More Bad News for HSA Proponents
by Scott Shields, Mon Jan 30, 2006 at 06:19:26 AM EST
Much has been made of the fact that President Bush is preparing to announce a plan to shift the burden of paying for healthcare from risk-pooling to personal savings in the form of health savings accounts, or HSAs. For a wide variety of reasons, this is an obviously terrible idea. It won't reduce the cost of healthcare overall, it will mean higher costs specifically for the sick and the elderly, and it will likely lead to bad healthcare decisions by understandably uninformed patients. We're already seeing an outcome similar to the latter with Medicare Part D.
As if to highlight how bad of an idea this is, the Commerce Department released numbers this morning indicating that the personal savings rate has dropped into negative territory. It is, as Martin Crutsinger of the AP puts it, "the lowest level since the Great Depression."
A negative savings rate means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. For the month, the savings rate fell to 0.7 percent, the largest one-month level since a decline of 3.4 percent in August.
The 0.5 percent decline in savings for the year followed a savings rate of 1.8 percent in 2004. There have only been three years that the savings rate has fallen into negative territory. The savings rate dipped by 0.9 percent in 1932 and the record 1.5 percent decline in 1933, years when Americans exhausted their savings to try to meet expenses in the face of soaring unemployment as the country struggled with the worst economic crisis in its history.
Bush's idea -- that has not yet been fleshed out in an actual policy proposal -- is that people should increasingly leave health insurance plans and put more money into health savings accounts. While this is obviously bad health policy, it's even worse as economic policy. These latest figures from the Commerce Department show that the American people are already at the end of their ropes, dipping into savings to pay their everyday bills. But the Bush administration thinks they're going to find money in the cushions to pay for medical bills? There is no guarantee that workers will see any extra money in their paychecks if they drop their insurance coverage. So they will likely be forced to choose between their HSA, their 401(k), their children's 529, and basics like food, shelter, and clothing. This is what the GOP calls "consumer-driven healthcare."