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August 17, 2005

HSA's for the Poor

Sam Rosenfeld has a fantastic, highly-comprehensive post on Republican efforts to gut Medicaid and turn it into a capped, "consumer-driven" program at exactly the moment when its expansion and full-funding are most needed. Read it. But remember too that liberals shouldn't be reflexively against certain forms of consumer-driven health care, particularly health reimbursement accounts (or donut hole accounts), where employers/government place X dollars in an account at the beginning of each year, folks spend that money on basic care, once it's exhausted they have a deductible to cover, and then catastrophic kicks in.

What Sam's going against is South Carolina's bastardized version, where the amount placed in the account is based on a Risk Assessment, which means each individual is theoretically given a first-dollar infusion in proportion to their health risks. Unfortunately, we have no effective way to calculate risks and, in any case, the amount of bureaucracy, lawsuits, and general craziness that would result from trying would destroy the system.

Instead, you can insert progressivity not through risk assessments but through incomes. Everyone gets X dollars in their account, but those making less than $15,000 have a negligible deductible, those making $15-20,000 have a higher one, $20-25,000 is even higher, and so forth. You can even use the deductible to incentivize various cost-saving measures, like quitting smoking and losing weight. South Carolina isn't exactly a blue state, but if the Dems in Congress have any power, this is the sort of compromise they should fight for. And Democrats generally, when fighting against badly-designed HSA's, should keep in mind that there are certain ways to design them that could result in a program even liberals would love.

August 17, 2005 in Health Care | Permalink

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I just can't agree with the HSA drive (if I understand it correctly).

Users of these accounts, since they pay cash - this isn't insurance, will pay the retail (fake list price) of medical services. All of the insurance companies and government programs negotiate with providers for fees that likely average less than 50% of 'retail'.

Why do the Dems even have to think of cooperating with the Repubs on what is clearly a program to destroy MedicAid? It should be clear by now that whatever emerges from the conference committees will bear little resemblance to what is negotiated in the Senate for passage, and rammed down the Dems throats without amendments even being considered in the House.

These HSA's have been a conservative hardon for years, and closely resembles their desire to eliminate Social Security through trojan horses.

No way!

Posted by: JimPortlandOR | Aug 17, 2005 3:04:47 PM

NAh, this isn't about compromise, it's about potentially embracing a better policy alternative. I like these plans on the merits, not on the politics. For more on this, see my original post on progressive HSA's.

Posted by: Ezra Klein | Aug 17, 2005 3:23:04 PM

The problem with doing direct correlation between low incomes and the size of the deductible is that it defeats the point of having a deductible in the first place. The deductible is there to discourage frivolous use of medical resources; if the minimum deductible is not large enough to be noticeable, it will not have the desired effect. A lower deductible for the poor would be worth looking at, but it should not be "negligible."

The other point is that when you say "full funding is most needed," you need to consider what that implies. The bare facts are that if we continue our present spending patterns, medical costs will engulf the economy within a few decades. "Full funding" is no longer an option; we need to change our medical spending habits. Whether that be through whole new methods of treatment, more efficient market models, more emphasis on healthy environments, or even outright rationing, our medical sector is going to change one way or another.

Of the options I listed, some have negligible effects, and others I find repugnant. But when the European model of health care is disintegrating before our eyes, we need to try something else. Will people be unhappy? Probably. Is there a better option? I hope so, but I doubt it.

JimPortland, have you ever wondered why conservatives dislike Social Security and Medicare? And "We hate poor people" isn't the right answer.

Posted by: Mastiff | Aug 17, 2005 3:49:58 PM

Ezra,

Theora Jones has a post up on this over at Matthew Holt's Health Care Blog. The risk-adjusted payments will be pretty hard to calculate, no?

Posted by: Abby | Aug 17, 2005 3:57:48 PM

No, it should negligible, that's why it's "progressive". Under our philosophy, when people can't pay for things, you help them out. Much like the very poor don't pay income tax, the very poor shouldn't pay a deductible. Does that mean disincentives to frivolous care will be lower for them? Sure. But I'm fine with that, and it won't do much at all to the system's general integrity. Remember that catastrophic care would kick in early, which means copay. The poor, who get hit hard by the copay, already use less than the average amount of health care. This won't change that.

Incidentally, full-funding is quite possible. It means more sensible taxation and a reworking of health incentives. Not too tough at all. It's a question of priorities and you guys, as it is, tend to prioritize tax cuts for the rich. Your choice, true, but not some magical system that makes entitlements out of the question.

Oh, and by the way, European health care isn't disintegrating, American health care is. Europe's costs are rising slower, all their people are ensured, and their systems are on much sounder footing, costing much less money, and delivering much better outcomes. Meanwhile, American premiums are rising in the double digits most every year. Saying Europe's system is in disrepair compared to ours isn't spin, it's either ignorance or a lie.

