Savings No Salvation for Healthcare
Don’t look now, but here comes the Bush administration, eager to slap the latest Band-Aid on the badly broken U.S. healthcare system.
This time, it’s health savings accounts that are supposed to save the day.
HSAs are tax-exempt investment vehicles -- similar to 401(k) plans -- in which an individual can deposit $1,000 to $5,000 a year before taxes, build up savings tax free and then withdraw the funds, also without penalty, to pay medical expenses. Or at least to pay “ordinary” expenses, including doctor visits, blood tests and other relatively simple treatments. Traditional health insurance plans, meanwhile, would still cover more serious medical procedures.
Lurking behind HSAs is a concept known as “consumer-directed healthcare,” a belief by some economists and government officials that medical inflation would be tamped down if patients were forced to pay more of their own doctor and hospital bills rather than simply sticking their employers or insurers with the tab.
After all, people tend to be much more judicious in their spending when the cash is flying out of their own wallets. Just ask any twentysomething who has moved into a first apartment. The menu suddenly goes from mom making steak to making your own hamburgers.
With health savings accounts, consumers “will question and argue every charge,” says Nileen Verbeten, vice president of economic services for the California Medical Assn.
Not surprisingly, HSAs have plenty of fans.
Big employers, in particular, are eager to see wider use of the accounts. That’s because insurance policies for major medical care, in theory, would carry lower premiums if routine expenses were absorbed by individual employees.
In a survey of 1,000 companies last year, Mercer Human Resource Consulting found that 73% of employers intended to introduce HSAs as an option for their workers by next year. At present, fewer than 20% of large companies offer the accounts.
But employees were far less enthusiastic about HSAs, with only 27% in favor of putting money into such accounts, according to the Mercer survey.
It’s no wonder they were so wary. Working folks clearly recognize HSAs for what they are: another effort by companies to divert financial burdens from their own bottom lines and onto workers’ backs. Currently, employees pay 32%, on average, of company health insurance bills. A move toward HSAs would hasten the rise of that number.
In this way, health savings accounts fit a much broader pattern, one illuminated recently by my colleague Peter G. Gosselin in his series “The New Deal.” In the last 25 years, business and government have eroded one safety net after another, all in the name of some free-market ideal. Among them: the minimum wage, job training, housing support, guaranteed pensions -- and, increasingly, medical insurance. The series might well have been called “The Raw Deal.”
Most interesting in all of this, perhaps, is the position of doctors.
Family practitioners, internists, pediatricians and many other docs have seen their take-home pay shrink in recent years, according to surveys by Medical Economics magazine and other authorities. The reason is simple: Reimbursements by Medicare and by private insurance plans, which take their cues from the government, have not kept pace with the rising costs of running a practice.
And the prognosis is not encouraging.
“Medicare plans to cut reimbursements by 6% in the next few years,” notes Jack Lewin, president of the California Medical Assn.
What was once the glamorous and socially upscale practice of medicine, in which a physician could take a weekly afternoon off for golf, has become a grinding job of seeing 20 to 30 patients a day, maintaining patient rolls of 2,000 or more and then squeezing HMO green eyeshades for a few extra bucks.
Desperate for answers, many doctors are encouraging HSAs.
Their hope is that these accounts will get them out from under the thumb of the insurers.
“If I can get a check directly from my patients, I will be better off than filing all the paperwork and waiting to get reimbursed by insurance companies,” says Dr. Eduardo Anorga, a family practitioner in Redondo Beach.
Even specialists, whose $200,000-plus annual incomes are almost double those of general practitioners, welcome the possibility of direct transactions with patients.
Philip O’Carroll, a neurologist in Newport Beach, complains of the obduracy of the current system.
“I’ve had to hire a person just to stay on the phone all day with insurance companies and HMOs trying to get approvals for procedures we need to do for patients,” O’Carroll says.
With support from corporate America and the medical establishment, health savings accounts are likely to become a much more widely used financial remedy in the next few years.
But in the end, the key question is this: Can they really rein in healthcare costs, which are still growing about 8% a year -- four times the rate of general inflation -- and have hit $1.7 trillion annually, a whopping 15% of gross domestic product?
The answer is: not likely. Capped at $5,000, the current HSA scheme is too modest to have much effect.
And if the plan was pushed further, the whole thing could easily backfire. Once people start paying more and more of their medical bills out of their own pockets, they might well become so cost conscious that they’ll forgo necessary tests and treatments. And that would just lead to bigger problems -- and bigger costs -- later on.
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James Flanigan can be reached at jim.flanigan@latimes.com.
