Why you should totally get an HSA, but Uncle Sam shouldn’t

Tod Kelly

Tod is a writer from the Pacific Northwest. He is also serves as Executive Producer and host of both the 7 Deadly Sins Show at Portland's historic Mission Theatre and 7DS: Pants On Fire! at the White Eagle Hotel & Saloon. He is  a regular inactive for Marie Claire International and the Daily Beast, and is currently writing a book on the sudden rise of exorcisms in the United States. Follow him on Twitter.

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140 Responses

  1. Will Truman says:

    Tod, one of the big advantages of HSA’s are that consumers will use more discretion for what they spend their health care money on (and providers respond to this). If you assume that this is not the case, then of course it’s unlikely to make a difference. Change in consumer behavior – and thus in total amount spent – is rather central to the HSA’s argument, though.Report

    • greginak in reply to Will Truman says:

      We don’t want to many health care choices made solely on cost. People who do that know are often putting off important stuff like meds, check ups, dental care for current problems since they can’t afford it. Medical need should be the highest value in seeking care.Report

      • Will Truman in reply to greginak says:

        Not solely on cost, but also not with the disregard for cost we have now and that we might have under single-payer (unless the government takes a long, hard look at what’s worthwhile).

        My preferred model for HSA would involve a subsidy. If you qualify, you get half (or some percentage) of the subsidy of whatever in cash if it goes unused. Something to encourage people towards generics, MLPs, cheaper options/procedures, and so on.Report

        • Chris in reply to Will Truman says:

          Aren’t you just going to end up with the typical intertemporal choice problem that leads people not to spend the money on precisely what they should be spending it on (e.g., preventative care) because people are shitty at predicting what they will or will not need in the future?Report

          • Will Truman in reply to Chris says:

            It’s not remarkably clear to me that preventative medicine is as awesome as a lot of people say it is. I’m not against preventative medicine, but I think it presents a more complicated picture than many people thing, especially on the economic side of things.

            (In some cases, especially in cases where it pays for itself or it represents a health hazard, by all means – free vaccinations for all! – but a whole lot of initial visits are rather unnecessary and self-triage would be more efficient.)Report

            • Chris in reply to Will Truman says:

              You should look at much of Europe, then. They spend less per person with single payer, and are healthier overall, in part (though not entirely) because they do primary and preventative care well.Report

              • DensityDuck in reply to Chris says:

                I’m curious as to what kind of preventative care will stop me ordering Baconators for lunch every day.Report

              • ThatPirateGuy in reply to DensityDuck says:

                According to the post you will be saving the system money by dying younger and cheaper.

                Enjoy that baconator and follow it up with an after dinner smoke. We have a health care system to afford.Report

              • Rod in reply to ThatPirateGuy says:

                I just finished an Arby’s 3-cheese-and-bacon roast beef sandwich and followed that up with a smoke.

                You’re welcome.Report

              • Trumwill Mobile in reply to Chris says:

                We do quite a bit of preventive care here, too, yet the result is not really cost savings. I’m not hugely optimistic on international comparisons. In any event, it’s entirely possible that HSA’s could improve primary care access by providing cheaper alternatives (the Walmart clinics and such). Or maybe not. Which is why I’d like to see it tried.Report

              • James K in reply to Chris says:

                The research I’ve seen on preventive medicine suggests that it increases costs rather than decreasing it, it takes quite a lot of prevention to stave off one case of a disease.

                As to why much of Europe is healthier than the US? Well there could be any number of confounds, but different lifestyles and genetic profiles could mess with the stats.

                Be very careful when comparing two countries and inferring what’s causing the differences. Real life is not a controlled experiment.Report

              • Brandon Berg in reply to Chris says:

                I’m guessing that your methodology here is:

                -Having lower per-capita health care costs is a good thing.
                -I think single-payer is awesome.
                -Therefore, single-payer results in lower per-capita health care costs.

                Am I wrong?Report

              • Trumwill Mobile in reply to Brandon Berg says:

                He actually didn’t say single-payer. A number of European systems are actually more complicated than that.

                They do seem more friendly to more aggressive primary care (preventive medicine is more complicated), though it’s not clear how much of the savings is actually a result of that.Report

              • greginak in reply to Trumwill Mobile says:

                Some of the euro systems even have private insurance type companies allthough they are heavily regulated.Report

      • DensityDuck in reply to greginak says:

        “Medical need should be the highest value in seeking care.”

        And that’s exactly what HSA advocates are arguing.Report

      • Mo in reply to greginak says:

        Shopping on cost seems to have worked fine for laser eye surgery.Report

        • Rod in reply to Mo says:

          Because it’s almost always elective. It’s an alternative to glasses or contacts. And it doesn’t treat a life-threatening condition. (Unless you drive without your glasses, I suppose.)Report

    • Tod Kelly in reply to Will Truman says:

      Well, I would agree that people will make different choices for those things that are reatively small, and I don’t discount the benefit of this. I think it would greatly increase the changes of people choosing low-cost generic prescriptions, for example.

      But I don’t see how it changes how people choose in the bigger ticket items that truly drive up costs; those will all be covered by insurance. I can easily see someone not going to the doctor for a cold; I cannot see them deciding not to get unnecessary back surgery in lieu of therapy any more than happens already.Report

      • Will Truman in reply to Tod Kelly says:

        I don’t know how much it would change things. On the one hand, I do question whether the costs of Lasik would be as stable as they seem to be if we could count on insurance companies to pick up the tab. I know that I personally behave differently when it comes to areas where I can’t count on insurance (dermatology, dentistry, optometry) than areas where I can. On the other hand, I saw a graph comparing the cost growth of veterinary care (which is generally – though not exclusively – a market model) and it tracked close to medical spending.

        You make a good point on big ticket items, and that could be why it wouldn’t work. It’s been looked at, and there are reasons for optimism, but that could be dismissed on the basis of demographics.

