Another Bad Study

A brand new report by Linda Blumberg and Lisa Clemens-Cope of the Urban Institute and funded by the Robert Wood Johnson Foundation repeats the tired old mantras we've been hearing for 15 years.

They argue that HSAs are okay for the healthy and wealthy, that the sick and the poor can't afford to pay the higher deductibles, that people can't effectively shop for health care services, that HSAs are ripe for tax cheating, and that they aren't very popular in any case. They support these views by relying on old information and discredited sources and by ignoring any research that runs counter to their predetermined views.

First, for the easy stuff. This report relies a great deal on a GAO report that came out last year. That is how it concludes that market penetration is only 2% and that HSA account holders are much wealthier than others. The GAO report was using very old data. Its enrollment numbers were from 2006, and its wealth estimates were even older – 2005 – when HSAs were still brand new. Further, it measured "wealth" by comparing HSA account holders to all tax filers, including the uninsured, people on Medicaid, people in the military, etc. Honest researchers would not have relied exclusively on this information, especially when much more robust and contemporary data is readily available.

The paper also discusses at length the problem low-income and high-consuming users will have in paying for their deductibles. But it completely ignores how the same people will manage to afford the premiums required to avoid the deductible. Any honest measure of financial impact has got to include all the elements of covering health care costs – premiums, deductibles, coinsurance, and non-covered out-of-pocket expenses. People with special needs (high costs or low incomes), obviously must be subsidized, but that subsidy can be just as well directed at covering their HSA contribution as at covering their premium payments.

Further, the paper assumes that "the sick" are disadvantaged by HSAs because of their greater out-of-pocket responsibility. But, in fact, because there is a limit on out-of-pocket spending with an HSA program, high utilizers actually spend less than they would with another kind of coverage. This point was made in a Health Affairs article by Dahlia Remler and Sherry Glied, who report, "We find that many HSA/high-deductible arrangements would actually reduce cost sharing for many groups. In particular, the group responsible for half of all medical spending would see no change or a decline in cost sharing at the margin and on average." Remler and Glied considered this a weakness of HSAs, that they would fail to restrain high cost spending. Maybe so, but you can't have it both ways. Either HSAs hurt high-spenders or they help high-spenders. It is irresponsible to ignore the available evidence.

The authors also make the argument that HSAs will have little effect on high-cost expenses that are above the deductible. Theoretically that argument has merit, and the response has usually been that HSAs are not a silver bullet that will solve all the problems in health care. But they are a good start. But more recently, there is evidence that HSAs are indeed reducing expenses across the board. We're not yet sure why that should be true. Perhaps people with HSAs or other high-deductible plans learn habits of frugality that do not disappear once they break through the deductible. Or perhaps being "invested" in their own care means they are doing things that lead to better health generally. It is something that needs to be explored, but the old argument is out-of-date.

The authors also are concerned that the tax advantage of HSAs accrues only to those consumers who pay taxes. Because of progressive taxation, people with higher incomes pay more taxes and thus get a larger tax benefit. This is all true, but it is not confined to HSAs. The exact same argument can be made about employer-sponsored coverage of any kind – there are great tax advantages for the wealthy, very little for the non-wealthy. That is why HSAs are tax advantaged. They must compete with tax-advantaged employer-sponsored comprehensive coverage. It would be dishonest to remove the tax advantage of one without removing it from the other as well.

Finally, the authors argue that consumers are incapable of shopping for health care services. This might have been a valid concern 15 years ago when the whole thing was just theoretical, but no longer. Today there is empirical evidence aplenty that empowered consumers are very capable of shopping and making cost effective decisions about the health care services they choose to buy. But once again, the authors completely disregard any evidence that does not suit their predisposition.

So, let's put the question out there again – why is the Urban Institute sponsoring, and the Robert Wood Johnson Foundation financing such disreputable and dishonest "research?" And what does that say about the credibility of those organizations?

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