Online Healthcare Innovation Forum: Are Health Savings Accounts (HSAs)  A Wave of the Future?

A penny sav’d a penny got.

William Somerville (1675-1742). The Sweet Scented Miser

Health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit or time of withdrawal.

Health Savings Accounts Definition

Surveys from  the American Health Insurance Plans (AHIP), indicate  Health Savings Accounts(HSAs) are growing like topsy.   In January 2007,  HSA  plans covered 4.5 million Americans.    In January 2012, that number grew to 13. 5 million.   In other words, HSA membership tripled. It  went up by 18% in 2011. If these trends continue,  26 million will be in HSAs by 2015,  and 40 million by 2017.

HSA Proponents

Proponents of HSAs include most Republicans, and  business leaders like Whole Foods CEO John Mackey ( “The Whole Foods Alternative to ObamaCare,“ WSJ, August 11, 2009, and  former Indiana Governor Mitch Daniels (“Hoosiers and Health Savings Accounts,” WSJ,.March 10, 2010.  These advocates  present evidence that broad HSA adoption reduces health costs by decreasing demand. 

Once consumers have “skin in the game” through HSAs linked to high deductibles, they become  prudent in using their own money,  They shop for care.  Savings for retirement are encouraged as money not spent is rolled over into the next year. Evidence to date indicates people with HSAs overwhelmingly prefer HSAs to traditional health plans.  Health insurance agents and banks support HSAs.   HSAs give agents another product to sell and banks another product to manage.  HSAs are equivalent to Individual Retirement Accounts (IRAs) and operate by many of the same rules.  Proponents claim HSAs encourage individual responsibility and choice.

HSA Opponents

Opponents, who tend to be Obamacare supporters and who benefit from the health law's policies, assert that HSAs do little to  reduce overall health costs since at least 70%  of those costs stem from people with chronic disease, not from healthy individuals who make up most of those owning HSAs.  Further, when  healthy individuals takes out HSAs,  it  increases premiums for those with disease. 

They present evidence that consumers at large have little interest in taking responsibility for reducing costs (“Consumers Don’t View Curbing Costs as Their Job in Choosing Treatments,” March 13, Kaiser Health News.  Consumers equate expensive care with good care.  They feel insurance entitles them to unlimited care. They do not want doctors to consider cost when advising treatment. In general, people don’t want the cheap test, e.g. a CT scan versus an MRI, or  a generic versus a brand name drug, even though the cheap drug may be just as effective. 

Opponents of HSAs  tend to be financial executives with health care institutions and progressives who feel that  government experts and private elitists know best,  that patients do not have sufficient intelligence or information to make their own health decisions, and that they have a paternalistic duty to protect patients.

Tweet:  HSA advocates say HSAs with high deductibles lower costs by sensitizing patients to costs; HSA critics believe HSAs may harm the sick.