Death by a Thousand Cuts

The major difficulty in reforming health care in this country is that most of us want improved health outcomes, but for less money. In some cases, that combination is simply unachievable. The evidence suggests, however, that consumer-driven health care plans, typically consisting of a high-deductible insurance policy and a health savings account (HSA), can provide most patients with both of those disparate goals. A review of the research by the American Academy of Actuaries last year concluded that consumer-driven plans give customers a 12- to 21-percent cost savings in the first year, and a slower growth in costs than traditional plans, yet patients who use the plans still seek out as much preventative care as those covered by more traditional plans.

Unfortunately, the new health care reform law placed new restrictions on consumer-driven health care plans. Beginning in 2011, patients will no longer be able to pay for over-the-counter medications out of their HSAs unless a doctor prescribes them. Furthermore, tax-free contributions to the accounts will be capped at $2,500. These aren’t major changes to the law, but at the margin they make these plans less useful, so fewer people will purchase the policies. Speaking as a happy customer of a consumer-driven plan, most of the money I have spent from my HSA so far has been on minor health care products, like over-the-counter drugs. The new regulation substantially limits the usefulness of the account to me. Before the year ends, I will probably buy up massive quantities of all over-the-counter drugs I might need for the next few years, so I do not have to pay out of pocket for them.

I do not fear that my plan will be regulated out of existence this year or next, but as it slowly becomes indistinguishable from all other health care plans, its proven advantages will slowly vanish, as well.