“What fresh hell is this?” –Dorothy Parker, on opening her door

By Lambert Strether of Corrente.

Speculating on what ObamaCare replacement bill the House Republican caucus will or should or might emit next week is a waste of time, despite the entertainment value of watching Republicans struggling to find ways to make a bad Republican plan — ObamaCare — even worse. [1] So I won’t join the fevered speculation. Instead, I’ll look briefly at a disgraceful piece of political theatre that took place yesterday, and then I’ll look at a really bad, neoliberal idea — sorrry for the reduncancy: Health Savings Accounts (HSAs). In his State of the Union Address, Trump said: “[W]e should help Americans purchase their own [health insurance] coverage through the use of tax credits and expanded health savings accounts.” I get griping in the guts when I think about tax credits — you can use ObamaCare’s tax credits in advance, which I doubt the Republicans will continue to do — so this post will be about HSAs. But first, the political theatre!

French Farce on Capitol Hill

The House Republican caucus says they have draft legislation for an ObamaCare replacement:

House Republicans were allowed to review the latest version of the overhaul measure Thursday — but only in a dedicated reading room , and they weren’t given copies to take with them, said one Republican lawmaker and a committee aide. The reason for the secrecy was to avoid leaks of the proposal.

The curtain rises to disclose Rand Paul, whinging:

Paul started the controversy Thursday morning when he tweeted that the House GOP’s ObamaCare bill was being kept under “lock & key” in a “secure location.” “This is unacceptable. This is the biggest issue before Congress and the American people right now.” Paul has serious objections to multiple key elements of the House GOP plan, and is threatening to oppose the measure if it includes them. His objections include the use of a refundable tax credit, which he calls a new entitlement program.

Hilarity ensues as Paul rushes round Capitol Hill in search of the secure location:

What followed was a surreal scene on the first floor of the U.S. Capitol that quickly drifted toward farce. Trailed by a scrum of reporters and cameras, Paul sought—and was denied—entry into the Republican office where, he was told, the draft Obamacare bill was being kept. “I think there’s a bill in there. It’s the secret office for the secret bill,” Paul told the reporters. As Paul was speaking, a House Democrat, Representative Paul Tonko of New York, slid past him to try to get into the office. But he, too, was denied. Tonko told reporters that staffers in the office had told him there was no bill inside.

The Democrats, having gotten into the act, proceed to steal the show. The normally sane and useful Sarah Kliff:

“There were comments that it was in room 157,” Hoyer said. “I’ve looked in the Ways and Means Committee Room, I’ve looked in the Ways and Means conference room, I’ve looked here, I’ve asked [Brady] if he knew where it was. And we cannot find the bill.” Hoyer exited room H-157 trailed by a gaggle of reporters. He proceeded to walk to a very large bust of Abraham Lincoln nearby. He began to speak to it. “Mr. Lincoln, I can’t find the bill,” Hoyer said. “Mr. Lincoln, you said public sentiment is everything. But if the public can’t see the bill, they can’t give us their sentiment. That’s not regular order. That’s not democracy. That’s not good for our people. I know, Mr. Lincoln, you are as upset with your party as I am.”

So that’s where we are. That is where we are. Falling life expectancy in the United States, and that is where we are. And the “controversy” really is like a French farce, isn’t it? Something pre-revolutionary from Moliere or Beaumarchais. Bewigged, bewildered, and besotted protagonists in powdered wigs rush across the stage, trailed by obsequious underlings; doors slam closed, or suddenly open; there are many well-crafted speeches; the denouement in our case would presumably be seeming antagonists Trump and Clinton, he suitably flushed, she disheveled, emerging together from under the bed in what was a locked room, until it wasn’t, to a hearty round of applause. And on health care policy, that’s basically where we are, isn’t it?[2] So, on to this year’s bad idea whose time has come: Health Savings Accounts:

Policy Farce with HSAs

Consumer Reports (remember them?) explains what HSAs are and how they work:

