The Truth about Health Savings Accounts
January 30, 2006
According to news reports, President Bush will devote a significant portion of his State of the Union address to talking about “health savings accounts (HSAs) as a solution to America's health care crisis.” In general, HSAs are tax-free savings accounts combined with high deductible insurance policies that people obtain through their employers or buy independently from insurance companies. Numerous studies have shown that HSAs may increase the number of uninsured and increase health care costs, all while costing taxpayers tens of billions of dollars. It sounds like Bush is trying to do to health care what he did to Social Security – placing the burden on ordinary Americans while expecting them to take on the billion-dollar health industry. As such, it is another special interest policy that allows profits and health costs to continue to rise.
HSAs will do nothing to address the increasing number of uninsured Americans. HSAs will not help expand coverage among the uninsured because most uninsured Americans do not make enough money to benefit from tax breaks. HSAs would also encourage employers to either drop health insurance or reduce their contribution amounts. According to the Center on Budget and Policy Priorities, the number of people who would lose their coverage because of HSAs would be higher than the number of uninsured who would get insurance.
HSA users will be more likely to skip necessary treatments to avoid the high costs. Individuals who have either consumer-driven or high deductible plans (both are elements of HSAs) were more likely to avoid getting necessary health care because of costs. Users with high deductible plans were also more likely than those with traditional coverage to have problems paying their medical bills.
HSAs have failed to work in other countries. South Africa and Singapore both implemented versions of health savings accounts, and Americans should learn the pitfalls from these systems. The Harvard School of Public Health found that the Singapore plan "caused financial hardship for Singapore's citizens and ... adversely affected the cost-effectiveness of its health care system." In South Africa, "the cost of specialty care has increased 43 percent, the cost of hospital care is up 65 percent,” and uninsured rates have "continued to grow rapidly."
HSAs will do little to control rising health care costs. Approximately 70 percent of costs in the U.S. health care system are spent on 10 percent of the population – the most expensive patients with the most catastrophic and complex needs. The costs these individuals incur well exceed health insurance deductibles, even for high deductible health plans, and high deductibles won't change their health spending patterns. By their very nature, HSAs are trying to control health care costs by changing care-seeking behavior for people whose health care spending represents a small proportion of overall health care costs.
From the Center for American Progress: