Why an HSA Option Should Be Added to Medicare.

More than two years ago John Mackey, the co-CEO of Whole Foods caused a storm of hostility, picketing and boycotting  from his own liberal customers by advocating the use of Health Savings Accounts combined with high deductible Health Insurance  ( a plan Whole Foods follows with its employees ) as an alternative to Obamacare.

As Mackey explains, health savings accounts are tax exempt accounts (meaning the money deposited into them is not taxed as income) that  can be used at the employee’s discretion to pay for medical expenses.Up to $3000 a year can be deposited in such accounts.  The money in the account belongs to the employee and can be invested in normal investments.  If the money is not spent it stays in the account from year to year.  It is thus possible for a healthy young person who makes minimalus use of benefits  to accumulate a large sum and have it available for major medical expenses when necessary. Governor Mitch Daniels lead the way in adopting such accounts in Indiana for state employees.  The plans, shunned by employees at first, have become extremely popular because of the flexibility that they offer.

At the present time such accounts can only be set up by persons under the age of 65, the age when people become eligible for Medicare.

Contrary to what many people believe, Medicare is not free for seniors.  It is heavily subsidized, but it isn’t free.   My understanding is that Paul Ryan’s proposal for cutting Medicare costs includes and HSA option.  He is right so that seniors can benefit from managing their own healthcare costs.

All medical care is, of course, optional.  People have a right to reject medical care if they choose.  Just about everyone knows that, but what most people don’t think about is that there is a lot of honest debate about routine “preventative” care like mammograms.  Recently there was a huge uproar when a proposal was made to reduce the frequency of mammogram screening from 1 year to 2 years for women over 40.  If insurance companies followed the proposal,  and Medicare followed the proposal there would be a substantial cost savings.  The cost of a mammogram can vary between $75 and $200.  So, without doing a whole lot of research, I think most people can afford that if they feel they have to have a mammogram and their insurance of Medicare won’t pay.  The prior “standard” advocated by breast cancer awareness advocates, was a mammogram every year.  Adoption of the new standard would save insurance companies and Medicare a lot of money.  Good.  But following the new standard wouldn’t save the patient one thin dime.  Because health insurance rates and Medicare rates are the same whether you use medical services or not.

This is the problem John Mackey points out.  Because individuals receive no benefit at all from being judicious and careful about spending health care dollars, they have zero incentive to do so.  And procedures like mammograms are examples of the kind of procedure where a lot of money can be saved.

What about me and mammograms?  I had my first one in over 10 years last week.  As evidenced by this post I am still alive, and so far as I know, breast cancer free.  But I pay the exact same health insurance as the lady I met in the waiting room who visits the doctor every month and gets a mammogram and a bone densitometry every single year because someone else is paying for it.

Now I might note that I consider high speed internet service a necessity of life, but I don’t ask others to pay for it.  A mammogram  for a woman(or man, yes men can get breast cancer) who is well, has no history of cysts or other problems with her breasts, hasn’t been on hormone therapy and has no family history of breast cancer is an optional procedure.  If a woman has an HSA and she thinks it really is necessary, then she can choose to have one.  And if she chooses not to, the money will be there for other procedures.  So simply giving patient consumers the ability to choose what they will  and will not pay for, saves money.

The other feature that saves money is cost consciousness.  As I noted in another post, my doctor recently wrote me a prescription for some wonderful new drug  to deal with pain prolems without knowing what the costs was.  It turned out that it costs $270 for 30 pills.  I told him I wasn’t in $270 worth of pain. We found another drug that was $8 per month.  When consumers become even aware of costs, that fact combined with knowing they will benefit from reducing the cost is inevitably going to lead to lower expenditures.  That has been JOhn Mackey’s experience at Whole Foods and Mitch Daniels’ experience in Indiana.