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July 22, 2006
Health Savings Accounts Will Make Affordable Health Care Possible
There have been outcries in the U.S. for a health care system that is government administered and regulated. Such systems in the rest of the industrialized world have inevitably led to long, sometimes fatal, delays in elective specialty referral and treatment. Primary care and emergency care are usually adequate, because failure in these more common areas of care would have political consequences.
Consumer-driven health care, best represented by Health Savings Accounts, controls cost while preserving choice and availability of quality health care.
Health Savings Accounts provide funds to pay medical expenses, tax free, up to the deductible and are owned by the individual for life. HSA funds cannot be used to purchase general medical insurance, and HSAs are not available to Medicare or Medicaid participants.
Unused HSA funds earn tax-free, compound annual interest and can be used to purchase insurance between jobs. At retirement, the HSA can be converted to an IRA or used to pay for Medicare premiums and deductibles, but not Medigap insurance. At death, the HSA passes to the spouse or to the estate if the spouse is deceased. Patients regain choice in all aspects of their medical care but must assume more responsibility, thereby reducing waste.
As of March, 6.3 million HSA plans and health reimbursement arrangements (similar to HSAs) had been sold with $6.9 billion deposited in the tax-free accounts. The U.S.Treasury Department estimates there will be 20 million to 25 million people covered by HSAs by 2010, under present law, and 40 million to 45 million if Congress expands HSAs, as President Bush has proposed.
Early concerns, that HSAs only favored the wealthy, healthy and young, appear unfounded. Of HSA participants, 37 percent previously had no health insurance; 40 percent earned less than $50,000 per year; 50 percent were over age 40; 19 percent were over age 50; 73 percent are families with children. Premiums ranged from $100 to $460 per month. Patients with chronic conditions are more compliant, and there is increased use of wellness and preventive medicine programs.
Deloitte Consulting, in a new study of large employers, found the cost of health benefits increased 2.8 percent in 2004 and 2.6 percent in 2005 in companies with HSA-type plans. HMOs, PPOs, point of service, and fee for service plans increased by 21/2 to 3 times as much.
The private sector, with governmental support, is engaged in solving the following problems: hospital and physician price transparency; the association of HSAs with comparatively inefficient PPOs; the lack of availability of HSAs to Medicare, Medicaid, and state high risk pool participants; and the danger that an aggressively promoted socialized system will pre-empt the development of HSAs.
Innovative plans are being developed and, in some cases implemented, to allow many Medicare, Medicaid and high risk pool patients to enjoy the choices and responsibilities of the mainstream of health care. Fewer patients will be totally dependent on government-run programs, which could then be funded and administered more effectively.
Learn more about Health Savings Accounts at HSA for America.
Posted by Wiley Long at July 22, 2006 10:14 AM