        Either way, I’d like to see it tried on a large-scale in the US, which is more-or-less the same approach I take to single-payer. I’m a tad more optimistic on the former score than the latter, but want to see how the rubber hits the road.Report

      • Dave Buck in reply to Tod Kelly says:

        I have, for perhaps a decade now, been one of those who pleads for our population to choose to move away from employer-based insurance and towards high deductible plans and HSAs. So I’m very interested (to say the least) in Tod’s argument here. I don’t want to push everyone towards a scheme that won’t work.

        My question is the same as Will’s: Won’t a high deductible change behavior and purchasing habits significantly? I read your answer Tod, but maybe you’re wrong? Does anyone know what percent of health care costs are due to ‘discretionary’ spending? To answer that, we’d have to define ‘discretionary’ of course. But, to give an example, I found out that my Nexium tablets ($80 copay for 90 days, not sure what insurance paid AstraZeneca) were discretionary. I lost weight and didn’t need Nexium anymore. I don’t have dental insurance so I skip the fluoride treatment during the semi-annual cleaning and just brush better at home (saves me about $90 a year). I shop around when its time to get the kids their physicals. Identify the most used medical products and their effectiveness or exactly how often they are necessary: One could argue that anti-depression medication, for example, is discretionary in a large portion of the consuming population because of the clinical trials finding its effects are similar to that of a placebo.

        But those are my judgments about what is discretionary vs required health care. Each person will have different definitions, and perhaps that is how it should be. A major population shift to high-deductible insurance would allow people to self-define discretionary (and I’m suggesting that in itself is a good thing).

        Still, the question is, if people had to pay out of pocket for more of their medical products/services , how much would consumption decrease? Do we know?

        Has anyone done research that compares a group who has HD policies and to a matched group who doesn’t? That would begin to get at your assumption.

        And, how might behavior change if the out-of-pocket deductible was even higher than you suggested in your essay? How about a $12,000 a year deductible? What would happen to consumer behavior in that situation? I seem to recall that my uncle used to sell 80/20/10,000 health insurance products as the norm many decades ago before copays existed. The client paid 80% of all bills until they hit $10,000 and then the carrier went from paying 20% to 100%. The argument is that people were keenly aware of every product/serviced they consumed then. Once that pressure was removed by the full-service employer-provided policies, people no longer focused on the bills, let alone itemized costs. Consumption and costs soared. You’re saying that if everyone went back to those kind of plans, the change in consumption would be minor? Would not be enough to significantly change demand and then lower medical costs?

        You can say ‘yes’, but I need a little more data to believe that.Report

        • wardsmith in reply to Dave Buck says:

          Dave you seem like a smart fellow, please stick around and comment with us. Here’s a Rand report I just found. Haven’t read past the first page yet, but there I found that If the proportion of Americans with employer-sponsored insurance who enrolled in consumer-directed plans increased to 50 percent, annual health care costs would fall by an estimated $57 billion.

          Furthermore I can say even without reading them I am likely in 100% agreement with anything Roger writes on this topic. In the last OP Tod did I’d read a comment Roger wrote and actually think I wrote it myself. He can’t have thought the same because he writes better than me. 😉Report

      • Lyle in reply to Tod Kelly says:

        I would point out that for routine lab tests there are outfits that charge 1/3 of what a typical hospital would charge, and indeed some hospitals have days that they offer screening tests for 70%+ off. Of course you do have to pay with a credit card. This does suggest that the current model of the provider not getting paid for 60 days does not make sense.
        Now if you required posting of prices people could for example choose which hospital to go to, including in elective surgery case going offshore.Report

  2. DensityDuck says:

    “The truth is, HSAs can only work effectively if a relatively small percentage of the population takes advantage of them. ”

    Insurance in general can only work if a relatively small percentage of the population takes advantage of it.

    This does, of course, assume that when you say insurance you mean “insurance” and not “group-based negotiation for prices”.Report

  3. Roger says:

    Not sure who was arguing HSAs were a panacea. Wardsmith and I brought them up as a part of the solution, which you obviously agree with us on. My question was why the left seems to hate them for other people. They seem to fear them, and I am not sure why.

    I repeat myself that the key to solving health care requires three things. First separating the safety net/ transfer part from the market part. When you mix them you fish up both.

    Second, aligning the payment with the benefit. Otherwise you not only fail to control costs, you incentivize massive waste.

    Third, removing rent seeking special interests groups from the system.

    To the extent these three things are the problem, then my recommendations to fix the system are great ideas and Obamacare is a travesty. I won’t repeat my ideas a fourth time though.Report

    • DensityDuck in reply to Roger says:

      See greginak’s response above. The assumption is that if medical care becomes fee-for-service then people will decide that they’d rather spend their money on something other than doctoring and do the human-body equivalent of driving around with worn brakes and unrepaired crash damage.Report

      • greginak in reply to DensityDuck says:

        The assumption, which i’ve seen happen many many times, is that people with very limited funds will put off recomended and needed care because they can’t afford it. HSA’s might be a good idea but only if there are other sorts of subsidies or care is somehow made available. The thing with HSA’s is that the most needy people ( poor people or people with chronic heath problems) are the people either with less money to put in an HSA or there expenses far outstrip anything that might be workable. People allready put off care and finding a way for them to get care when they need it or their doc says they need it is a problem many of think needs to be solved.Report

        • DensityDuck in reply to greginak says:

          “People allready put off care and finding a way for them to get care when they need it or their doc says they need it is a problem many of think needs to be solved.”

          …doesn’t that mean that it’s not a new problem that HSA’s will introduce?

          “The thing with HSA’s is that the most needy people ( poor people or people with chronic heath problems) are the people either with less money to put in an HSA or there expenses far outstrip anything that might be workable. ”

          A: don’t the former get Medicaid? Or, in the HSA-and-high-deductible plan, maybe everyone in the USA gets a yearly government contribution to their HSA, and they can put in more as a pre-tax contribution if they want.

          B: explain why the rest of society needs to pay for my insulin. Make sure you don’t also explain why the rest of society needs to pay for my third stomach-stapling surgery (I know that I’ll bust it back open if I eat too much but I just have these cravings)

          PS Maybe if there weren’t $2.6 trillion dollars available every year to pay for insulin, then insulin wouldn’t cost so much.

