Health Savings Accounts Taking Off in the Market — Despite Misgivings by Some

IN THIS ISSUE:

 HSA Debates in Washington, DC

 HSAs – "Too Powerful to Ignore"

 HSAs – "Increasingly Attractive"

 HSAs – "Exceeding Expectations"

 HSAs – Leading to Cash-Only Physician Practice

 

HSA Debates in Washington, DC

 

I spoke at several conferences and meetings last week. Two were particularly interesting. The first was a debate on "The Implications of Consumer Directed Health Care" between myself and Dr. Peter Kongstvedt of Cap Gemini at the National Managed Health Care Congress (NMHCC). The next was a similar debate I had with Len Burman of the Urban Institute on HSAs at a meeting at the National Academy of Sciences.

 

I'm delighted that these groups find merit in presenting alternative points of view. That has rarely happened in the past. Health policy has traditionally been done by like-minded people who never disagree with one another. Programs are usually stacked with speakers who simply echo the same bromides. The result is policy based on slogans rather than analysis. Things like, "A Built Bed is a Filled Bed" to justify Certificate of Need, or "Fee-for-Service Medicine is Inherently Inflationary" to justify Managed Care. It doesn't matter how misguided such statements may be. Because they are short and breezy and sound authoritative, the group-think world of health policy has never questioned the truth of the slogan. The sloganeering continues with expressions like "HSAs are Only Good for the Healthy and Wealthy."

 

Fortunately, this time around there is an interest in hearing opposing points of view. I think we've pretty well discredited The Healthy and Wealthy argument, and it is no longer the centerpiece of the opposition. Concern about selection still comes up, of course. But in these debates, Len Burman talked as much about "moral hazard" as he did about selection. Moral hazard is the flip side of selection. Selection means that people choose only those benefits they want to have. Moral hazard means people get benefits they don't especially want, but once they have them they use them. Both are illustrations of how insurance distorts normal market effects.

 

Peter Kongstvedt's approach to selection was citing a study of Humana's HRA experience that was published in a special edition of "Health Services Research" last summer. This gave me an opportunity to suggest to him that he should also read the half dozen other studies in the same volume which indicate selection is not much of a problem. He also would have discovered that Humana's initial benefit design allowed no rollover of unspent funds and confined spending to services that are covered by the underlying insurance policy. These design flaws have since been corrected. "Selection" is indeed a problem – when researchers select only those studies that support their bias.

 

Most interesting, however, was that both gentlemen were reduced to arguing that people can't make their own health care decisions. In fact, in both cases the argument went something like this: Now, the people in this audience are well-educated, intelligent, and knowledgeable about health care. I don't doubt that you all would do a fine job of controlling your own health care resources. But most of America isn't as smart as you are. They will be lost in the woods. Let's take pity on these poor souls and make sure someone intelligent is controlling their care.

 

What a clever approach – win over the audience with flattery and then use the implicit elitism to divide the population into "us versus them" – "we" are smart enough, but "they" are not. I would like to be present when one of these fellows goes to a different setting and explains to the audience that they are not smart enough to control their own resources – that someone else will have to do it for them.

 

The next night I spoke to one such audience – the Leesburg, Virginia Rotary Club. The Rotarians did not seem to feel any lack of adequacy. In fact they seemed to be eager to sign-on to consumer driven health care even though few of them had graduate degrees and fewer still worked in health policy.

SOURCE: There isn't much to share here, but the agenda and speakers for the NMHCC may be found at http://www.nmhcc.com

 

HSAs – "Too Powerful to Ignore"

 

Meanwhile, it doesn't much matter that the reactionaries are quivering. Consumer driven health is on a roll. Leah Carlson of "Employee Benefit News" attributes a diminishing of health trends at least in part to the growth of consumerism. She reports that PPO enrollment is still dominant, but cites a Hewitt study showing that 57% of employers "are considering HSAs." She also says, "Just 4% of Americans are enrolled in a health savings account, according to a recent study by the Kaiser Family Foundation and Harvard's School of Public Health." I'm not sure about the number, but 4% in one year seems like a whole lot to me. The article points out that, according to AHIP's survey, 79% of the HSAs sold in the first nine months of 2004 went to individuals, 18% to small groups, and a mere 3% went to large groups. Still, according to a Watson Wyatt survey, relatively few people (29%) are familiar with HSAs, while 61% are not yet familiar with them. Watson Wyatt's Ted Chien says, "The whole concept of account-based plans is really catching on. The potential of HSAs to lower costs – when combined with financial incentives to improve employee health and change health care purchasing behavior – is too powerful to ignore."

