August 18, 2016


Bridging the divide on Health Savings Accounts to deliver higher value health care (James C. Capretta, August 18, 2016, Real Clear Health)

An important starting point should be deregulation of the use of resources in Health Savings Accounts (HSAs). HSAs are the most prominent effort to place consumers at the center of important decision-making in the health sector. Consumers (and their employers) can make tax-preferred contributions to their HSAs, which can then be used to pay for the costs of needed medical care not covered by insurance payments. For consumers with high deductibles (often several thousand dollars), HSAs become an important financing source for paying for costs before insurance coverage kicks in.

HSA enrollees have an incentive to conserve the resources in their HSAs because it is their money. The more judicious they are in the use of their HSA funds, the larger their accounts will grow over time (they can make penalty free withdrawals for non-medical purposes at age 65 or older).

But an unspoken presumption of HSAs is that the account holders will use their funds to pay for care on a fee-for-service basis. Indeed, that is a requirement of current law and IRS regulations: HSA funds can only be withdrawn to pay for qualified medical expenses, which is to say they must be used to pay for a specific service or product purchased by the HSA account holder. But, in the best-managed care plans, care is not paid for on a piecemeal basis. Rather, the plan gets paid a fixed fee of some sort and then provides care to the enrollee according to medical need and the terms of their contract.

Despite the HSA bias toward unmanaged fee-for-service medicine, there are many examples in the marketplace today of HMOs sold in tandem with an HSA. Kaiser Permanente, for instance, enrolls many patients in its HSA-HMO plan. But these managed care offerings are adjusted to fit within the confines of today's HSA rules, which means they look and feel more like loose network plans than tightly integrated managed care products.

To begin to harness more fully the power of both consumerism and managed care in controlling costs, the rules for HSAs should be modified substantially to allow HSA holders to use their balances to purchase care from integrated systems in more creative ways than on a fee-for-service basis. For instance, HSA holders should be allowed to pay a fixed monthly fee to integrated plans to secure access to a wide variety of services, including access to electronic records and the ability to connect with their providers remotely. Moreover, HSA holders should be allowed to purchase options contracts allowing them to access an integrated plan's network and care protocols in the event they incur large medical expenses, such as in the course of cancer treatment. Giving consumers more leeway over the use of their HSA resources will allow them to exert more pressure on those supplying medical services to them, and thus also allow them to get services provided to them in ways that they prefer and at prices they find acceptable.

To many state insurance regulators, these kinds of arrangements will look suspiciously like premium payments. But if an HSA holder is already enrolled in an high-deductible insurance product, there is no reason to prevent them from using their HSA balances to secure the best possible arrangement for securing both primary and preventative care in an integrated setting and for accessing the best management possible in the case they need more expensive care.

Loosening the rules for the use of HSA accounts with managed care and other private plans could make room for creative arrangements, and it could foster greater price and quality competition among integrated care offering.

Posted by at August 18, 2016 12:40 PM