          C: If the healthcare expenses “far outstrip anything that might be workable” then you’re in catastrophic-costs territory, which is what the “high-deductible” part of “HSA-and-high-deductible” is for.Report

          • greginak in reply to DensityDuck says:

            A ummm no there are somewhere between 30 to 50 million uninsured people in the US and many others with minimal insurance.

            B Oh well that is a simple question. This has been dicussed a million times and i assume we will never agreee.Report

            • Stillwater in reply to greginak says:

              i assume we will never agreee.

              That’s about the beginning and end of it really. I mean, the libertarian response to the PPACA is to ask one of two questions: what about my liberty? and isn’t this other (idealized) model much better?

              The answers to both are viewed by the libertarian as non-starters, so the questions themselves are discussion enders. Ideology baby.Report

        • Roger in reply to greginak says:

          And that is why I suggest HSAs should be optional, that our healthcare should have substantial subsidies built in a way which doesn’t pervert the market, and shouldn’t apply to serious or catastrophic care.


          One other thing is that the data seems to show that much of preventive care is a massive waste. Not all, but much of it. This used to be a regular topic at the Overcoming Bias blog.Report

          • greginak in reply to Roger says:

            Well for the sake of discussion, what is your answer to DD’s question? Why should i or you have to pay ( through subsidies) for his insulin?Report

            • wardsmith in reply to greginak says:

              Better put and expanded outward, should society be on the hook for the misbehavior of a subset?

              Perhaps you are unaware that 70% of ALL Medicare spending goes to only 10% of all Medicare beneficiaries? What if we as a society were to dig a little deeper and discover that a vast majority of that 10% (piggishly consuming 70% of a Trillion dollar outlay) were themselves… pigs? They overeat, get diet induced diabetes and receive all the complications therefrom. Should we as a society gird up our belts and live a lower quality existence to support the pigs? “All animals are equal, but some animals are more equal than others”?Report

              • greginak in reply to wardsmith says:

                how do you determine the differnce between misbehavior, bad luck, crappy genes, acts of God and/or FSM?

                should people really be compared to animals?

                isn’t comparing people to animals the start to dehumanizing people and seeing them as less worthy?Report

              • Jaybird in reply to greginak says:

                Maybe if we punished misbehavior, we’d have less of it. A decent eugenics program could weed out bad genes.

                I’ll think about a top-down solution for bad luck. I’ll get back with you when I come up with something.Report

              • Patrick Cahalan in reply to Jaybird says:

                “Tonight, on Eugenics Cage Match, defending champion Timothy Elder takes on the partially immobile tag team of Walker Jane and Wheelchair Annie! Three will enter… ONLY ONE WILL LEAVE!”Report

              • DensityDuck in reply to greginak says:

                “how do you determine the differnce between misbehavior, bad luck, crappy genes, acts of God and/or FSM? ”

                Remember this speech next time you feel disgusted by the sight of a fat person.Report

              • greginak in reply to DensityDuck says:

                ummm huh….wow massive answer fail duck. i’m perfectly fine with my answer. i’m aware of the reasons why somebody might be fat and how i feel about it. for the record i’m think all those fat people should have health care and some sort of gov uni plan is the best way to provide it even for those people who have had a massive ding dong overdose.Report

              • wardsmith in reply to greginak says:

                Greg, I take it you never read Animal Farm? Methinks the author wasn’t /really/ talking about animals but YMMV. I am absolutely certain that Watership Down was about rabbits though…

                Now if you’d care to address the point instead of nibbling around the edges we could have a conversation. Should society be on the hook for the misbehavior of a subset? This expands in multiple directions like pouring water on a table. For instance the percentage of /true/ criminals and their impact on /total/ crime percentages. But we should stick with healthcare here.Report

              • greginak in reply to wardsmith says:

                Oh i know all about animal farm, i still have my dad’s copy. you’re no orwell. have you read Down and Out in London and Paris or The Road to Wigan Pier or Homage to Catalonia?

                I think we should have uni HC. People who eat to much, engage in sports, drives to fast or does anything that could be considered to be raising some risk level should have health care. Everybody has some sort of “misbehaviour”. Eat to many twinkies: you should have HC. Smoke cig’s: you should have HC. etc etc etc.

                The question still stands about what you consider misbehavior and how you assess who is worthy? Those questions lead to an intrusive state and scary questions about who should be deciding who is worthy. The thing about uni HC is that everbody has it, nobody gets to be more equal.Report

              • DensityDuck in reply to greginak says:

                “The question still stands about what you consider misbehavior and how you assess who is worthy? ”

                Or you could drop the question entirely and let everyone pay their own damn doctor bills.Report

              • wardsmith in reply to greginak says:

                No no Density, universal health care is a RIGHT and therefore EVERYONE has to pay for everyone ELSE. Except of course for those unfortunate enough *(due to circumstances beyond their control like misbehavior, bad luck, crappy genes, acts of God and/or FSM? “). I mean lets face it, when any of us misbehave it is clearly the fault of that evil FSM in the sky. Therefore we should all live grasshopper lives and let the ants pay for it. Oops another literary reference, now Greg can lecture me on his vastly superior knowledge of Aesop. 😉Report

              • Stillwater in reply to greginak says:

                Or you could drop the question entirely and let everyone pay their own damn doctor bills.

                With chickens.Report

              • Roger in reply to greginak says:

                Speaking of learning through great literature… I just got back from the theater. Today I learned Vampires were behind the whole slavery thing, and were the ones that started the Civil War. Amazing.Report

              • RTod in reply to greginak says:

                Really? I owe the South a huge apology.Report

              • Roger in reply to greginak says:

                Actually no… They were in cahoots with the bloodsuckers. seriously.Report

              • greginak in reply to wardsmith says:

                oh duck…you are so right…why are we stopping people from paying their own bills… that all people want…what a simple elegent solution…nobody will go without care, all bills will be paid….its a win/winReport

              • greginak in reply to wardsmith says:

                Ward, i’ve clearly stated i don’t think the misbehaviour concern matters to me. Without some sort of subsidy/gov plan/ insurance many people will go without HC. I think that is bad and wrong and a worthy problem for gov to solve. The rights talk is a red herring. i don’t give a fork if its a “right” or not.

