Expert Comment: Contrary to Media Reports, New Study Does Not Undermine Health Savings Accounts

August 09, 2006
Michael Van Winkle

Expert comment on "How Much More Cost Sharing Will Health Savings Accounts Brings?"

By Sherry Glied and Dahlia Remler

Published in Health Affairs, July/August 2006


(Chicago, Illinois - August 9, 2006) A study published in the July/August 2006 issue of Health Affairs has garnered much attention for its apparent criticism of Health Savings Accounts as a strategy for reforming the health insurance industry. The Heartland Institute contacted prominent experts on the health care reform for their thoughts on the study. For more information about The Heartland Institute or for assistance reaching one of the experts below, please call me at 312/377-4000 or email vanwinkle@heartland.org.


Grace-Marie Turner is president of the Galen Institute. She can be reached by phone at 703/229-8900 or by email at gracemarie@galen.org:

"Dahlia Remler and Sherry Glied are respected researchers who have assessed who wins and who loses with Health Savings Accounts in their Health Affairs article, 'How much more cost sharing will health savings accounts bring?' but the tone and selective interpretation of their study in the press is distorting their results.

"They find that healthier patients come out ahead, largely because they get a bigger break from shielding their HSA deposits from taxes. They also found that the very sick come out ahead financially because the limits on overall out-of-pocket costs with HSAs are often less than limits on conventional insurance policies.

"But they observed that reducing cost sharing for 'those high spenders who are responsible for a large share of overall health spending' could turn back the clock on lessons learned from the Rand experiment. The losers in their study were patients with mild chronic conditions who are likely to spend more with HSAs. But we believe these are also the patients who might respond best to incentives to become more involved in their care management and to seek out more economical treatment alternatives."


Michael Cannon is director of health policy at the Cato Institute. He can be reached by phone at 202/218-4632 or by email at mcannon@cato.org.

"The Glied/Remler study points out a very real shortcoming of HSAs. Even though HSAs are a step in the right direction, they still don't allow workers to purchase whatever type of insurance they need. To have an HSA you must accept a government-designed insurance policy, which may have less cost-sharing than your old insurance policy.

"Why should the government have any say in how much cost-sharing you carry? Congress needs to give workers full control over that decision by letting workers take all their health benefits as a cash deposit into their HSAs. Only when workers control the cash will they control their health insurance.

"HSA supporters should applaud the Glied/Remler study."


Devon Herrick is a senior fellow at the National Center for Policy Analysis. He can be reached by phone at 972/308-6470 or by email at devon.herrick@ncpa.org.

"This is nothing new. Back in 1996 [The Urban Institute] found that MSAs would appeal to those with high health costs because their out-of-pocket spending was often less than traditional health plans (see Len M. Nichols et al., "Tax Preferred Medical Savings Accounts and Catastrophic Health Insurance Plans: A Numerical Analysis of Winners and Losers," Urban Institute, April 1996.)

"That is one of the reasons we argue HSAs will not result in adverse selection and segmentation of the risk pool. This pooling of health costs is generally considered beneficial to society. (If it were not beneficial, then why have insurance at all?) Getting rid of all health insurance would definitely increase cost-sharing."


John R. Graham is director of health care studies at Pacific Research Institute in San Francisco. He can be reached by phone at 415/989-0833 or by email at jgraham@pacificresearch.org.

"Professors Remler and Glied use a very simple model to demonstrate that Health Savings Accounts may not always have the intended effect of reducing medical costs by increasing patients' direct share of payment. They point out, for example, that maximum out-of-pocket payments (MOOP) for HSA-eligible, high-deductible plans are often not very much higher than they are in traditional health plans.

"Fair enough, but this is because the federal government has put restrictions on maximum out-of-pocket costs for those plans but not traditional plans. We don't know how patients will respond to a truly high-deductible, high MOOP HSA-qualifying plan (for example, $10,000 deductible and $50,000 MOOP) because the government forbids them. However, we can be sure that they would have very low premiums! The government must loosen its restrictions on these plans.

"Also, while Professors Remler and Glied know that HSA-qualifying health plans have deductibles between $1,000 and $2,000, and MOOP of $2,000 to $5,000, they model an implausible plan where both the deductible and the MOOP are the same: $2,500. I doubt whether such a plan exists, because it would exhibit exactly the failings that the authors demonstrate.

"As to the fact that any pre-tax (HSA) direct patient payments are at lower net marginal prices to patients than post-tax direct payments associated with traditional plans––that is the point of the exercise: to motivate patients to accept plans that encourage them to make more cost-effective spending decisions, by requiring more payment at the 'front end.'"