Mainstream Media Mischaracterizes HSA Effects

Published October 1, 2006

A Commonwealth Fund study in the July/August issue of Health Affairs found high-cost patients with health savings accounts (HSAs) spend less out-of-pocket than they would under traditional health plans. A Bloomberg wire service story treated this as a newsworthy discovery of a “flaw” in HSA design, since if less is spent out-of-pocket, incentives to conserve costs under HSA plans must be weaker.

There is no news here, and there is no flaw.

HSA type-plans have been on the market for a decade in the United States and for more than a decade in South Africa. Everyone familiar with the plans knows they typically lower out-of-pocket expenses for high-cost patients. This fact is not only well documented, it has been hashed over in the trade literature, at health care conferences, and in numerous think tank reports, including studies by the RAND Corporation, Urban Institute, National Bureau for Economic Research, and National Center for Policy Analysis.

Seeking Consumer Pain

The only people who will find this recent “discovery” surprising are HSA critics who have been saying for years that HSAs would harm the sick, especially the chronically ill, and who (despite being quite vocal) tend to have very little familiarity with actual products on the market.

Far from this being a “flaw,” most HSA plans are an improvement over traditional insurance, which has co-payments (sometimes without limit) for expenses over which patients exercise no discretion (such as inpatient hospital costs). Most HSA plans, by contrast, allow patients to manage health care dollars for expenses over which they can exercise discretion and where it is appropriate for them to do so.

Here’s a news flash: The goal of HSA plans is to allow patients to manage their own health care dollars, not to see how much financial pain we can make them suffer.

John C. Goodman, Ph.D. ([email protected]) is founder and president of the National Center for Policy Analysis in Dallas.

For more information …

“How Much More Cost-Sharing Will Health Savings Accounts Bring?” by Dahlia K. Remler, Ph.D. and Sherry A. Glied, Ph.D., Health Affairs, July/August 2006,

“MSAs Can Be a Windfall for All,” a November 2001 report from the National Center for Policy Analysis, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to, click on the PolicyBot™ button, and search for document #19679.