Health Savings Accounts (HSAs) have been around for nearly 23 years. The Medicare Modernization Act of 2003, which created HSAs, was signed into law on December 8, 2003. Liberal groups hated the idea. They mostly still do. The core idea with HSAs was that high-deductible plans were supposed to be much cheaper than first-dollar health coverage. Consumers could select a high-deductible plan and use the savings to fund an HSA. That way, when patients skipped unnecessary medical services; when they looked for a better deal on a diagnostic test; when they asked about a generic drug rather than fill a brand-name drug, much of the money they saved would be theirs.
Consumerism, as outlined above, did not set well with public health advocates. They did not believe consumers had the necessary skills to comparison shop or decide when a recommended service was of little value. They were afraid only the healthy and wealthy would benefit from HSAs. Furthermore, public health advocates wanted [HSA] funds not used by one patient to be available for use by other people whose health needs may be greater. In 2022 scholars from the liberal Commonwealth Fund wrote in the journal Health Affairs:
In short, HSAs are a tax advantage for better-off people, masquerading as a health care efficiency increase that was never very likely and is not occurring now. There is no remaining justification for a regressive tax break that failed to achieve its policy goal and is used disproportionately by higher-income people.
Yet, with or without HSAs high-deductible plans are on the rise. The Kaiser Family Foundation (KFF Health News) reports on how to make high-deductible health plans (HDHPs) work for you. Guess what? They have figured out HSAs benefit people with HDHPs. The organization credits the expiration of enhanced subsidies with driving more people to HDHPs to save money, but then admits the trend has been going on for years, saying:
The plans are pretty common. In 2023, 30% of people who got insurance through their employer had a high-deductible plan, up from only 4% in 2006.
KFF has some great data on Obamacare cost sharing in its website. The weighted average deductible is around $2,900, with average deductibles for silver and bronze plans (75% of ACA plans) much higher. The advocacy goes on to provide some good advice:
- You might qualify for an HSA and not know it.
- HSA-curious? Here’s how to open one.
- Preventive services should be covered at no cost to you.
- Seek care early in the year.
- Consider paying cash instead of spending down your deductible.
- On an ACA plan? Update your income and use an HSA to avoid a tax surprise.
Items 5 and 6 are worth discussing. Sometimes paying cash (especially if you have an HSA) is cheaper than going through your health plan. I routinely get bloodwork without going through my personal physician. You can sometimes find generic drugs cheaper than your drug plan copay using GoodRx. Do not be afraid to let your doctor know you are price sensitive. Ask if your doctor works for a hospital. Let them know you do not want to use the hospital labs for blood work (it is far, far more expensive than Walk-In Lab). Do not let them order diagnostic imaging to be done at the hospital. It may cost you seven or eight times more than elsewhere. My wife almost did this years ago and the cost difference was nearly $3,000.
Item 6: if you do qualify for a subsidy and your income changes, it can cost you. In 2023 and 2024 my entire subsidy went away (about $6,700 at the time) due to some retirement planning and I had to repay it back when I filed my taxes.
On the one hand, left-leaning advocates did not think HSAs would work. On the other hand, they were afraid they would work. HSAs undoubtedly work but are hamstrung by consumer protection laws that seem to apply to everything except health care. Health care is about the only service where a vendor you have never met is free to charge you whatever they want and you cannot decline their services. That should change. Furthermore, health care is about the only service where it is almost impossible to get a price quote in advance, but the hospital business office magically finds the price after-the-fact and bills you for it along with dozens of related billing codes. Contract law requires mutual assent to be enforceable in virtually every area of commerce except medical care. A woman in Colorado was given a cost-sharing estimate of $1,337 only to discover after her surgery that the hospital was out-of-network and the facility claimed she now owed $229,112. Her health plan had already paid its usual & customary fee of nearly $75,000 but the hospital fought hard to extract another $230,000 out of her personally. That is life-changing money for most people nearing retirement, but the hospital did not care. It wanted an extra $230,000 if it could legally extract it. A jury sided with her, ruling she only owed what the hospital had estimated, but the verdict was overturned on appeal. She had to take the case to the Colorado Supreme Court to get the surprised bill struck down. In legal terms there was no meeting of the minds when her final bill was 170 times larger than the estimate.
Congress could make HSAs more useful by beefing up price transparency requirements, and by making it clear that financial responsibility forms are unenforceable without clear prices and clear estimates. Patients want lower prices and they are willing to shop for them. They just do not have to have the tools and knowledge to seek them out.