Health Savings Accounts Are A Scam
by J Ro, Sat Aug 02, 2008 at 01:54:55 PM EDT
Health savings accounts, touted as the latest "free market" solution to our spiraling health care costs, is nothing but a scam to give more money to insurance companies and the rich.
Health savings accounts by definition favor the wealthy and/or the healthy. For those that never go to the doctor, or who can afford the high out-of-pocket costs incurred when using health savings accounts (you need to pay $1,050 as an individual or $2,100 for a family before your insurance will cover the rest), health savings accounts are great. Wealthy and/or healthy individuals can put a bit of money away, tax free, into their health savings account and then draw from it to pay their astronomical out-of-pocket costs when they decide to go see a doctor. If you're healthy, the doctor's visit doesn't happen very often. If you're wealthy, who cares if it happens very often, you can afford it.
For the rest of us, however, health savings accounts don't work. If we get sick and see the doctor often, we have to pay those huge costs often; that means we have to save a lot of money in that health savings account. For those on fixed incomes, or even those just barely scraping by (and that's a lot of us in today's economic climate), putting away even $4,000 in a health savings account is out of the question. Health savings accounts don't work for the same reason tax credits don't work: Those who don't have a lot of cash to save are forced to put away money they don't have a bit at a time to pay for their care. With tax credits, they get repaid at the end of the year. With health savings accounts, they don't pay taxes on that money. But either way, they need to save over the course of a year to get that payoff. For a lot of folks, this just isn't a realistic option - there's simply nothing to spare.
Is it any wonder, then, that health savings accounts haven't been embraced by most Americans? Jason Roberson at The Dallas Morning News reports:
Today, with only 5 percent of the 114 million Americans covered at work opting for such health plans, their future is in question. In Texas, regarded as the birthplace of the HSA, only 387,000 people have signed up out of the 12 million with employer-provided insurance.
Proponents point to small companies - including some in Texas - that have used the lower-cost plans to offer coverage for the first time.
Meanwhile, critics argue that the plans benefit only the healthy and wealthy, with sick patients who can't afford deductibles of more than $2,000 doing without care.
Despite the tax benefits, patients have not been enamored of the trade-off. Few have signed on at companies now offering HSA plans as a new option, according to the Commonwealth Fund, a private New York City foundation focusing on the nation's health care system.
On the other side, Stacy Pogue, a policy analyst at the Center for Public Policy Priorities, an Austin-based advocacy group, argued that HSAs favor healthy people, who don't worry about a deductible, and the rich, who have the money for a big deductible and like the tax incentives.
In fact, a May report from the Government Accountability Office found that taxpayers with health savings accounts averaged an adjusted gross income of $139,000 in 2005 vs. $57,000 for other filers.
Health savings accounts, by favoring the wealthy/healthy, redistribute wealth in the wrong direction. Insurance companies pay out less money, as our out-of-pocket costs are higher. The rich who can afford to pay the costs stay fat. The rest of us are forced to pay more of our hard earned money for health care and the gap between the rich and poor rises. This is redistributing wealth towards the rich, a venerable American tradition.
People who work hard, who pay their taxes, and who get sick out of no fault of their own deserve better.
And health savings accounts do nothing to address underlying problems. Insurance companies can still deny care at will, even after people are forced to pay thousands out of pocket. Health care access is still determined by your wealth - the more money you have the more health care you can buy. And health savings accounts do nothing to lower the actual cost of health care, they only serve as a small deterrent for people to see a doctor in the first place.
John Goodman, president of the National Center for Policy Analysis in Dallas and "father" of the health savings account admits as much:
"If a mother wakes up in the middle of the night with a sick child, we want her to think about the cost of the emergency room visit," said Mr. Goodman, dubbed by many the "Father of Medical Savings Accounts."
That's an amazing admission. Proponents of health savings accounts like Goodman want mothers with sick kids thinking about how much money is in their bank account instead of the health of their child. And here is where the differences of opinion become intractable: I believe that when a child is sick, the only thing that should be on a parent's mind is healing and comforting. Parents should be consulting their doctor, not their check book.
Paul Krugman agrees with this basic assessment of the failings of health savings accounts, and he points to a further problem:
But for people whose income puts them in high tax brackets, these accounts are a very good deal; making the premiums deductible turns them into a great deal. In other words, health savings accounts will offer the already affluent, who don't have problems getting health insurance, yet another tax shelter. Meanwhile, health savings accounts, in the view of many experts, will actually increase the number of uninsured.
In the case of health savings accounts, the key side consequence is a reduced incentive for companies to insure their workers. When companies provide group health insurance, healthier employees implicitly subsidize their sicker colleagues. They're willing to do this largely because the employer's contributions to health insurance are a tax-free form of compensation, but only if the same plan is offered to all employees.
Tax-free health savings accounts and premiums would provide healthier and wealthier employees an incentive to opt out, accepting higher paychecks instead, and would lead to higher insurance premiums for those who remain in traditional plans. This would cause some companies to stop providing health insurance, or raise employee contributions to a level some workers can't afford.
Not only to health savings accounts redistribute wealth upwards, they undermine the basic notion of risk-sharing that our current health system is based on.
So, to recap:
- Health savings accounts allow insurance companies to keep more money.
- They offer tax shelters to the wealthy,
- while hard working Americans pay more out of pocket,
- and parents are forced to worry about their bank accounts instead of the health of their children.
In short, health savings accounts are a scam.