Can High-Deductible Health Plans Reduce Costs?

Can consumer-directed health plans that allow enrollees to put money into tax-favored health savings accounts (HSAs) help control health-care spending?

Depends on who you talk to, and the issue tends to divide among party lines, with Republicans arguing  HSA-eligible high-deductible health plans can lead to greater value in health care, while many Democrats argue HSAs help mainly people who don’t need the tax breaks and HSAs don’t save money.

But at a recent House Ways and Means health subcommittee hearing at least some Democrats spoke in favor of them, and several pieces of legislation aimed at expanding them have support from both Republicans and Democrats.

“As it stands today, high-deductible health plans and the health savings accounts that accompany them plug a gap in our market,” Rep. Mike Thompson (D-Calif.) said at the hearing. “They offer employers a lower-cost alternative amid ever-climbing large and small group coverage rates, and give patients a hand in making out-of-pocket payments.”

But, Thompson added, sharply increased enrollment in high-deductible health plans and HSAs is a direct result of the escalating cost of care, and “our reaction must not be to incentivize the shift of those costs to consumers.”

In 2017 about 21.8 million people were members of such plans, and they now cover as much as 12 percent of the non-Medicare population, Matt Eyles, president and chief executive officer of health insurance trade association America’s Health Insurance Plans (AHIP), testified at the hearing. Enrollment in HDHPs that are eligible for HSAs experienced a 2,014 percent increase from 2005 to 2017, he said.

“They provide an attractive option for employers, employees, and individuals seeking an efficient way to cover health-care costs,” Eyles said.

AHIP called for changes to the tax law that would enable health insurers to cover treatments for chronic diseases such as diabetes in the plans without requiring enrollees to meet annual deductibles. AHIP supports the Chronic Disease Management Act (H.R. 4978), sponsored by Ways and Means Committee members Diane Black (R-Tenn.) and Earl Blumenauer (D-Ore.), which would do that.

But many liberals think the plans are a bad idea, forcing people who can ill afford it into high-deductible plans. More than a third of Americans don’t have enough savings to cover even a $400 medical bill, Sherry Glied, dean of the graduate school of public service at New York University and a former Obama administration official in the Department of Health and Human Services, testified.

“That low level of financial security is on a collision course with this rise in high deductibles,” Glied said.

Ways and Means Chairman Kevin Brady (D-Texas) has said an HSA bill is coming soon, Bloomberg Law’s Alex Ruoff reported.

Read my article here.

Stay on top of new developments in health law and regulation, and learn more, by signing up for a free trial to Bloomberg Law.