Bush Makes Push for Health Care Savings Plans

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The president is emphasizing individual responsibility for health care.

The president is emphasizing individual responsibility for health care and expanding consumer-directed options, such as Health Savings Accounts. Luke Frazza/AFP/Getty Images hide caption

itoggle caption Luke Frazza/AFP/Getty Images

President Bush plans to make health care the centerpiece of his domestic agenda this year, say aides. But unlike former President Clinton, who wanted to put more emphasis on employer-provided coverage, Bush wants to put more emphasis on individual responsibility for health care.

Health Savings Accounts 101

Part of President Bush's new health-care initiative may involve an expansion of the Health Savings Accounts (HSA) program. HSAs, rolled out in 2004, were designed as a tax incentive to make health care more affordable for the uninsured, but also as a way for consumers to take charge of their health-care costs.

  

The theory goes that consumers who have to spend their own money — versus their employers' — are likely to choose more wisely, and thus help keep down rising health-care costs. Employers, such as GM, have felt the pain of ballooning costs, and the Bush administration says the trend threatens economic growth.

  

But what advocates like about "consumer-driven" health care — personal responsibility — can also be a negative, says Greg Scandlen, president of Consumers for Health Care Choice. Those with HSAs and high-deductible plans "have to pay a lot more attention" to financial and medical records, he says. "Frankly, if you're not capable of doing that, then you probably shouldn't be in it."

  

A break down of how HSAs work:

  

What's an HSA: A savings account where consumers invest money and then withdraw it, tax free, for eligible medical expenses. The accounts can be opened at banks, credit unions or directly through insurance companies.

  

Who's Eligible: Anyone whose medical coverage comes through a high-deductible insurance plan (HDIP) is eligible to open an HSA. For 2006, your HDIP must have a minimum deductible of $1,050 for an individual and $2,100 for families.

  

What's an HDIP: Sometimes called "catastrophic" coverage, high-deductible insurance plans offer low premiums in exchange for a high deductible. Once your annual deductible is met, the plan kicks in to provide coverage similar to that of a traditional, comprehensive health-insurance plan.

  

Eligible Expenses: In general, HSA money can be used for a wider range of expenses than covered by comprehensive insurance plans. HSAs cover routine doctors' appointments and prescriptions, and cash can be withdrawn to cover over-the-counter medicines, such as aspirin and antihistamines, weight-loss programs, smoking cessation programs and chiropractic services. A partial list of eligible expenses is available in IRS publication 502.

  

Services at a Higher Price? Consumers who buy an HDIP through Blue Cross Blue Shield, for instance, often get the same negotiated discounts with doctors and drug companies as those in traditional plans.

  

Who's in Charge? Ultimately, the buying decision is up to consumers; there's not always a plan administrator to check expense eligibility. But you should be prepared to document your expenses in case of an IRS audit.

  

Contribution Limits: Your annual HSA contribution can't exceed your insurance plan's deductible. Many employers who offer HDIPs also contribute funds to an employee's HSA.

  

Who Benefits: If you have high health-insurance costs, you may benefit from an HSA and HDIP partnership because you get a tax break on your out-of-pocket expenses. If you participate in a traditional plan, there's no tax break until out-of-pocket costs reach 7.5 percent of your gross adjusted income.

  

Those with low health-insurance costs also benefit. That's because the money you invest each year is rolled over, so if you start an HSA early enough, and are relatively healthy, you could see savings in the triple digits by retirement.

  

Drawbacks: HSAs and HDIPs require good bookkeeping and health-care research — all the responsibility of the consumer. Once you run through your HSA funds, you may need to submit all of your receipts to your insurer to prove you've met your deductible.

  

— Vikki Valentine

The theory is that people spending their own money will seek out higher-quality, lower-cost care. But early experience with some of these new plans has not yet lived up to that promise.

Ten years ago, everyone thought managed care would be the answer to exploding health care costs. But that theory was flawed from the start, says Merrill Matthews, who heads the Council for Affordable Health Insurance.

"The way managed care controlled the cost was by having someone look over the doctor's shoulder, somebody looking over the patient's shoulder, making sure they weren't using too much care," Matthews says. "That was never a system that was going to work well in the United States. People don't want to be told what they can and can't have."

So managed care gave rise to something called "consumer-driven care." It comes in a variety of forms, including Health Savings Accounts, or HSAs, and Health Reimbursement Arrangements, among others.

But Matthews says all the plans have one thing in common: They give consumers an incentive to spend less on health care. When a health insurance company is paying health bills, consumers are insulated from the true cost of that care.

"What the consumer-driven movement does is remove some of that insulation, and give people the incentive to ask the question 'Where do I get value for my dollar?'" Matthews says.

