Health savings accounts are not likely to stem rising health care spending

July 11, 2006

New York, NY--Health savings accounts (HSAs) coupled with high-deductible health plans sometimes lower consumer cost-sharing compared with many typical health insurance plans, according to a study supported by the Commonwealth Fund in the July/August issue of Health Affairs.

Many of the HSA/high-deductible health plans in the market today actually reduce cost-sharing for people who spend the least and the most on health care, while increasing cost- sharing for those who fall in the midrange, according to the study, "How Much More Cost Sharing Will Health Savings Accounts Bring?" by Dahlia Remler and Sherry Glied. Decreased cost-sharing is due to several factors including tax subsidies for out-of-pocket expenses and the fact that people with high deductible plans can reach the plans'out-of-pocket maximum far more quickly than those in more comprehensive plans, potentially reducing the total amount of medical spending that is subject to cost-sharing.

HSAs--a form of medical savings account which must be accompanied by a high-deductible health plan (at least $1,050 for an individual and $2,100 for a family)--permit people to save money tax-free and use those funds, also tax-free, to pay their out-of-pocket health care expenses. Proponents of HSA/high-deductible health plan arrangements say that increased out-of-pocket costs will encourage consumers to be more cost-conscious, leading to lower costs and greater efficiency in the health care system.

In their analysis of HSAs, authors Remler, a professor at the Baruch College School of Public Affairs, City University of New York, and Glied, chair of the Department of Health Policy and Management at Columbia University, compared HSAs combined with high deductible plans with traditional health insurance policies. They found that the 7.7 percent of people who are responsible for half of all medical spending would see no change or a decrease in their level of cost-sharing under an HSA/high-deductible plan. In contrast, cost-sharing would increase for people who spend between $700 and $6,100 of their own money on health care. Taking the tax subsidies of HSAs into account, the authors found that for enrollees with a 40 percent marginal tax rate (including exclusion of HSA contributions from both income and payroll taxes), only those with expenses between $700 and $2,500 would see an increase in the marginal and average cost-sharing.

"Health care spending is highly concentrated among a small group of people who have very high medical costs," said Remler. "This study shows that a high-deductible HSA would have no effect on this spending, leaving a negligible impact on health care costs."

Out-of-pocket caps in HSA-eligible high deductible health plans are a primary reason why cost-sharing decreases rather than increases. For example, once a person with a typical high-deductible health plan (no coinsurance, a deductible of $2,500 and an out-of-pocket maximum of $2,500) spends $2,500 there are no additional out-of-pockets costs. However, in a traditional plan with no deductible but a 20 percent coinsurance, a person would have to spend $12,500 before they would reach their maximum out-of-pocket costs.

Cost-Sharing Already Significant

The researchers reviewed a series of recent health insurance surveys and found that today's insurance plans already require a substantial amount of consumer cost-sharing. The average plan had a deductible of $221 and an out-of pocket maximum of $1,864, and 80 percent of plans had coinsurance.

"These plans do not appear to be living up to the rhetoric about their effect on consumer spending," said Glied. "The health care market has been asking consumers to pay a bigger part of their health care costs for years."

To give HSA/high-deductible policies more bite, the authors say that cost-sharing would have to be increased sizably among the people who spend the most on health care. The risk is that substantially increasing cost-sharing would make health care inaccessible for people who need it the most. The authors contend that HSA/high-deductible health plans can only seek to increase cost-sharing so much while still protecting consumers from excessive health care expenditures.

"This analysis points to the importance of considering the tax subsidies provided by HSAs," said Commonwealth Fund President Karen Davis. "Tax subsidies benefit higher income individuals disproportionately, while failing to achieve the purported advantages of high-deductible plans. Public subsidies should instead be targeted on these least able to afford health insurance or health care."
The Commonwealth Fund is a private foundation supporting independent research on health and social issues.

Commonwealth Fund

Related Health Care Articles from Brightsurf:

Study evaluates new World Health Organization Labor Care Guide for maternity care providers
The World Health Organization developed the new Labor Care Guide to support clinicians in providing good quality, women-centered care during labor and childbirth.

Six ways primary care "medical homes" are lowering health care spending
New analysis of 394 U.S. primary care practices identifies the aspects of care delivery that are associated with lower health care spending and lower utilization of emergency care and hospital admissions.

Modifiable health risks linked to more than $730 billion in US health care costs
Modifiable health risks, such as obesity, high blood pressure, and smoking, were linked to over $730 billion in health care spending in the US in 2016, according to a study published in The Lancet Public Health.

Spending on primary care vs. other US health care expenditures
National health care survey data were used to assess the amount of money spent on primary care relative to other areas of health care spending in the US from 2002 to 2016.

MU Health Care neurologist publishes guidance related to COVID-19 and stroke care
A University of Missouri Health Care neurologist has published more than 40 new recommendations for evaluating and treating stroke patients based on international research examining the link between stroke and novel coronavirus (COVID-19).

Large federal program aimed at providing better health care underfunds primary care
Despite a mandate to help patients make better-informed health care decisions, a ten-year research program established under the Affordable Care Act has funded a relatively small number of studies that examine primary care, the setting where the majority of patients in the US receive treatment.

International medical graduates care for Medicare patients with greater health care needs
A study by a Massachusetts General Hospital research team indicates that internal medicine physicians who are graduates of medical schools outside the US care for Medicare patients with more complex medical needs than those cared for by graduates of American medical schools.

The Lancet Global Health: Improved access to care not sufficient to improve health, as epidemic of poor quality care revealed
Of the 8.6 million deaths from conditions treatable by health care, poor-quality care is responsible for an estimated 5 million deaths per year -- more than deaths due to insufficient access to care (3.6 million) .

Under Affordable Care Act, Americans have had more preventive care for heart health
By reducing out-of-pocket costs for preventive treatment, the Affordable Care Act appears to have encouraged more people to have health screenings related to their cardiovascular health.

High-deductible health care plans curb both cost and usage, including preventive care
A team of researchers based at IUPUI has conducted the first systematic review of studies examining the relationship between high-deductible health care plans and the use of health care services.

Read More: Health Care News and Health Care Current Events is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to