Sunday, March 12, 2006
Two years after they became legal, President Bush has begun to champion health savings accounts as a salve for the nation's ailing health care system, proposing $156 billion in tax breaks to encourage Americans to buy an unorthodox kind of insurance that is favored by conservatives but whose merits are largely unproven.
Early studies of HSAs -- and the early experiences of a small but growing number of people who are trying them -- do not match the White House's certainty that this recent concept in health insurance is, as Bush put it recently, "good for you."
Health savings accounts differ sharply from traditional insurance by requiring people to pay more of their own medical expenses in exchange for significant tax benefits if they set aside money for that purpose. The arrangement consists of two parts: an insurance policy -- less expensive than most ordinary health plans -- in which people pay at least a few thousand dollars up front before the coverage begins, combined with a special investment account into which they and sometimes their employers may save money tax-free for current or future medical expenses.
According to the White House and other proponents, the plans can tame medical costs, turn patients into smarter medical consumers and make insurance affordable for more people. HSAs, however, remain so new and rare that there is little evidence on whether they curb overall health care expenditures or overuse of care. Meanwhile, research hints that they are most appealing to people who are relatively affluent, not poor and uninsured.
Some people who have switched to the plans are delighted. "So far, it's been very, very good for myself and my family," said Daniel Reisfield, 47, a Wall Street headhunter who lives in San Diego with his wife and two children. Reisfield said he thinks it makes more sense to invest more than $5,000 a year in mutual funds through his HSA than to pay a large insurance premium for his healthy family, which rarely seeks medical care.
Others have been disenchanted quickly. Felix Meschke, 32, a business professor at the University of Minnesota, did careful calculations of medical probabilities before he, too, switched his family to an HSA on Jan. 1. Less than two weeks later, his 11-month-old son, Jason, developed an ear infection that progressed to a fever and persistent cough so worrisome that a pediatrician sent him to a hospital, where he stayed for two days. By Jan. 24, Jason was getting better, but Meschke faced a $3,700 bill. If he still had his old insurance, he would have owed a few hundred dollars.
HSAs' Uncertain Impact
The uneven, uncertain impact of HSAs on the broader landscape of health care can be glimpsed at Wendy's International Inc. The fast-food chain has moved as aggressively as any corporation to switch to health savings plans, and Bush chose its Ohio headquarters as his destination for a recent speech to talk up HSAs. "They're good for Wendy's," he said. "They'll be good for you, as well."
Last year, Wendy's eliminated its old insurance plan for about 9,000 managers and administrators and offered them only an HSA instead. The company has not offered such a plan to its hamburger cooks and the rest of its front-line crew, most of whom do not work enough hours or are not in the right parts of the country to qualify for health insurance -- and tend not to buy it, even if they qualify.
Jeffrey Cava, Wendy's executive vice president of human resources and administration, said the company now insures about one-third of its U.S. workforce, the same as it did before. And although insurance premiums for its HSAs rose much less than the company's old insurance would have done, Wendy's still spent more money overall on health benefits during its first year with health savings accounts than the year before.
The firm has brought in consultants to explore whether the switch will turn its workers into more careful medical consumers. "I am cautiously optimistic," Cava said.
Such expectations, even from proponents such as Cava who met with Bush during the president's visit, are more measured than the White House's talking points. "We think HSAs are the prudent way for people to insure themselves in America," said Allan B. Hubbard, director of the White House's National Economic Council.
Selling the Product
Urged on by business, the banking industry and conservatives in Congress, the White House is defining HSAs as part of what Bush has called an "ownership society" that shifts responsibility -- and, critics say, risk -- from government and employers to individuals. The budget the president recently recommended to Congress includes three tax breaks, totaling $156 billion over the next 10 years, to encourage the use of health savings plans.