Saturday healthcare blogging pt. 2
Now compare this to Singapore-style Health Savings Accounts. Let’s say you have 10% of your income deducted from your paycheck and that goes into your HSA (or “Medisave” account), and another 5% deducted as a health tax. This is a flat rate, and the numbers are purely hypothetical. You are responsible for your health care costs up to the amount you contribute to your HSA. So if you make $50,000 you have a cap of $5,000 and you decide where those dollars go, and if you don’t spend them you get them back with your tax return or can choose to redirect them tax-free into a personal retirement account. Maybe you don’t get them all back so that you are sure to spend a minimum on preventative care, but you get most of them. This incentivizes you to not overspend on health care. And unlike a mandated purchase of health insurance, it allows you to spend the dollars you save on cheeseburgers and travel if you so desire.
Indeed, it takes the insurance company out of the picture altogether, allowing consumers a direct line to their health care choices. (Case in point, we just had some semi-elective medical expenses and we had no idea at the time how much they would cost. The bill that we got after insurance was a lot more than we expected, and if we’d been aware of that cost, we probably would have put it off for a couple years. But health care consumers are rarely aware of the cost.)
Above that cap a single-payer system kicks in for necessary procedures and coverage, as well as catastrophic coverage. This means that for healthy people they might only spend the minimum for preventative care. For sick people or those who face accidents, etc. there is fairly sensible cap to their expenses. They aren’t bankrupt. This blends two philosophies – the libertarian idea that we will spend less if we understand the costs, and the highly touted HSA’s that make this happen, along with a very progressive payment system. If you make $500,000 a year, you’re responsible for your first $50,000 in health care spending and you contribute significantly more to the health tax than someone making $20,000 a year.
For elective procedures like face-lifts and such, you’d obviously be on the hook. But if you got cancer or some other high-tab medical problem, you’d be okay.
And best of all, this sort of system contains costs. People are loathe to spend money on health care that they could spend on big screen TV’s. So they do their best to stay healthy and not have to spend their own dollars. This means that the single-payer side of all of this only kicks in when it’s needed, and for the poorest among us. This contains costs much better than when people rely on abstractions like insurance. And if you have to spend some of your contribution, you may as well spend it, and that’s going to be on preventative care and check ups. This is the key difference between other single-payer models, which allow people to use as much of the system’s resources as possible, effectively forcing government rationing when self-rationing works so much better.
I’m not all that familiar with HSAs in the United States, but from what I understand they’ve been implemented in a fashion very similar to what you explain and are almost universally considered to be a horrible option because, in practice, you can’t do the legwork required to figure out price (and what about emergency care?). Obviously there’d be more incentive to reduce these headaches if HSAs were universal, but I doubt that most Americans are capable or willing to become sufficiently educated on these matters. Libertarians scoff at that sort of remark, but as Exhibit A I point to the fact that people purchase brand-name drugs when generics are available for literally no reason. People want to defer to authority on health care because we aren’t expert enough to make these decisions, and on top of that it’s hard to imagine the sorts of reforms that would eliminate deceptive advertising that perverts consumer choice every coming out of Congress.
An obvious objection to your plan is that it will, in practice, discriminate on the basis of class in that incentive to save will increase with decreasing income (your incentive to stay healthy is also an incentive to willingly stay unhealthy). I also don’t think this is all that different from aiming to cap out-of-pocket spending at X% of income with subsidies… and I think the subsidies in at least the HELP bill and probably the others are structured with this in mind.
I think if you worked out the numbers, the tab that would be picked up by the Feds in your plan would wind up having the same effective tax rate effect that you complained about w/ Baucus’ bill. Incentivizing saving money is definitely something that needs to be done, though. In theory you could accomplishing the same thing by making an insurance market that actually resembles a free market (or nixing a broken system and letting bureaucrats work out the cost/benefit analysis for particular procedures. HSAs just seem like a way to bypass the broken insurance system instead of fixing it.Report
E.D.:
Not necessarily. Not at all necessarily. It’s much more likely that people will put off needed health care, leading to reduced general health and/or even more expense to the system if what seems like a minor problem easily postponed turns out not to be.
The problem with HSAs, or really, any of this “freedom” blather associated with the health reform debate is that “giving people choice” is in effect “forcing them to self-diagnose.”Report
Not at all. If some of their money is withheld no matter what they’ll be inclined to spend it. Actually this idea is Brad DeLong’s really, touted by Yglesias and, oddly enough, Tyler Cowen. Seems to have pretty broad bipartisan support….Report
E.D.:
I don’t understand your sense of incentives/disincentives–or DeLong’s, Yglesias’s or Cowen’s, either.
If we assume people would rather spend money on TVs than health care, there’s two ways people can accomplish that. 1) Radically alter their lifestyles to be more healthy so as to obviate the need for health care spending, or, 2) Radically alter their definition of “health” to encompass a higher threshold for health events that require expensive professional attention.
I think at the margins of behavior, #2 is far more likely to occur than #1. Can you explain why #1 would predominate?
I could stop eating tasty but shitty food so I’m not so unhealthy anymore and buy an awesome HDTV, or I could keep eating the tasty but shitty food and just decide I’m really not all that fat, so why do I need a doctor and besides, this new HD TV is awesome!Report
You can’t have it both ways, E.D. The whole efficiency of HSAs is based on the way they discourage spending below the HSA amount, which makes the way it dissuades people from seeking cheap preventive care and screenings problematic. That’s why, in addition to their HSAs, Singapore also directly subsidizes 80% of the cost of basic and preventive care. And their draconian stance on just about every public health issue, such as making drug trafficking a mandatory capital offense, doesn’t hurt either.
Not that I’m complaining mind you. Among health care reforms we’ll never, ever implement, an HSA-based system is easily the 3rd or 4th best.Report