The Rise of Consumer-Driven Care

Will ObamaCare put a stop to the most promising way of controlling health care costs?

The American health care debate occurs primarily between two factions: On one side are the centralizers. They prize equality of care and access, and believe that, to the extent possible, health risks should be spread proportionally amongst the populace. They argue that health care is sufficiently complex that most individuals cannot make decisions for themselves. And they say that the responsibility for making tough decisions about how to keep health care costs under control ought to be made by enlightened, well-intentioned policy elites.

On the other side are the decentralizers. This faction prizes the subjective preferences of individuals, and takes the line that centralized decision making does not account for individual variations in responses to care, and is a poor substitute for local, personal knowledge. Further, they argue that artificially redistributing risk obscures the true cost of care, and inevitably—and uncontrollably—drives up prices and spending.

Decentralizers' greatest weakness is health care anxiety, the entirely reasonable (if not always justified) fear that some great health care misfortune will befall an individual or her family.

Partly for this reason, decentralizers—and I count myself as one—have not had much success in recent years. The recently passed health care overhaul forcibly spreads risk, requires an up-front expense of more than a trillion dollars, and is likely to do little to contain costs long-term.

Yet the news is not entirely grim. According to a new study from America's Health Insurance Plans, a trade group representing the insurance industry, consumer-driven health care plans—which typically feature a high-deductible insurance plan paired with a health savings account (HSA)—are expanding rapidly. As of January 2010, they are used by more than 10 million people, up from 6 million in 2008.

Consumer-driven plans blend the decentralizers' individual focus with a lighter version of the centralizers' risk sharing. That means they harness the power of individual preference and decision-making, but without sacrificing stability and security. Patients make their own decisions about relatively inexpensive, routine care, but limit their exposure to expensive, unforeseen illnesses or injuries.

Because these patients are spending their own money—and can keep the remainder—they have an incentive to understand their individual care and cost options, and make prudent decisions. At the same time, they voluntarily pool their greatest risks, providing a measure of predictability and stability. The result is patient choice, but without anxiety.

Still, the news is not all good. Consumer-driven plans work in part because they are customizable and cheap. But under the new health care law, that may not be the case for long. The law doubles the penalties for HSA spending that isn't approved by regulators. And, according to John Goodman, a frequent Health Affairs contributor and the President of the National Center for Policy Analysis, "it opens the door to death by regulation." That's because it gives the Secretary of Health and Human Services the power to mandate health insurance benefits. As Goodman explains, that means "the Secretary could make the mandated health insurance plan inconsistent with the requirements of the HSA law, thus effectively outlawing any new contributions to HSAs."

That's a shame. Consumer-driven plans don't just work in theory; after a decade of use, there's strong evidence that they are the best known mechanism to achieve lower costs without sacrificing quality of care. A 2009 metastudy of high-quality research on consumer-driven plans by the American Academy of Actuaries (AAA) reported that "properly designed [consumer-driven health] plans can produce significant (even substantial) savings without adversely affecting member health status."

With traditional insurance plans, the only question is how much costs will grow each year. The AAA review of consumer-driven plans, on the other hand, showed first year drops of between 5 and 15 percent—putting total savings (when compared with traditional plans) between 12 and 20 percent. And although the evidence is less certain, the AAA metastudy even showed smaller cost reductions in subsequent years.

Critics of consumer-driven health care argue that, by allowing individuals to keep unused health care dollars, the plans create a financial incentive to skimp on preventive care. But the AAA report reveals this claim not only as baseless, but as the opposite of the truth: Every one of the studies reviewed reported a "significant increase" in preventive services.

This last point is especially important, for it speaks directly to the centralizers' idea that individuals cannot be trusted to make prudent decisions about their own health expenses. The reality is that most individuals are perfectly capable of making such decisions. And thanks to consumer-driven plans, many of them do.

Peter Suderman is an associate editor at Reason magazine.

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  • Beezard||

    is that Billy Ocean on the right?!

  • Beezard||

    picture's down. now I make no sense.

