Managed Care Matters

Half of the 2 million people who have signed up for consumer directed plans with health savings accounts have yet to put anything into the accounts. Interesting, as one of, if not the major attraction of the plans was the tax-favored status of the dollars going into the savings accounts.

(Matthew Holt at The Healthcare Blog has a transcript of Pres. Bush's interview with the Wall Street Journal in which Bush describes HSAs as one of the ways to make health care more affordable...)

What appears to be happening is what I (and others) have been predicting all along. Employers, staggering under the burden of rising health care costs, have all but given up and thrown in the towel. Those who have given up are dropping their health plans in favor of the new high-deductible plans, thereby shifting more of the burden onto employees. In those instances where the CDHP option is offered alongside regular heath plans, CDHP participation is in the low single digits.

The idea (at least the politicians' idea) behind CDHPs is that they will make the consumers more directive, more involved, more aware of their health and thus better consumers. I'm not sure the employers care much about the theory; what they do care about is health care inflation is now less of a problem for them.

I write that with no malice towards employers; many have decided health care is simply unmanageable. It is digging into their profits, their ability to fund new businesses or products, increase wages, enhance training, pay bonuses and executive stock options, and hire new workers. Employers in the US are tasked with addressing the health care needs of their workers, a challenge their competitors in other OECD countries don't worry about.

Here's more detail from Milt Freudenheim's article in today's New York Times:

" people have evidently signed up not because they are eager to direct their own medical spending but because the plan looked cheap or they had no other insurance option. And at least half of those enrolled have not put money in their health savings accounts. So there will be no money building up for next year's out-of-pocket expenses — a big selling point for these health plans.

In addition, many employers have been slow to offer the plans. And companies that do so have been reluctant to encourage worker participation by contributing money to the savings accounts. The employers figure that "portability" means that their money will go out the door with workers who leave...

(Bush is likely to recommend raising the limit on what individuals and families can contribute to HSAs)...For people with modest incomes who are hard put to save for medical needs or much else, raising the contribution limit may be a moot point. But for those who have the money to set aside, the savings accounts can be attractive....

While nonunion employees of Banta (a printing company that dropped all plans but the CDHP) have no insurance alternative, workers at large companies that still offer a choice have been slow to abandon coverage like H.M.O.'s and preferred-provider networks.

At I.B.M., only "a very small number" of employees have selected the health savings account option, according to Marianne E. DeFazio, the director of global health benefits, who declined to provide a specific figure. Industry experts estimated that 3 percent of I.B.M. employees had signed up for the savings plans, which the company has offered for the last two enrollment periods.

UnitedHealth Group, the largest provider of the savings plans, says that of the 24 million people insured under its various types of policies, 654,000 now have health savings plans. But so far, only about half have started setting aside money, a spokesman, Daryl Richard, said.

Among UnitedHealth's policy holders, a larger number — 846,000 — are still covered under an older type of policy that, like health savings plans, has low premiums and high annual deductibles. But instead of employees' setting aside money, the employer contributes to an account that gradually grows in value and is available for the employee to draw down for health expenses.

The money in these plans, known as health reimbursement accounts, reverts to the employer when workers leave their jobs. That is one reason some large employers are sticking with this older form of insurance.

I hope I'm just being paranoid when I look at Bush's proposal to increase HSA contribution limits as another tax giveaway to the better off. But I fail to see how the push for CDHPs will, in any meaningful way, address health care cost inflation.

It just won't.

What does this mean for you?

CDHPs won't significantly impact health care costs. Period.