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Tuesday, March 07, 2017

What's wrong with Health Savings Accounts and the Amoral GOP replace plan

Here's how it works, in lay language- it's not a good deal for middle class (and certainly not for those with pre-existing conditions!):

A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit. (But if the money isn't used, the employer keeps the balance.) Republicans want to expand this plan as part of their "Amoral care" replacement to the Affordable Care Act. 
Not a good idea, for lots of reasons.

Image result for health care graphics
HSA's or Health Savings Accounts are special tax exempt funds set up by an employER on behalf of the employee, who makes predetermined designated contributions to the account. It all sounds too good, because you provide the money and then can request the employer to pays the bills, submitted by you, for allowable purchases like reading glasses or over the counter medications.  

On the other hand, if the employee doesn't spend all the money allowed in a defined year of contributions, the employer keeps the cash difference. Therefore, the employER takes very little risk. 

For statistical purposes, if 10 employees contribute, then, statistically, on a bell curve, there will be at least 1 person who does not spend down their fund and the employer makes money.  

There's very little risk to the employER, because, if an employee over extends their contribution, the account dries up and the costs are shifted back to the employee, regardless of the reason for the spend down.

So, that's why it's fair to say HSAs are not a good alternative to the Affordable Care Act, because (a) a person must be employed to have a tax exempt plan (b) the employER must have the regulatory oversight to establish a tax exempt fund for this purpose, and (c) the fund forces the contributor to spend down the HSA contributions, regardless of whether or not costs are necessary; otherwise, the employER keeps the year end difference. Although the year end balance on most HSAs are small, in the aggregate, they are substantial, especially benefiting large employers.

Another problem with HSAs, of course, is that they force the contributor to spend more out of pocket money on health care than they need to, because only certain costs are allowable. For example, most prescription drugs are not allowable. Therefore, while a risk adjusted health plan might pick up some prescription costs, the HSA will not. Obviously, this is one HSA regulation that could easily be changed; but doing so would require an approved drug formulary for every employer. This conceptual reform would cause enormous challenges for the pharmaceutical industry, because each one would competitively be in a position of having to lobby for every employER's HSA plan. As it is now, the pharmaceutical companies bid competitively with insurance companies NOT with every employer that supports an HSA.

It's difficult to see where HSA competition for drug costs, if such a plan were hypothetically considered, could save anybody money, because the implementation would involve a lot of oversight and competitive investments.

In other words, HSA's work for the rich, who benefit from the tax exemption allowed; and the employERs, that keeps unused funds. On the flip side, HSAs don't help anyone who simply can't afford to make the contributions or who quickly spend down their accounts and can't afford the out of pocket expenses. HSAs in no way "replace" the safety of "risk adjusted" insurance premiums, paid by beneficiaries. In fact, insurance companies have the ability to assess, with actuarial analysis, the health care consumption of a large population of people and calculate the expenses of the accumulated funds in accordance with a contract, shared with the beneficiaries. 

In the Affordable Care Act, the mandate for all qualified Americans to have a health plan, or to otherwise pay a penalty, allowed for the insurance exchanges to recruit a large pool of beneficiaries that shared in the actuarial analysis. In other words, remove the mandate for coverage, thereby reducing the pool of people who pay premiums, and the population quickly melts down to a few who are too sick and, most assuredly, will eventually be unable to pay for the insurance.  

Therefore, the mandates are necessary to recruit a large risk pool.

Moreover, there's no way for the Republican "Amoral-care" plan to allow for more competitive "cross state" insurance companies to compete for coverage and then, somehow, lower premium costs. This "fantasy" is frankly impossible becasue the Republican plan puts the regulatory oversight of their "Replace" plan back into the hands of the states, but then supports interstate insurance plans. This is an oxymoron if I ever heard one. Health coverage cannot be given and then taken away.

States cannot control the GOP "Repeal" aka "Amoral plan", while, at the same time, giving licenses to interstate insurance companies, to authorize payments to providers. It's an impossibility. What it means is, every state must agree to license the same insurers and, worse, the reimbursement would be based on the lowest provider costs, which vary substantially from county to county (and even more so, from state to state)!  Most important, people with pre-existing conditions will find their coverage evaporate, because even if they happen to have insurance, their access to care will be dependent on where they happen to live and the services available.

None of this makes any practical sense.  

Yet, there's hope! Republicans could open their minds to accept the premise that Medicare works wonderfully, as does Medicaid in states that comply with the laws. 

Therefore, roll these benefits into a Medicare4All plan, with a safety net for the indigent, and expand the coverage to all qualified Americans.  Simple!  Maybe, too simple for Republican minds that, in my opinion, are basing their "Repeal" plan on what's in the best interest of the rich, who can afford to pay for health care, regardless of the expenses in the allowed choices, including, of course, the choice to "private pay." 

In my opinion, save the ACA until Medicare4All is a reality.

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