Health Savings Account Blog

The private-sector revolution is gaining full steam at a time when public payers are going bust. The latest Medicare prognosis is that it will run short of money in 2017. The state budget is facing a monumental $6.5 billion deficit, partly because of mushrooming health care costs. And school districts are paying more than $20,000 a year per employee for health benefits, three times what the best managed private plans cost.

It also comes at a time when, with the government hemorrhaging red ink, President Barack Obama and his lieutenants in Congress are pushing for bigger federal expenditures and responsibilities for providing coverage.

It comes down to a battle of political philosophies: one a top-down model of how the world should work, the other bottom-up. It can be characterized as bureaucrat-driven vs. consumer-driven.

On the market side of the roaring debate are the HSA Bank, the 51% of private companies that offer a consumer-driven plan, and an estimated 8 million people who have opted for HSA accounts. Included are most companies in the health care business, like hospitals and insurers.

Their proponents believe marketplace reforms can cure the hyper-inflation that has deprived many people of access to health care. Indeed, the moderation of hyper-inflation was probably brought about by consumer pressure.

The reduction in health costs from converting a traditional plan to a high-deductible plan is put at 20% to 60%, according to HSA Bank. One study puts the premium savings at $3,836 per employee.

The grass-roots movement toward consumerism and individual responsibility has gained enormous momentum in just a decade. Following the creation of medical savings accounts in 1997, the trend toward personal health accounts of one sort or another has been stunning.

The health insurance industry reports there were 1 million Health Savings Accounts in early 2005, 3.1 million in 2006, 4.5 million in 2007 and 6.1 million in 2008. Current estimates are about 8 million.

Cost analysis

As always, the missing ingredient in the national and state debates about access and affordability of health care is a serious analysis and discussion about costs. Isn't that strange?

In business, any self- respecting manager would attack the costs. And that's exactly what's happening in a major way at the grass-roots in the private sector.

Payers are saying we're not going to take it any more. They are converting their traditional plans to consumer-driven plans, and they are managing health as well as health costs.

What a discovery - you can't manage health costs without managing health.

The social engineers at work in Washington are correctly seizing on prevention, wellness, disease management and information technology as their way to deal with costs. But those four items are only part of a comprehensive attack on bloated costs.

The private sector has learned it's absolutely essential that part of the mix has to be the right incentives and disincentives to bring about individual responsibility.

You just know in your gut that any virtually free government plan will require heavy subsidies from the taxpayer to be competitive with insurers in the private sector.

Price control backfires

Even if the Democrats have their way and we end up with a government-managed, taxpayer-subsidized health system, don't expect perfection. A recent series in the Journal Sentinel about how Medicaid performs for low-income dental patients is illustrative. Many poor people go begging for dental care and often find none. It's a mess.

The root problem is that the government uses price controls as a way of setting payments. They are set so low, about 40% of normal charges, that they result in de facto rationing. People can't get care because most dentists have withdrawn their services.

Further, even though the government payments are low, the Medicaid program in Wisconsin is a major factor in the ballooning state deficit. The state can't afford the low-priced programs it now offers.

Once again, it is proof positive that there isn't enough money in the system to let the government run a poorly managed program that would expand to many more Americans.

In contrast, there is plenty of money in the system if the grass-roots revolution on consumer-driven health care is allowed to flourish and if the principles learned in the private sector are incorporated into the necessary public plans that serve as a safety net.

The president needs to look at HSA Bank to find out how to cover everyone at an affordable price tag.

Find a complete list of preferred HSA Administrators at HSA for America.