IN THIS ISSUE:

? Krugman Misses an Opportunity

? American Prospect Fixated on Ideology

? AHIP Survey Shows Wide Support for HSAs

? Small Employers Desperate for Relief

? HSAs Coming On-Line in Tennessee

Krugman Misses an Opportunity

Let’s start this week with a couple of items from the other side. We’ll begin our tour with Paul Krugman writing in “The New York Times,” who believes that, “Working Americans have two great concerns: the growing difficulty of getting health insurance, and the continuing difficulty they have in finding jobs.” At 5.5%, the unemployment rate is lower than it was in 27 of the last 50 years, so it is hard to give much credence to the idea that people can’t find jobs, but he does have a point that health insurance is getting harder to afford. Mr. Krugman mentions the 2004 Economic Report of the President and its analysis of why health care costs continue to rise – “because people have too much insurance and purchase too much medical care.” He then poses the alternative Kerry explanation – greedy insurance companies that “have excessive overhead, mainly because they are trying to avoid covering high-risk patients.” Mr. Krugman would prefer a Canadian-style Nationalized Health Insurance system, but alas, “the antigovernment propaganda of the right has become too well established in public opinion,” so he’ll settle for “the modest step in the right direction” that Mr. Kerry has proposed.

It is sort of a pity that Mr. Krugman copped out of what might have been an interesting discussion in favor of partisan cliches. He walked right up to the edge of an insight that could have helped move the discussion. He says the President’s economists attribute excessive health care costs to the current role of insurance – and so do Senator Kerry’s. There can be no question that over-insurance causes excess utilization, and there also can be little argument that insurance-induced administrative costs are a big contributor to high health care costs. That convergence of views might have led to a discussion of what is the most appropriate and efficient role of insurance in financing health care needs. Perhaps after the elections, Mr. Krugman will lay down his partisan cudgel and do some thinking.

SOURCE: http://www.nytimes.com/2004/08/27/opinion/27krugman.html

American Prospect Fixated on Ideology

Barbara Dreyfuss slams HSAs in a major article in “The American Prospect.” She starts out by relating an anecdote of the Ada County, Idaho, experience in trying out MSAs in 1996 before they were allowed under federal law. Idaho had enacted a state MSA law, allowing MSA deposits to be free of state taxes, and Ada County hoped that would be incentive enough to make them work for their own employees. But they dropped the program in 1997. Ms. Dreyfuss attributes the problems to selection, and says the local Blue Shield company “told the county that if it continued with the MSAs, it could expect premiums [for its traditional coverage] to jump an astronomical 15%.” This might be due to selection, or it might be due to strategic pricing by a company that was none too enthusiastic about a program that would cut its premium income by a third.

Ms. Dreyfuss’ facts are pretty accurate, but like Mr. Krugman, she prefers partisan name-calling over thoughtful discussion. “[D]espite skepticism of MSAs by many employers, unions, and workers,” she says, “promotion of such tax-free savings accounts and high-deductible insurance plans has lived on thanks to a band of ideologically minded conservative Republicans?” She adds that “a bevy of conservative think tanks [NCPA, the Galen Institute, the American Enterprise Institute, the Cato Institute, and The Heritage Foundation] are the champions of consumer-directed care.” She concedes, “Experts believe? consumer-directed health care is about to take off,” but she argues they are a bad idea for individual employees.

Ms. Dreyfuss’ big coup is quoting “Republican Liz Fowler, chief health counsel of the Senate Aging Committee” who says she has an HRA under the federal employees plan. Unfortunately, Ms. Dreyfuss gets all of her facts wrong. Ms. Fowler is a Democrat, not a Republican, and she is minority chief health counsel for Sen. Max Baucus on the Senate Finance Committee, not the Senate Aging Committee. Ms. Fowler doesn’t care for her plan, saying, “Let me tell you, my experience has been awful. I don’t consider it consumer-directed, and it certainly is not consumer-friendly.” The whole point of consumer choice is to enable Ms. Fowler, or anyone else, Republican or Democrat, to choose the plan they prefer. The ones that please their customers will succeed, the ones that do not will fail. That is how markets work.

