April 25, 2023

THE FUTURE OF PUBLIC POLICY IS ALWAYS THE PAST OF W:

Health Savings Accounts at 20 (James C. Capretta, 4/24/23, AEIdeas)

The 2003 federal law which created the Medicare prescription drug benefit also authorized consumer-directed Health Savings Accounts (HSAs). Twenty years on, HSAs are now frequently offered with employer-sponsored plans and have become an accepted feature of the overall health insurance landscape. However, despite high take-up and growing reserves, HSAs have yet to galvanize consumer pressure and force the suppliers of services to lower their prices. [...]

To build new momentum for consumer-directed health care, some HSA proponents want to make it easier for Americans to contribute to the accounts. Their priority is to sever the connection to HDHPs, and, in some cases, to eliminate altogether the need for enrollment in an insurance plan.

Based on the evidence, this change would lessen the cost savings from HDHPs by removing the incentive for employers to offer such coverage. With lower deductibles, HSAs would become a vehicle for financing care and not a spur for more vigorous price competition.

Bringing more pricing discipline to health care will require changes that go beyond HSAs. In particular, consumers need to be able to compare prices for bundles of shoppable services, which will require standardizing what is being priced. Consumers also need strong financial incentives to select lower priced care even when they have already satisfied their insurance deductibles. Those incentives will not exist without changes to how typical insurance plans operate today.  

To make HSAs more attractive, new reforms should focus on making them more useful vehicles for paying expenses not insured by Medicare. In particular, many Americans remain uninsured for the high costs of long-term care. HSAs could partially fill the gap for some retirees by allowing them to shelter some of their assets from Medicaid if they first use a minimum amount from their HSA reserves before turning to public assistance. Workers would then have stronger incentives to build their HSA reserves while still employed.

Posted by at April 25, 2023 3:11 PM

  

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