  • Chipotle||

    individuals cannot be trusted to make prudent decisions about their own health expenses

    About the only time they feel we demonstrate any measureable prudence is when we pull a lever for them. Then right back to no choices over our own lives.

  • Mike||

    The problem with HSA's is that they are competing with the "free" employer healthcare.

    People don't see the true cost of traditional employer-provided healthcare. Even I have a hard time thinking about it, since my benefits page doesn't say I get paid X dollars and Y dollars of benefits - it says I have a whatever copay and deductible.

    So my friends who have HSA's through work all express that they suck, because they *aren't* as nice as having everything you could possibly want provided for you. The fact that they cost much less overall doesn't matter because the savings are not presented visibly to the employee. One would assume that their salary is higher than it would be if the company had to pay for a buffet-style healthcare plan, but it's not like they mark off that $2-3k a year on their pay-slip.

    If I could take an HSA and few thousand more dollars into my 401k every year instead of normal insurance I would do it in a heartbeat (especially since, being a young person, I have been to the doctor once in the five years I have had health insurance). But companies don't normally give you that as an option.

  • Chad||

    Mike, you are a proud advertisement for why health insurance doesn't work in the free market: all the healthy people try to opt out, leaving only the sick. In the meantime, insurers do everything they can to boot the sick people from their rolls.

    The only way around this "adverse selection" problem is to insure everyone roughly equally all the time.

  • cynical||

    Health insurance works fine in the free market. Once progressives politicize it and turn it into a for-profit welfare program, it fails, but the entire concept is so laughable that only a high-functioning retard like a progressive could think it would actually work.

  • Chad||

    Citation, please.

    No nation has, or ever has had, a functional "free market" health insurance system.

  • Colonel_Angus||

    Why would it be a good idea for all the healthy people to opt out? What if I get shot? I only want to opt out of the routine shit I can pay for myself.

  • Mike||

    Umm, no?

    I would still have health insurance. I play numerous dangerous sports, there is no way I would not have health insurance. I would *very* gladly, however, give up my premium plan that pay for my doctor visits and getting my teeth cleaned.

  • ||

    Chad,

    How is this comment relevant to Mike's? He doesn't want to be uninsured. He wants to have an HSA to reduce his premiums.

    FYI: Even for sick people the combination of lower premiums and tax deductions for health spending accounts make them cheaper.

  • Chad||

    Most young, healthy people do not want to go "uninsured". They want to be very lightly insured. Either way, it is the same market failure.

  • Contrarian P||

    Good thing you are here to tell all of those young people what's good for them. I would contend that you're wrong: they want to be lightly insured for things that are highly unlikely to happen to them and heavily insured for things that are. If I'm 23, being insured for Alzheimer's really doesn't make a hell of a lot of sense, but being insured for a car accident does.

  • Joe||

    Citation, please.

    You don't undersyand adverse selection.

  • Jon||

    I love my HSA. Wish I could have started it 30 years ago.

  • Chad||

    Yeah! There is nothing like having thousands of dollars locked up in an account where I can't use it and it earns basically no interest, and having to track every penny I spend on medical care. THAT will sure lower the costs! How about we just give everyone a tax cut and skip the HSAs? It is FAR easier.

    I suggest you look at the health care system of Singapore. Everyone is covered, but there is a sliding co-pay based on income. Basically, Bill Gates would be paying mostly out-of-pocket, while someone who was really poor might only have a 10% co-pay (and a ceiling which caps the amount he or she could pay in a year). Japan is similar, with a 30% co-pay for most procedures. This controls costs without all the burdens of HSAs.

    There is nothing incompatible with universal coverage and co-pays that are sufficient to get people to pay attention to prices and avoid unneccessary procedures.

  • ||

    You have to track what you spend on health care? Jesus Fucking Christ! What sort of fascist goddamn nightmare is this?

  • cynical||

    It's a good thing that insurance and public health care programs eliminate the need for paperwork.

  • ||

    In general, I agree with your main criticism here, Chad. But from real-world experience with both HSAs and Flexible Spending Accounts, I can say that the trend is simply to give you a healthcare "credit card," by which means the tracking of expenses is automatic.