SOURCE (subscription required): http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=8345

AHIP Survey Shows Wide Support for HSAs

On the other hand, a survey sponsored by America’s Health Insurance Plans (AHIP) finds that 71% of Americans have a favorable opinion of HSAs, including 67% of Democrats and 62% of self-described liberals, while only 22% have an unfavorable opinion. This is despite the fact that 68% of the people who already have coverage on their jobs expressed satisfaction with their current coverage. The respondents responded especially favorably to the roll over of unused balances (91% favorable), and the tax-free nature of the accounts (81%). Other attributes cited by over 70% of the respondents were personal control, choice, and lower cost. AHIP president Karen Ignani said, “Although HSAs are still in the earliest stage of development, many consumers clearly indicate this new approach offers new opportunities that they will closely consider.”

SOURCE: http://www.ahip.org/redirect/hsasurvey.ppt

Small Employers Desperate for Relief

The fact is that HSAs are coming along just in time to help both employers and employees manage their health care costs. “The New York Times” ran an article by Eve Tahmincioglu on “tackling the high cost of health benefits.” She cites a small business in Massachusetts that raised deductibles from $500 to $1,000 and then made $500 available to anyone “who actually ended up in the hospital.” The owner figures he saved so much in premium that he will break even if 16 of his 17 employees need the $500. Another company, an independent record label in Los Angeles, dropped its coverage because the monthly premium went from $89 per employee in 2001 to $150 this year. The article says a June membership survey by NFIB found that 65.6% of responders think health care costs are a “critical” issue. The author mentions HSAs as a promising answer, but also mentions that Senator Kerry has proposed corporate tax credits if they will insure low to moderate income workers, and some states are trying out programs like Maine’s Dirigo Health Plan.

http://www.nytimes.com/2004/08/26/business/26sbiz.html

HSAs Coming On-Line in Tennessee

The Tennessee Blue Cross plan has just announced it will be making five versions of HSAs available beginning October 1, according to an article in the “Chattanooga Times Free Press.” Vice President Linda Andreae says, “the HSA creates a new opportunity for employers of any size to reduce their health care costs and make their employees more responsible health care consumers. On the flip side, HSAs allow individual employees to plan and save for future medical expenses and help offset the costs of a high deductible health plan. Other companies, including Cigna, United Healthcare, and John Deere, are expected to begin offering HSA coverage in January.

SOURCE: https://www.timesfreepress.com/ShowIndex.asp?Section=Business. The article by Dave Flessner (dflessner@timesfreepress.com) ran on August 30, but is not available online.

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.

IN THIS ISSUE:

? Krugman Misses an Opportunity

? American Prospect Fixated on Ideology

? AHIP Survey Shows Wide Support for HSAs

? Small Employers Desperate for Relief

? HSAs Coming On-Line in Tennessee

Krugman Misses an Opportunity

Let’s start this week with a couple of items from the other side. We’ll begin our tour with Paul Krugman writing in “The New York Times,” who believes that, “Working Americans have two great concerns: the growing difficulty of getting health insurance, and the continuing difficulty they have in finding jobs.” At 5.5%, the unemployment rate is lower than it was in 27 of the last 50 years, so it is hard to give much credence to the idea that people can’t find jobs, but he does have a point that health insurance is getting harder to afford. Mr. Krugman mentions the 2004 Economic Report of the President and its analysis of why health care costs continue to rise – “because people have too much insurance and purchase too much medical care.” He then poses the alternative Kerry explanation – greedy insurance companies that “have excessive overhead, mainly because they are trying to avoid covering high-risk patients.” Mr. Krugman would prefer a Canadian-style Nationalized Health Insurance system, but alas, “the antigovernment propaganda of the right has become too well established in public opinion,” so he’ll settle for “the modest step in the right direction” that Mr. Kerry has proposed.

It is sort of a pity that Mr. Krugman copped out of what might have been an interesting discussion in favor of partisan cliches. He walked right up to the edge of an insight that could have helped move the discussion. He says the President’s economists attribute excessive health care costs to the current role of insurance – and so do Senator Kerry’s. There can be no question that over-insurance causes excess utilization, and there also can be little argument that insurance-induced administrative costs are a big contributor to high health care costs. That convergence of views might have led to a discussion of what is the most appropriate and efficient role of insurance in financing health care needs. Perhaps after the elections, Mr. Krugman will lay down his partisan cudgel and do some thinking.

