According to the quoted report, there are only one fourth as many health savings accounts as high deductible health plans. This would only make economic sense if health plan members anticipated having no out of pocket health care expenditures. How could this be the case? Only if these members were significantly healthier than the population as a whole, or if those members were foregoing cost effective preventive care (though some disagree on the cost effectiveness of preventive medicine). Therefore, high deductible employer-sponsored health plans would be one means (and an economically inefficient one) for employers to shift the cost of health on to the overall society.

I believe that there are two fundamental principles that must guide us through the inevitable health care crisis that is looming on the horizon. First, we must bring personal responsibility back into the payment of health care. Health insurance was originally established to cover only catastrophic illnesses. Over the years, it has moved toward a semi-socialized program that has most of the costs covered by employers and the federal government. But in the end, all these two entities do is take our money through lower pay and higher taxes. We need to take these “middle men” out of the system for all routine health care. It would cut out huge administrative overhead costs that corporations and government spend that if we kept in our pockets would give us more money than we now have to spend on health care.

Second, we need to bring the market back into health care. Government controls health care at the local, state and federal levels. The pages of laws and regulations that control health care would make the 60,000 pages of the tax code look like a short story. The percentage of health care dollars that actually go to direct health is incredibly small. Some studies over the years have shown that 80% of the dollars in the system go to administrative costs. Government’s attempt to manage health care have contributed more than any other factor the the health care cost crisis.

For his conclusions to be correct, the following would need to be true:

1. Non-managed (“traditional”) health plans would need to be less expensive than managed care plans. However, the decision of most corporations to select HMOs, EPOs and other managed care options suggests the opposite.
2. Government managed care, such as Medicare, would have to be more expensive to administer. Though there are plenty of contradictory articles on the web, research suggests that government Medicare is less costly to administer than private Medicare HMOs, though those HMOs insure healthier patients.
3. Some significant portion of health care costs would need to be “discretionary” rather than urgent or emergent. The opposite, in fact, seems to be the case. Health plans find themselves needing to incentivize members for preventive care. These plans find such incentives to come out positive on a cost-benefit analysis because they avoid the sorts of catastrophic conditions that Jeff suggests should be the true use of health insurance. Moreover, without middlemen negotiating rates, physicians and facilities would be free to charge whatever they liked.

I’m not sure where Jeff gets his data–I don’t want to dispute his assertion that 80% of health care dollars are spent on administration but I would appreciate cited sources. More important, though, is that he seems to ignore the fact that good health is a very real public good. People with overall poor health, whether from poor nutrition, poor lifestyle, or poor preventive care, are more susceptible to the contagious diseases that are at the center of concerns about pandemics. Access to health care could even be considered a homeland security or national defense issue: healthy individuals are less susceptible to bio-terror attacks and would be better able to join the military in a time of true national emergency.

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.

Soaring costs mean that the financial health of Medicare is deteriorating quickly. Commentator and health policy expert Jonathan Weiner says major surgery may be in order.

Jonathan Weiner, professor at Johns Hopkins in the department of Health Policy and Management, singled out Medicare as an example of a healthcare payor in need of cost controls. I believe his choice was unfortunate for two reasons: When comparing commons benefits, Medicare spending has traditionally grown at a slower rate than private health insurance spending (cf: “Comparing Medicare and Private Insurers: Growth Rates in Spending Over Three Decades,” Cristina Boccuti and Marilyn Moon, Health Affairs 22, 2 (March 2003): 230–237). Furthermore, Medicare administrative costs are only a fraction of private payor administrative costs.

Weiner was correct to highlight the high cost of healthcare in the US as compared with other western countries. However, in singleing out Medicare, he implies that this federal program is a significant cause of such costs. Representing only about 20% of personal healthcare spending, he would do his audience a service to examine systemic problems across the entire healthcare industry rather than criticizing one of the few successful US programs.