    Credit card companies already track your spending and keep it on record for a period of time, so the cost for the tracking mechanism is already inherent in the existing credit-card processing infrastructure. Any additional overhead cost comes from the determination of whether a particular expense qualifies as "medical."

    In the old days of FSAs, you did indeed have to keep track of your expenses and apply for reimbursement for yourself. Also, if you didn't spend all the money in a plan year, the remainder reverted to your employer. I eventually decided that the benefits of using "pre-tax" money through FSAs weren't worth the hassle, or the value of my time. But this was only after my employer switched away from a benefits administrator that handled FSAs through a credit card arrangement, and to an Administrator that did FSAs the antiquated, "traditional" way, requiring the hapless "beneficiary" to be responsible for all the paperwork.

    Myself, I am not a fan of ANY THIRD PARTY having and keeping detailed records on my medical transactions. But as long as we're going to have an intrusive income tax, I would certainly prefer, for example, to use a particular (regular) credit card exclusively for my medical expenses, and then use the statements to verify medical deductions against taxable income, or to qualify for medical tax credits. I would certainly prefer such an approach if the forces of competition and innovation were allowed to drive down medical costs in a true free-market for health care.

    In any case, the present US model, of a third-party payer, to which access is granted via one's employer, is imbecilic and unsustainable. Going further down the road to government-controlled centralization is a profoundly wrong path. I hope the trend toward "consumer driven health care" will ultimately culminate in a system in which providers post their menus of services and prices, watchdogs post provider and product ratings, barriers to entry and exit from the industry (or the market for products and services) are low, and patients are expected to pay for products and services, out-of-pocket. That system will ensure that the best care is most widely available at the lowest price, as it has for every other industry where it is allowed to work without harmful intervention.

  • Jon||

    My HSA earns interest whats your problem. retarded?

  • Chad||

    Money market interest that doesn't even match inflation, probably.

  • Mike the Other||

    Sounds like you have a very limited grasp of the options available to HSA account holders. And inflation.

  • Chad||

    I have an HSA, and for the first $5000, my options are money market. I do actually have more than that, but not enough to make it worth paying attention to.

  • Contrarian P||

    Chad, the cost of health care is spiraling upward much, much faster than inflation, so I'm not sure exactly how you propose to keep up with it, regardless of what mechanism you use. The only way we can stop this trend is to use measures that have been shown, as the HSA model has, to reduce costs.

  • Chad||

    Easy: pick any other OECD nation, and copy their health system exactly. This would lower costs between 60 and 35%, depending on which nation we chose.

    I suggest you look at how Singapore handles things. Libertarians might like it.

  • Contrarian P||

    You are making a gross assumption that we could lower costs simply by copying another nation's system.

  • Contrarian P||

    While I'm at it, your proposal is that it would be better to scrap our entire system and copy Singapore instead of offering consumers a choice as to their method of insurance?

  • Colonel_Angus||

    Health saving account: extra money I set aside for emergencies. Earning interest in the bank.

  • Joe||

    Right, just incent people to do as little as possible and get the same benefits as those who carry society's load. This should encourage people to work hard, make something of themselves and make our society all it could be.

  • ||

    As a health actuary studying and following medical expense insurance issues for 30 years, I feel compelled to make a response to what I believe is a somewhat misleading use of the recent actuarial monograph Emerging Data on Consumer-Driven Health Plans (May, 2009) from which you draw various supporting statements in your piece.

    Upon full study of the actuarial review (CDHP May, 2009), reading a bit between the lines, and also recognizing some still significant questions that were not, to my view, clarified well enough, I am not persuaded, certainly not whole heartedly, that the endorsement you appear to claim is being made in the Academy review is really there. There are some material gaps in the data, and it should be first noted that this was NOT a study of primary data by actuaries, it was a review of several studies that had been produced by marketing entities which, as discussed in the review, could very much have a bit of an ax to grind in releasing those studies. It is a bit like the FDA trying to sift through the research submitted by a drug manufacturer – what DIDN’T they submit, that kind of thing. The Academy did NOT find out things for themselves, they merely studied the methodologies and results of other studies.