SOURCE: http://www.benefitnews.com/pfv.cfm?id=7181

 

HSAs – "Increasingly Attractive"

 

Writing in "AMNews," Joel Finkelstein also reports that consumer driven health is "increasingly attractive." He says, "The past year has changed many brokers' opinions about just how far consumer-driven offerings are from broader adoption. One year ago, 80% said these plans were five or more years away from being a mainstream option, but the new [NAHU] survey shows that 77% think the plans will be adopted more widely in the near future." He also interviews Mila Kofman of Georgetown University's Health Policy Institute about a report from one company that "29% of HSAs sold by one company were purchased by people with household incomes of less than $50,000." Her reply is that, "It's very dangerous if low- or even moderate-income people are buying these things." Sheeeeesh. Sometimes you just can't win. The liberals have been predicting that HSAs would appeal only to the "Healthy and Wealthy." Now that lower-income families are buying them, they still aren't happy.

SOURCE: http://www.ama-assn.org/amednews/2005/03/07/gvsc0307.htm

 

HSAs – "Exceeding Expectations"

 

HSAs are even catching on in Vermont, which has little competition and a small population, according to the "Times Argus." An article by George Malek of the state Chamber reports that the Blue Cross Blue Shield HSA's enrollment has "exceeded the company's expectations." He adds, "The VACE-Cigna small business group began offering them Jan 1, 2005, and had a similar experience. More than 13 percent of participants in the program changed to the HSA-compliant policy."

SOURCE: http://www.timesargus.com/apps/pbcs.dll/article?AID=/20050310/NEWS/503100311/100

 

HSAs – Leading to Cash-Only Physician Practice

 

Finally, "World Magazine" celebrates the growing trend of physicians going to cash-only practices in an article by Lynn Vincent. The article poses it as a response to many trends, including rising professional liability costs, the growth in the uninsured, rising administrative costs, and new forms of payment such as HSAs. The article cites Dr. Daniel Cosgrove who switched from a family PPO plan that cost $900/month to an HSA-qualified plan. He says, "Now for less than $5,000 a year, I can get catastrophic coverage – and use the money I'm saving to cover the deductible or pay for preventive care." The article goes on to cite Dr. Robert Berry of Greeneville, TN, and Seattle-based SimpleCare as examples of the new era of cash-only physician practices.

SOURCE: http://www.worldmag.com/displayarticle.cfm?id=10408

 

Please send all comments/questions directly to me at gmscan@aol.com.

 

"Consumer Choice Matters" is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.

 

If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.

 

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

 

 

 

 

 

 

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IN THIS ISSUE:

 HSA Debates in Washington, DC

 HSAs – "Too Powerful to Ignore"

 HSAs – "Increasingly Attractive"

 HSAs – "Exceeding Expectations"

 HSAs – Leading to Cash-Only Physician Practice

 

HSA Debates in Washington, DC

 

I spoke at several conferences and meetings last week. Two were particularly interesting. The first was a debate on "The Implications of Consumer Directed Health Care" between myself and Dr. Peter Kongstvedt of Cap Gemini at the National Managed Health Care Congress (NMHCC). The next was a similar debate I had with Len Burman of the Urban Institute on HSAs at a meeting at the National Academy of Sciences.

 

I'm delighted that these groups find merit in presenting alternative points of view. That has rarely happened in the past. Health policy has traditionally been done by like-minded people who never disagree with one another. Programs are usually stacked with speakers who simply echo the same bromides. The result is policy based on slogans rather than analysis. Things like, "A Built Bed is a Filled Bed" to justify Certificate of Need, or "Fee-for-Service Medicine is Inherently Inflationary" to justify Managed Care. It doesn't matter how misguided such statements may be. Because they are short and breezy and sound authoritative, the group-think world of health policy has never questioned the truth of the slogan. The sloganeering continues with expressions like "HSAs are Only Good for the Healthy and Wealthy."

 

Fortunately, this time around there is an interest in hearing opposing points of view. I think we've pretty well discredited The Healthy and Wealthy argument, and it is no longer the centerpiece of the opposition. Concern about selection still comes up, of course. But in these debates, Len Burman talked as much about "moral hazard" as he did about selection. Moral hazard is the flip side of selection. Selection means that people choose only those benefits they want to have. Moral hazard means people get benefits they don't especially want, but once they have them they use them. Both are illustrations of how insurance distorts normal market effects.

 

Peter Kongstvedt's approach to selection was citing a study of Humana's HRA experience that was published in a special edition of "Health Services Research" last summer. This gave me an opportunity to suggest to him that he should also read the half dozen other studies in the same volume which indicate selection is not much of a problem. He also would have discovered that Humana's initial benefit design allowed no rollover of unspent funds and confined spending to services that are covered by the underlying insurance policy. These design flaws have since been corrected. "Selection" is indeed a problem – when researchers select only those studies that support their bias.

