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.
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