Study: HSAs Don't Significantly Control Costs
According to a study published in the journal Health Affairs, the new Health Savings Accounts touted by the Bush Administration do not significantly control health care costs. HSAs were rolled out in 2004 as part of legislation that established the Medicare Part D prescription drug program. An msnbc.com story described the program this way:
HSA deposits are tax-deductible, up to a maximum of $2,600 for an individual and $5,150 for a family, and the withdrawals are used to pay approved out-of-pocket healthcare costs are tax-free. Unlike previous health-savings plans offered by employers, account balances not used in one year can be carried over to the next, as well as from job to job. And like an individual retirement account, the funds can be used for any purpose when the account holder enters retirement, although the withdrawals are considered taxable income at that time.
Apparently, though, the HSA program is not living up to its hype:
The study found that the lowest healthcare spenders, typically the young and the healthy, saw reduced co-payments, or cost-sharing, because of HSAs’ tax breaks. The main problem is that a very small number of very sick people spend the most on health care. Only 7 percent of people are responsible for half of all medical spending, but they would see either no change or an actual decrease in cost sharing with an HSA and a high-deductible plan. However, cost sharing would rise for the majority of consumers, whose out-of-pocket health spending ranges between $700 and $6,100. About 30 percent of people in the study’s analysis saw their cost-sharing go up.
HSAs aren’t living up to their reputation of having people spend more of their money, or, as the healthcare industry calls it, ‘putting more skin in the game”. As a result, HSA proponents’ expectations of substantial cost savings may be overblown, according to the study’s other co-author, Sherry Glied, Professor and Chair of the Division of Health Policy and Management at Columbia University’s Mailman School of Public Health
“Most healthcare costs go to treating serious problems like cancer and heart attacks,” said Glieb. “Since those costs are well above the out-of-pocket maximum amount, the very ill face little to no cost-sharing. Since that’s where are the costs are, how much savings can you achieve?”
Click here to read the story on msnbc.com.