Kenny Hulshof finally released his health care plan the other day, months overdue. Strange timing, because if someone’s confident in every detail of their proposal, they usually tend to release it when the news cycle isn’t already being dominated by a predictable event, like say, the opponent’s convention. Looks like Hulshof is throwing out a bunch of half-baked pablum disguised as a plan to grab a little attention from Jay Nixon at the convention, and to have some paper to wave around later in the campaign just so he can’t be attacked any more for not even having a plan.
I’ll just skip past the excellent point that the Missouri Democratic Party is currently making – Hulshof is unsure as to whether the plan will cost closer to $50 million or $500 million – and get right to some of the details that have been bothering me.
Hulshof’s plan is based on enrolling Missourians into HSAs – Health Savings Accounts – supposedly controlling our spiraling health care costs and allowing uninsured Missourians to get back on the rolls of the insured. An HSA is essentially a tax-exempt interest-bearing bank account that you can only use to pay for health care, and they are typically tied to high-deductible health insurance plans (HDHPs). In theory, instead of paying a premium every month and a co-pay when you go to the doctor for a checkup or for a minor illness, you would save a percentage of your income, then pay the doctor out of your account as needed.
Confused as to what’s the difference between having an HSA and being uninsured? Well, you neither have to pay income tax on the amount you saved nor on the amount you withdraw, but that’s about it. And in case you were thinking that this might be an ideal situation for a tax shelter, you are absolutely correct.
Hulshof also claims that “putting these HSA plans into HealthMAX will guard against the risk of adverse selection.” Either he’s being disingenuous or he doesn’t know what adverse selection is (or possibly both), because an HSA/HDHP is more likely to increase the risk of adverse selection, not decrease. A 2006 GAO study showed that the healthy and the wealthy were the primary beneficiaries of HSAs. The healthy, because they have fewer costs in an HSA compared to a traditional plan, and the wealthy, because they have enough extra income to divert some money into tax-free savings.
Think about it this way. If you’re a young, healthy man with no history of serious illness or little taste for extreme sports, you would rationally choose an HSA, because you don’t need health care services except for the occasional checkup or flu shot. If your family has a history of illness, or you had an accident when you were younger that still requires regular attention, or you’re a woman (women tend to consume more heath care services than men because of regular checkups and you know, giving birth) you might want to stick with your traditional health plan.
Well, if any significant number of the healthiest consumers leave the pool of those participating in the traditional health plan, that leaves the same amount of risk (and expense) in the pool with fewer enrollees. To make their money, insurance companies will jack up premiums, leaving some of those who previously thought the traditional plan was still more cost-effective for them to instead choose an HSA. Every round of premium increases leave the pool a little riskier and more expensive, until you have two pools, the healthy with cheap plans and the chronically ill with expensive plans. That’s a textbook example of a adverse selection death spiral, and that’s not what we want in Missouri.
Finally, HSAs don’t do anything to reduce the overall runaway health care costs in America. Think about it. If you have an HSA paired with a high deductible plan, you’re less likely to pay for preventive care, like doctor visits for checkups and treating minor illness like the flu. Most people don’t like going to the doctor anyway, and you’re really going to avoid it if you have to pay the entire cost of the visit out of pocket. But those doctor visits help catch problems that can develop into much more dangerous conditions later on, the ones that, you know, cost a lot of money to treat. By the time it reaches the point of really expensive to treat, you’re probably not going to care too much about cost, especially since after the deductible, the insurance company picks up the tab. Problem is, someone has to pay for the expensive tests and treatments, so the costs rise for all of us in the form of higher premiums and deductibles and more expensive prescription drugs. So rather than helping control costs, HSAs help drive costs up.
No thanks, Kenny. By the way, when Hulshof had the chance in Congress to increase health care coverage for Missouri children last year, he stood with Bush and locked the door.