HSA's And The Health Care Crisis

I have always believed that the solution to the rising cost of health care is to do two things. First, eliminate health insurance companies and replace them with "Health Crisis Insurance companies" which insure you for only the most costly procedures. Second, instead of giving Health Insurance coverage, companies should stop offering them and just give the employees a larger income. This will make patients pay for the small, non-crisis type medical necessities out of pocket. Both of these solutions will eliminate unnecessary costs, give patients more power to shop around, thereby driving competition up and establishing a direct link between medical costs and medical decisions.

Well now Health Savings Accounts move us much closer to that. Steve Forbes, from Forbes Magazine, has an article detailing the advantages of this new method of savings, he writes,

The premise of HSAs is to once again put the patient, i.e., the consumer, in charge of the health care market. HSAs allow employers to offer health insurance with high deductibles--up to $2,600 for individuals and $5,150 for families. These levels make health insurance policies infinitely cheaper. In turn, companies-- workers, as well--put money into HSAs, tax free, that will cover the lion's share of the deductible. What an employee doesn't use stays in the HSA earning tax-free interest for future use. This is the antithesis of Flexible Spending Accounts, in which the worker loses whatever money in the account hasn't been spent by year's end.

Money that isn't used is rolled over. If medical bills exceed both that $2,000 and the employee portion of the deductible, traditional health insurance kicks in. Our premiums last year went up only a fraction of the national average. When companies initially put such a plan in place, they often see a decline in premiums. Now that employees will have "skin in the game," employers rightly figure that those dollars will be spent more carefully, more wisely. For instance, why get an MRI when, in certain situations, an X ray would be just as good?

The virtue of HSAs, however, goes well beyond this semi-zero-sum mentality: The way health care is delivered will change as providers find it in their best interest to come up with inno-vative breakthroughs. The traditional cost-plus mind-set will wither away. We truly will get more for less.

Two examples that have already proved this--plastic surgery and laser vision surgery. Neither is covered by traditional health insurance unless the surgery is needed because of accident or disease. The cost of plastic surgery has not experienced the kind of inflation that has afflicted the rest of the health care industry. In recent years laser eye surgery that reshapes the cornea so a patient no longer needs to wear glasses cost more than $1,500 per eye; today the same procedure can be done for less than $500 per eye. As HSAs become more common, similar results will be seen in the rest of American medical care.

With HSAs consumers will want to know what a procedure costs in advance. Using the Internet, they can comparison shop, not only for price but also for quality. More and more, insurers will make available easily accessible checklists of what patients should expect from various kinds of consultations and procedures. Today if you question a hospital or physician about prices, they'll look at you like you're some kind of nut or, even worse, someone who's uninsured.

Up to now there have been precious few consumer-directed pressures to bring about better care at less cost. Every other facet of a free-market economy experiences technological advances that make for better products and services at less cost.

Health Savings Accounts will let patients own and control a big chunk of the dollars spent on health care. People will try to get value for those dollars. HSAs don't take benefits away from people; they reward them for spending wisely. There will still be catastrophic coverage. People will be able to build up a rainy-day reserve, tax free. The account will belong to the employee, not the insurer, the employer or the government.

HSAs will make insurance more affordable for small businesses, which will be a boon for many of today's uninsured. If Washington's chest-beating pols who posture as tribunes of the people really want to help, they will allow individually owned HSAs to escape state regulations that vastly inflate medical insurance costs, just as corporate plans do today.

For health care we will finally see the return of genuine insurance--coverage for major risks, instead of the dollar-for-dollar kind of coverage we have now. And, amazingly, consumers will be better off with HSAs than they are with what they have now.