Let the HSA experiment run its course

The House of Representatives is trying to cripple the experiment with health savings accounts by burdening it with extra layers of bureaucracy. It has passed a bill requiring that every HSA transaction be reviewed and verified as a legitimate medical expense, even though HSA participants must already be able to prove this if challenged by the Internal Revenue Service.

Second, HSAs may help recreate a saving culture in the United States — something the country desperately needs.

The current health insurance system encourages health-care consumption — often unnecessary consumption — because the true cost of the service is hidden from the consumer, as either the government (i.e., taxpayers) or an employer is picking up a major part of the cost.

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Many people run off to the doctor when they have colds or the flu, even though they often know there is little the doctor can do. Visiting the doctor may make them better psychologically, and it costs them little.

If they had to pay the bill entirely from their own pockets, they would at least think twice.

HSAs are tax-advantaged medical savings accounts that allow people to save for routine medical expenses while buying low-cost, high-deductible health insurance plans to cover the major expenses.

In 2008, the maximum contribution is $5,600 for a family and $2,900 for an individual.

The money saved in HSAs can be invested in much the same way as money in individual retirement accounts and 401(k)s until needed to pay medical bills, and any money in the HSAs not used in one year can be left in the account to continue to grow with contributions in subsequent years. Further, if the savings aren’t consumed by medical expenses, they can later be used in retirement.

Proponents believe that HSAs make people more responsible for their own health care, encourage them to save for future health-care costs, and allow them to receive needed care without receiving pre-approval from insurance companies.

They believe that HSAs also make people more aware of the costs of health-care services and may encourage them to negotiate with the service providers over those costs.

Opponents argue that HSAs will be used primarily by healthy people, removing them from the pool paying for regular health insurance and raising the costs for those who remain in health insurance plans. They also argue that low-income workers may not be able to afford to contribute significant amounts to HSAs and may not be able to afford the high-deductible health insurance policies.

The critics also say surveys show that those enrolled in HSAs are less satisfied with many aspects of their health plans than are workers enrolled in traditional health insurance plans.

But it is far too soon to judge the experiment.

HSAs were authorized only in December 2003, and the IRS estimates that only 14 million workers will be covered by HSAs in 2010.

Many of those opposed to HSAs are strong proponents of a national health insurance plan. If they are so convinced that HSAs are unpopular with workers and so bad for the health care system, why not let the experiment continue and fail from the weaknesses they perceive?

The Ways and Means bill suggests that the opponents are not convinced that this will happen, and must act to strangle the HSA baby at birth.