April 3, 2006


The Health of a Nation (ALLAN B. HUBBARD, 4/03/06, NY Times)

To control health care costs, we must give consumers an incentive to spend money wisely. We can do this by encouraging the purchase of high-deductible policies and providing the same tax benefits for out-of-pocket health spending that employer-provided insurance enjoys. The overall cost to the consumer will be no greater than it is now and, in most cases, significantly lower. And no consumer is better than the American consumer at driving prices down and quality up. [...]

The accounts aren't just good for the health care system — they're a good deal for American families. Catastrophic policies have affordable premiums that bring health insurance into reach for lower-income families. And the low premiums compensate for most, if not all, of the policies' higher deductibles.

Consider the following two real policies offered by the same insurer in Columbus, Ohio, for a healthy family of four earning $50,000 a year. A Health Savings Account policy has a premium of $3,750, a deductible of $3,000, and co-insurance of 20 percent up to a maximum of $5,000. Meanwhile, a traditional Preferred Provider Organization policy has a premium of $5,800, a deductible of $1,000, and 10 percent co-insurance up to a maximum of $2,000.

If the family's medical bills totaled $1,000, they would save $1,900 by choosing the Health Savings Account policy. Under the president's policy proposals, the savings would jump to $3,200. Even if something catastrophic confronted the family with $10,000 in medical bills (fewer than 20 percent of families face costs this high in a year), under the current law, the family would pay only $400 more by choosing the Health Savings Account rather than the P.P.O. Under the president's proposals, they'd save $1,600. That's why 40 percent of these Health Savings Account-based policies are purchased by families with incomes lower than $50,000.

These affordable policies are also an attractive option for employers that might not otherwise provide health insurance. With premiums rising, only 60 percent of companies offered their workers health insurance in 2005, compared with 69 percent in 2000. A recent study showed that a third of the small businesses offering policies based on Health Savings Accounts had not previously offered their employees insurance at all.

Imagine how the world might look if patients, armed with information about the price and quality of health care, set out to find the best possible value. We saw this with Lasik eye surgery, a procedure not covered by most insurance plans. Its price fell by almost half, and the number of procedures performed increased 10-fold from 1998 to 2002, as more doctors began providing the service and customers shopped around. Informed consumers could bring down costs throughout the health care industry by choosing only high-value care, making providers raise quality and lower prices to compete for their business, and spurring the development of the kind of cost-effective innovation we see in other parts of the economy.

Heath Savings Accounts will help unleash this consumer power.

It'll be amusing to watch, say ten years from now, as conservatives toot their own horns about the trade treaties, school vouchers, and HSAs that they passed in the Bush years.

Posted by Orrin Judd at April 3, 2006 9:14 AM

Here, like many of the examples in the news media, the policies compared are probably not equivalents. The conventional PPO plan premium is so much highter because the deductible is much lower. Also, it is likely that the the insurance is more comprehensive which also causes the premium to be higher.

I will look into an HSA again this year but last year I ran into this same problem. I had a Basic Blue catastrophic plan which BB/BS wanted to convert into a more comprehensive HSA plan at a much higher premium. Even taking into account tax effects, I was still going to be out several thousand per year.

Posted by: Rick T. at April 3, 2006 10:12 AM

I've already asked my service provider if they made plans and how are they going to handle it?

Because I'm not paying full price if they're getting cash.

Posted by: Sandy P at April 3, 2006 11:06 AM

Physicians here in Boston tell me that doctors cannot charge different prices to different patients for the same service. Therefore no bargaining and no discounts for cash! Of course many doctors do negotiate or have special rates for the uninsured but it is all on the QT.

Posted by: Steve at April 3, 2006 11:37 AM

You mean Boston doesn't want to institute a progressive system?

Posted by: Sandy P at April 3, 2006 12:26 PM