Consumer-driven health care is beginning to show real signs of
progress. A recent survey by America’s Health Insurance Plans found that
the number of people with a health savings account (HSA) tripled,
from 1 million to 3 million, in barely a year’s time. Companies are
finding that high-deductible plans coupled with an HSA cost less.
In his recent visit to Milwaukee, President Bush pointed to the
hamburger giant Wendy’s, which saw an increase of only 1 percent in
its premiums after switching to an HSA plan.
Although I haven’t had much to cheer about regarding the White
House as of late, health care is an exception. President Bush has
released a relatively bold agenda that would add steam to consumer-driven
health care. The proposals include allowing all taxes, including
payroll taxes, to be deducted from HSA contributions; putting
individually-purchased health insurance on a more equal footing
with employer-purchased insurance by permitting those who buy an
individual HSA policy to deduct the cost of the premium from their
income taxes; and also putting individual-purchased insurance on an
equal footing with that of large employers by allowing individuals
to purchase their insurance out of state.
Despite the progress, the political left refuses to acknowledge
consumer-driven health care’s promise and persists in promoting
misconceptions about it. Jason Furman, of the liberal Center for
Budget and Policy Priorities, in a missive against HSAs, complained that:
Our nation is suffering from two chronic health
challenges: spiraling insurance premiums and 46 million Americans
with no coverage at all. Just since 2000, premiums have skyrocketed
by 73% and 6 million more people have become uninsured. The
President’s Health Savings Account “solution” would likely make
these problems even worse.
Actually, consumer-driven health insurance provides relief from
higher premiums. The Deloitte Center for Health Solutions released
a survey showing that while premiums for more
traditional plans rose between 6.6 and 7.5 percent last year,
premiums for consumer driven plans rose only 2.6 percent. That’s
lower than the 2005 inflation rate of 3.4 percent.
Furman also overlooks improvement in the insured/uninsured
numbers since HSAs came on line in 2004. While Census Bureau
statistics show the number of uninsured has
increased by 6 million since 2000, in 2004 the growth in the
uninsured slowed. In the previous three years, the growth in the
uninsured had ranged from about 3.2 percent to 5.7 percent; in
2004, it was under 2 percent. Another promising development in 2004
was that the total number of privately insured and those with
employer-based insurance increased for the first time in five
years. The arrival of a lower cost insurance product in the form of
HSAs is likely one factor leading to these positive
developments.
In reaction to Bush’s agenda, many liberals like Ted Kennedy
trotted out the increasingly tired “only for the healthy and the
wealthy” charge against HSAs. While it is tempting to go
through all the evidence showing it isn’t true, it may be more
instructive to consider the example of Wendy’s touted by Bush. The
average worker at Wendy’s is likely part of the “working poor.” And
since the health of the poor tends to be worse than that of general
population, chances are that Wendy’s employees are a bit sicker on
average. In other words, Wendy’s is an excellent example of
consumer-driven plans not being primarily for the healthy
and the wealthy.
Furthermore, other parts of Bush’s health care agenda make HSAs
more accessible for the poor and sick. Bush’s agenda permits a
low-income family to take a refundable tax credit to purchase an
HSA. It also allows small businesses and civic and religious groups
to form associations that enable them to pool their resources to
purchase insurance for their members. Finally, Bush enables
employers to put additional contributions in the HSA of an employee
with a chronic health condition.
Despite all the promising news, the path toward a more
consumer-oriented health care system will not be without some
serious obstacles. Many people are still stuck in an “entitlement”
mentality regarding health care, for years accustomed to employers
and insurance companies picking up the tab. A recent article in the Chicago Tribune examined
the experience of Lutheran Social Services, which switched to an
HSA plan last July. On balance, it has not been positive:
Larry Lutey, the agency’s vice president of human
resources, said many employees “don’t like the HSA, to be quite
frank,” because it’s a new way of thinking about buying medical
services, and workers think it costs them more. “If my position had
been an elective one,” he added, “I would have been voted out of
office this year.”
Lutey said employees are unhappy with HSAs because “it feels
like they’re paying more upfront. The perception is, this is a very
expensive type of plan. Even though there is money in [employee]
accounts to cover these expenses, people end up feeling they’re
paying more out of pocket.”
As the example of Whole Foods shows, companies can minimize such problems
if they make a serious effort to educate employees about the switch
to a consumer-driven plan. Nevertheless, there will be both some
resistance and resentment as people change from health-care
dependents to health-care consumers.
Despite some problems, consumer-driven health care can be
expected to grow as it lowers costs and gives people more control
over their health care choices. Congress can move the process along
even more if it acts on Bush’s health care agenda.
David Hogberg is a senior research analyst at the
Capital
Research Center. He also hosts his own website, Hog
Haven.
