President Obama has offered to incorporate some "Republican ideas" into his health care proposal, by adding high deductible plans to federally regulated exchanges, and expanding tax-advantaged health savings accounts.
Politically, let's remember, this move to the center (much like the bipartisan health care summit) isn't about appeasing Republicans. It's all about providing cover for nervous conservative House Democrats. The more interesting point for me is: Is this a good change in policy?
As an Atlantic employee, my first thought is that the health savings account idea looks very familiar. In our epic 2009 cover story How American Health Care Killed My Father, David Goldhill thoroughly critiqued the byzantine, wasteful and poorly-incentivized US health system and concluded that the solution was to cut out the million middle men and encourage Americans to take a more active role in their health care by expanding, yep, health savings accounts.
So what does that term even mean? A health saving account is, simply stated, a personal piggy bank for medical spending. You save a percentage of post-tax income, with a cap in total dollar contributions, and you withdraw money for pay for most non-catastrophic care. Here's how Goldhill responded to one reasonable critique: How am I supposed to be able to personally afford health care in this system?
Well, what if I gave you $1.77 million? Recall, that's how much an insured 22-year-old at my company could expect to pay--and to have paid on his and his family's behalf--over his lifetime, assuming health-care costs are tamed ... If you had access to those funds over your lifetime, wouldn't you be able to afford your own care? And wouldn't you consume health care differently if you and your family didn't have to spend that money only on care?
Sounds like a great idea, right? Some health care experts aren't impressed. Brookings' senior fellow Henry Aaron told me, "I had been sent that [Atlantic] article to look at it before it was published, and lost it to my eternal regret. When I talked about it with my friend [and former CBO director] Bob Reischauer at the Urban Institute, we had the identical reacion to the piece. It was over-simplified."
Why is Aaron down on the idea of health savings accounts? Two big reasons.
(1) Today, health care should be about expanding coverage. "The fundamental purpose of insurance is to prevent people from being exposed to the financial consequences of expensive medical treatments," Aaron told me. "When you're talking about health care reform extending coverage, you're talking about reducing sensitivity to costs, not increasing them. The first lump of reform will reduce cost sensitivity, and it should."
(2) Personal consumerism isn't the silver bullet.
Americans spend much more per capita on health care than the average developed country, and yet basically no developed countries rely on significant consumer exposure to curb their spending. Asking Americans to bear a larger share of their non-catastrophic medical care is a fine thing to do, but there's no reason to think it will dramatically offset the real drivers of health care inflation: advancing medical technology and population aging. (And I think it bears repeating: those drivers of health care inflation are good things! Long lives are good. Medical technology is good.) Numerous studies have demonstrated that when patients more actively participate in paying for their care, the savings are small and the effect on ignoring preventative measures is real.
But what about high deductible plans -- plans that have consumers pay for most non-serious care out of pocket before insurance kicks in? Aaron likes the idea, but cautions that we shouldn't see anything as a silver bullet. He told me:
"Including high deductible plans is I think probably a good idea if well designed. It won't take any serious bite out of the problem of rising health care spending spending. But the impact on the quality of care will on balance be positive if people are provided good information and a good ancillary program of preventative benefits. When people are exposed to cost sharing they tend to do too little preventative care -- routine visits, vaccinations. You want preventative exclusions to encourage some of the most important medical interventions."
So what do I think? Let's step back for a second and look at what this bill does. Health care reforms wants to do two things on the spending side. First, wants to expand coverage. That's the easy part: you've basically got an individual insurance mandate and a generous subsidy programs to keep Americans from drowning in medical bills. Second, it wants to control overall health expenditures. That's the hard part, because short of a dramatic tax increase on insurance or the draconian rationing of care, you're not going to find a silver bullet to kill the medical inflation monster.
This bill doesn't have a silver bullet. But it has a quiver of arrows: Medicare cuts that could fight fraud or overspending, a (delayed and watered down) excise tax, a Medicare advisory council, an innovation center, billions in investments for electronic medical records and comparative effectiveness research, and many other potentially useful (or, I'll admit, potentially pointless) delivery system reforms and straitjackets. At worst, I suppose, the inclusion of HSAs and high deductible plans are sideshows that potentially discourage preventative care, vaccinations, routine doctor visits and the like. At best, they're two more arrows in the quiver. This is a smart deal for the president to make, politically, and an acceptable coda to a year-long health care policy debate.