Posted by: Ezra Klein | Aug 17, 2005 4:03:00 PM

My biggest problem with HSAs is that I think they're just a cover for cost-shifting. I have a similar problem with managed care--it's great in theory, except in practice it wasn't about managing care but about making it easier for insurance companies to not pay their bills.

But in defense of managed care, at least it sounded good on paper. I utterly fail to see where HSAs add any value, even in theory.

If they worked as advertised--they gave consumers all the coverage they promised...so what? Any insurance policy on the market today could in theory do that, but they largely don't. And there's no obvious difference between an HSA and everything else that would drive HSAs to do what no other insurance product has chosen to do.

HSAs won't control medical costs by properly incentivizing consumers, because they maintain the status quo in which insurance companies pick up the tab when someone gets really sick (which, as you know, is where all the spending is). So, nothing new there.

Although arguably your progressive model might make preventive care more affordable, it's another "so what?" The ability to pay for checkups really isn't what keeps currently insured people out of doctors' offices--most plans encourage them, and for the working poor and the Medicaid population issues like hours of operation, availability in their neighborhood, language barriers, travel times, etc. are as great a problem as the actual cost of a doctor's visit.

But even more, the medical system needs far more than more visits to teh PCP. There needs to be far more coordination between care providers, better systems of follow-up, active facilitation of patient compliance, better management of chronic conditions--and the HSA adds NOTHING to that. In fact, it theoretically detracts because it throws everything back into the patient's lap and leaves insurers, the people with a vested interest in keeping these folks from getting really sick, totally in the dark until the deductible threshold is passed. And by then, it's too late.

In addition, billing is going to be a lot of fun. Personally, I can't imagine a more attractive mark for fraudsters than a patient, especially a Medicaid patient--largely ignorant of the system, and weakened by illness and fear. Rock on.

When you look at the problems that our medical system faces, it's pretty clear that HSAs are ill-equipped to solve them.

However, if you're looking for a trojan horse that lets you (1) ration care and call it "increasing personal responsibility" (2) make insurance cheaper for the healthy so you can claim you're "fixing" the problem (3) give well-off people another tax shelter and (4) undermine the idea that everyone, even the poor, are morally entitled to healthcare (and even more fundamentally, that society functions better when we take responsibility for each other), then you've got a pretty good policy in HSAs.

I can see why liberals would think that HSAs can be used to further a progressive healthcare agenda. Because they sound like an easy sell and in theory, we could certainly re-engineer HSAs and make them part of a progessive universal system.

But let's be real here. They're not designed to do anything we want them to do, while they are really well designed to do a lot of very destructive things we don't want to do. And we're not in power, so we can't re-enrineer them to do something different.

Posted by: theorajones | Aug 17, 2005 7:18:23 PM

If deductibles should be negligible, Ezra, why have them at all? Why not just have full coverage for the poor?

I should mention that I don't know the specifics of the South Carolina plan, and it sounds like a real mess. I'm speaking more generally. Ideally, an HSA plan would be opt-in, as I think the national system is; of course, this raises its own problems. What happens when all the healthy people opt out of Medicare in favor of HSA's?

All I know is that present medical practices are incredibly wasteful, often based on poor ways of looking at the problem of health in general. We need as a society to embrace a more holistic view of health and its importance.

Posted by: Mastiff | Aug 17, 2005 7:20:53 PM

We should have full coverage for the poor. I'm speaking in context of how a national HSA system can work in such a way that liberals would like it too. I think HSA's get some important things right (and, often, some more important things wrong), and we shouldn't throw the baby out with the bathwater. As I've said previously, if the aim is simple coverage of the poor, just cover them with Medicaid and fully fund the program. That's easy. But since we're talking about ways to reform delivery, this is an option.

By the way: healthy folks don't opt out of Medicare because Medicare covers the elderly, and they're not healthy, or at least not enough for HSA's. I figure, though, that you mean Medicaid, and the answer is absolutely. That's the entire problem. Which is exactly why you can't have aprallel tracks and can't leave it up to the private market. If government ensures everyone and we pay for it through a VAT (or something), thei ssue becomes moot, and we can decide between policies without worrying about the perverse incentives crated by self-cherrypicking. As it is, what you're talking about is done constantly by private insurers: it's how they make money. They insure the healthy and price out the unhealthy. You say our system is fucked up. Well, that's exactly why, and it's why we need government involvement, and why Europe is cheaper with everyone covered, etc.

Theora: But nobody's instituting anything major on the health care front now. We can't suspend all policy discussions simply because we're not in charge. These are things to think about. Any major reforms should, of course, include the backend aspects you're talking about, but progressive HSA's as a delivery mechanism aren't something to scoff at...they're something we should think about. Part of the reason comes from Kevin Lamb's article on overtreatment:

"Research on the questionable value of bypass surgery and angioplasty has also found that when patients are fully informed of risks, benefits and unknowns, they're 23 percent less likely to choose the procedures over cheaper, less invasive options. In a serious quality program, it would be unethical to keep that information from anyone."

Word. And in a smart program, we'd incentivize the dissemination of that info.