    Also, it is very unclear as to exactly what comparative plans were used, and exactly the interaction between the selection possibilities, benefit plan choices, and relative “funding” of the HSA/HRA by the employer and the results. No (reasonably knowledgeable) person would say that a high deductible does NOT lower costs, so it really depends on what you are comparing with. My own understanding of general data available is that while there has certainly been an increase in the utilization of CDHP plans in the form of high deductible plans with either HSA or HRA components, most employers do NOT offer to fund the HSA or HRA with anything approaching the "savings" between the higher deductible plan and the previous lower deductible plan. Without that money coming FROM THE EMPLOYER, any claim that truly necessary care is not diminished is highly questionable.

    The short of it is that I can describe any number of scenarios, quite reasonable in nature, that could produce the results of the indicated studies, but for which you most certainly cannot draw a conclusion that CDHP packages are "better" from a "cost control" standpoint than a traditional benefit plan of similar value would be. Besides, what “cost control” means is within the eye of the perceiver – employer or employee? Healthy employee or chronic employee?

    The net result is that it looks to me that the situation has NOT changed dramatically from the original Academy 2004 monograph on this subject, which pretty much stated that the “jury is still out” on the actual impact, if any, of CDHP on true, longitudinal costs. To conclude otherwise from the updated review of the literature just completed is as much an exercise in faith as it is in actuarial analysis. Of course, this is merely my own professional opinion, and I readily admit that I have not seen the primary report data. My concern, however, is that others seem to take from the report far more than it actually says, and by doing so, infers an actuarial “blessing” that is pretty weak, at best, and possibly nonexistent in reality.

    (As a matter of clarification, I work with programs utilizing CDHP concepts all the time, and in fact, am involved in bringing to the public what will be the first truly comprehensive “price and cost” data base for physician and hospital services, and prescription drugs. Current CDHP programs still tend to be integrated with existing “network” mentality, and will not be in a position to achieve their (still undeveloped) potential until actually USEFUL data on what treatment package prices can actually be negotiated with providers OUTSIDE the current network pricing grid becomes an actionable reality. Hence, I am not in the “anti-CDHP” camp at all, I just prefer to see “evidence” like the Academy monograph used in a conservative and appropriate manner.)

  • His Eminency||

    Are we going to see this response popup anywhere anyone quotes the American Academy of Actuaries study that says high deductible + HSAs bring down costs?

  • Contrarian P||

    I believe the matter definitely should have more study, but am guessing the money for doing those sorts of studies will not be available given the source of funding for most research these days. In my practical experience, I find that those patients who have HSAs are much more involved as to what tests and procedures are ordered and, generally, are much more likely to educate themselves on their care. My question is, if there's any evidence, even if it's questionable, that HSAs might lower costs and provide a viable insurance alternative, why is some Washington autocrat deciding for the consumer that it is of no benefit? Why not let consumers have options?

  • Howard||

    Good Lord, I have never read more words communicating less.

  • Howard||

    Sorry, but I meant to add that when Chad is confronted with middle age and the opportunity to have his health care wholly under his control via having Do you take...cash?, I suspect he will have a different view of having a pile of cash "locked up" that he can use as he pleases to support his well-being.

  • ||

    You cannot have smart healthcare reform without respecting individual choice. ObamaCare is a failure and we have to let the Democrats in office know that we disagree with the government controlling our decisions. Lets let them know with out votes. In NY-14, Republican Ryan Brumberg is running against Carolyn Maloney and her reckless fiscal policies. Check him out at www.brumberg2010.com/issues/healthcare

  • Some Guy||

    I would be OK with spreading catastrophic risk out to the entire population, though with at least some minimal co-pays.

    The problem is that we want every little nickel and dime item to be covered by insurance, and that's where the prices are most distorted.

  • Attorney||

    As Reasonoids and others often point out, what most people seem to mean by "health insurance" is not insurance but a subsidized health plan.

  • Some Guy||

    When people complain that "insurance" doesn't cover pre-existing conditions, it makes me want to punch them.

    If I total my car without insurance, why exactly should an insurance company cover it the next day when I sign up?