The basic idea behind consumer-driven care is that consumers buy an insurance plan with a high deductible, at least $1,000. That insurance would pay for serious illnesses or catastrophic costs.

Consumers would also have a tax-preferred savings account. They could use that account to pay for routine health costs and keep anything they don't spend.

Matthews says that encourages them to spend more wisely. "So if a patient, for instance, chooses one doctor over another and the cost is a little less, the patient benefits," he says. "If the patient chooses an X-ray over an MRI, all in conjunction with the advice of the physician, that's less expensive."

There's a third requirement to make these health plans work: giving patients the information they need to make those wise choices.

When he signed up for a consumer-driven plan three years ago, Jim Jaffe of Washington, D.C., thought that's what he would get. "My expectation was that I would be presented with a wealth of data, of prices and quality, and I could choose a doc or a facility of my choice, which would be 75 percent good for 25 percent of the price," he says.

Instead, Jaffe says the Web site run by his plan is less than ideal.

"It can tell me that taking Lipitor is probably cheaper than getting a heart attack, but it can't tell me where to get cheap Lipitor and it can't even tell me which hospital is safer or cheaper if and when I get a heart attack."

In some ways, Jaffe says, the plan comes with all the faults of any other health insurance company. "Insurance companies tend to have problems because they're dealing in a language which is basically foreign to them, which is to say, English," he says. "And they have problems with some words like 'free,' which to most of us mean we don't pay anything, but in this case I've had at least four instances in which they've offered me free services, and subsequently tried to get me to pay for them."

That would be services like his wife's "free mammogram," which came with a $25 dollar fee to have the doctor read it. Then there's the list of "preferred providers" that includes a hospital that's been closed for four years. And when Jaffe went looking for a colonoscopy, he got a list "that includes four hospices within 10 miles of my home and the Psychiatric Institute of Washington. And with due respect, I don't think any of these institutions actually do colonoscopies."

Jaffe's experience with consumer-driven health care is not unusual, says Paul Fronstin of the Employee Benefit Research Institute. At least in part because the plans are so new, "it's hard for people to get good information, which makes it very difficult to assume responsibility over your health care," he says.

That probably helps explain a survey conducted last year, which found those with HSAs and other consumer-directed plans are less satisfied than those with more traditional types of insurance coverage.

"People are very frustrated by the amount of — or lack of — information on cost and quality, and that certainly shapes their opinion about these plans," Fronstin says. "To the degree that these plans may be providing information, people don't see it yet."

Those in consumer-driven plans also say they're not yet experiencing the promised savings, according to the survey. In fact, people are finding exactly the opposite. Says Fronstin, "We do find that people in these plans are spending a higher percentage of their incomes on out-of-pocket expenses and premiums than people with comprehensive plans, and that finding is exacerbated for people that are less healthy and lower income."

President Bush is clearly responding to public opinion by elevating health care as a political issue. But it's not at all clear that his prescription — giving consumers more responsibility — will be very popular with voters.

Drew Altman, president of the Kaiser Family Foundation, says surveys sponsored by his group have long found consumers wary about being on their own when it comes to health insurance. "They're actually pretty attached to the employment-based health insurance system," he says, "which while — sure, they'd like to see their employer give them better benefits, they also see their employer as running interference for them in a pretty complicated world of health insurance arrangements."

Altman says those same surveys also show that people may be resistant to spending their own money for health care, since they already think they're spending too much.

"The big worry people have is that the cost of their health insurance is going to go up," he says. "So this idea that health economists love so much, that people should see more of the costs of their health insurance, this may strike average Americans as a pretty strange idea."

Indeed, Democrats are already linking President Bush's plans to give individuals more choice and control over their health care in general to the new Medicare prescription drug benefit. The myriad choices of Medicare Part D, as it's called, are frustrating many seniors.

"We haven't seen any leadership at all from this administration on health care," said former Senate Minority Leader Tom Daschle at a health care forum last week. "The best they could do was Part D for Medicare. And if you like Part D for Medicare, you will love consumer-driven health care," Daschle said.

In fact, says Kaiser Foundation President Altman, it's not overreaching to combine the president's proposals for the health care system in general with the Medicare drug plan, or even plans to turn Medicaid over to private insurance companies, as some Republican governors are planning.

"We're seeing the beginning of a really fundamental shift in how we think about health insurance in our country, from shared responsibility and risk from pooling, to everybody makes their own deal," Altman says.

But unlike President Clinton's failed health insurance plan of a decade ago, which was printed, sliced and diced in the public square, this plan is coming in such dribs and drabs that it's been mostly overlooked. The president's State of the Union address could change that.

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