The Trouble with Health Savings Accounts: A Social Work Perspective

Abstract

In recent years, conservatives have promoted health savings accounts (HSAs) a way of addressing growing cost of health (Hubbard, 2006). HSAs were introduced under Medical Modernization Act of 2003 alternative to traditional health insurance (U.S. Department of Treasury, 2006, [paragraph] 1). They are at heart of an effort to replace our current system of with consumer-directed health (Robinson, 2005). In this article, I examine HSAs and consider their implications for social workers. open an HSA, an individual must first buy a high-deductible health plan (HDHP), which requires consumer to assume responsibility for at least first $1,050 in costs ($2,100 for families), up to a maximum of $5,250 ($10,500 for families) (U.S. Department of Treasury, 2006). (Claxton et al. [2005] found that average deductibles were $1,901 for individuals and $4,070 for families; two of three employers offering these plans contributed to workers' accounts.) HDHPs may offer preventive on a first-dollar basis, although they are not required to. Individuals with HDHPs establish HSAs, into which they can deposit money ... reap investment returns and withdraw money for eligible medical expenses, all tax-free (Ginsburg, 2004, p. 2). Employers also contribute to HSAs on behalf of their workers. Although number of individuals with HDHPs or HSAs is relatively small, experts believe this could increase (Claxton et al.). Advocates of HDHPs and HSAs believe health inflation is rooted in our system of employer-based and low-deductible policies, which insulate[s] people from cost of ... medical care and enables the vast majority of Americans to consume health as if it were free (Hubbard, 2006, p. 3). This is well-known theory of moral hazard, which assumes that if individuals buy a good for less than its market price, they will consume of it than they ordinarily would. To extent that this increase in use or spending arises from lower user price that health brings about, it is called 'moral hazard' (Pauly, 2004, pp. 113-114). HDHPs and HSAs seek to address moral hazard by giv[ing] consumers an incentive to spend wisely (Hubbard, p. 4). PROBLEMS WITH HSAS Unfortunately, there are problems, both theoretical and practical, with HSAs. begin with, Nyman (2004) pointed out, moral hazard is not necessarily inefficient, or welfare decreasing. Moral hazard occurs when third-party payments encourage individuals to buy more health than they would have purchased at normal market prices (p. 194). However, not all this spending is a welfare loss. Third-party payments enable individuals to obtain that they cannot afford but would buy if they had money. This is particularly true for patients needing more serious procedures, such organ transplants[,] ... trauma care, and many cancer treatments (p. 197). In these cases, subsidized actually represents a welfare gain. Advocates of HSAs assume that demand for health is infinite, that patients will consume much of it they can, whether they need it or not (Gladwell, 2005). This is questionable, however. For people, visiting a physician is not an enjoyable experience. As Reinhardt (cited in Gladwell) put it: You always hear that demand for health is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into hospital because it's free? Do people really like to go to doctor? Do they check into hospital instead of playing golf? (p. 47) The answer seems obvious: Few if any people would frivolously choose to endure coronary bypass surgery just because price had dropped to zero (Nyman, 2004, p. 197). Advocates of HDHPs and HSAs also assume that we shop for health in same way we do for other goods, such automobiles or iPods. …