A health savings account, or HSA, is a tax-exempt account available to people in certain high-deductible health plans to help pay for out-of-pocket medical expenses . To open an HSA today, your annual deductible must be at least $1,300 for an individual or $2,600 for a family—but deductibles in such plans can be, and often are, higher than that. There are currently 20 million active HSA accounts in the U.S., but expansion plans could increase that number significantly. About 24 percent of companies providing health benefits offer HSA-qualified high-deductible health plans. Some companies only offer high-deductible plans. However, some people with access to multiple employer-provided plans still choose these high-deductible plans because they prefer to pay lower premiums and assume they’ll stay healthy and save money this way. If your employer offers a high deductible health plan, it may also contract with a bank to host an HSA and will set up an account for you. But you can also open up your own account. Hundreds of banks and credit unions offer HSAs, and because the interest rates they pay, fees they charge, and features they offer can vary, it can be worth it to shop around. And HSAs are portable… You can direct your employer to contribute your pre-tax earnings into any HSA you designate, currently up to $3,400 a year for individuals and $6,750 for families. “Whatever you contribute leads to immediate significant tax savings, and as long as you spend the money on qualified medical expenses, it’s tax-free when you use it,” says Greg Geisler, associate professor of accounting at the University of Missouri–St. Louis. Such expenses include doctor visits, surgery, prescriptions, and physical therapy. Keep in mind, also, that there’s no requirement to spend the money in an HSA in any given year…. That means that if you can afford your current health care expenses, investing in an HSA now can help fund your health care costs in retirement, when they are likely to be higher. If you don’t spend it all, your heirs will inherit the balance.

Sounds great, right? (I’ve helpfully underlined “out-of-pocket medical expenses” because I want to return to it.) My immediate thought on this — and I can’t find the answers in the few hours I had to do research — was that a maximum of $3,400/$6,750 (individuals/families) seems pretty low, considering the extremely high-deductible plans we see under ObamaCare, where the average deductible for an individual silver plan is $3,572 (and that’s before we get to the co-pays). It also occurred to me to question whether an HSA would be subject to asset seizure, and whether a college debt collector could put a lien on your HSA. Not that I’m paranoid. Readers?

But there are larger issues. First, as usual with these markets-first neoliberal schemes, the HSA manager may take a cut:

You’ll also need to take into consideration that some HSA providers charge a monthly fee or a transaction fee. These fees typically aren’t very high, but over the life of having a health savings account they can eat into the nest egg you’ve built up to protect yourself against unexpected medical expenses and for retirement.

The HSA scam, in other words, is the same scam the finance guys ran with 401k plans, at least qualitatively.

Second, the HSA presumes the ability to save; at this point we remember that most Americans have less than $1000 in savings, and 20% don’t even have a savings account. In other words, the benefits of HSAs skew toward the rich. Consumer Reports once more:

“The HSA-expansion proposals disproportionately benefit wealthy Americans by offering them tax breaks,” says Maura Calsyn[3], managing director of health policy at the Center for American Progress, a nonpartisan policy institute. “But they do nothing to increase coverage for poorer people who don’t have any extra money to put aside.” Since HSAs require consumers to have extra income to store in the account, they provide little help to those already struggling to pay for their health insurance in the first place. Meanwhile, wealthier people who can stash money in an HSA could get a giant tax benefit.

Third, HSAs have not been shown to improve health care outcomes. Health Affairs:

In general, studies have found that HSAs combined with high-deductible plans can decrease overall use of services and costs, but there is little evidence yet that this results in improved health status. …. Studies have found that the impact of HSAs differs by income level, e.g., lower-income workers (and their dependents) were more likely than higher-income individuals to reduce their use of physician office visits and certain high-value services not subject to the deductible, such as influenza vaccinations and breast cancer screenings.

A second study confirms:

A recent study by the Employee Benefit Research Institute found a reduction in health care spending too – but not for good reasons. People reduced spending by not visiting the doctor or by not filling prescriptions, and this finding was more pronounced in lower-income earners. Low-income people with health-savings-account based plans had increased emergency department visits and higher rates of hospitalizations than those with traditional insurance plans.

For example, from USA Today, real estate broker Francisco Nieves-Taranto has an HSA:

Nieves-Taranto said he also has become a discerning shopper, favoring cheaper retail clinics over a doctor’s office for routine care. When he reinjured his knee playing basketball, the Windermere, Fla., resident avoided going back to the doctor because of the potential cost. Instead he stopped playing and used ice and stretching to give his knee time to heal. He’s now pain-free and figures he saved a few thousand dollars in medical bills.

