Health Savings Accounts: Consumer Directed Care

Throughout medical care's long history society has witnessed a variety of provider to patient relationships. More often than none the patient in the past has been the submissive partner in the provider-patient relationship. Therefore the provider has been deemed the one with the power of influence and choice. Although medical treatment has been an intricate part of society's needs since the beginning of time it is only in recent decades that the power in the provider-patient relationship has changed. The patient has now become the consumer and an equally dominate figure in the provider-patient relationship. Patients armed with healthcare knowledge accompanied with the rising cost of healthcare have helped the healthcare system become a multi-billion dollar business and a system of "consumer driven healthcare." One major movement in the efforts to contain costs is to put the responsibility of the costs in the hands of the consumer or the patient. It can be interpreted as the solution to moral hazard (where the behavior of patients may differ when the cost appears to lay upon the insurance company or whatever third party payer is involved). This shift in responsibility of care has brought about various programs for patients seeking medical care and the most recent and largest program has been given the title Health Savings Account. Looking at what HSA's are, how they emerged in a consumer driven health care system, some of the reasons it was opposed, and the best reasons to advocate it one can truly understand how to benefit from HSA's and how it will be quintessential to paying for and being responsible for healthcare in the future.

Prior to discussing why HSA's are opposed and advocated for one must understand the background/history of the HSA and how this background leads up to its eventual impact on providers, patients, and the business of health. The department of treasury for the United States of America briefly defines health care savings accounts as "special account[s] owned by individual[s] where contributions to the account are to pay for current and future medical expenses. These HSA's are apart of the Medicare reform act known as the Medicare prescription Drug improvement and Modernization Act. This change was created during the Bush administration and passed in December of 2003. Persons who were deemed eligible (people who were within the requirements pertaining to insurances, income, etc.) were able to begin the search to find and set up HSA's individually, as a family, or as an employee because the individual person or job can contribute to the health care savings account. As of now individuals can contribute upwards of $2,600 a year into the account and a single family could contribute up to $5,150. These figures are important because they represent what the consumer/patient will be able to spend on healthcare on a variety of healthcare options even including alternative medicine. It also represents the amount of finances that an HSA investing consumer will benefit from through various tax deductions and interest. Before an individual is able to establish an HSA they must first be enrolled in a qualified High Deductible Health Plan. Just as it states in the title this is simply a plan which has a high deductible which in turn leads to a low premium. Those individuals who support having these types of plans typically use little health services or have no children; children tend to drive healthcare costs up for a growing family.

Furthermore the history and eventual induction of HSA's has led to some who oppose the Idea of flexible, tax free health savings account. One of the first major arguments that has been brought forth is the idea that the "haves" will once again benefit more than the "have nots." It has been discussed that those who have money to spend or invest will be able to afford HDHP's and in the long wrong be able to contribute and maintain there health savings account more so than those who may be poverty stricken or in the lower class. This is the result of having high deductibles which results in individuals paying up to $1000 and families paying up to $2,000 before the insurance kicks in. The irony which exists in this scenario that critics of HSA's point out is that those who need more health care are most typically the ones who do not have the money to enroll in good insurance let alone HDHP's and in turn are not eligible to establish an HSA. The idea that remains disheartening is the fact that those poverty stricken individuals healthcare will continue to spiral down because they have no money to maintain health which in turn makes them sicker and in a situation where they need even more money for multiple complications. So once again the cliché "the richer get richer and the poorer get poorer" prevails again if the amount of benefits were measured among the rich and poor in the eyes of the critics.

Another big issue is the negatives associated with being deemed eligible for HSA's. Eligibility other than being enrolled in an HDHP are that you cannot be under more than one insurance plan, you cannot be 65 years of age or older when enrolling, and you cannot be claimed as a dependent on another individual's tax return. In modern healthcare there are many gaps associated with insurance plans as far as what is covered and how much is covered. History shows that this situation is solved in many cases by being under more than one insurance plan. Typically you're parents' insurance plan as well as your own when younger and your spouse's insurance plans as well as your own plan when older are common solutions. Having just one insurance company eliminates this option if medical bills soar past the amount present in the HSA. The second factor mentioned is that if an individual is already over the age of 65 they are not eligible which immediately brings about questions from those who realize that the biggest growing age group is the elderly. Not to mention that the medical bills created and paid for by the elderly (largely due to the aging baby boomers) are a big contributor to the healthcare industry as far as being consumers. The last eligibility factor that critics define as a negative pertaining to HSA's is the rule that you cannot be claimed under another's taxes. Families with dependents (typically college students and spouses who do not work) will be excluded from HSA's by default if they have been accustomed to claiming each other on another's taxes to receive the best return.

