HDHPs with HSA did not achieve their original goals: study
One of the reasons for allowing consumers to open health savings accounts in conjunction with eligible high-deductible health plans was to reduce unnecessary expenses by making them more cost-conscious. These expected savings no longer exist, according to a study published in Health Affairs.
“Using published sources and our own analysis of National Health Survey data, we argue that HSAs no longer substantially achieve this goal of cost consciousness because cost sharing has increased so much in non- qualified by the HSAs,” the researchers said.
“Indeed, people who have HDHP with HSA are increasingly less likely than others with private insurance to report financial barriers to care. In sum, the efficiencies promised by the HSAs have not materialized, so it is difficult to justify maintaining this regressive tax break.
Congress introduced the HSA tax benefit because proponents believed it would increase healthcare efficiency through a chain of events:
- First, more people would adopt HDHPs because they could be paired with the new tax-advantaged HSAs.
- Second, consumers spending their own money on health care, whether through the deductible or when using HSA funds, would be more cost-conscious. They would have more “skin in the game” and would be more attentive to their use of care.
- This would lead them to reduce their use of low-value health services and seek out providers and services with lower prices.
The study showed several ways in which the initiative fell short of these goals:
HSA-qualified and non-HSA-qualified plans have become similar over time. In 2007, the deductible of an employer-sponsored plan was just over a quarter of that of an HSA-qualified plan, and the difference in deductibles between HSA-qualified high-deductible plans and non- qualified HSA was over $1,500.
In 2018, the non-HSA-eligible plan deductible was more than half of the HSA-eligible deductible, and the absolute difference in deductibles had fallen to $1,196. Many Americans today have deductibles above the HSA limit but no HSA option. Overall, Americans who do not qualify for tax relief face much higher deductibles than in the past.
HSA-qualified plan holders report fewer financial barriers over time. The HSA subsidy gives high-income Americans an additional subsidy, likely causing them to use more care. The failure of eligible HSAs and associated high-deductible plans to increase cost consciousness is compounded by the fact that HSA tax breaks are highly regressive. Unsurprisingly, it is high income earners who benefit from the HSA tax relief.
HDHPs with HSA failed. Greater cost sharing reduces valuable healing alongside less valuable healing, and it does not increase the purchase price. But the claim that the tax subsidy would itself generate cost awareness was questionable from the outset, as the combination of a tax-advantaged scheme, higher deductible and maximum out-of-pocket could effectively reduce cost sharing. Additionally, deductibles and out-of-pocket maximums have increased in non-HSA qualified plans, eroding any relative cost awareness that HDHPs with HSAs might have created.
“Wealthy, educated people are more likely to use HDHPs with HSAs and contribute more to their accounts than people with less income and education,” the study concluded.
“The regressivity inherent in this policy was initially justified by the belief that HDHPs with HSA would generate an increase in cost consciousness, and therefore efficiency. In fact, however, people who have HDHPs with HSAs become less likely over time to report financial barriers to accessing care—the source of HDHP cost consciousness—than people with HSAs. private insurance not linked to HSAs.
“In short, HSAs are a tax advantage for wealthier people, masquerading as an increase in healthcare efficiency that was never very likely and isn’t happening now. no more justification for regressive tax relief that has failed in its political purpose and is disproportionately used by high-income earners.