                So “have you read Down and Out in London and Paris or The Road to Wigan Pier or Homage to Catalonia?”
                Just curious, many people loooove to reference only the Orwell books that fit their views.Report

              • wardsmith in reply to greginak says:

                Greg your position is clear and yet you started the discussion. Why? Just to trot out your bona fides yet one more time?

                Look it is just like the moral high ground discussion. The left claims moral superiority by defining subgroups that are discomfited in some way and proposing a government run solution that “solves” the problem. The reality that the left’s solutions have ALL failed miserably doesn’t stop the left from demanding yet another trip to the plate. I’m totally serious about this picture. There comes a time when there isn’t a hair’s breadth difference between the most ardent leftist and the most hardcore fascist dictator. It all ends up in dictatorships and tyranny. Castro is one example, Chavez is another. Supposedly Cuba has /great/ healthcare. On this site I’ve eviscerated that myth.

                As for my reading list, yes not only have I read those books but I used to comment as Eric A. Blair on other sites. Others copied my trick so I quit posting with that name.Report

              • greginak in reply to greginak says:

                I’m not talking moral high ground positions. Or at least any more then you are. I think uni HC is a good idea for a variety of reasons. I can point to many simalar places that have shown how it can work well in the real world. Trotting 0ut that pic is meaningless to me. You can raising the spectre of fascims/socialiasm rather then answer the questions i posed. Its always easier to throw out totalitarian fears then anything else. Worthless fear mongering. You did learn then that Orwell was a wee bit of lefty then, didn’t you?Report

              • wardsmith in reply to greginak says:

                Orwell started as a communist then became disenchanted with them, then hated them with a passion. Yes I know this, I wonder if you do? That picture isn’t just a picture to those with intelligence, it is a warning. I’ve answered your question and expanded on it with my own (which I also answered).

                The fact is we can’t AFFORD to continue to pay for “everyone’s” health care when the costs are increasing exponentially. The CBO in 1965 said Medicare would cost $12Billion by 1990. It cost $120B, which today would be a bargain. CBO estimates aren’t worth the toilet paper they should be written on. Costs skyrocket, HSA’s are a mechanism to restrain those costs and I’m the only one in this discussion who has at least pointed to a study that estimates cost reductions with greater HSA enrollment. But the left hates HSA’s because the left likes big government “solutions” even though big government “solutions” are destined to failure and look, we’ve come full circle.Report

              • Bad-ass Motherfisher in reply to greginak says:

                You give great stereotype.Report

              • MikeSchilling in reply to greginak says:

                Orwell began as a socialist, lived as a socialist, and died as a socialist. From “Why I Write”, published in 1946:

                Every line of serious work that I have written since 1936 has been written, directly or indirectly, against totalitarianism and for democratic socialism, as I understand it.

                Animal Farm was published in 1945.

                He was never fond of Communists and turned against them, for good, after his service in the Spanish Civil War in 1936, because he felt that they betrayed the rest of the Left. The notion that Orwell ever ceased to be a socialist is simply false.Report

              • greginak in reply to greginak says:

                Roger. I want universal care. I don’t like the current insurance system, we have it due to a historiacal artifact of when and why it was put in place. Any sort of uni care system can be said to have you paying for my accident. Any sort of plan that pools risk to cover people with greater need can be accused of that. I’m not arguing against you allthough i don’t think your plan is workable. I’m more in favor of uni care system along the lines of one of the better western euro type plans.Report

              • greginak in reply to greginak says:

                damn i go to lunch and Mike beat me to it.Report

              • wardsmith in reply to greginak says:

                Mike I said communist, therefore I MEANT communist. You want to start an argument by pretending I said something I didn’t? Or does your dictionary show: Socialism=Communism? As Orwell understood the IDEALS of the left he was certainly a leftist. As he understood the REALITIES of the left, he was a critic as his work clearly shows. Orwell didn’t have the benefit of the nice graphic I posted a link to earlier, good thing or we wouldn’t have gotten so many good quotes from him.Report

              • MikeSchilling in reply to greginak says:

                You said that Orwell started as a communist. When was that?Report

              • wardsmith in reply to greginak says:

                I’ll play your silly little game. How about when he belonged to Partido Obrero Unificación Marxista? Can you translate that or do you need Blaise’s help? Homage to Catalonia tells you everything you need to know. I believed that things were as they appeared, that this was really a workers’ State and that the entire bourgeoisie had either fled, been killed, or voluntarily come over to the workers’ side; I did not realize that great numbers of well-to-do bourgeois were simply lying low and disguising themselves as proletarians for the time being All know Orwell was a small-c communist, not the Capital C-Communist you put in your comment.

                Ooh look a squirrel, let’s split hairs some more!Report

              • MikeSchilling in reply to greginak says:

                Yes. Orwell was a socialist and never stopped being one, was never a Communist and grew to despise them more and more, fought alongside the POUM and wrote bitterly about the way the capital-C Communists betrayed them.

                There’s nothing in any of that to support the idea that he turned rightward in his later years.Report

              • wardsmith in reply to greginak says:

                Yeah buckwheat, he was a real fan of the Left: “So much of left-wing thought is a kind of playing with fire by people who don’t even know that fire is hot.”

                But you didn’t even read my post wherein I NEVER said he turned rightward. I respect Orwell because he was a realist, pragmatically understanding that man-made solutions were doomed to failure because of the inherent flaws in man:

                “The ”Communism” of the English intellectual is something explicable enough. It is the patriotism of the deracinated.

                ‘One does not establish a dictatorship in order to safeguard a revolution; one makes a revolution in order to establish a dictatorship’

                ‘Progress and reaction have both turned out to be swindles. Seemingly, there is nothing left but quietism robbing reality of its terrors by simply submitting to it

                We of the sinking middle class may sink without further struggles into the working class where we belong, and probably when we get there it will not be so dreadful as we feared, for, after all, we have nothing to lose.