And on his tombstone, the words: “He was a smart shopper.”

Fourth and finally — and here’s where we come to the “out-of-pocket expenses” part — HSAs assume a markets-first, neoliberal approach, where “savvy consumers” shop for health care, keeping costs down. There are at least two problems with this approach. To begin with, it hasn’t been shown, in any way other than anecdotally (as above), that “consumers” actually “shop” for health care. From the NBER, in “What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics” (Working Paper No. 21632):

We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large self-insured firm which required all of its employees to switch from an insurance plan that provided free health care to a non-linear, high deductible plan. The switch caused a spending reduction between 11.79%-13.80% of total firm-wide health spending. We decompose this spending reduction into the components of (i) consumer price shopping (ii) quantity reductions and (iii) quantity substitutions, finding that spending reductions are entirely due to outright reductions in quantity. We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).

In other words, Nieves-Taranto was lucky, not smart. (And if want to see what you would have to do to really become a “smart shopper,” just read yesterday’s post on medical coding, because that’s what your receipts look like.)

Even worse, paying for your out-of-pcoket expenses with your HSA is an enormous tax on time (also a fundamental problem with ObamaCare itself). Forbes:

With health savings accounts, it is expected that patients will “shop” for care which will make doctors and pharmacies compete on price and service. Here are the holes in that theory: Do you really want to spend your day calling around to doctor’s offices to find out who has the cheapest office visit? They will have to run your insurance card first to see the negotiated rates with your insurance company. So maybe you’ve saved a few dollars on the visit, but how much time have you wasted calling around and how much time has your doctor’s office wasted with people shopping for care? GOP, I have something to share with you, Plus, people want a doctor they trust. Are you really going to shop around when you’ve found a doctor you like?

How about shopping for your drugs? Doctors don’t have the time to call around to different pharmacies to find out the cheapest route for you. And once they call it in and you’ve arrived, do you want to go somewhere else? Between the nightmare of Pharmacy Benefit Managers, insurance companies calling the shots on where you can purchase prescriptions, and bogus “discount cards” – is the patient in the driver’s seat? The cards are stacked against you.

The majority of health care spending occurs when patients are very ill. When you are really sick or have a serious illness, are you going to shop for care? No, you will go to whomever you heard is the best doctor or wherever the ambulance takes you. So the only time you may be willing to shop is for minor health care expenses. Overall, this will dent spending very little and may actually increase spending in the long run because patients will avoid going to the doctor before an illness becomes a serious concern.

Face it –financial literacy and preparedness for retirement in this country is abysmal. What makes the GOP think their constituents will grasp health care spending with any more zeal? If your employer puts money in a health savings account and your car breaks down and you have no other savings, will you really save that money for health care or get your car fixed? I recently had a very busy physician client complain about paying $1,000 for a month’s supply of insulin. I suggested he shop around and gave him some resources to try. He said, “I don’t have time for this and at this rate, I’ll hit my deductible pretty quickly anyway.” He has the resources to pay for his insulin – imagine if you are making minimum wage at two jobs and barely have the money to keep a roof over your head. Trying to control costs through consumer behavior is not practical.

Unless you want to make people, especially working class people, suffer, of course. So there’s that!

Conclusion

The part of Rand Paul will be played by Debbie Wasserman Schultz, en travesti. (The hair is the giveaway). The part of Steny Hoyer will be played by Ann Coulter, ditto. I don’t know if HSAs will do more than send a few million people to Pain City who might not be going to HappyVille with ObamaCare in any case, but they’re the sort of dumb idea that only a neoliberal — or a 10%er who can hire another professional to handle the paperwork — could love. It is what it is. We are where we are.

NOTES

[1] Has anybody raised the question of whether the Russia-linked Her m itage Foundation schemed to discredit the Democrats by laying the groundwork for ObamaCare, tampering with liberal progress toward a single payer system?

[2] “What do you call the act?” “The neoliberals!”

[3] I hate to quote anybody from CAP, including Calsyn, because they oppose Medicare for All, and so are just neoliberal Pepsi to the Republican’s neoliberal Coke.