Health Savings Accounts are a much neglected feature of our present system. The use of them is very restricted and very discouraged by All the “smart people” because they give choice back to the consumer and they cut insurance companies out of a lot of transactions.
John Mackey, CEO of Whole Foods, is a great fan of them for this reaason: They force consumers to look at the price of their health care. Here is the summary of how they work. You have a high deductible insurance that covers major medical costs like hospitalization or Chemotherapy. You put money into a tax deductible savings account which can be used only for medical expenses. When you see the doctor or fill a prescription, you use the money in your Health SAvings Account. They should be set up so that money that is not used in one year stays in the account. This leads you to ask, before you buy, as you do in most things, how much will it cost? What are the other alternatives?
They also have other big benefits: 1) the doctor, pharmacists, or other vendor gets paid right away without filling out a lot of claim forms 2) If you don’t spend the money it stays in your account for later, and if you die, it goes to your heirs. 3) thus providing a motive for individuals to make reasoned judgments about their own needs and expenses for medical care because they actually benefit from spending less money.
At present, if you are insured and you use fewer benefits, you don’t see dime one in savings to you.
Health Savings Accounts, if set up so that you can use them like a credit card with any medical care provider or to pay for any prescription or non prescription medicine or medical device, will also reduce administrative costs. The administrative costs of billing for each prescription and doctor visit are cumulatively very high. Most physicians have staff who do nothing but bill. Whole companies do nothing but pay bills for the medicare/medicaid program and whole office complexes are devoted to paying bills for insurance companies. Those costs cannot be completely eliminated but they would be significantly reduced if only, for example, hospital costs were being billed. As they now exist, employers can contribute up to $2500 a year to a health savings account tax free. And they have to be linked to a high deductible insurance policy. This is an approach that now exists but which needs to be strengthened and expanded. It will cut medical care costs through competition and elimination of administrative costs.