A natural way to begin the process of reform is greatly expanding the role of Health Savings Accounts (HSAs). Yet on his blog, Cowen took a gratuitous slap at them, declaring that "HSAs are ineffective as health reform."
Tyler Cowen has more explanation of his position on HSAs at his blog this morning. Here is my posted response:
Tyler:
I believe you are missing the big picture. It is perhaps unfortunate that the word "savings" even appears in the term "health savings accounts."
The issue is: the tax law heavily subsidizes third-party insurance and penalizes individual self insurance. As a result, we have way too much of the former and way too little of the latter. This is especially true of the chronically ill, who spend more than half of all health care dollars and who are often capable of managing their own care and their own expenses if given the opportunity to do so.
The current structure of HSAs is way too restrictive and it limits the use of these accounts. That is one reason why about half of all people in consumer directed health plans are in Health Reimbursement Arrangements (HRAs), rather than HSAs.
No single health reform would do more to revolutionize the health care marketplace than a universal, completely flexible HSA.
PricewaterhouseCoopers reported last month that health care inflation can be expected to rise by 9.9% throughout 2008. Of particular note is their distinction between increases in different types of coverage:
• PPO and HMO plans will increase by 9.9%
• Consumer-directed health plans will only experience inflation of 7.4%
This illustrates that, overall, consumer-driven health plans will lead to lower costs. The PWC study asserts that such lower medical cost trends would increase the adoption of CDHPs by employers and employees, and their market share is expected to triple in 2008. (Full report here)
Tyler’s comments prompted me to write the following post:
Summary: The best defense of Health Savings Accounts is not that they promote wise spending and bring costs down. It’s that they are a step toward a more ethical tax policy.
Tyler Cowen has more explanation of his position on HSAs at his blog this morning. Here is my posted response:
Tyler:
I believe you are missing the big picture. It is perhaps unfortunate that the word "savings" even appears in the term "health savings accounts."
The issue is: the tax law heavily subsidizes third-party insurance and penalizes individual self insurance. As a result, we have way too much of the former and way too little of the latter. This is especially true of the chronically ill, who spend more than half of all health care dollars and who are often capable of managing their own care and their own expenses if given the opportunity to do so.
The current structure of HSAs is way too restrictive and it limits the use of these accounts. That is one reason why about half of all people in consumer directed health plans are in Health Reimbursement Arrangements (HRAs), rather than HSAs.
No single health reform would do more to revolutionize the health care marketplace than a universal, completely flexible HSA.
PricewaterhouseCoopers reported last month that health care inflation can be expected to rise by 9.9% throughout 2008. Of particular note is their distinction between increases in different types of coverage:
• PPO and HMO plans will increase by 9.9%
• Consumer-directed health plans will only experience inflation of 7.4%
This illustrates that, overall, consumer-driven health plans will lead to lower costs. The PWC study asserts that such lower medical cost trends would increase the adoption of CDHPs by employers and employees, and their market share is expected to triple in 2008. (Full report here)
Greg Scandlen, Dave Racer and quite a few others are setting the record straight on Tyler Cowen’s blog.
Tyler’s comments prompted me to write the following post:
Summary: The best defense of Health Savings Accounts is not that they promote wise spending and bring costs down. It’s that they are a step toward a more ethical tax policy.
Read the whole thing here:
http://www.patientpowernow.org/2008/07/21/moral-health-savings-accounts/