SOURCE: http://www.nytimes.com/2004/08/27/opinion/27krugman.html

American Prospect Fixated on Ideology

Barbara Dreyfuss slams HSAs in a major article in “The American Prospect.” She starts out by relating an anecdote of the Ada County, Idaho, experience in trying out MSAs in 1996 before they were allowed under federal law. Idaho had enacted a state MSA law, allowing MSA deposits to be free of state taxes, and Ada County hoped that would be incentive enough to make them work for their own employees. But they dropped the program in 1997. Ms. Dreyfuss attributes the problems to selection, and says the local Blue Shield company “told the county that if it continued with the MSAs, it could expect premiums [for its traditional coverage] to jump an astronomical 15%.” This might be due to selection, or it might be due to strategic pricing by a company that was none too enthusiastic about a program that would cut its premium income by a third.

Ms. Dreyfuss’ facts are pretty accurate, but like Mr. Krugman, she prefers partisan name-calling over thoughtful discussion. “[D]espite skepticism of MSAs by many employers, unions, and workers,” she says, “promotion of such tax-free savings accounts and high-deductible insurance plans has lived on thanks to a band of ideologically minded conservative Republicans?” She adds that “a bevy of conservative think tanks [NCPA, the Galen Institute, the American Enterprise Institute, the Cato Institute, and The Heritage Foundation] are the champions of consumer-directed care.” She concedes, “Experts believe? consumer-directed health care is about to take off,” but she argues they are a bad idea for individual employees.

Ms. Dreyfuss’ big coup is quoting “Republican Liz Fowler, chief health counsel of the Senate Aging Committee” who says she has an HRA under the federal employees plan. Unfortunately, Ms. Dreyfuss gets all of her facts wrong. Ms. Fowler is a Democrat, not a Republican, and she is minority chief health counsel for Sen. Max Baucus on the Senate Finance Committee, not the Senate Aging Committee. Ms. Fowler doesn’t care for her plan, saying, “Let me tell you, my experience has been awful. I don’t consider it consumer-directed, and it certainly is not consumer-friendly.” The whole point of consumer choice is to enable Ms. Fowler, or anyone else, Republican or Democrat, to choose the plan they prefer. The ones that please their customers will succeed, the ones that do not will fail. That is how markets work.

SOURCE (subscription required): http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=8345

AHIP Survey Shows Wide Support for HSAs

On the other hand, a survey sponsored by America’s Health Insurance Plans (AHIP) finds that 71% of Americans have a favorable opinion of HSAs, including 67% of Democrats and 62% of self-described liberals, while only 22% have an unfavorable opinion. This is despite the fact that 68% of the people who already have coverage on their jobs expressed satisfaction with their current coverage. The respondents responded especially favorably to the roll over of unused balances (91% favorable), and the tax-free nature of the accounts (81%). Other attributes cited by over 70% of the respondents were personal control, choice, and lower cost. AHIP president Karen Ignani said, “Although HSAs are still in the earliest stage of development, many consumers clearly indicate this new approach offers new opportunities that they will closely consider.”

SOURCE: http://www.ahip.org/redirect/hsasurvey.ppt

Small Employers Desperate for Relief

The fact is that HSAs are coming along just in time to help both employers and employees manage their health care costs. “The New York Times” ran an article by Eve Tahmincioglu on “tackling the high cost of health benefits.” She cites a small business in Massachusetts that raised deductibles from $500 to $1,000 and then made $500 available to anyone “who actually ended up in the hospital.” The owner figures he saved so much in premium that he will break even if 16 of his 17 employees need the $500. Another company, an independent record label in Los Angeles, dropped its coverage because the monthly premium went from $89 per employee in 2001 to $150 this year. The article says a June membership survey by NFIB found that 65.6% of responders think health care costs are a “critical” issue. The author mentions HSAs as a promising answer, but also mentions that Senator Kerry has proposed corporate tax credits if they will insure low to moderate income workers, and some states are trying out programs like Maine’s Dirigo Health Plan.

http://www.nytimes.com/2004/08/26/business/26sbiz.html

HSAs Coming On-Line in Tennessee

The Tennessee Blue Cross plan has just announced it will be making five versions of HSAs available beginning October 1, according to an article in the “Chattanooga Times Free Press.” Vice President Linda Andreae says, “the HSA creates a new opportunity for employers of any size to reduce their health care costs and make their employees more responsible health care consumers. On the flip side, HSAs allow individual employees to plan and save for future medical expenses and help offset the costs of a high deductible health plan. Other companies, including Cigna, United Healthcare, and John Deere, are expected to begin offering HSA coverage in January.

SOURCE: https://www.timesfreepress.com/ShowIndex.asp?Section=Business. The article by Dave Flessner (dflessner@timesfreepress.com) ran on August 30, but is not available online.

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.