              • BlaiseP in reply to greginak says:

                I think everyone here should lay off trying to hoist up Orwell as anything we’d recognise today. The Communists did subvert the anti-fascist cause in Spain. Many people continue to believe the Communists sold out to the fascists. Nikolai Yezhov so thoroughly infiltrated the Republicans it was hard to tell who was reporting to the NKVD and who wasn’t.

                The International Brigades were idealists, good hearted people, fighting an enemy we would eventually fight in our turn. But do not confuse Orwell with any of these: Orwell was a different man after Homage to Catalonia. He knew he had been betrayed, that his cause was betrayed. The ultimate humiliation awaited him in Britain, where his old socialist friends denounced him and the rest of the world ignored him.

                Well, the Allies held their nose and sided with Uncle Joe Stalin. Orwell stands on his own high ground, on a hill far away, beyond description. Yes, he called himself a socialist but he was no acolyte of Communism as we’d understand the word today. The very idea, that Orwell might have been a communist — it’s absurd. We might as well call Winston Churchill a Communist, for he had many more nice things to say about Stalin than Orwell did.Report

              • Stillwater in reply to wardsmith says:

                They overeat, get diet induced diabetes and receive all the complications therefrom

                I think I know where you’re going with this. Soda bans.

                Jaybird hates soda bans.Report

              • Jaybird in reply to Stillwater says:

                Now that I’m paying for your health care, I’m coming around.

                I’m hoping that I can get you to stop eating so many goddamn twinkies after that.Report

              • Kazzy in reply to Jaybird says:

                “Now that I’m paying for your health care, I’m coming around.”

                You are also paying for a number of people’s (mostly kids) education. Should we start banning things that make them stupider or otherwise harder and more expensive to educate?Report

              • Stillwater in reply to Kazzy says:

                Kazzy, JB was being sarcastic. He’s all about permitting things that make people stupider.Report

              • Kazzy in reply to Kazzy says:

                Like Mindless Diversions?

                (Hehehe, I knew he was joking. I was just throwing more fuel to the fire for folks who actually take that position.)Report

              • Jaybird in reply to Kazzy says:

                Legalize pot!Report

              • Jaybird in reply to Stillwater says:

                On a more serious note, it wasn’t *THAT* long ago that someone who introduced a “soda ban” into the conversation would have been accused of strawmanning some hysterical right-wing talking points into the conversation.Report

              • Patrick Cahalan in reply to Jaybird says:

                I’m waiting for a couple of these.

                I have them bookmarked. From right here on the blog. Someday somebody’s going to walk right into that one.Report

              • Stillwater in reply to Patrick Cahalan says:

                See, that’s the thing about arguing with you Patrick. You’re not only smarter than me, you’re more prepared.Report

              • Patrick Cahalan in reply to Patrick Cahalan says:

                No, I’m just bitter and vindictive.Report

              • Brandon Berg in reply to wardsmith says:

                I strongly suspect that that means that that 70/10 statistic is on an annual basis, not on a lifetime basis. That is, in any given year, 70% of Medicare funds are spent on 10% of the beneficiaries, but that there’s a huge amount of turnover in that 10% on a year-to-year basis.Report

              • MikeSchilling in reply to Brandon Berg says:

                Considering the huge percentage of medical spending that shortly precedes death, I’m sure you’re right.Report

              • Stillwater in reply to MikeSchilling says:

                Why do people become so unAmerican right at the end? Where’s the sacrifice? It’s puzzling.Report

              • Jaybird in reply to Stillwater says:

                Pain management is for pussies. Real Americans gut it out and try to get healthy and feel good that way instead of saying “can I have some morphine”.Report

              • Stillwater in reply to Stillwater says:

                Most Real Americans I know are all about wanting more ‘morphine’, whether for pain relief or not. And it’s comparatively cheap. Cheaper than a gastrointestinectomy, anyway.

                They don’t necessarily have to tough it out, ya know?, especially when I’m on the hook for their rectopulmonarydialysis.

                See what I’m sayin?Report

              • Stillwater in reply to Stillwater says:

                I’m on board Ward. It’s a real problem. I think everyone concedes that. For the record, Obama is – or was – on board too. He tried to address this very issue and his critics, spearheaded by Ms. Palin, accused him of advocating government run death panels.

                Kevorkian was onto something. But lots of people, and their families, aren’t Kevorkianable.Report

              • UK Mail, June 2012: Top doctor’s chilling claim: The NHS kills off 130,000 elderly patients every year

                Professor says doctors use ‘death pathway’ to euthanasia of the elderly

                Treatment on average brings a patient to death in 33 hours

                Around 29 per cent of patients that die in hospital are on controversial ‘care pathway’

                NHS doctors are prematurely ending the lives of thousands of elderly hospital patients because they are difficult to manage or to free up beds, a senior consultant claimed yesterday.

                Professor Patrick Pullicino said doctors had turned the use of a controversial ‘death pathway’ into the equivalent of euthanasia of the elderly.

                He claimed there was often a lack of clear evidence for initiating the Liverpool Care Pathway, a method of looking after terminally ill patients that is used in hospitals across the country.

                It is designed to come into force when doctors believe it is impossible for a patient to recover and death is imminent.
                It can include withdrawal of treatment – including the provision of water and nourishment by tube – and on average brings a patient to death in 33 hours.

                There are around 450,000 deaths in Britain each year of people who are in hospital or under NHS care. Around 29 per cent – 130,000 – are of patients who were on the LCP.
                Professor Pullicino claimed that far too often elderly patients who could live longer are placed on the LCP and it had now become an ‘assisted death pathway rather than a care pathway’.

                He cited ‘pressure on beds and difficulty with nursing confused or difficult-to-manage elderly patients’ as factors.

