Today at work I was musing about what it would take for Health Savings Accounts (HSAs) to be successful. HSAs, for those not familiar, are a combination of tax-advantaged saving accounts to be used for healthcare expenses (perhaps employer funded) combined with high deductible managed care health insurance. These plans have been advocated by many, including President Bush, as a way to decrease the growth rate in healthcare spending.
I think there are two general sets of requirements that would need to be met: a true market for health care coverage and high deductible benefit plans need to represent real savings over traditional insurance products.
For the market to be considered developed:
- A consumer should have a choice of healthcare providers and healthcare procedures.
- A consumer should have access to price and quality information. Price should be straightforward but quality is harder to define. It would have to include adverse outcomes, time for the procedure, time for recovery, etc.
- Consumers would also need a choice of high deductible coverage plans and HSA plans. Ideally, the two should be completely decoupled from each other. Consumer should be able to purchase lower deductible plans at a greater cost and have choices in how their HSA dollars are invested.
The high deductible plans will also need to be cheaper than insurance currently offered today:
- A relatively large amount of health plan costs (generally speaking) should accumulate below the higher deductible threshold. That is to say, the cost to insure all households spending less than $5000 or whatever per year needs to be a large portion of total healthcare spending.
- The growth rate in spending above the deductible threshold should be lower than that below the threshold.
I’m not sure if those conditions have been met in the US. Certainly, choice of providers, at least outside major cities, is poor. And price and quality information is extremely hard to come by. Moreover, I’m not yet convinced that high deductible plans will be so much less expensive: most healthcare is consumed by only a few of us and most care is delivered in the last few months of life.
