Consumer Choice Matters: Celebrating Consumer Choice

Published March 1, 2004

The President of the United States has become the number one salesman and marketer for Health Savings Accounts (HSAs).

Grace-Marie Turner and I were honored to be among about 100 people to join President George W. Bush at a Washington, DC event on January 28, highlighting several employers and consumers who have already benefitted from HSA products. He called for malpractice reform, tax credits for low-income Americans, and more community health centers.

But the meat of his talk focused on Health Savings Accounts. He stressed HSAs will begin to educate consumers about the true costs of care and restore the patient-physician relationship. “We need a consumer-driven health care system,” Bush said. “And we need better information about health care prices. A consumer-driven health care system with better information will help control the cost of health care. That’s the rationale of the health savings accounts.”

He went on to list some of the benefits of HSAs:

“First, many American families who choose HSAs will pay less overall for their health care. Secondly, HSAs will encourage people to spend wisely for their routine medical expenses. Third, HSAs will encourage people to save for their health care needs both now and in the future. Fourth, there is an incentive to take care of their bodies and live healthier lives. Fifth, HSAs will make it easier for some people who are now uninsured to purchase health insurance.”

The President introduced several consumers who were illustrations of these various points. He went on to call for deductibility of HSA premiums and the establishment of Association Health Plans.

Thinking Outside the Box

The Baltimore Daily Record included an article by benefits attorney Becky Kukuk in which she notes, “The enactment of HSAs represents a further shift in U.S. health care policy toward consumer-driven health care.”

She adds, “HSAs offer a flexible, tax-free savings vehicle to a growing segment of health care consumers.” She cites the recent Kaiser Family Foundation study of employer benefits that “found that 17 percent of large employers (5,000+ employees) offered high-deductible health plans (and) 16 percent indicate they are likely to add a plan of this type in 2004.”

Eva Rosenberg writes for CBS’s “MarketWatch,” “Finally, a tax-advantaged health care program that cuts across all income levels and lifestyles–the new Health Savings Accounts. They are a real boon for people who pay for their insurance coverage.”

She cites Tim Bireley of Fortis Health as saying up to 40 million people will take advantage of them. She reports on a CPA in South Carolina who knows of one company that already has implemented an HSA and expects to save $65,000 in premiums in 2004. Also cited is Elise Koll of Working Today magazine, who says HSAs are “more than just portability in health care. They remove the employer-ownership of the plan and put control into the employees’ hands.”

AHPs–Is a Compromise Possible?

Speaking of Association Health Plans (AHPs), USA Today is frustrated that such a simple idea as small businesses joining together to gain better insurance rates has become so controversial. The paper agrees it isn’t a panacea, “but (AHPs) would address an important problem: the steep costs small businesses must pay to offer medical coverage. Yet even this small, common-sense reform has touched off fierce opposition from powerful groups ranging from Blue Cross and Blue Shield to state health commissioners.”

The article points out AHPs passed the House, but were held up in the Senate last year. The writer hopes the “pop from Bush’s [State of the Union] speech and a commitment by Senate Majority Leader Bill Frist (R-Tennessee) to take up the matter as part of a broader health care package may brighten the outlook.”

Uninsured Getting Political Attention

Writing in “AMNews,” Joel Finkelstein reports, “Now more than ever, the problem of the uninsured must be addressed without delay. That is the unified message being delivered by politicians, special interest groups, voters, and academics across America.” He cites the President’s State of the Union address and quotes AMA President Donald Palmisano as saying, “The AMA is encouraged by President Bush’s attention to the plight of the uninsured. We applaud the President’s conclusion that ‘a government-run health care system is the wrong prescription’ for America.”

The article goes on to mention the Democrats’ opposition and the recent Institute of Medicine study concluding “the only satisfactory answer is universal coverage.” The article also cites a recent survey done by Democratic pollster Stanley Greenberg for the American Hospital Association that ranks health care as tied with terrorism for the number two issue on the minds of voters. The economy is number one.

Maryland’s Health Care Future

Maryland is one of the states wrestling with these issues. There are two competing proposals–one Republican and the other Democrat–for mandatory universal coverage.

The Maryland Public Policy Institute asked me to write a paper on what Maryland should be doing in health reform, and I decided a pox on both their houses was in order: “Covering the uninsured with more of the same insurance policies available in the state does nothing to correct what is wrong–and expensive–with those policies,” I noted.

Maryland is one of the most highly regulated states in the country. It has more health care mandates than any other state, it has a Health Care Commission that has created a regime in which two insurers control 88 percent of the small group market, and it has an “all-payer” hospital rate control system and one of the most restrictive Certificate of Need programs in the country. It is the wealthiest state in the country, but has a worse record than most of its neighbors in assuring coverage.

All of these regulations serve to drive out competition and keep the local health care establishment fat and happy. Even Medical Savings Accounts were never allowed in the state, and it is unlikely the Health Care Commission will ever allow small employers to get their hands on an HSA.

My recommendation is to blow it all up. Get rid of all these regulations and allow competition and innovation back into the state.

Trouble in Paradise

Some states think the answer to rate increases is regulation. Hawaii is undergoing its first round of rate approvals since a new law requiring prior approval went into effect last year. The market is dominated by two carriers, Hawaii Medical Service Association (HMSA) and Kaiser, which are requesting increases of 9.7 percent and 14.5 percent, respectively, for limited blocks of business.

The primary effect seems to be delay of the increases while the insurance department deliberates. HMSA CFO Steve Van Ribbink says, “Regulation to me has nothing to do with the underlying health care costs other than the fact that it does add some administrative burden.”

But a smaller competitor sees it as a much greater obstacle. Arnie Baptiste Jr., president of Health Management Alliance Association, says the process will add to rates due to the administrative burden. “The process is horrible. I have full-time staff people on this and I have attorneys working on this. We’re spending an inordinate amount of money,” he said.

Greg Scandlen is director of the Galen Institute’s Center for Consumer Driven Health Care and assistant editor of Health Care News. His email address is [email protected].