Amid all the yelling and screaming over the future of US healthcare, it’s not surprising that the points on which Trump, his party and even some Democrats agree on have gone largely unnoticed. And yet chief among them is a product that is likely to feature in any future legislation proposing a replacement insurance system, or that could well end up surviving as an independent, standalone idea if the broad legislation fails. Sadly, it’s a product that for many people just doesn’t work.



It’s called a health savings account, or HSA, and if you haven’t heard much about it before, you’ve got plenty of company. HSA accounts have grown at a rate of about 25% a year – there were only about 18.2m accounts open as of last summer, according to one specialist consulting firm. But the HSA simply doesn’t fit with the way the vast majority of Americans’ approach to managing their healthcare spending or even their personal finances. And all the wishing, wanting and hectoring on the part of Republicans is unlikely to change that any time soon.

The HSA allows those people who are enrolled in certain kinds of insurance plans with high deductibles to set aside some of their pretax income (currently, up to $3,400 for an individual or $6,750 for a family annually) in a fund that can be drawn on to pay for qualified medical expenses.

The Republicans like that, and made the HSA a centerpiece of their first attempt at repealing and replacing Obamacare early this year, in part because they believe it will impose a kind of virtuous behavior upon healthcare consumers and thus drive down costs. If we’re spending our own money rather than an insurer’s, this thinking goes, we’ll be more careful with it and more mindful of how we budget for our medical costs, and shop around.

It sounds common-sensical. The typical consumer prides himself on his eagle eye for hidden value. But what applies to big-screen TVs doesn’t apply to cardiac surgery. Pricing in the healthcare system is opaque, and often we don’t know how to correlate price to quality of care. “Shopping” for an oncologist isn’t the same as consulting Consumer Reports for the best car model.

Even if you do shop around, you may be denied the chance to take advantage of a deal. Remember the hullabaloo over the pricing of the EpiPen after Mylan hiked its cost by some 400%? Some savvy consumers may have heaved a sigh of relief when CVS Pharmacy announced in January that it had would sell a licensed generic alternative at all its locations for $109.99 for a two-pack, compared to a cash price for $649.99 for the EpiPen and $339.99 for its generic. The smart comparison shopper would rush right out to CVS, right? Unless, that is, their insurance was with BlueCross Blue Shield and they lived in one of a handful of states, such as Illinois or Florida, where that insurer had struck a deal requiring them to deal with Walgreens or pay full price.

The biggest obstacle to the HSA becoming the bedrock of any future healthcare funding system is that it simply won’t work for the vast majority of Americans, who struggle to set aside even an extra few hundred dollars to cover an emergency. Some 47% of Americans couldn’t come up with even $400 in a financial crisis, according to the Federal Reserve.

So just how do Republicans touting the virtues of HSAs expect their constituents – who aren’t even able to provide adequately for their eventual retirement – to set aside still more of their income (even on a pretax basis) and invest it in an HSA? It isn’t as if they can simply stop buying insurance and put the money they would otherwise have spent on premiums into an HSA, because they need to have the insurance policy to qualify for the HSA.



There’s a valid argument that those cash-strapped individuals would struggle to come up with the money they need to cover out-of-pocket medical costs until their deductible kicks in. Coping with a financial emergency due to a medical emergency is (alas) a familiar problem, one we can understand.

Forcing people who have shown very little ability to financially plan to start planning for those emergencies is likely to result in nothing other than a new reason for judgmental souls to tsk-tsk about the working poor’s failure to plan adequately.

The real culprit, however, will be the fact that many people simply don’t have enough money to cover all their eventualities adequately. If they had the cash, some of those families probably would have purchased insurance plans with lower deductibles and a shortfall would never have existed.

This isn’t to pour scorn on the HSA itself. For those who can afford them – for well-heeled members of the upper middle class with adequate disposable income who have been able to fund their retirement plans, they’re wonderful. They are the single most attractive investment vehicle around, from a tax perspective: money goes in, accumulates and is withdrawn without ever being taxed (as long as you use it to pay for qualified medical expenses, which includes a large array of stuff, including eyeglasses). Some Republicans have proposed boosting contribution limits, making the plans still more alluring – as long as you have the cash to set aside for them.

But that doesn’t make them a viable alternative to health insurance. They “are virtually useless to low-income patients who can’t afford to contribute to them”, suggested Natasha Bhuyan, a Phoenix physician, in a roundup of opinions by the American Academy of Family Physicians.

Ironically, she noted, “they serve as great tax shelters” for well-to-do Americans. Sounds like Trump’s healthcare plan has a lot in common with his tax plan.