease it.
Um, and then there’s the universe I perceive, which is different from that.
Thanks,
-V.
Oh, and one other thing I had meant to put in the original. Another aspect of a shift from an insurer-based system to a savings-based system is that the collective bargaining that the insurers due would be much less powerful. Now, that system as it exists now (employer-based and private) completely screws anybody who is not part of a big collective bargaining unit, and does not really provide entry into the unit other than through employment or vast personal expense. Still, for the people it helps, it helps them a lot. A savings-based system would not have much less emphasis on that collective bargaining.
Of course, Our Only President and his cabal of crooks and incompetents don’t believe in collective bargaining, either for workers or nations, and certainly not for medical expenses, so it’s not a great surprise that their preferred system doesn’t use its power.
Thanks again,
-V.
the troubles with encouraging people with little money to lowball their medical care and more importantly that of their children … list left to imagination. let’s just say that at that point we’re talking about a public health problem, not a question of when to get the next boob job.
oh gosh i’m sorry. i said “public health” – there’s no such thing anymore. epidemics, sanitation, and prevention are micro concerns now. people with training and information need to keep their noses out of consumers’ business.
on the QT i was just told by a big time surgeon and administrator that co-pays are fake – most of them don’t even cover the administrative costs – almost totally a game-inspired control on patient behavior, demanded by the insurers. conversations on proper pricing structures can reach far orbit.
As I understand it, the point is to use HSA money to pay for small, discretionary costs, coupled with high-deductable insurance for large, unavoidable costs. The main advantage is that it keeps the small discretionary costs down, by giving people an incentive to try to minimize them. It doesn’t really address large unavoidable costs, but given that you can’t avoid them, what are ya gonna do?
on dailykos i found in this batch a comment:
… This is not a conspiracy to merely enrich the insurance companies, this is really a way of offering a less-than-ideal product for healthy people who need buy their own insurance … [such as] small business and individuals.
Yes, people will become much more aware of true medical costs when they are forced to pay for it. Hopefully that will finally force people to realize just how screwed up our system really is. … Most people have no clue how much health care really costs. … HSA’s will not solve this, nor is it anything new to offer healthy people cheaper plans for being healthy. This is not going to make insurance companies raise all their rates on old, sick people. All it is is a feeble attempt at making a swipe at solving one small area of the health-care-cost crisis.
They’re not even new. HSA’s are just a revamping of a traditional insurance offering. Let’s review a little history.
HSA’s are like the old kind of insurance that used to be common. It was called Catastrophic and protected you against massive medical bills in the event of a medical catastrophy. It used to be that that was all most people needed. Regular health care was not that horribly expensive. You could see the doctor and even get an x-ray in the hospital without having to get a second mortgage.
Then health care costs started to spiral out of control and regularly priced health care went out of the range of all but the rich. One of the first big responses was essentially a basic insurance where you paid a portion (co-insurance) and the insurance company paid a portion up to a set limit (your deductable).
Then insurance companies tried to directly manage care and thus were born HMO’s. These were a massive failure because people felt out of control of their own health care decisions.
So, PPO’s and other modified forms of the basic insurance plan were formed. You pay larger premiums and promise to go to a specific set of doctors and hospitals. You only pay co-pays for basic visits and go back to the old pay a portion up to a limit system of the basic insurance.
HSA’s are trying to update the old catastrophic insurance plans by making your deposits in an account pre-tax and you can then use those deposits to pay for medical care which you are 100% responsible for up to a large deductable. ($5,000-$10,000 or so). What this means is that you can save for your medical care pre-tax, but you are responsible for it except if you get into a bad accident or some other catastrophic medical need that would go over your deductable. The insurance company then uses the deposits in the HSA accounts like a bank uses deposits in a savings account. It’s still your money, but they get to borrow it while you don’t need it.
These are obviously only good for healthy people, or people who make a lot of cash and don’t plan on getting too sick. They’re not for everyone, nor are they a panacea for the health care crisis. They do allow small companies that can’t afford regular insurance to at least offer a cheap form of catastrophic insurance to their employees, but it’s no substitute for a comprehensive medical system overhaul.
Don’t buy either of the hypes, that it will solve our health care crisis, or that it’s an evil plot by the insurance companies to seperate the flock for better fleecing.
Plane Crazy
If there is, in fact, a large national problem involving too much medical care going to small, discretionary items, then it makes sense for the government to encourage HSAs. And if, in fact, there is no large national problem involving people having insufficient access to medical care, then it makes sense for the government to stay out of the basic economy of health care, and just fiddle around the edges, as HSAs do.
The first step is diagnosis, right?
Thanks,
-V.
Oh, and Plane Crazy is not far from right, although she (or he) (or it) doesn’t address why we should expect people to actually put that $5,000-10,000 in their HSAs, when empirically (diagnostically) people don’t, and what happens if they don’t.
Thanks again,
-V.
Who benefits from HSAs, and particularly from the parts where contributions are discretionary and tax-free and withdrawals must be justified and documented? These are not necessary parts of a system of self-insurance.
For example, the plan managers (insurance companies) get a bunch of cash to play with and gradually accumulate a huge amount of health data. Aetna has every receipt for every doctor we’ve seen in the past 2 years, every drug we’ve bought, and every vaguely medically-related item we’ve bought. It’s an aggregate and duplicate of data that was previously incomplete and spread among Blue Cross and five pharmacies. They also have an average of $1000 from us to play with. Not that I don’t wish Aetna all the best and want to give them access to all of this personal information and a large chunk of money…
And the way the money works, it deducts $300 from our federal taxes, gives $150 to Aetna, and $150 to us. The richer we are (because richer correlates well with more plan contributions, higher tax rates, and age — equaling more health care expenses), the more gets removed from our federal taxes, given to us, and given to Aetna. It’s a huge subsidy for Aetna, a tax break scaled toward the rich, and a further reduction in federal tax revenues. All of which are noble goals, of course, but which wouldn’t necessarily have much public support if done directly.
I’d expect that the effects on health care consumption and quality are pretty minor compared to the changing flow of data and money.