More Bad News for HSA Proponents

Much has been made of the fact that President Bush is preparing to announce a plan to shift the burden of paying for healthcare from risk-pooling to personal savings in the form of health savings accounts, or HSAs. For a wide variety of reasons, this is an obviously terrible idea. It won't reduce the cost of healthcare overall, it will mean higher costs specifically for the sick and the elderly, and it will likely lead to bad healthcare decisions by understandably uninformed patients. We're already seeing an outcome similar to the latter with Medicare Part D.

As if to highlight how bad of an idea this is, the Commerce Department released numbers this morning indicating that the personal savings rate has dropped into negative territory. It is, as Martin Crutsinger of the AP puts it, "the lowest level since the Great Depression."

A negative savings rate means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. For the month, the savings rate fell to 0.7 percent, the largest one-month level since a decline of 3.4 percent in August.

The 0.5 percent decline in savings for the year followed a savings rate of 1.8 percent in 2004. There have only been three years that the savings rate has fallen into negative territory. The savings rate dipped by 0.9 percent in 1932 and the record 1.5 percent decline in 1933, years when Americans exhausted their savings to try to meet expenses in the face of soaring unemployment as the country struggled with the worst economic crisis in its history.

Bush's idea -- that has not yet been fleshed out in an actual policy proposal -- is that people should increasingly leave health insurance plans and put more money into health savings accounts. While this is obviously bad health policy, it's even worse as economic policy. These latest figures from the Commerce Department show that the American people are already at the end of their ropes, dipping into savings to pay their everyday bills. But the Bush administration thinks they're going to find money in the cushions to pay for medical bills? There is no guarantee that workers will see any extra money in their paychecks if they drop their insurance coverage. So they will likely be forced to choose between their HSA, their 401(k), their children's 529, and basics like food, shelter, and clothing. This is what the GOP calls "consumer-driven healthcare."

Tags: Healthcare, HSA, Republicans, State of The Union (all tags)



semi-random remark about hsa's

well, here in new york city you see a lot of signs like "got flex left, spend it here"  and "use your health savings account here" at all the ultra expensive sunglass shops.  we're talking $700 shades tax free if you got flex left at the end of the year.  

it's not a statistic, but it seems at least like annecdotal evidence that an hsa really is a tax shelter for the wealthy.

by yass32 2006-01-30 07:44AM | 0 recs
where do we get the extra money...

I look at all the people in rural michigan, the folks that need health care reform, and this idea doesn't do squat for them...

by chanupi 2006-01-30 09:45AM | 0 recs
Re: More Bad News for HSA Proponents

This is all part of Bush's ownership society.

As in: You Break It, You Own It.

As is usual, Bush focuses everyone away from the real question:

"Figuring out how to pay rising health care costs" is the red herring. Enabling an out-of-control industry.

The real question is: "WHY?" Followed closely by "WHO?"

WHY are health care costs so high? WHY are health care costs rising SO FAST?

WHO is getting the money? WHO is gouging us for ALL THAT MONEY?

HOW do we as a nation stop this corruption of the health care delivery system?

WHO'S at fault?

Ins. companies? Pharma? Medical equipment companies? For-profit hospital companies?

All of the above?

Follow the money.

What is the supplier chain for each and every aspect of the health care industry?

When do people begin to investigate the business models of all the various components of the health care industry?

They all want the "free marketplace." Let's see how the consumer and his advocate in government react to the realities of the runaway spiral of greed and corruption in health care price gouging. What happens when you put a stick in the spokes of that wheel? Who goes flying?

Who invents a diagnostic machine? Who markets it? What is their business model? What is their markup / profit margin? What cost does the hospital incur to buy this machine? Is it a fair price? When does the hospital-as-consumer say, "No." What is the hospital's profit margin? What is the depreciation for that machine over what period of time? When is it paid for? How is that reflected in their charges? IS it reflected in their charges? How much is the ins. company willing to pick up? Or the patient? When do they say, "No. That's too expensive." Does this change for machinery that's finally paid off and all depreciation taken?

What are a Dr.'s education costs? How is he/she reimbursed over what period of time? What's the break-even point? Do their fees drop to account for their finally being free and clear? Or do they stay the same, since it's just comfortable?

What is the actual cost to Pharma companies for the R/D of any new drug? What is the cost of ingredients for each of their products? What is the actual mark-up on their products? What is a fair mark-up? What percentage of the price is simply for packaging and extensive, expensive marketing? What percentage of their marketing costs goes to bribing Doctors to prescribe a given drug? What's the quickest route to generics?

What is a fair mark-up for each player at each step in the health care racket? How far above that is every player charging? How do we unite to force them back down to a more fair mark-up, saving the American people trillions of dollars a year?

These are the areas the harsh spotlight need to be flashed on.

All the rest of the discussion is a dodge.

by EJ 2006-01-30 10:03AM | 0 recs
Re: More Bad News for HSA Proponents

The market will detrimine the price.  I am a little uncomfortable with the government controlling all of the details you explained.  I think that Washington is powerful enough as it is.