    Now that doesn't excuse some shady coverage denials based on a hangnail 20 years ago that wasn't reported, but that is far more rare than people make it out to be.

  • Mike the Other||

    You hit on an important issue: in a free market for health care and insurance what would happen to people with conditions who are on a plan and would like to switch? Perhaps they've been covered by a plan of their parents' choosing for the past 18 years, but that plan's premiums are high because the plan covers routine care... now the young person wants to switch to an HDHP type of plan? Can we imagine a market where this is possible? I certainly can imagine stipulations, limits, etc, around treatment of pre-existing conditions. But the concern is to address the idea that if I have State Farm insurance and total my car, can I still get insurance from Farmers for my next car? Or will I be stuck with State Farm, who actually have an incentive to mistreat me so that I drop coverage entirely now that I have a pre-existing condition and can't get coverage anywhere else?

  • Some Guy||

    Was your car already totaled when you went to Farmers?

    This can be more of a gray area in health than cars because a car accident is a one-off event. But as long as State Farm isn't allowed to drop you during cancer treatment, I don't see the problem. If they are shady, then they will get a reputation for it and lose all their business.

  • Contrarian P||

    It would seem to me that insurers could see the benefit from a cost standpoint to covering those with pre-existing conditions at a premium indexed to the actuarial risk of covering those persons. The problem would likely be that covering people with very severe health problems would like become prohibitively expensive at a certain point.

    The biggest problem we have is that as a nation we engage in many extremely unhealthy behaviors, like tobacco use, excessive alcohol, overeating, and not exercising, just to name a few. Then we think that a physician like me is supposed to come through and take care of things.

    I am a libertarian, so I believe that people have a right to engage in behavior that is self-destructive if they so choose, but then at some point society has a right to refuse to pay for the consequences of that behavior. Until we decide on what that balance should be, whatever plans we put into place will always struggle.

  • ||

    what if I don't want to insure myself against catastrophic risk? What if I want to insure myself differently than you do?

  • Some Guy||

    What if I don't want to protect the country from invasion?

    The details are obviously important, but it's just something I think would be a good and valid thing to do.

  • Mike the Other||

    Then, when the invaders come, we'll steer them to you all who didn't feel it was important to help pay for a national defense fund.

    Given that many of us have very different ideas about what it means to protect our country, perhaps those controversial areas (invading Iraq, for example) could be paid for by people who think that's a good idea.

  • Some Guy||

    So when they land on the beaches of...New Jersey? you're just going to give them a list of people who didn't pay for that parts of national defense that you agreed with, and expect them to only attack people at those addresses?

  • Mike the Other||

    Under the current system, we have a free rider rate of about 50%. Half of Americans have an income tax of $0.00, right? (http://www.msnbc.msn.com/id/36226444) Yet they all get defended. Non-taxpayers elect politicians who take money taxpayers and use it to defend those who don't find the service valuable enough to pay for it themselves.

    Not only that, a considerable portion of the money used to pay for our military adventures is *borrowed* (see also: soaring national debt). So who besides me is paying for the wars and defense? Future taxpayers who can't even vote right now and may not even be born yet.

    Do I expect an invader to pick and choose who they attack? No. But I do expect that in the face of a reasonable concern about invasion that communities will find ways to defend their borders. And that those who have the most to lose will probably find themselves the most motivated to pay for such defense (i.e. people with a lot of private property have a lot to lose, and therefore more motivation to help pay for defending it)-- whether their paying for this defense allows others to be safe "for free". In the end the system may not turn out much different than what we have.

    But is toppling Saddam in Iraq making New Jersey more secure? Shouldn't the financial burden of that decision be on those who believe that it is instead of those of us who believe it isn't? Why should 50% of the population get to have a say on how to spend the other half's money?

  • Some Guy||

    You seem to be under the delusion that I agree with our national spending. There are some few things that I agree with, many that I would cut, and some expansions (well, they'd still be cheaper than what we're already spending on health care - we'd just be doing it differently) of government if I was given absolute power to do so.

    I would also make it nearly impossible to run a deficit, and have the government automatically shut down if a balanced budget cannot be reached.

