Health Savings Accounts just Social Security retooled
Warning: Discussing the status of health care in America may cause nausea, vomiting and possibly a severe case of depression. The numbers aren’t encouraging. The United States spent nearly $1.9 trillion dollars on health care in 2004, and there are still nearly 46 million Americans who are uninsured. As college students we may feel invincible, but the health care crisis will soon be our problem.
President Bush offered some solutions for these problems in his State of the Union address. A key component of his plan is to make Health Savings Accounts (HSAs) more attractive for people to use. According the U.S. Department of the Treasury Web site, these accounts “enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.” The 2006 limit on the amount of money a single individual can place in an HSA is $2,700.
So far the plan sounds pretty nifty. Open up an HSA account at a bank, insurance company or possibly through your employer and you can control how this pre-tax money is used for qualified medical expenses. Of course, one of the caveats is that you cannot have this account if you’ve got a health plan with a low deductible or no deductible at all (for example, an HMO). HSAs are only allowed if you are insured by a high-deductible health plan.
Without getting too far into the fine print, suffice it to say that HSAs are great for the healthy among us if we are willing to take the risk that we will stay that way. Realize, however, that your future health is a mighty big gamble with consequences far greater than losing a friendly card game.
The president’s proposal to deal with rising health care costs – part of his “ownership society” platform – is little more than a retooling of his private accounts approach to Social Security. The premise for HSAs is that by shifting more of the cost to consumers, they will have a greater stake in controlling expenses.
This seems, on the surface, to be logical. But who is more able to shoulder medical costs: corporations that are fiscally sound enough to provide CEOs with salaries 475 times that of an average worker or wage-squeezed laborers?There are other clear losers with HSAs. According to Princeton economist and New York Times columnist Paul Krugman, “In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs.”
Admittedly, private sector insurance coverage is not perfect. For those covered, it spreads the cost between the most needy medically and the healthy. As healthy people flock to HSAs, those who utilize insurance the most will find it prohibitively expensive and may join the ranks of the uninsured.
The crisis in American health care is a complex and multifaceted problem that must be addressed with a comprehensive solution. A proposal that allows employees to contribute thousands of dollars to an HSA fails in its presumption that discretionary income is available for such a plan. For many workers, the fact that inflation rose faster than earnings in 2005 means that taking care of essential expenses is increasingly challenging.
So what can be done? Comprehensive health care reform must start with a focus on prevention. The long-term cost of diabetes, obesity and a host of other debilitating illnesses is dragging down our nation’s medical infrastructure. While prevention will not lead to eradication of long-term illness (heredity is often involved), early detection of risk factors can make a difference.
Companies both large and small should be encouraged to provide workers with time for healthy, lifestyle-enhancing activities. Clearly not everyone is going to train for a marathon, but peer-to-peer groups for weight loss or even support groups for overeating due to depression could be useful. The goal is to personalize the medical challenges that individuals face in the context of those around them in the same situation.
Furthermore, we, as Americans, need to face the fact that our own bad habits often contribute to ongoing health problems. We need to take a look at our behaviors and make the choice to change the way we eat and exercise – and that’s just for starters.
These suggestions and other proposals should be sought to nationalize the solution to our health care dilemma. As it stands, we are already spending 16 percent of gross domestic product on health care in America. HSAs would only provide a Band-Aid on the problem when what the country needs is comprehensive health care reform. Otherwise, nausea, vomiting and severe depression will occur with no doctor willing to treat you.
Aaron Hill is a senior majoring in economics.