Posted by: Ezra Klein | Aug 17, 2005 7:45:55 PM

Could you spell out in more detail how HSAs would incentivize the dissemination of that info. Unless I'm an unusually conscientious person who worries abstractly (and I am), then once you get above the deductible threshold, I don't care what it costs.

Posted by: Abby | Aug 17, 2005 11:12:59 PM

Well, you do, because there's a copay. But more to the point, you could incentivize the decuctibles. You a smoker? Higher deductible. You obese? Higher deductible. You stop being either of those things? Lower deductible.

I'm not actually sure that'd be good for government to do, as I said, these are ideas, and not fully formed ones at that. But they are ideas, and we should be considering them.

Posted by: Ezra Klein | Aug 18, 2005 2:37:02 AM

I'm really not smart enough to know the dirty details, but I will say this has been a fascinating discussion.

I will add one anecdote. On Thursday I went to the ER with chest pains. My PCP could not see me right away, and it felt really wrong so naturally I went there. I was treated well, but felt an overwhelming sense of unorganization from top to bottom in there. There was also not that much information they gave me. I had to ask. I know nothing about health or healthcare, so that turned out to be a very difficult process for me. It seems to me that costs would be improved quite a bit by just internal reorganization. On Friday I went in for more tests and was carted around from place to place. They didn't even know where the orders for my tests came from (the ER.) How is that possible? I think they needed to make better use of a computerized tracking system.

We should also encourage people to visit their PCP more often. Keep constant tabs on their health. However, I have a follow up with the PCP tomorrow, but all he's going to do is recommend me to some sort of specialist. After the problem occurs, the PCP is not really all that much help. Its before the problem occurs that they are. But managed care still insists you visit him/her. I and the insurance company still has to pay the PCP. Seems like a waste of money to me.

Posted by: Adrock | Aug 18, 2005 11:43:17 AM

Ezra: Fair point that the clock is ticking down on the window of reform--the way I see it, when the boomers start to hit in 2011 then it's game over. I'm terrified, and it KILLS me that we can't push for real legislative reform.

But it's sort of like the social security issue, isn't it? When reform is a trojan horse, sometimes you just have to focus on other things. Instead of pushing for universal health care in the legislative process, maybe what we should be doing over the next 3 years is a massive, relentless PR blitz with large multinationals to get their support for universal care. (Figure out who's going to make money off universal care and start bleeding them for contributions to support said PR blitz). Or, work with sympathetic folks in Medicare to push for reforms we all agree on and that are critically necessary to make any medical system work--IT, pay for performance, etc.

I'm willing to support compromise and suffer another "Democrats have no values" attack in order to improve the situation. I'm simply not willing to do it in order to move the ball 20 yards backwards.

Abby's point on "what do I care" stands, and ironically it's backed up by the very study you cite. Once they knew the facts, 23% of people chose less invasive and cheaper procedures even though they didn't save a nickel. Patients aren't fundamentally out to spend money or save money--they mostly want to get better.

Furthermore, study after study has shown that it's really hard to financially incentivize laypeople to make better medical decisions, and can even be counterproductive. Case in point--a rational consumer should have appreciated the opportunity to save money by using generics, but in many places people went absolutely apeshit. And this is in a situation where you weren't even asking them to weigh different clinical options! When you put in place financial incentives, the default setting is not for consumers to go out and get a medical education, but for consumers to continue to do the same stupid things they've always done and then get very angry when they suddenly can't afford them. If you want a different outcome, you also have to do a whole bunch of other things around consumer education, generating physician and institutional buy-in, etc. HSAs do none of these things--if our goal is to make people pissed off and pennywise, then HSAs work. If we actually want patients to help push the medical system toward using medicine that actually works? HSAs suck.

Furthermore, HSAs biggest selling point, the whole idea that there's going to be some sweeping sea change in people's health behaviors because they have a higher co-pay or premium is frankly laughable.

Why would you think a higher premuim would motivate a significant percentage of people to dramatically change behavior in a way that the fact that they're going to get lung cancer and die a horrible, painful choking death doesn't? In NYC, smokers are already willing to pay nearly $4 a pack--where is a premium going to hurt them financially that they can't rationalize it away by saing "well, I just won't have coffee at Starbucks anymore. And I'll try to quit. I mean, I've basically decided to quit, so there's no point to even check off this 'i smoke' box..."

I just don't believe that even if it were enforceable (it's not), that paying a bit more on insurance would be a greater motivation to change behavior than the fact that obese people earn less money and suffer discrimination, their joints hurt, they can't go places and do the things they used to do, people stare at them and make fun of them...if the loss of thousands of dollars of earning potential won't put me on a diet, do you think a higher premium will?

Behavior modification around these issues is simply not easy, and it's irresponsible for you to suggest we adopt a very bad health policy becasue it's also promising major reforms that it's simply not going to deliver.

Posted by: theorajones | Aug 18, 2005 12:05:08 PM

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