                Read more: http://www.dailymail.co.uk/news/article-2161869/Top-doctors-chilling-claim-The-NHS-kills-130-000-elderly-patients-year.html#ixzz20Gt3Go8BReport

              • BlaiseP in reply to Stillwater says:

                Daily Mail? Hee hee. Horrible news! Terminally ill people die in hospital! Next: Bat Boy Found in West Virginia Cave.Report

              • You can’t wave it away, Blaise. Well you can, but that’s dog bites man stuff.Report

              • BlaiseP in reply to Stillwater says:

                Daily Mail is a joke. It’s somewhere between News of the World and National Enquirer. They’re a great source of capital for half the stars in the UK, most of which have successfully sued them for libel.Report

              • DensityDuck in reply to Brandon Berg says:

                Yes, the 10% die and a new 10% roll in to replace them.Report

              • RTod in reply to DensityDuck says:

                yes. the great circle of death.Report

              • Stillwater in reply to RTod says:

                If we could figure that out, our health care problems would be solved!Report

              • RTod in reply to RTod says:

                Two words:

                Soylent. Green.Report

              • RTod in reply to RTod says:

                you’re welcomeReport

              • MikeSchilling in reply to DensityDuck says:

                I saw “die” and “roll” and assumed we were shooting craps.Report

              • DensityDuck in reply to MikeSchilling says:

                Roll above your Palin Score on d100 or die.Report

            • Roger in reply to greginak says:


              Why do I pay for your accidents? Because that is how insurance works.

              I am not suggesting that we let diabetics die.

              I want UNIVERSAL catastrophic care with an opt out. Voluntary routine insurance with competition, and a healthy social safety net with income transfers. This covers everybody but compels nobody. It is cheap. It is fair. It is rational. And it is compassionate.Report

  4. DensityDuck says:

    “We’ve still just spent $2 trillion on healthcare, but we’ve only collected $1.3 trillion to pay off that debt.”

    Wait, where in your example did we spend two trillion dollars? The only place I see an estimate for dollars spent was earlier, when you said “the vast majority”.

    ” The reason that we pay as a country $2.6 trillion in health care a year isn’t because we’re using a particular kind of insurance; it’s because we spend $2.6 trillion in health care.”

    The assumption of HSA-and-high-deductible advocates is that we spend $2.6 trillion because $2.6 trillion is what’s available to us, and that we use health insurance as pass-through payments to providers because it’s what we’re used to, and that neither of these things is set in stone.Report

    • Tod Kelly in reply to DensityDuck says:

      1. Yes, you have spent $2 trillion. You are an insurer, and you have unilateral contracts guaranteed to pay for the services that have already been rendered. (Similar to how if you have maxed out your VISA, you’ve spent that money, whether or not you’ve sent in a payment.)

      2. But anything above, say, $1500 is fully insured, so you’re no more likely to change your conser habits than you would be if there were no HSAs for those expenditures that drive costs.Report

      • DensityDuck in reply to Tod Kelly says:

        Wait. Are you setting yourself right-now-today, or in a hypothetical HSA-and-high-deductible world? In the latter world maybe there’s still two trillion being paid, but a great majority of it is being paid directly by the service receiver to the service provider.Report

      • wardsmith in reply to Tod Kelly says:

        Tod did you see my reply to Dave Buck? Rand shows a number albeit they don’t consider old people in the equation. You’re forcing HSA’s to solve a problem they aren’t part of in your analysis, ie the problems inherent in Medicare. Furthermore your entire analysis is doomed to failure because Americans spend $9000/year on healthcare, not $500.
        The health care industry now employs 14.3 million people, more than labor in manufacturing, and twice as many as the combined work forces in computing, mathematics, and engineering. Even in a recession with unemployment pushing 10 percent, jobs in the health sector are rising.

        Health care in America will cost nearly $2.7 trillion this year—$9,000 per person—a $200 billion increase over last year. $763 billion of this is for Medicare and Medicaid alone, which is over eight times the federal spending for education. Medicare and Medicaid costs have now squeezed out Social Security and defense as the number one expenditure in the federal budget, consuming 21 percent of President Obama’s 2011 suggested outlay of $3.5 trillion. Report

  5. Burt Likko says:

    The second [model] is to have a system where it is decided, either by the government or private insurers (think: HMO), that not everything can be covered for everyone – and choices are made about what will and won’t be covered.

    Death panels are totally OK when it’s a big company deciding to withhold life-sustaining medical care from my loved ones. But when it’s the gummint, man, that’s tyrrany.Report

  6. A truly fantastic, informative post. It helped clarify the issue for me in a way I’ve not yet encountered.

    And at the end of the day, you’re right. Any health care reform proposal that does not include People Getting Less of Something is a ruse.Report

  7. DensityDuck says:

    It does occur to me that there’s a legitimate argument against HSA-and-high-deductible, but it’s a “this won’t solve the problems” argument. Because for a lot of people, the cost that stops them getting healthcare is time, not money. It doesn’t matter if the state pays your doctor bills if you can’t take time off to go there.Report

  8. Anderson says:

    “The second is to have a system where it is decided, either by the government or private insurers (think: HMO), that not everything can be covered for everyone – and choices are made about what will and won’t be covered. Call them death panels if you will, but the belief that you can continue having everything paid for without dealing with exponentially rising costs is a fantasy. The belief that you can do it and have millions in a savings account by the time you’re retired is a fantasy on steroids.”

    This. No matter which direction our system goes, much more comparative effectiveness research must be done to figure what procedures the gov’t should and shouldn’t subsidize. Clearly there’s room for regulatory capture and rent-seeking here, but I don’t know how else to save money in the long run. As for HSA’s, they make sense as a piece of the system–like IRAs, Roth IRAs, and 401(ks)s when it comes to retirement saving. But, as always, I’d be concerned about their effect on the poor and financially-illiterate. Huge asymmetries in the doctor-patient knowledge relation make markets less responsible when it comes to healthcare.Report

    • Murali in reply to Anderson says:

      No matter which direction our system goes, much more comparative effectiveness research must be done to figure what procedures the gov’t should and shouldn’t subsidize


  9. Brandon Berg says:

    Also, if you withdraw them for non-medical reasons there is an additional tax penalty.

