Frequently Asked Questions (FAQs) on Consumer-Driven Medical Care
1. Aren't Health Savings Accounts (HSAs) for the Healthy and Wealthy?
Yes. And they are also for the Poor and the Sick. They reduce costs and make money available to individuals to use as they see fit: to become less poor, or to purchase medical care that suits them better.
2. How can an HSA cover a big medical expense?
It doesn't—until it's been accumulating money for many years. That's why you have catastrophic insurance.
3. How can low and middle-income people afford a $5,000 deductible?
In a few years, most people will have saved the amount of the deductible because premiums are much lower. In the meantime, they could use a medical “bridge” loan to cover any gap between available HSA funds and the deductible. Why won't people who borrow $20,000 for cars, $75,000 for college, or $200,000 for a house borrow $5,000 or $10,000 to save their lives? Future premium savings should pay off the loan.
Besides, it's much easier to raise $5,000 through a bake sale than $100,000 to cover a procedure that low-copay HMOs deny. A better question is, how can anybody afford a low-deductible but high-premium policy?
4. Won't people skimp on medical care until they get really really sick?
I wonder why the same people don't worry about insurance companies skimping on their medical care!
But the fact is that people generally exercise pretty good judgment about what's important and what's not. A RAND study showed that free care, compared with cost-sharing plans, is associated with 90% higher emergency room use for less urgent diagnoses and only 30% higher use for more urgent diagnoses. People who have to pay part of the bill economized, for example, on things like abrasions, sprains, gastroenteritis, diarrhea, headache, or viral syndrome, which are usually self-limited.
And by the way, people with an HSA have money— to pay for things insurance doesn't cover. It's first-dollar coverage, only with their own money. They face fewer barriers to care than people with copayments do.
5. Does CDHC “leave consumers at the mercy of a broken market,” as Hillary Clinton said in The New York Times Magazine of April 18?
HSAs empower individuals. Those who don't want to be in charge of their own decisions are free to stick with managed care.
6. Does CDHC “shift cost and risk onto individuals,” as Mrs. Clinton says?
Consumers already pay the cost of their insurance: it comes right out of their paychecks. Moreover, they pay inflated costs thanks to cost shifting from government programs, as well as taxes.
Everything, it is true, has some risk. But which is riskier? Depending on your employer, who may go bankrupt or “offshore” your job? Depending on the government, which can change benefits drastically just by manipulating regulations, and which is also headed for bankruptcy? Or owning your own insurance plan and HSA?
7. Won't people prefer to let savings build in their HSA, instead of spending it every year?
Maybe that's not a bad idea! People might well want to use money that's going to be taxed anyway for medical care and take advantage of the tax break on deposits to the HSA. Shouldn't they be allowed to choose how to use their own money?
If a person starts an HSA at age 25, makes a deposit of $2,000 every year and pays medical bills out of other funds, the account should be worth $253,680 in 40 years, assuming 5% interest.
8. Don't consumer-driven plans “cherry pick”?
The reason for cherry picking—screening out high-risk individuals—is inability to price the product according to risk. In other words, government regulations, especially price controls, force insurers to compensate in other ways if they want to remain in business.
Today, carriers cannot cherry pick for group policies, but they can generally underwrite individuals. This is not expected to change with HSAs.
Remember, however, that socialized medicine's equivalent of cherry picking is offering good service only to the healthy and politically well connected. Rationing and denying care are inevitable with government-financed medicine.
9. Isn't it just right for a civilized country to provide health coverage for all?
Is it right to force people to pay for other people's coverage while forbidding them, as in Canada, to use their own earnings to buy timely, lifesaving care for themselves and their loved ones? Is it right to force people into government dependency?
More compulsory government “coverage” displaces and erodes the voluntary ethic of caring for one's neighbors, which is the true sign of a civilized society.
10. Haven't other Western countries proved the advantages of national health insurance or “single payer”?
The U.S. may still talk about expanding taxpayer-funded benefits, but many European governments, including France and Germany, have no choice but to start rolling them back. For a cinematographer's look at the Canadian system, go to see The Barbarian Invasion, an award-winning movie about end-of-life issues, which is partly set in a Canadian hospital. The beds in the hallway, closed floors, delays, and pervasive corruption are taken for granted by the protagonists.
And don't forget the record of our very own single payer plan called Medicare, projected to bankrupt our own federal treasury in a few years.
11. Why aren't businesses jumping on this idea?
Some of them are. But it's hard to overcome inertia and special interests who are making huge profits by shuffling money around. And some big players think they'll soon be able to unload their soaring insurance premiums onto the taxpayers.
12. Why isn't Big Labor demanding HSAs?
The interests of workers and Big Labor do not necessarily coincide. Unions may mistakenly view HSAs as a threat to their own raison d'etre. Workers could benefit greatly from a larger paycheck, downward market pressure on medical costs, portable insurance, and freedom to choose their own medical care. But it's frightening to take on a responsibility when you're accustomed to someone else “taking care” of you (or pretending to do so).
13. Where can I buy an HSA?
Ask your insurance broker. If he doesn't know and won't find out, get another broker. Lists of companies offering HSAs in various states are posted on the internet, for example: www.americanhealthvalue.com or www.hsainsider.com.