Many economists feel that Health Savings Accounts (HSAs) are the direction in which health reform needs to head. HSAs combine high-deductible health plans with tax-deferred savings account. The theory behind HSAs is for the patient to pay for ‘basic’ health care to reduce the problem of moral hazard while letting insurance pay for catestrophic illnesses.
Kroncke and White (2009) wisely note that the devil is in the details. “The most puzzling detail is how to draw an unambiguous legislative line between basic and catastrophic health care.” In the long-run, legislators will have an incentive to categorize more and more care as catastrophic to appeal to specific disease-related lobbying groups. The authors provide a list of important questions which need to be answered if HSAs are to gain a significant foothold in the health insurance marketplace.
Basic Insurance Questions
- Should HSAs be regulated at the state level or the federal level or by the free market?
- Should HSAs be voluntary or mandatory?
- Should legislatively mandated minimum or maximum limits be placed on the size of the accounts?
- What percentage of one’s personal income should be dedicated to health savings in comparison to other goal-directed savings plans, such as for a new house, education for one’s children, and retirement?
- What role should fourth-party employers play in any future HSA program?
Catastrophic Insurance Questions
- Should the content of these policies be shaped by politically sensitive legislation?
- If so, should the new policies be community rated or experience rated?
- What specific treatments are to be covered by the catastrophic insurance policies?
- Will insurance companies be forced to pay for extraordinarily expensive new drugs with uncertain or marginal benefits?
- Will government continue to regulate the formation of risk pools?
- Should government act as a single payer in order to maximize economies of scale?
- If the system is to be funded by tax write-offs, who should receive the tax benefits—individual buyers of health care or their employers?
- What role, if any, should employers play in the distribution of catastrophic insurance or HSAs?
- Kroncke C and White RF (2009) “The modern health care maze: development and effects of the four-party system,” Independent Review, Summer 2009, v14(1): 45-70.