    Slight correction here: Once you turn 65, you can make withdrawals for any reason without paying a tax penalty. You still have to pay income taxes on non-medical withdrawals, but you don’t have to pay the additional 20% penalty.Report

  10. James Hanley says:

    Off topic message to Erik–no matter how often I reload the League, the front page doesn’t show me any posts past July 7. Tod’s “Increased Health Insurance Competition…” post is the most recent one that shows up.Report

  11. Kazzy says:

    Practical question…

    As I described elsewhere, I was previously in an HSA and it worked gangbusters for me because of how my work setup benefits. Now that I’m married, I am on my wife’s plan. It is a PPO, costs us $100/month combined, and has a $20 co-pay. Despite the great benefits that Tod has outlined here, I struggle to see an HSA making sense for us. Is our situation such that we are better off staying as we are? Or would an HSA, assuming the premium was half (so $50/month), still be better?Report

    • Brandon Berg in reply to Kazzy says:

      Often employers will pass some of the savings from HSA-based plans onto employees by partially funding the HSA, so you should check and see whether they offer that, and take that into account.

      Another less obvious benefit of an HSA-based plan is that an HSA basically acts like an IRA (with tax-free withdrawals for medical expenses) once you reach retirement age. If you’re maxing out your other opportunities for tax-deferred savings, an HSA-based plan has additional added value in the form of raising your cap on contributions to tax-deferred savings. But if you’re not already maxing out your other opportunities, this isn’t relevant.Report

      • Kazzy in reply to Brandon Berg says:

        Maxing out our IRAs (though I believe we are fast approaching a combined income that makes such options unavailable).

        I’ll have to look more closely at my wife’s plan options. Obviously, specifics matter, so I realize asking for advice absent them is a bit of a fool’s errand. But it seems we have an atypically good set of options ($100/month for couple’s PPO (which I believe drops to $75/month once she hits the 1 year mark in a couple months); $6000/year in additional income for me by declining insurance through my work).Report

        • wardsmith in reply to Kazzy says:

          Kazzy, I can’t give tax advice but you could theoretically /still/ get HSA insurance for yourself and park some percentage of that $6K there. Get the highest deductible policy you can find (since you’ll be using the wife’s insurance). You can use the HSA account money for medical procedures that aren’t covered by her insurance and it /is/ an investment vehicle and will accumulate returns tax free. The same PPO that covers her might sell an HSA plan and might give you a discount on it given the situation.Report

          • Kazzy in reply to wardsmith says:

            Dope. Thanks.

            Who tend to offer HSAs? Are they investment vehicles any financial institution can offer? Or are they the exclusive domain of insurance companies?Report

            • Brandon Berg in reply to Kazzy says:

              I’m not sure. Mine is with HSA Bank. I believe that at one point I tried to consolidate it with my IRA and brokerage accounts at Fidelity, but was not able to, so unless I’m misremembering it’s not something that an ordinary financial institution can (or does) offer.Report

              • Kazzy in reply to Brandon Berg says:

                Does it accrue interest or any other type of return? If not, it seems that the long-term tax savings would be dwarfed by returns (I’m working with a 30 to 40 year horizon).Report

            • BlaiseP in reply to Kazzy says:

              Most large banks offer them. They’ll give you a debit card, too.Report

  12. Brandon Berg says:

    The basic problem, I think, is that almost no one actually has to pay the difference between a policy that pays only for cost-effective treatments and one that pays for really expensive treatments that might kind of help a little bit. If I could redesign our health care system with the constraint that I could not reduce the amount of money the government spends on health care, what I would do is replace all government health care programs with a single non-means-tested program that pays only for treatments that meet a specified cost-effectiveness threshold in terms of dollars per expected QALY gain. The threshold would be set to match spending to the budget.

    Anyone who wanted access to less cost-effective treatments would either pay out of pocket or buy supplemental insurance; presumably the supplemental insurance would raise the cost/QALY threshold for the policyholder. So, for example, if the government’s threshold is $25,000/QALY, you might buy insurance that covers treatments between $25,000/QALY and $50,000/QALY. Supplemental insurance would not be tax-deductible, so employers would not have a strong incentive to offer it in lieu of wages.

    The upshot is that the individual consumer now has to bear the full marginal cost of coverage for very expensive and/or questionably effective treatments. Furthermore, nobody dies for lack of basic care.Report

  13. Rod says:

    Up above somewhat, Will T. wrote : “…On the other hand, I saw a graph comparing the cost growth of veterinary care (which is generally – though not exclusively – a market model) and it tracked close to medical spending.

    Now this is important. I’ve been rolling an idea around in my head for awhile but hadn’t actually got around to checking it out. But I think it’s time to unveil it.

    What if this whole fishing health care “crisis” is an illusion?

    What I mean is this: The problem is always stated as “health care costs are rising at two (or three, depending on your source) the rate of inflation.” And sure enough, if you look at a graph, health care costs have been rising just over twice as fast as the general CPI. Nice and steady. Too nice and steady if you ask me. And when the subject is education? Well, lookey there, another nice straight line, consistently about 2 1/2 times the rate of inflation for the last 25 or more years.

    So that got me to thinking… what do these things have in common? I mean other than the dadburn gummint interference that some would like to peg it on? Well, they share three characteristics:

    1) They’re not amenable to gains in industrial productivity, as measured by output per man-hour. The maximum class size for decent education is about 15 – 25 depending on age and no one’s been able to much affect that. Similarly, medicine is essentially a handicraft. Despite the best efforts of HMO’s and other insurers effective medicine still involves some one-on-one time with a physician. Patient interaction time may be down to about 4 1/2 min/patient but it’s never going to be a tenth or a hundredth of that. Not unless doctors are replaced by AI’s or something.

    2) You can’t outsource it to China (or Mexico, or Vietnam, or Little Shittystan). There’s a bit of medical tourism, but it’s negligible.

    3) The practitioners are educated and credentialed professionals.

    The basic hypothesis is that, primarily through outsourcing and productivity gains, much of what we purchase as consumers has actually gotten substantially cheaper over time. But not everything, simply because some types of goods don’t respond to those factors. Now the CPI is just a weighted statistical average of the prices experienced by consumers. It’s based on a standard market-basket of goods that some average or median household would consume. It’s going to contain both goods that have gotten relatively cheaper over time and other goods that may have increased in price or just stayed the same. So if you have goods in the basket that haven’t really changed in price and other goods that have gotten cheaper, the total should fall, and therefore the average price. But the CPI is just that average price. So if the average is taken as the baseline then goods that have just stayed the same in an absolute sense will appear to have gotten more expensive. But they have only done so relative to that average which has fallen.