Call it a dodge, but I think all of your questions have little to do with anything of importance to this arguement.

by Classical Liberal 2006-01-30 12:57PM | 0 recs
Re: More Bad News for HSA Proponents

What market? Do you have a choice in what hospital you go to that is not coupled to your choice of doctor? Do you have an alternate supplier for any drug that has come onto the market in the last 17 years? Have you ever priced out a medical procedure and compared alternative suppliers? I couldn't even get a straight answer on what the anethesiolgy charges would be on my recent operation.

Medicine is not a free market. It's not like corn or wheat or oil.

by antiHyde 2006-01-30 03:16PM | 0 recs
I am coming around to HSA's

I am currently paying $10,000/year to insure myself, my wife and my duagther.  Imagine putting that away tax free!  I will eventually need the money anyway and after one to three years I would have enough to pay the high deductable should I need more money for medical expensies.  The HSA's certainly work well for the individual.  As far as how they will effect the market.  That is a whole nother debate.

It certainly would influence saving.

by Classical Liberal 2006-01-30 12:43PM | 0 recs
Re: I am coming around to HSA's

How well will that HSA work if you need an operation this year? The hospital alone charged $13,000 for my  simple gall bladder removal. This doesn't include the surgeon, the anesthesiologist, the pathologist, the radiologist and their labs. Nor the internist who diagnosed the condition. I haven't added all the charges and this was a simple operation. Several years ago my mother-in-law was in intensive care for four days. The hospital charge was $73,000. Luckily for us, I only paid around $280 and she paid zero (Medicare). By the way, Blue Cross only had to pay the hospital $7300 under PPO contract. I paid $100 deductible. But YOU would pay the full $13,000.

As was pointed out above, if the hospital breaks even or makes a small profit at $7300 (and why would they sign the contract if they were losing money under it), how can they justify charging the uninsured $13,000?

by antiHyde 2006-01-30 03:10PM | 0 recs
Re: I am coming around to HSA's

NO - I would pay up to $10,000 that would be my deductable.  Insurance with that high of a deductable is dirt cheap.  I would have to get a second mortgage to cover the 10,000 only if it happened in the first year.

by Classical Liberal 2006-01-31 03:03AM | 0 recs
Re: I am coming around to HSA's

Certainly good for which individuals? The relatively healthy ones? Sure. No one's arguing that. The problems arise when that relatively healthy individual is in a sudden unexpected accident where no one is at fault, or contracts an unexpected illness. And HSAs are terrible for those already in poor health with huge medical bills since, with all of the healthy people pulled out of the risk-pooled insurance system, insurance premiums have nowhere to go but up.

As for me, I'm a progressive. I believe that we're better off when we come together as a society rather than trying to go it alone as individuals. You're a classical economic liberal and free marketeer. I get it. Every man for himself, the invisible hand of the market, etc, etc. Of course you like HSAs. And of course I don't.

by Scott Shields 2006-01-30 04:27PM | 0 recs
Re: I am coming around to HSA's

Most people are healthy for the majority of thier lives.  Lots of time to save for when they are sick!  HSA's are not for the people already sick of course new insurance won't cover those people either so I am not sure of your point.

For sure we have to help the people unable to help themselves, but first we have to be responsible for ourselves so that when we do get sick we are not adding to the cost of health care for everyone else.

I see where you are coming from, but I think you are just giving up your freedoms for a little bit of security.

by Classical Liberal 2006-01-31 06:41AM | 0 recs
Re: I am coming around to HSA's

" are just giving up your freedoms for a little bit of security."

Give me a break. That has to be one of the most dishonest, disingenuous uses of that quote I've ever seen. Franklin was talking about political freedom, not freedom in the economic sense. And if HSAs are what you consider freedom, well God bless you, but that's not the way I view the world.

by Scott Shields 2006-01-31 03:24PM | 0 recs
Re: I am coming around to HSA's

I think that the statement can most certainly be used in the context in which I did.  Let's see if we can come to some kind of agreement here. Let me know where we go different ways.  

  1. Freedom is having choices.
  2. Choices have consequences.
  3. The level of freedom of the individual can be placed on a scale against his own security.  For example give people the choice how to spend their money and you put their security in their hands.  Force them to save (remove some level of freedom) and they will be more secure.
  4.  A certain level of freedom is expectable to take away from the individual for the greater good of the whole and arguably to protect themselves.

When it comes to ideas like Universal Healthcare it is imperative that we not forget that we are trading some freedom for security.  

by Classical Liberal 2006-01-31 06:11PM | 0 recs
Re: More Bad News for HSA Proponents

Bush must live on planet Mars.  I would hope he would lead and his house and senate follow by giving up their health insurance.   My mother had a heart attack.  30 days in intensive care = $100,000.00.  So, lets see at $200/mo x 12 mos x 41 years that ought to cover it just in time to pay for real old age diseases.  This man really has no clue.  They can't even afford freakin gas for their cars.

by oakland 2006-01-31 04:30PM | 0 recs


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