Feb. 3, 2006 – As part of its recently publicized healthcare reform plan, the White House is pushing for an expansion of controversial tax-free savings accounts linked to private health insurance. President Bush touts "health savings accounts" as a market-based remedy for the swelling cost of medical care. But public-health advocates fear the plan will widen inequalities and allow Washington to continue ignoring the systemic causes of the unaffordability crisis.
The Bush administration is promoting individual, tax-free savings accounts as a strategy to make health care "affordable and accessible." As a response to climbing medical costs for privately insured Americans, health savings accounts (HSAs) are designed to encourage households to buy into health plans that might cost more out-of-pocket in exchange for tax breaks.
But consumer advocates are concerned that HSAs will merely provide another tax shelter for the wealthy, favor healthier segments of the population, and shrink healthcare access for people in relatively poor health or with fewer financial resources.
Ron Pollack, executive director of Families USA, a healthcare reform group, told The NewStandard, "This is going to be very disappointing for those people who think this is going to save our nation money in health care, [and] it certainly is going to hurt the people who need health care the most."
Proponents of HSAs refer to them as â€œconsumer-drivenâ€ programs, structured to entice patients to control their personal healthcare expenditures.
Consumers who opt for HSAs buy non-traditional insurance plans that cost more up front before their insurance kicks in, known as "high-deductible plans." Theoretically, the high deductible rates â€“ at least $1,050 for individuals and $2,010 for families â€“ are offset by lower monthly premiums. Meanwhile, enrollees, as well as employers, can make tax-deductible contributions to HSAs â€“ set at a maximum of $2,700 per year for individuals and $5,450 for families -- which can then accumulate wealth through stocks, bonds and other investments. In employer-based versions of the plan, employees may opt out of the regular insurance pool and into an HSA-linked healthcare system.
Individuals can then withdraw money tax-free from their HSAs for healthcare expenditures.
In his State of the Union Address this week, Bush rolled out plans to further relax tax rules for HSAs and make them more easily "portable" from employer to employer.
Proponents of HSAs refer to them as "consumer-driven" programs, structured to entice patients to control their personal healthcare expenditures.
Healthcare consumer groups argue that "tax-preferred accounts" like HSAs, first established in 2003 as part of Medicare reform legislation, are an insufficient and even detrimental approach to the insurance crisis that mires millions of Americans. Opponents say HSAs and other market-oriented solutions serve just two groups: the relatively wealthy, who enjoy the tax break, and those with fewer health problems, who will likely spend less than the deductible.
Preventive care is, dollar-for-dollar, a wiser use of healthcare money than waiting until tragedy strikes.
Meanwhile, critics say, health care will become more expensive for others. For one, less-healthy people who sign up for HSAs, such as those with disabilities and chronic conditions, will pay more to cover their greater needs. Additionally, those who keep traditional coverage may see their costs rise as their insurance pools include a higher concentration of less-affluent and less-healthy individuals.
HSA critics also reject the premise of using these accounts to encourage healthcare consumers to "save," arguing the policy discourages people from taking care of themselves. A major concern is that consumers will be sold on HSAs by private insurance companies without fully understanding the consequences of high out-of-pocket costs.
Research already shows that Health Savings Accounts may not be as cost-effective as the administration claims. According to a recent study by the centrist health policy research groups Employee Benefits Research Council and the Commonwealth Institute, among patients in consumer-driven plans such as those linked to HSAs, 31 percent of participants paid more than 5 percent of their income in out-of-pocket healthcare costs and premiums. By contrast, only 12 percent of people with regular comprehensive health coverage spent the same portion on medical care.
Drawing from a survey of about 1,200 individuals, the researchers also reported that about 35 percent of consumer-driven plan enrollees put off seeking medical care to save money -- about twice the rate of those with more comprehensive coverage. The rate was even higher among those with incomes under $50,000.
Noting that preventive care is, dollar-for-dollar, a wiser use of healthcare money than waiting until tragedy strikes, Pollock pointed out that the immediate savings that HSAs supposedly yield "may well be overcompensated-for by higher costs later on for people experiencing catastrophic health problems, because they didnâ€™t get primary and preventive care."
The real culprit behind unaffordable care is not the supposedly superfluous consumption of health benefits, but the insurance companies that overcharge for essential services.
Some government regulators are wary of the hidden costs buried in HSA schemes. In a January report, the California Insurance Commissionerâ€™s office warned consumers and policymakers, "The perverse incentives HSAs create for individuals to actually forgo necessary prevention and care of chronic conditions far outweighs the available cost savings possible in the deductible portion of health expenditures."
Some analysts fear HSAs may spell doom for employer-provided healthcare coverage. The progressive research group Center of Budget and Policy Priorities warned that as the popularity of HSAs grows and the remainder of the insurance pool becomes increasingly illness-prone and costlier to insure, more employers will stop offering health insurance altogether in order to cut costs.
Enrollment in HSAs grew to over 3 million between 2004 and 2005, according to federal data. A 2005 survey by the health-policy institute Kaiser Family Foundation found that roughly one in five companies offered employees a high-deductible option -- a trend that coincides with a declining overall number of employers that provide health coverage. The group reported that the proportion of private employers offering healthcare coverage dropped from 69 percent to 60 percent between 2000 and 2005.
Edwin Park, a health-policy analyst with the Center on Budget and Policy Priorities, warned that this trend pushes more working people into the unregulated "individual insurance market," where the sicker and poorer typically fare even worse. Calling that market "the Wild, Wild West of insurance," Park said that under these programs, "insurers can generally vary premiums based on health, can exclude coverage for certain preexisting conditions, and can even refuse to provide insurance at any price."
Opposing HSAs from a patientâ€™s perspective, Carmen Balber of the California-based watchdog group Foundation for Taxpayer and Consumer Rights, said that the real culprit behind unaffordable care is not the supposedly superfluous consumption of health benefits, but the insurance companies that overcharge for essential services. Likening consumer-driven healthcare schemes to other White House-backed programs that boost insurance-industry revenues, like the Medicare Prescription Drug Plan, she commented that promoting HSAs "doesnâ€™t do anything to address the hugely inflated profits, the massive overheads that health insurers are charging."
According to data collected by the Kaiser Family Foundation, the growth in the cost of employer-sponsored premiums in 2002 was nearly triple the rate of inflation for actual medical costs, indicating that more money is being diverted into the coffers of insurance corporations.
On a broader level, healthcare reformers say the presidentâ€™s plan ignores the problem confronting a growing swath of the population that lacks any health coverage at all.
Families USA has criticized the administration for fixating on market-based initiatives that help certain groups control individual costs, while strangling funding for the broadest public healthcare program, Medicaid, which Congress hacked during the 2005-2006 budget process.
Henrie Treadwell, director of Community Voices, a nonprofit healthcare advocacy coalition and service provider, views HSAs simply as a tool for the wealthy to siphon money away from shared resources, supporting their own health and financial status "instead of paying the taxes... that are needed in order to design a system that is socially just."
Treadwell said that the solution to rising healthcare costs is to stem the problem at its source: a vast population of uninsured and underinsured Americans without access to quality care. The federal government, she said, can move toward equity only through the universal provision of primary-care health insurance.
While such a plan would require an unprecedented expansion of healthcare access, she said, "I think our government can do that, if they would take the favoritism towards the wealthy out of the equation."