Senior Fellow and Director
Consumers for Health care Choices
The Heartland Institute
The Health Subcommittee
Ways and Means Committee
United States House of Representatives
May 14, 2008
Chairman Stark, Mr. Camp, and Members of the Committee,
I would like to set the record straight on some of what you have been told about Consumer Driven Health Care generally, and Health Savings Accounts specifically.
These programs are not a panacea for our health care problems, but neither are they intended to be. There are no simple solutions to the problems in health care and we would be foolish to think there should be. H.L. Mencken was famously quoted as saying, “For every complex problem, there is a solution that is simple, neat, and wrong.” There is hardly a problem more complex than health care, so solutions will be equally complex.
But HSAs and Consumer Driven Health Care (CDHC) are significant steps in the right direction. They are beginning to address some of the most intractable problems in the system. In particular
- Patient behavior is changing — people are being more cautious about needless use of services.
- Consumers are more compliant with treatment regimens, especially those with chronic conditions.
- The rate of increase in health care costs is down substantially for people and groups in these plans.
- The demand for information, transparent prices, and patient support services is high.
- The adoption rate in the benefits market is sizzling.
- The transformation of service delivery is beginning, though still very formative. Early indicators include the growth of retail clinics, concierge medicine practices, and medical tourism.
These changes are not mere speculation. They are taking place among real people in real life, and have been verified by actual results reported on by employers, consulting firms, and health plans.
Most of what you have been told in the testimony to date is either mistaken, based on suppositions or surveys of uninformed people, or simply irrelevant to CDHC. For example –
- You were told that lower-income people cannot afford the out-of-pocket responsibility that comes with an HSA. You were not told how those same people could afford the higher premiums that are required to avoid that cost. In fact, money that is paid to an insurance company for first-dollar coverage is money that is lost forever. Lowering the premium and using that saving to pay directly for services gives the low-income consumer a chance to save money that would otherwise be lost.
- You were told that the tax break associated with HSAs is unprecedented and a boon to the “wealthy.” In fact, the tax treatment of HSAs is precisely the same tax treatment afforded to employer-sponsored health insurance. Premiums are untaxed and benefits are untaxed. It is true that the “wealthy” get a larger tax benefits than the unwealthy, but that is the case for employer-sponsored comprehensive coverage as well as for HSAs. Further, the opportunity to save, say, $2,000 a year that would otherwise go to an insurance company is of far greater benefit to the low-income worker who earns $20,000 a year than to the wealthy executive who makes $200,000, regardless of the tax treatment.
- You were told that “the sick” do not benefit from HSAs because of the higher out-of-pocket responsibility. In fact, both the healthy and the sick have less out-of-pocket exposure with an HSA, a point that was well documented in a recent Health Affairs article. In fact, HSAs limit a patient’s out-of-pocket exposure, something that is not true for the Medicare program, for instance.
- You were told that most health care spending takes place above the deductible associated with an HSA, so they will not have “a significant effect on overall spending.” This is probably true, but irrelevant. HSAs are having a profound effect on lower-cost routine spending and that is significant by itself. Other strategies are needed for high-cost services with or without an HSA.
- You were told that many people with a high-deductible health plan do not open up an HSA. That, too, is true but irrelevant. The HSA itself is attractive for those people who are able to get a tax benefit from passing their direct payments through the account. Other people, especially those who pay no income taxes, may find it more suitable to simply pay cash at the time of services or to keep their funds in some other, non-HSA, account. Further, there is likely to be a lag time between the point of enrollment and opening up that account. This is not a problem.
- You were told that some people who have to pay directly for care or for prescription drugs may fail to do so to save the money. That also may sometimes be true. But there is never any guarantee that people will always fill their prescriptions and take their medications regardless of the financing scheme. In fact, we know that many health conditions are caused or aggravated by patient behavior under all health insurance systems. But, to the extent that people with CDHC are more knowledgeable and more invested in their own care, their compliance will be better than it is for other benefit programs. And that is precisely what we are seeing in the market.
In fact, with one exception your witnesses were people with long-standing hostility to HSAs and consumer empowerment in health care. The one exception could speak only to the experience of his own company and his own employees. But his positive experience is being replicated by tens of thousands of similar cases throughout America today.
There is a revolution underway in American health care. It is being transformed from a system that is inconvenient, unaccountable, uncompetitive, bureaucratic, of questionable quality, and far too expensive into one that is efficient, convenient, accountable, innovative, and matches quality and costs in a way to deliver the best value to the American consumer. This is an enormous undertaking, and HSAs are only one element of this movement.
I urge the Members of the Health Subcommittee to open your eyes and your minds to the dramatic changes that are taking place right now, right in front of you.
Thank you for your attention