IN THIS ISSUE:
? Thoughts on the Medicare Signing
? HSAs Ready for Market on January First
? Tremendous Boost to Consumer-Driven Health Care
? The Entire Landscape Has Changed
? HSAs Are Cunningly Versatile
? Sharply Lower Premiums
? HSAs For Individuals, Small Groups
? Kilpatrick Stockton Compares HSAs, HRAs, and FSAs
Thoughts on the Medicare Signing
Grace-Marie and I just got back from the signing ceremony for the Medicare bill. It is now the law of the land. I know many readers are upset about this bill, and its enactment has divided the ranks of pro-market activists. I’m no Medicare expert, but my sense is the criticisms have been intemperate and overstated.
It may seem that $400 billion over ten years is a lot of money, but in the context of what Medicare and health care are already costing, it is small potatoes. On an annual basis, it is about one-fourth of the $160 billion we spend on the employer-based exclusion every year, 15% of the $255 billion Medicare already costs, and less than 3% of the $1.5 trillion total health care bill in the US.
It is true that the cost will soar when the Baby Boomers retire and hurry the date of reckoning for an unsustainable Medicare program. But Medicare is already unsustainable even without this new benefit, and this may force Congress to deal with the issue of fundamental reform earlier than they otherwise would have.
It is also true that it would be better to do fundamental reform this year than to kick it down the road. But the fact is that current beneficiaries are not clamoring for reform. They are pretty happy with the program just the way it is. We have failed to convince the people most affected that change is needed or that we can offer something better. We simply haven’t made the case – yet.
Meanwhile, I believe this bill will create the conditions that will make reform possible. It introduces ideas like means-testing and privatization without scaring the old folks. It allows people to choose, instead of being forced into anything.
Listen folks, in football the shortest way to the goal line is not always right up the middle. Sometimes the running back has to stutter step and cut to the side to avoid a tackle. That is what is going on here. This president knows how to run with the football. Have a little faith.
HSAs Ready for Market on January First
Meanwhile, the press has been hopping with the news of the new Health Savings Accounts. I guess I’ll start with the “USA Today” story by Tom Fogarty, in part because he quotes me prominently, so you know he’s a reporter with fine instincts and discriminating tastes. The article says, “Just how popular the new accounts will become remains unclear. But their cost-sharing features and likely promotion by big employers could make them huge.” The article quotes me as saying, “They have the potential to become the dominant kind of health care financing in the next five to 10 years.” The article says Golden Rule and Fortis Health will be selling the programs “on the first business day of 2004.”
Tremendous Boost to Consumer-Driven Health Care
Writing in “The Washington Post,” Al Crenshaw is also pretty positive: “The provision could have a profound effect on employer-base medical insurance plans.” The article quotes a Deloitte & Touche analysis that says, “These changes will offer a tremendous boost to consumer-driven health care,” and adds that employees will not have to wait for their employer to set up an account – provided they have a qualifying insurance plan.
The Entire Landscape Has Changed
An article by Ann Meyer in the “Chicago Tribune” quotes Allen Wishner of the Flexible Benefit Service Corp. as saying HSAs are going to “change the way people think about health insurance and the way they pay for it. The entire landscape has really changed.” As an example, the story cites small business owner Jinshil Duquet who switched to an MSA after being notified of a 35% rate increase for her company’s old health insurance. “It’s cheaper for me, and as long as we’re covered for catastrophic, (employees) can keep part of the savings in the MSA. It’s good for all of us.” Larry Boress, executive director of the Chicago Business Group on Health, is also quoted as saying that “people will begin to shop for medical care the same way they shop for other consumer services.” He adds, “Now that it’s your money, you want to make sure you’re spending it appropriately.”
HSAs Are Cunningly Versatile
In the “LA Times,” Vicki Kemper says “Savings Accounts Key to Drug Law.” She writes, “To some, the health savings accounts are cunningly versatile. To others, they are insidiously scary.” She quotes Consumers Union’s Gail Shearer who complains, “It’s a double tax break,” because “your money does not get taxed when you put it in, it does not get taxed when you pull it out.” (Gosh, kind of like insurance that way). But Pete Sepp of the National Taxpayers Union says HSAs will address “some of the rotten features of the employer-based insurance system.” The article also quotes Edwin Park of the Center for Budget and Policy Priorities and Devon Herrick of NCPA.
Sharply Lower Premiums
And Mark Schwanhausser writes in the Knight Ridder papers that, “Health savings accounts could benefit workers.” He doesn’t get it all right, saying for instance that, “Only those employees enrolled in company-sponsored health plans with high deductibles can open the accounts.” (It doesn’t have to be company-sponsored, and I wonder if a $1,000 deductible can really be characterized as “high” anymore.) But he says, “Such plans allow workers and their employers to pay sharply lower premiums — and plow the savings into an HSA?.” So he gets the concept right.
Next Step – FSA Rollover Into HSA
Even UK’s “The Guardian” is writhing about HSAs. Mary Dalrymple quotes Rep John Kline (R-MN) as saying, “I’m just thrilled by it. It’s fair to say the health savings accounts are what has [sic] me most excited about this bill.” On the other hand, Sen. John Breaux (D-LA) says, “I don’t like them. I think they’re bad policy.” The article goes on to say, “The next step (Ways and Means Chairman Bill) Thomas said, is legislation letting those with flexible spending accounts, also called cafeteria plans, deposit money left over at the end of the year into the new health savings accounts.”
HSAs For Individuals, Small Groups
Kent Hoover writes about HSAs in many of the Business Journals this week. He quotes me as predicting that the individual market will turn to this “in droves.” And he cites the National Small Business Association (NSBA) as estimating a 40% premium saving from switching to the higher deductible plan. And he quotes the NFIB’s Jessie Brairton as expecting the insurance industry to develop “a lot of products.”
Kilpatrick Stockton Compares HSAs, HRAs, and FSAs
Finally, the law firm of Kilpatrick Stockton has released its “Employee Benefits Legal Alert” on HSAs. The firm’s Mark Wincek has been one of the most articulate interpreters of HRAs and this analysis focuses a great deal on comparing and contrasting HRAs, FSAs, and HSAs. Good stuff.
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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.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.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.