04 October 2007

The Panacea of HSAs

Kevin approvingly links to an op-ed by 20/20's nutcase-in-residence John Stossel. Key graf:

We’d each be better off if we paid all but the biggest medical bills out of
pocket and saved insurance for catastrophic events. Truly needy people would
rely on charity, not government, because once government gets involved,
unintended bad consequences abound. If people paid their own bills, they would
likely buy high-deductible insurance (roughly $1,000 for individuals, $2,100 for
families) because on average, the premium is $1,300 cheaper. But people are so
conditioned to expect others to pay their medical bills that they hate high
deductibles: They feel ripped off if they must pay a thousand dollars before the
insurance company starts paying. But high deductibles may be the key to lowering
costs and putting you in charge of your health care.

Stossel's explanation for the escalating cost of American healthcare is the typical conservative mantra that Americans consume too much health care. If we could only somehow make consumers directly bear the cost, they would start making smart, rational cost-sensitive decisions and stop consuming so damn much unnecessary health care

Which is stupid on so many levels. American health care is insanely expensive for numerous reasons, but lack of price transparency/sensitivity is not one of them.

The biggest waste of healthcare dollars by far are the structural inefficiencies inherent in the modern health care industry: the fact that doctors & hospitals spend 15% of revenue trying to get paid; that insurers waste 10-20% of premiums on administration; wasted spending on defensive medicine and malpractice; the lack of access to preventive healthcare, etc.

Beyond that, there may be a role of overutilization, but it is just silly to think that by shifting the cost onto consumers, that consumers will cut back on the right items or make more rational decisions. For example, higher deductibles will create a negative incentive for patients to access routine preventative services, which may lead to later detection of disease or poorer control of chronic diseases like diabetes. This would also likely fall heaviest on the economically disadvantaged who are most price sensitive and most likely to skimp on 'elective' doctor visits and tests.

On the other hand, the largest amount of "wasted" dollars is in fact physician-driven, and consumers in general do not have the education or resources to second-guess the advice given to them by their doctors. For example, if you have chest pain, and an abnormal angiogram, and you find yourself in the recovery room talking to a cardiac surgeon who is recommending a bypass, most people are going to be terrified and happy to accept the advice of the intelligent, trusted expert at their bedside. You are probably not going to go home and research the benefits of CABG vs stenting, nor are you likely to look around for the best price, were that information available. Or if you have been suffering from chronic knee and back pain and your orthopedic surgeon recommends an arthroscopy or laminectomy, most patients are unaware of the data showing that many of these procedures are no better than placebo, and even if the surgeon discloses that fact, but says "I think you are likely to benefit because ..." the natural tendency is to trust the doctor and go with his/her recommendations.

Ditto in the ER -- you come in with heartburn, and I see you and wonder if it might be a heart attack or an Aortic Aneurysm (and I hate getting sued) so I recommend a CT scan and and admission for a rule-out MI work-up. People rarely if ever inquire as to the costs, and when they do, I point out the risk to their life, and that tends to end the debate. And when you are 80 and demented but your family it too squeamish to sign a DNR, you can get a week in the ICU for the pneumonia which should have naturally ended your life.

Now, I am not claiming to have an answer for the spiraling costs of healthcare. It seems like a particularly intractable problem. My point, however, is that none of these drivers of health care spending will be affected by HSAs and higher deductibles. HSAs are a scam to let the wealthy (like me) shelter money pre-tax, and to shift some of the cost and risk of health care from Bushco's corporate masters onto consumers.

And, not to beat the dead horse once more, it does nothing to cover the uninsured.


  1. Hey SF, could you put together a post outlining the different kinds of proposed systems and the benefits and detriments of each as you see them?

    I keep getting lost on which system wants what! A "healthcare systems for dummies" guide would be very useful to me.

  2. Even if consumers were able to make rational, informed choices, medical treatments are worse than an airplane seat in terms of having an identifiable price. Insurance rates vs. the "official" rate charged to no one but the uninsured vs. what the uninsured are actually required to pay etc. There's no place consumers can go to find out who provides the best ____ exam or best _____ procedure at the lowest price. Are ER's going to put little Internet kiosks in their lobbies and at the beds so that folks can compare the cost of a CT scan or MI workup at this hospital to the one across town? I don't think so. Are paramedics going to carry around "menus" of the prices at various area ERs? If you're diverted from an ER with cheaper care to one with more expensive care because all the beds are full, what happens?

    The idea that healthcare is a one-size-fits-all commodity that can be priced like an ear of corn or a carton of milk is fundamentally ridiculous. An MRI is not worth the same thing to a healthy person vs. one with a severe knee injury, and as a society we (at least in theory) frown on extorting a high cost of service from those whose need for care is desperate. Certainly something needs to be done about the rising costs of health care, but trying to make consumers responsible for limiting health care costs is destined for failure.

  3. Anon 8:05 -- Great idea for a post. I'll mull it over.

    Anon 8:20 -- Also great points. Tough to say how pricing ought to work. For example, I think a surgery or consultation by an academic expert in their field should reasonably be priced (or at least reimbursed at a higher level) compared to a community-based doc. However, an MRI actually is somthing of a commodity. What about a hospital bed? Should institutional quality, reputation, amenities be factored into the cost factor? And most important, who gets to set the price? In other industries, you just let the market decide, but in an illiquid industry like medicine, that's clearly not viable. and you can't just let providers decide, because, honestly, we all think we deliver the best quality of care and deserve the highest reimbursements...

  4. Roger that. We have a serious problem on our hands. How to resolve it may similarly take us down just as the Romans went.

    I must say Shadowfox, I do appreciate your edge on medical blogs with a twist of politics(They are inseparable really).

  5. For me the WTF element that really stood out was the mention of charity.


    We tried charity for thousands of years. It sucked. When we got universal suffrage, people who had experience of a charity-based system voted to replace it.

    Why on earth would someone ignore the evidence we have of an approach we have already tried and have never been able to make effective?

  6. Obviously a tough subject. I think the basic premise that we need to draw in the public (and probably the private sector eg. LEAPFROG)to try and effect any change is correct. We we obviously agree is that we simply can not lump all aspects of healthcare together and think an HSA will cure all that the system suffers from. We waste a ton of money on commodity services; MRI, XR, Labs, Braces, Orthotics, etc. My current patients with HSAs definitely think twice about whether or not their knee pain is severe enough to warrant an MRI. Patients without HSAs nearly demand an MRI.

    If I was lying on a gurney with an occluded LAD, cost would not be a highly prioritized issue for me.

    HSAs should cover all preventative care determined necessary by evidence based medicine.... for a nominal co-pay.

    Patients with chronic diseases such as Asthma should receive a premium refund if they stay out of the ER for two years and have "X" follow up visits per year. Same for diabetics and heart failure. If we enable, encourage and educate most patients and then incentivize them to stay healthy I believe they will respond.

    We need to be the drivers of change and insist on coverage for the less fortunate. Otherwise the next system will be no better for us and we will find that we are looked at as commondities too.

  7. BTW... not all arthroscopies are useless



Note: Only a member of this blog may post a comment.