    Going into Iraq absolutely made New Jersey less secure. The financial burden shouldn't be a consideration because it never should have happened, period.

    The 50% who pay zero should get to vote because that's what a free society does. You don't address a problem with the tax system by removing the right to vote.

  • Mike the Other||

    I am reminded of Ben Franklin's warning: "democracy must be more than two wolves and a sheep voting on what to have for dinner".

    By voting for politicians who legislate and execute programs funded by taxpayers, the non-taxpayers have actively decided they are not interested in any sort of "free society".

    They have, in fact, decided to operate as a mob, looting the productive minority's pocketbook.

    How then to consider them, except as criminals who, by abrogating the very social contract under which a system of liberty and private property must operate, have forfeited the right to participate in ongoing decision-making at the group level?

    If a man who is guilty of robbing your home can be deprived of his right to vote because he is a felon, why not similarly all those who commit the same crime but call it taxation instead?

  • ||

    "But is toppling Saddam in Iraq making New Jersey more secure?"

    Did attacking Africa, or bombing oil fields in the middle east make New Jersey more secure in WWII?
    Hitler didn't bomb Pearl Harbor, after all.

    National Defense is one of the few things the Federal Government is expressly authorized to do on our behalf. We hire people to analyze where and when it is in the best interests of this country to use force, and, in this case, even then ran it past representatives from all the states to make sure they were in agreement. Use of force in Iraq was voted on and authorized by a majority of your paid representatives.
    If NJ doesn't like the outcome of federal decisions, the constitution says they can secede, but we all know how that worked out last time.

    Either way, your parochial arm-chair hindsight on the value of toppling Hussein is moot. The Tyrant is dead; hung by his countrymen after being dragged from his hole by US Soldiers sent under the authority granted by Congress and the President, elected representatives all.

    Now tell me where, what passage, in the Constitution, or Bill of Rights, gives the Government the power to force me to buy approved insurance? To set levels for what insurance may be offered?

    "Promote the general welfare" doesn't mean what you think it means.

  • Some Guy||

    Did attacking Africa, or bombing oil fields in the middle east make New Jersey more secure in WWII?

    Yes. Whereas doing so today would not, given that Hitler is no longer around and invading our allies.

    Getting rid of Saddam only works to the point where we could replace him with something better, and even then it was prohibitively expensive.

    Wouldn't it be nice if we actually had enough resources to deal with Afghanistan properly?

    Now tell me where, what passage, in the Constitution, or Bill of Rights, gives the Government the power to force me to buy approved insurance? To set levels for what insurance may be offered?

    Absolutely nowhere. Now explain why that is relevant to the discussion of whether it would be a good thing or not. Arguments based solely on whether something is Constitutional are only useful in courts and legislatures, not in theoretical policy arguments.

    I can rip both of those things to shreds on logical grounds. But as someone who thinks that Iraq made us safer, I guess that's too much to ask from you.

    In fact, you probably read all that and think I supported the health care bill. Why am I even bothering?

  • Contrarian P||

    "what if I don't want to insure myself against catastrophic risk? What if I want to insure myself differently than you do?"

    Then go do it! That's the great thing about a system where you have choices. Just don't try to force me to accept the same health care paradigm you think is good. That's the trouble with the people we have in D.C. now. They decide what's good for us, regardless of what we might think.

  • ||

    On one side are the centralizers. They prize control, and use sham claims of equality of care and access to trick the gullible into giving them control,

    C'mon, Peter. You don't have to take what these people say at face value, when their actions, and the inevitable results of their actions, are contrary to what they say.

  • MikeL||

    I have not heard the centralized versus decentralized debate nearly as often as I have heard statist versus corporatist arguments. Maybe I just watch too much Charlie Rose.

  • TruthOffering.com||

    No form of government intervention will help the healthcare situation. Only a privatized, deregulated system will lower costs via the free market working its magic. Anyone who thinks government intervention works knows nothing of history, economics or politics.

    I came across this article from TruthOffering.com that talks about how we're going to be seeing more and more Physician Assistants...and that's if we're LUCKY! Doctor shortages will abound, and our care will go down as costs continue to skyrocket. Fun times:

    http://www.truthoffering.com/p.....lucky.html

  • Some Guy||

    Weird how you "came across" an article on your own website, Spambot.