Another issue that will be disputed at one point or another when dealing with taxes is the payment of taxes if funds go unused. One critic argues that in a worst case scenario that an individual would accumulate money in the HSA and as that individual reaches retirement and decide to use the money not considered qualified deductible medical insurance expenses by the IRS that individual would have their accumulated funds taxed. This is possible because once an individual owns an HSA turns 65 they can use the money for any purpose with no restrictions. That being said when HSA's become more prevalent in the future there will be some opposition to the taxation of the money used in the HSA. Those who withdraw from the account before the age of 65 will oppose the idea of having a 10 percent withdrawal penalty. Another group opposition regarding age and this newly passed health act is the strong possibility that the younger or healthier population may opt out of enrolling in HSA's. By the younger-healthier population being less prone to illness and less likely to be hospitalized or subjected to medical visits some believe that they will elect not to enroll into any HSA's. This will result in higher comprehensive insurance prices for those who choose to participate in the new savings account.

There are also a few political issues associated with opposition to HSA's. The main worry is that this healthcare move allows much more Federal oversight than the average consumer/patient would like. An example of this is the notion that consumer directed care may be constricted because HSA's allow the government's ability to control consumer behavior strengthen. There are individuals who are concerned about privacy. With the health insurance and healthcare so closely tied to the IRS because of the HSA's patients' records and spending habits will be watched. In an online article one person who opposes federal control states, "Where is the dignity in a tax code that treats Americans like so many gerbils-do this and you get sugar water; do that and you get an electric shock?" Even so, allowing citizens to put money (tax free) into privately owned HSAs is a huge step away from employer-owned health insurance. There are others who feel the same way about federal control even though it is a positive step towards health care reform and none of these individuals or organizations who combat HSA's have presented any other viable options.

The last factor to pay attention to when looking at the reasons why some would oppose HSA's are the fact that holding an HSA account is just like holding any money account. Meaning it has to be maintained just like a regular bank account and of course like anything involving large sums of money an HSA has regulations and stipulations with regards to tax. These may seem like minute reasons to oppose a potentially positive move in healthcare but there are critics who exist who will see this responsibility of holding an HSA and being subjected to tax regulations as burdensome. These conditions are especially amplified if the same people forced into holding HSA's are not in bad health and are comfortable holding regular insurance with no extra time allocated to creating and maintaining an HSA.

Despite the many reasons individuals have found to dispute the new healthcare movement there are many more reasons that exist that support the induction of HSA's. In a country where majority rules it would be natural for a knowledgeable American to assume that there are more positives than negatives when balancing HSA benefits because that is the most prevalent and logical way to pass an act in the United States which is run by democracy. Unfortunately U.S healthcare system finances have festered to point where the majority rule may not play as big a role in passing new health laws as the dire need for healthcare reform. Healthcare in America has long since needed to change in order to combat rising healthcare costs while satisfying the provider, the insurer, and the patient. This means the incentives and benefits must be clearly evident to the employee/patient/consumer while solving the United States healthcares problem regarding costs and consumer behavior pertaining to responsibility of the costs.

One of the largest persuasive methods use to sway consumers/patients into jumping on the HSA bandwagon is presenting money that has flexibility and self growth. The first example of this and most emphasized benefit is idea of non-taxable funds that are tax deductible. The average American's relationship with the IRS is always win, lose, or draw. The winners are those individuals who tax filing result in a large refund, losers are the individuals who usually have cheated on their taxes or filed wrong and end up paying, and then there are those who break even. Therefore any financial incentive for an account that involves individuals receiving a higher tax return and/or paying no taxes is a powerful tool that can be used to sway patients/consumers behavior. The fact that individuals who own HSA's can deposit money into the account tax free and claim those funds on the next tax return is where the benefit is appealing to the consumer/patient.

