False promises: ‘Consumer driven’
health plans

A promotional pamphlet for a health savings account (HSA) boasts, “If you plan correctly, you may find that you spend far less for health care than ever before.” True, if you could plan to avoid cancer, being hit by a car, or growing older. But you can’t.

Three million Americans have signed up for high-deductible health plans, which are often paired with tax-advantaged HSAs designed to give them the funds they need to pay those deductibles. Proponents call this “consumer driven health care.” They claim that patients who have to take on more of the costs themselves--annual deductibles range from $1,050 to a total deductible and costs of $10,500--will avoid unnecessary care and look for medical providers who deliver high-quality care at the lowest price, thus driving down costs. The plans are touted by some, including President Bush, as a solution for the U.S. health-care crisis, with its 46 million uninsured.

The reality is that these schemes shift increased financial risk to consumers and will surely weaken our already fragile health-insurance system. HSAs provide little assurance of affordable, quality health care to those with chronic illnesses, families with children, those of moderate incomes, or older Americans with more health-care needs. HSAs do nothing to address the factors that really drive up health costs: care for those with chronic diseases; overuse of technology; hospital care; prescription drugs; and end-of-life care.


Who benefits, who doesn’t?

HSAs may benefit young, healthy workers without dependents, who don’t spend much on medical care. They’re especially advantageous for the wealthy of all ages, since the higher the tax bracket, the more valuable the tax break. Contributions to HSAs are tax-deductible, the account grows tax-free, and money pulled out for medical expenses is not taxed. After age 65, money saved in the account can be used for any purpose, without a tax penalty. But the income level of the vast majority of uninsured Americans prevents them from reaping those tax benefits.

A recent national survey by the Employee Benefit Research Institute, a nonprofit organization, found those currently in HSA-type plans were significantly more likely to spend a large share of their income on out-of-pocket health-care expenses than those in comprehensive plans. They were also more likely to skip or delay health care because of costs. And though HSAs work on the premise that consumers have access to reliable cost estimates and comparative information about providers, that information all too often does not exist. No surprise that the survey found those enrolled in HSAs far less satisfied than those with traditional, comprehensive coverage.

So, who, besides the wealthy, benefits from HSAs? Employers do, since they are shifting health-care costs to their employees and are more able to predict health-care expenses. And financial institutions offering HSAs are poised to reap billions in profits from the fees they can charge in setting up those accounts.

A health-insurance system can function only if costs and risks are spread among healthy and sick participants. But healthy employees who don’t expect to need much medical care are the ones most likely to abandon traditional plans in favor of low-premium, high-deductible ones. Those left in traditional plans will be sicker and more risky to insure. That means a greater likelihood of steep premium increases, pricing coverage out of the reach of more workers and adding to the ranks of the uninsured.

“Consumer driven” health plans, including HSAs, abandon the premise that the community has a responsibility to care for all members. The health-care system needs fixing, but HSAs are a sham substitute for comprehensive reform.

For more on health savings accounts, go to
http://www.consumersunion.org/pub/cathealthinsurancemsa/.