The Senate Finance Subcommittee on Health Care will meet today to discuss consumers’, businesses’, and health care providers’ experiences so far with health savings accounts (HSAs). Tomorrow, the House Ways and Means Committee will go even further by marking up H.R. 6134, which seeks to maximize the tax-shelter potential of HSAs under the guise of expanding these inadequate health insurance arrangements.
Conservatives have promoted HSAs as a way to address health care costs by injecting greater consumer responsibility into the health care system. Yet HSAs are likely to give consumers higher health care bills and less coverage.
Health savings accounts are billed as an alternative to traditional health insurance. They allow employers to provide their workers with a high deductible insurance policy paired with a special tax-preferred savings account for medical expenses the employee may incur before they meet the deductible. Although the employer may deposit money into this savings account, more than a third of employers contribute nothing to the account, while many others contribute only a portion of the deductible—leaving consumers to fund the savings account or cover their out-of-pocket costs themselves.
HSAs’ high deductibles and under-funded savings accounts shift the burden of health care costs to the individual. Traditional insurance makes health care a shared responsibility between the company and its employees; HSAs make health care costs an individual liability. People who need health care services, particularly those with serious or chronic illnesses, will experience this shift the most.
HSAs also do nothing to solve the underlying problem of exploding health care costs. The approach does not address the costs associated with high-cost patients who account for most health care spending, nor does it cover the preventive services that lead to long-term improved health and lower costs.
The one group who clearly benefits from HSAs—and who would benefit even more under the Ways and Means proposal—is wealthy enrollees. The tax benefits for individual contributions increase as incomes rise; the GAO reports that HSA participants are using their HSAs as tax-advantaged savings vehicles. The Ways and Means Committee will markup a bill that enhances these tax benefits, at a cost of $1 billion over ten years, without having any effect on the nation’s health coverage crisis.
HSAs fail to address the central problems of cost and coverage in America’s health care system, shifting the burden of health care costs to the individuals and families who need care while providing new tax shelters for the wealthy. The nation cannot afford to continue creating new incentives and throwing new funding at this flawed approach.
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