  • ||

    When I speak of "barriers to entry and exit," above, I am speaking of such things as, for example, New York City's requirement that a medically qualified institution must stand behind any midwife who seeks to practice in the city. You may say that such a rule protects the public. But what of all the experienced, qualified midwives who suddenly lose their "legitimacy" when the only institution that would stand behind them goes out of business?

    http://healthfreedoms.org/2010.....s-at-home/

    It would be one thing if midwifery were rife with incompetence, fraud, or innumerable medical horror stories. But we're talking here about people who were, on the whole, providing a valuable service to willing clients, in response to demonstrated demand -- bringing new life safely into the world -- and who are now legally enjoined from that pursuit because they lack a sponsor from the mainstream establishment. To the extent that the law is enforced, that's a very high barrier to entry, which can only promote an increase in the cost of giving birth under competent care in NYC.

  • ||

    I'm looking at being transferred to the US later this year and so one of the first things I looked into was health insurance. Since I'll be managing my own payroll I'll have complete control over what sort of policy to take as part of my complete salary package, so I know if I take a comprehensive plan it reduces my take home pay.

    I discussed my needs with a local insurance agent and it was clear a HSA plan was the way to go: the premiums are 2/3 cheaper; anything I put on the HSA Visa card is tax-deductible; if I reach the deductible (unlikely) I get 0% co-pay; if I'm in an accident the deductible drops to zero; and finally I can start using the HSA visa card as soon as I've put money on it, instead of throwing away the first 12 months in premiums with comprehensive insurance.

    There's really no comparison as far as I'm concerned.

  • Chad||

    Well, until you have kids or get sick.

  • Mike the Other||

    Really? I have kids and have been sick. My HSA and high deductible plan were awesome. Way better than when I had to use an FSA to get tax benefits (aka "use it or lose it"). In fact, my son recently needed an expensive operation. Complications arose *and* he caught an infectious disease in the hospital requiring far more care... once we hit our deductible (using pre-tax funds) his care was 100% covered. I imagine if cost controls were more rigorous and there was a more free market we (or our insurance company) might have been able to convince the provider to make some concessions on price because of their errors (especially that of allowing stomach flu to spread in a pediatric ward). I'm pretty happy we weren't on one of those 80/20 plans that are common in the non-HDHP world. We would be broke! Instead we were able to carefully analyze our risk, plan accordingly, and everything went smoothly.

  • Chad||

    I am not talking about one-off illness, but chronic ones. You used your HSA to plug one bad year. But what happens the next year, if you had a recurring problem? Your HSA is depleted but you have to meet the deductible...and next year, and next year, and next year. Oh, and your income probably dropped as a result, too. It's obivious how someone would get swamped by this.

    As I have said many times, there is nothing incompatible with CDHP and universal coverage. Indeed, many nations do something along these lines, with reasonably high co-pays and modest out-of-pocket caps. It works just fine, and they spend far less on health care than we do.

    The problem comes when you let people choose their plan: sick people want low deductibles, healthy people want high ones. This creates adverse selection and mucks up the marketplace.

  • Contrarian P||

    I have seen many patients who do much better under the HSA model than with conventional insurance, even with chronic illnesses. But in any event, what we are talking about here is choice in the marketplace. If the HSA does not work in your situation, you are free to explore other options, including possible government solutions. But your solution seems to be to slap one size fits all programs onto everyone with the arrogant assumption that you know so much better than the great unwashed what we need.

  • Colonel_Angus||

    The risk for a person to get a chronic illness is quite low, but unpredictable and likely enough that healthy people find it wise to insure against by choice. Since most people who chose to insure themselves against chronic illnesses will never have one, the money they pay in to their plans is enough to cover those who do. Or would be, in a free market.

  • Contrarian P||

    Chad, no offense, but on this issue you really don't know what you're talking about. You really should take the time out to research the actual costs of various plan options, as the original poster did.