 

Most interesting, however, was that both gentlemen were reduced to arguing that people can't make their own health care decisions. In fact, in both cases the argument went something like this: Now, the people in this audience are well-educated, intelligent, and knowledgeable about health care. I don't doubt that you all would do a fine job of controlling your own health care resources. But most of America isn't as smart as you are. They will be lost in the woods. Let's take pity on these poor souls and make sure someone intelligent is controlling their care.

 

What a clever approach – win over the audience with flattery and then use the implicit elitism to divide the population into "us versus them" – "we" are smart enough, but "they" are not. I would like to be present when one of these fellows goes to a different setting and explains to the audience that they are not smart enough to control their own resources – that someone else will have to do it for them.

 

The next night I spoke to one such audience – the Leesburg, Virginia Rotary Club. The Rotarians did not seem to feel any lack of adequacy. In fact they seemed to be eager to sign-on to consumer driven health care even though few of them had graduate degrees and fewer still worked in health policy.

SOURCE: There isn't much to share here, but the agenda and speakers for the NMHCC may be found at http://www.nmhcc.com

 

HSAs – "Too Powerful to Ignore"

 

Meanwhile, it doesn't much matter that the reactionaries are quivering. Consumer driven health is on a roll. Leah Carlson of "Employee Benefit News" attributes a diminishing of health trends at least in part to the growth of consumerism. She reports that PPO enrollment is still dominant, but cites a Hewitt study showing that 57% of employers "are considering HSAs." She also says, "Just 4% of Americans are enrolled in a health savings account, according to a recent study by the Kaiser Family Foundation and Harvard's School of Public Health." I'm not sure about the number, but 4% in one year seems like a whole lot to me. The article points out that, according to AHIP's survey, 79% of the HSAs sold in the first nine months of 2004 went to individuals, 18% to small groups, and a mere 3% went to large groups. Still, according to a Watson Wyatt survey, relatively few people (29%) are familiar with HSAs, while 61% are not yet familiar with them. Watson Wyatt's Ted Chien says, "The whole concept of account-based plans is really catching on. The potential of HSAs to lower costs – when combined with financial incentives to improve employee health and change health care purchasing behavior – is too powerful to ignore."

SOURCE: http://www.benefitnews.com/pfv.cfm?id=7181

 

HSAs – "Increasingly Attractive"

 

Writing in "AMNews," Joel Finkelstein also reports that consumer driven health is "increasingly attractive." He says, "The past year has changed many brokers' opinions about just how far consumer-driven offerings are from broader adoption. One year ago, 80% said these plans were five or more years away from being a mainstream option, but the new [NAHU] survey shows that 77% think the plans will be adopted more widely in the near future." He also interviews Mila Kofman of Georgetown University's Health Policy Institute about a report from one company that "29% of HSAs sold by one company were purchased by people with household incomes of less than $50,000." Her reply is that, "It's very dangerous if low- or even moderate-income people are buying these things." Sheeeeesh. Sometimes you just can't win. The liberals have been predicting that HSAs would appeal only to the "Healthy and Wealthy." Now that lower-income families are buying them, they still aren't happy.

SOURCE: http://www.ama-assn.org/amednews/2005/03/07/gvsc0307.htm

 

HSAs – "Exceeding Expectations"

 

HSAs are even catching on in Vermont, which has little competition and a small population, according to the "Times Argus." An article by George Malek of the state Chamber reports that the Blue Cross Blue Shield HSA's enrollment has "exceeded the company's expectations." He adds, "The VACE-Cigna small business group began offering them Jan 1, 2005, and had a similar experience. More than 13 percent of participants in the program changed to the HSA-compliant policy."

SOURCE: http://www.timesargus.com/apps/pbcs.dll/article?AID=/20050310/NEWS/503100311/100

 

HSAs – Leading to Cash-Only Physician Practice

 

Finally, "World Magazine" celebrates the growing trend of physicians going to cash-only practices in an article by Lynn Vincent. The article poses it as a response to many trends, including rising professional liability costs, the growth in the uninsured, rising administrative costs, and new forms of payment such as HSAs. The article cites Dr. Daniel Cosgrove who switched from a family PPO plan that cost $900/month to an HSA-qualified plan. He says, "Now for less than $5,000 a year, I can get catastrophic coverage – and use the money I'm saving to cover the deductible or pay for preventive care." The article goes on to cite Dr. Robert Berry of Greeneville, TN, and Seattle-based SimpleCare as examples of the new era of cash-only physician practices.

SOURCE: http://www.worldmag.com/displayarticle.cfm?id=10408

 

Please send all comments/questions directly to me at gmscan@aol.com.

 

"Consumer Choice Matters" is a free weekly newsletter published by the Galen Institute, a not-for-profit public policy organization specializing in research and education on health policy. Visit our website at http://www.galen.org for more information.

 

If you wish to subscribe/unsubscribe or update your address, please send an e-mail to galen@galen.org.

 

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

 

 

 

 

 

 

SHARE THIS ARTICLE

About the author