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After being re-elected in 2004, President Bush began touting an ambitious social policy platform, the so-called "ownership society." Part of this agenda was a strong push for high-deductible health plans (HDHPs) coupled with health savings accounts (HSAs) -- tax-free savings accounts to pay for health care expenses.
Like so much else that the Bush Administration attempted, the ownership society flopped, in large part because it called for the privatization of Social Security. With this failure, HDHPs and HSAs fell out of the public spotlight. To the casual observer, the question of whether or not health care reform should move in this direction seemed to have been put to rest.
But even though they are no longer in the political spotlight, HDHPs and HSAs are actually thriving -- and in fact penetrating our health care system at a relatively brisk rate. This is problematic. Not only are HDHP/HSA plans poor policy, but their proliferation also weakens the political viability of the health care reform we really need.
Here are the numbers: at the end of last month, the Associated Press reported that the number of Americans enrolled in HDHP/HSA plans has nearly doubled from 2006 estimates, to around 6 million. Admittedly, these plans still have a long way to go before they become a force to be reckoned with. America's Health Insurance Plans estimate that enrollment in HDHP/HSA plans comprises just 3.4 percent of the private insurance market in the U.S., and in March, Employee Benefit Research Institute (EBRI) estimates that 42 percent of people who have HDHPs and are eligible for HSAs don't even use the accounts.
Nevertheless, a doubling of enrollees over two years is nothing to scoff at. And while national rates of enrollment are still meager, the picture's somewhat different at the state level. The AP reports that in Minnesota, the state with the highest percentage of HDHP enrollees, "about 9.2 percent of the state's total enrollment in private health insurance comes through high-deductible plans. Following closely behind [are] Louisiana, [at] 9 percent and the District of Columbia, [with] 8.7 percent."
State governments are also beginning to turn to HDHPs and HSAs as models for reform. Last week, Georgia passed a law -- with the support of Newt Gingrich -- that will give insurers $146 million in tax breaks for selling HSA plans. In Indiana, Health Affairs reports that HSAs are being coupled with Medicaid to provide high-deductible health insurance to low-income citizens.
In practice, the HSS/HDHP combination makes little sense for families poor enough to qualify for on Medicaid. The $1,100 deductible is more money that most impoverished families have lying around, and the requirement that they contribute 2 percent to 5 percent of their income to the HSA each month ignores the fact that families on Medicaid live paycheck to paycheck and often run out of groceries before the end of the month. They don't have a 2 percent to 5 percent cushion to deposit in an HSA.
Yet while Bush was unable to broadly institutionalize HDHPs and HSAs in one stroke, it's clear that the two still have made major inroads into our health care system -- and into policymakers' thinking on reform. With so much activity surrounding HDHP/HSA plans, projections for growth are optimistic: the U.S. Treasury Department estimates that there will be 14 million HSA policies in place across the U.S. by 2010.
Despite this healthy forecast, HDHPs and HSAs aren't the answer to America's health care problems. As I've noted in the past, consumer-driven health plans require a lot of out-of-pocket spending (even in the Indiana Medicaid/HSA program, the annual deductible is a not-cheap $1,100). Big expenses at the point of service encourage patients to forego necessary care -- including patients with chronic conditions, who often end up needing more costly and extensive catastrophic care down the line. With HDHPs, patients save now, and pay -- a lot -- later.
Niko Karvounis is a Program Officer with The Century Foundation in New York City, where he works on issues of socioeconomic inequality and health care. He is a regular contributor to Health Beat, the Foundation’s health care blog.