Health Savings Account (HSA’s): an Impending Threat

From Progressive American:

The "innovative program" is HSAs, paired with high-deductible health insurance. Bush wants to dramatically increase the amount of money that individuals can contribute to Health Savings Accounts to encourage more high-deductible plans. An increased reliance on HSAs, however, could actually increase the number of uninsured Americans because they won't be able to afford plans with high deductibles. HSAs provide benefits almost exclusively to high-income individuals and big businesses. "The bottom line is that what the Bush administration calls reform is actually the opposite," Paul Krugman wrote. "Driven by an ideology at odds with reality, the administration wants to accentuate, not fix, what's wrong with America's health care system."
The administration's "consumer-driven health care" model would not fix our health care system's major problems, such as "rising costs and rising numbers of Americans without health insurance." Rather, healthy people will have greater incentive to get out of traditional plans, leaving the sick to pay higher premiums and possibly leading to more uninsured Americans as they decide to stop paying prohibitively-expensive premiums. As Uwe Reinhardt of Princeton University writes, "A wholesale switch to HSAs would redistribute the nation's overall financial burden of health care from the budgets of chronically healthy families to those of chronically ill families." Second, HSAs would not reduce costs. The theory behind the accounts assumes people are willing to shop between hospitals to find the lowest price for health care. But are people willing to do this? "No," Kaiser Permanente CEO George Halvorson said flatly, "we don't buy hospital care by the hour." Finally, the Center for Budget and Policy Priorities found the "number of people who would lose coverage due to actions that their employers would take would likely exceed the number of uninsured people who would gain insurance." This is because most Americans are not in a high enough tax bracket to significantly benefit from the tax-free accounts. Another problem with health savings accounts, Paul Krugman points out, is that "in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase" because "buying health care isn't at all like buying clothing." Life and death decisions about our health are already difficult to make even with the guidance of trained medical professionals. "Health is simply too complex for people to make smart, waste-reducing decisions," Sebastian Mallaby wrote, "when you go to the hospital with screaming stomach pains, you have no idea how many tests you need - and you're not in a fit state to embark on comparative shopping." Unlike other choices between goods and services which may lead to higher efficiency and lower prices, it is "irrational to assume that the parents of a critically ill child will call for price quotes on an urgently-needed procedure, or that accident victims will consult hospital quality report cards to direct the ambulance to the emergency department of their choice."According to Political Money Line, the financial services industry was the top PAC contributor to President Bush's presidential campaigns in both 2000 and 2004. These companies stand to make a hefty profit from the transaction costs and financial fees associated with HSAs. Also, like Bush's tax cuts, HSAs disproportionately benefit the wealthy over low- and middle-income Americans. The benefits will become more pronounced if Bush's plans to increase contribution limits and create an additional 15.3 percent tax credit become law. A study by the Center for Budget and Policy Priorities' Jason Furman found these policies would mean those with higher incomes would receive higher tax breaks. A hypothetical family making $15,000 a year would receive a $153 tax cut under the plan, while a family making $180,000 would receive over $4,500. Sebastian Mallaby rightly called the study's results "shockingly regressive."