Another financial incentive is being used to sway consumers/patients to lobby for HSA's is informing them of capital gain. Now patients who enroll in this health spending account not only are investing in a new wave medical payment plan but them investing in earned interest as well. Individuals who deposit money into HSA's but do not use them can opt to let the money lay stagnant and gain interest similar to a traditional savings account or bond. With this type of money account build up an additional incentive and reason to those who stay healthy is that the HSA is a means of "fall back funds" as one advocate states. These scenarios represent a big shift in "responsibility of cost" rewards. The patient/consumer is not only taking the burden of cost into mind but now there is positive reinforcement for staying healthy.

Being that it is a "fall back fund" advocators see that consumers will have an advantage with HSA's over traditional insurers in that the money allocated to premiums and monthly expenses accumulates rather than dissipate into the pockets of insurance companies. The money can be withdrawn as an emergency fund with a percentage penalty when under 65 and no financial penalty if over 65. The other aspect of this is that some individuals who are looking past the age of 65 see the HSA as a type of retirement fund when enough deposits and interest have accumulated. Not only is the Unites States a society that likes to build up finances, it is also a society that does not favor high investment (in this case healthcare costs) with no return or money that goes to waste. This is a reason that many have and many will favor HSA's for the simple fact that it has what analysts have referred to as "rollover money." This is yet another financial incentive and reward for staying healthy. HSA prospective enrollees admire the idea that unlike traditional insurance money that is not used can be rolled around to the next year and used for future health payments or saved for retirement.

The non-financial favorable factors associated with enrolling in an HSA are just as important as the financial factors despite being more indirect and/or overlooked. One of these non-financial factors is the networking. By being enrolled in an HSA it provides the same opportunities as managed care in that gradually you are introduced to a variety of providers and hospitals by way of referrals. If managed right theses opportunities could turn into a financial benefit by receiving discounts. Another supporter states that using an HSA eliminates the claims department. In other words the middle man is gone because essentially the patient controls the funds and has no stipulations regarding time and processing as long as the service is included in the wide variety of medical expenses deemed coverable. One of the big issues with insurance within the last few decades is the gaps associated with medical coverage when moving from job to job. Many people esteem the idea that HSA's are completely transferable between workplaces. This allows changing careers easier and eliminates paperwork which could potentially lead to administrative fees. By eliminating the paperwork and dropping some of the administrative fees, the healthcare market will continue the move toward cost containment.

The last non-financial positive in HSA's that many patients struggling with insurance gaps will cherish is the part of HSA stipulations dealing with "what's covered." This is a big advancement in medical coverage for the impoverished because they are typically the victims of services not covered when dealing with healthcare conglomerate services like transportation, handicap tools, alternative therapies etc. Not only will people favor HSA's for gap coverage but businesses will be activists as well because giving patients the power to choose could potentially mean big business for previously uncovered services. A list of services and medical supplies can be found that are covered by HSA's and will look similar to this: transportation and lodging, dentists, mental therapy, physical therapy, family physicians, alternative therapies, preventive health programs, non prescription medication, special handicap equipment, maternity expenses, insurance premiums for long term health, artificial limbs, and nursing home costs. The list has others but the important thing to recognize is that all can be paid for with one account as oppose to filling gaps with other insurances and again it eliminates the paperwork/administrative fees of dealing with more than one payer and different types of coverage.

The fact of the matter is HSA's major opposition lies within the idea of the rich benefiting more and the poor being excluded out by default of having little finances. Other minor oppositions are having another account to keep track of with tax regulation, and having such controversial differences in stipulations with HSA's before and after the age of 65. The majority of healthcare analysts describe the benefits and incentives as overwhelming compared to the negatives. Theses positive attributes of HSA's include tax deductible contributions, rollover money, interest gaining, and most importantly that it allows freedom of choice (giving more power and responsibility to the patient) while resulting in coverage of a wide array of medical services and paraphernalia. One article states, "the bottom line is that HSAs will provide strong economic incentives for more rational use of medical care, give patients strong incentives to demand higher quality care (after all they are paying for it), and help keep prices competitive." The overall goal is being reached in that the responsibility of costs is shifting to the consumer while proving the consumer/patient freedom and meeting the self-interest of the healthcare industry (cost containment).