  • ||

    Why? The quote I've got from Farmer's says I wouldn't pay more than $2100 (pre-tax) out of pocket per year - $4200 when I transfer to a family plan. Plus even things that aren't covered like routine vision or dental checks I can pay for out of pre-tax dollars. I really can't see a downside, except that the plans might be banned soon.

  • Some Guy||

    Just enjoy it while it lasts, HDHPs will be banned as of 2014 (or maybe 2018, I forget.)

  • Brett||

    In Saskatchewan, the doctors opposed single payer until co-operative clincs came along. These clinics paid doctors by the ghour and used better division of labour to cut costs. I think this is one of many cases where single payer hurt inovation by ending consumer driven care.

  • Janice||

    HSAs do not work for everyone. And, market based healthcare does not work for everyone.
    My example is the cronic condition of Crohns disease - not based on lifestyle at all. The recommended medicines are biologic and are extremely expensive, like $20,000/yr. On an average income, I could not afford this privately, and there would be no insurance which have me as a customer. So what is a person to do in this circumstance? All I can see right now is employer provided insurance or become unemployed and wait a couple of years to become eligible for SSI and medicaid.

    I am not against HSAs in general, but there would need to be some cap on expenses based on income, and somehow include those with pre-existing conditions.

  • Contrarian P||

    I think that an HSA model could still be useful in your situation, as the main obstacle really is finding an insurer who would cover you given that condition. That wouldn't change if you were in an HSA versus a conventional plan. If HSAs were more widely accepted and utilized, there's no reason why consumers couldn't collectively bargain for better rates, as employers do now, and even allow the inclusion in those risk pools of those with more severe illnesses like yourself.

    I am assuming you have failed some of the first line Crohn's therapies and wish you all the best, as that condition really is a very difficult and debilitating one.

  • Mike||

    I think that there are some situations where we need to stop talking about insurance and start talking about charity. When you have a long-term need for a disease like that, there is no way that buying insurance after you are diagnosed is going to make sense to either party. Unless you structure your insurance to have an immediate payout large enough to last the rest of your life, but I don't want to think what the premiums on that would be.

    It's a horrible problem, but at some point we as a society have to decide how to deal with it, that some people can be kept alive but only at a cost much higher than they would ever be able to afford (even assuming some kind of real risk based insurance model, where you had been paying massive premiums for your whole life). Does society prioritize keeping those few alive a bit longer at huge cost, or do they spend the money on something with a possibly greater return. I think once we start to look at paying for catastrophicly expensive situations as charity (something you ask for) and not as something we are entitled to ( on average, hiring everyone a personal trainer would actually increase their lifespan more for the money) we can try to address things more rationally and realistically.

    I guess what I'm saying is that some things break the shared risk model because the payout is so high, and we need to start evaluating them honestly as the straight transfer of wealth that they are. Not saying it's good or bad there, just that we don't evaluate cost benefits in any sort of reasonable manner when it comes to healthcare.

  • Chad||

    Mike, private charity is far too small to cover such needs. We currently donate about $300 billion/year as a nation. If we were to drop total tax rates to ~5% and implement a libertarian dream world of just courts, cops, and a small military, that might rise to about $400 billion, because people would have more money in-pocket to donate. Good luck plugging all the holes in the safety net with that extra $100 billion.

  • Contrarian P||

    No, it isn't. You are making several gross assumptions here. You should check out the Amish...they do a fine job of paying for the health care needs of their communities without the employment of government sponsored programs. Americans are an incredibly charitable people and would be more likely to give if a need was in evidence. Last time I checked, I have blood available when I order it, even though most blood donations are given for free.

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  • Contrarian P||

    You hit the nail on the head, Mike. One of my friends is an internist who runs a private practice. He sees several patients who cannot afford to pay him for free and works with the drug companies to obtain medications for them at little or low costs, as well as taking advantage of generic products that often work as well or better than newer drugs. But, as he says, he does it because he believes in helping his fellow man, not because some government jerk is standing over him making him do it. Almost every physician I know loves to help people and is fine with doing pro bono work. Many of us derive great joy from it, but dislike intensely being forced to do it. It destroys the spirit of giving when it's done by force.

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