    So how do you test this hypothesis? Well, the obvious means is to identify other classes of consumer goods or services (and it will be services) that share the three characteristics I identified above. So I Googled, like any good geek would do and found this site: metricmash (dot) com/inflation.aspx?code=SEGD01

    Cool site, BTW. You can find the CPI for just about any class of consumer goods or services you like, and you can have it overlay up to four curves. The “All Items” gives you the overall CPI. So for comparison I chose “Legal Services” and “Financial Services”, reasoning that Lawyers and CPA’s would fit the general criteria. Then I generated the following graph: US Inflation Rate for Legal Services, All Items, Medical Care and Financial Services

    Fascinating. It confirms that Medical Service inflation has indeed risen at a little over twice the rate of overall inflation. But so have Legal and Financial Services. So I guess any general theory of why health care is so expensive will also have to explain why those sectors (and Veterinary as well, although I couldn’t find it in the list) have increased at pretty much the same rate.

    Btw, when you do the same thing for other stuff household buy a lot of, like food, clothing, etc. you generally find that they prices have decreased relative to the overall CPI.

    I await your howls.Report

    • DensityDuck in reply to Rod says:

      Go home, Dad, you’re trying to imitate BlaiseP.Report

      • Mr. Duck, BlaiseP is inimitable.

        Rod, I read somewheres today that physician salaries [or total medical salaries, I forget] represent only 10 or 15% of health care costs, so this might be a dead end.Report

        • For doctors, Uwe Reinhardt said 10%, McKinsey pegged it at 8.7%.Report

        • Rod in reply to Tom Van Dyke says:

          The cool thing about that site is the way you can break things down, although sometimes the data doesn’t go back very far. Here’s another one you may find interesting: US Inflation Rate for Medical Care, Physicians Services, Outpatient Hospital Services and All Items

          And it’s not necessarily about doctor’s salaries, per se. So “Physician Services” would be the bill they hand you at the end of an office visit. This is going to include what she pays the nurse and receptionist as well as any other overhead like tongue depressors. And Physician Services have only risen half-again faster than inflation–159% vs 99% since 1987. “Medical Care” covers everything–doctors, hospitals, nursing homes, eye glasses, prescriptions, etc.

          Similarly, “Legal Services” in the first graph means that, on average, if you went to a lawyer to say, get a will drawn up, if that cost $100 in 1987 it would cost you about $300 today while everything else, on average, has only doubled in price. Why? And why isn’t everybody jumping up and down about that as well? Probably because most people don’t use lawyers as much as doctors and unless you’re on trial it isn’t for life-threatening situations.Report

          • Roger in reply to Rod says:

            I will howl.

            What industries have gotten substantially more expensive? Industries where various entities have perverted or distorted the machinery of the market.

            We already have discussed how medical care has perverted the market by disassociating the receipt of benefits and the costs. Up to a third of medical care is thus wasted, and the incentives to reduce costs are actually reversed so firms benefit from higher costs in some cases. In addition, consumer choices are limited. Competition is limited. Entry into medical fields is controlled by a cartel. And there is an element of social engineering buried in the costs. On top of this, the industry is managed from above, distorting price signals, and adding huge amounts of bureaucracy and regulation. Finally, people are forced to pay for services and coverages they don’t even want to pay for.

            The other two fields with similar problems are government services and education. What do these have in common? Let’s see…. Massive government interference. No semblance of market competition. Barriers to entry. Massive regulations. Odd tax incentive distortions. Rent seeking by various special interest groups working through government regulators.

            Markets are search algorithms for consumer problem solving. Distorted markets aren’t. Distorted markets are cash machines for exploitation by special interests and bureaucratic parasites.Report

      • Rod in reply to DensityDuck says:

        Blaise and I are different species of crank.

        But at least we’re mammals.Report

    • Brandon Berg in reply to Rod says:

      This is called the Baumol Effect, and it’s almost certainly part of the explanation. But there are also demand-side factors. For one, we’re richer and have more discretionary income than we did in the past. Once all your basic needs are met, pouring more money into medical care in the hopes of extending your life a bit is a fairly reasonable thing to do with marginal income.

      None of this is a problem. If as our economy grows we collectively choose to spend more and more on health care, that’s fine. The problem is that not all of the demand-side factors are the outcome of free choice. Government has made a commitment to pay whatever it costs for certain groups’ health care. Tax-deductibility of employer-sponsored health insurance leads to more coverage than people would voluntarily pay for if they were given that money as wages instead. We know we spend too much on health care not because we’re exceeding some arbitrary threshold, but because we have policies that very clearly encourage spending too much on health care.Report

  14. Murali says:

    Tod, good post! However, I think you’re missing one of the points about HSAs.

    If you want to devise a system where we carve out that theoretical $700 million, then we certainly can – but know that we have to do it by making a decision to withhold $700 million in healthcare from someone

    This is precisely the point of a HSA: to get consumers to spend less. On the high deductible insurance side of things, Brandon Berg’s solution is good. i.e. everyone should have a basic high deductible plan which only pays for treatments that pass a certain expected QALY/$ ratio*. Supplemental insurance will cover lower ratios. So only the super rich will purchace treatment that only marginally improves outcomes. But that is like buying a ferarri: nice to have, but not even remotely a disaster if you can’t afford one. By re-introducing a marginal cost to marginal consumption, demand for healthcare is reduced.

    Reducing healthcare demand would also hopefully bring down prices. So that $700 million is made up by reduced consumption and reduced price.

    *The basic catastrophic care plan can be single payer but only as a last resort. If we could achieve the same thing with private insurers by tweaking the regulations (I’m not sure in which direction), that would be good too. Single payer seems like a really blunt instrument, and hopefully, if we can avoid it, we should. but it is not off the table.Report