And cons of Health Saving account and how they might offer to Traditional Health insurance. This is about two hours. Good afternoon, everyone. The American Enterprise institute. Im tom miller, resident fellow iei aei. Lull week bit of a where things are not moving as theyve pretended to move for of months. Uple the efforts in the senate for repeal and replace ended up in and depart, before recess week. And perhaps more to come. Let me just tell you, todays forum is called unbundling the forfit for broader role Health Savings accounts. In light of the senate efforts, thinking of is an older competition that used to be held for Young Athletes ages six to 15, to show their skills. Nfl. E it was called the hunt, pass and kick competition. Thats actually being discontinued. An announcement came in may, 55, 56 years of it. But it looks like the senate is up to the task. In terms of punting, passing, in sense orthrow it aside kicking approach. And well see how much more of that competition renews when the senate is back next week, perhaps for the balance of the month as well. I had to be careful with this, because the nfl is rather namessive on it trade protection. So this is a news shot, as violating any nfl ordinances on pass, punt and kick. Besides, theyre leaving it they want to give everybody now a certificate for being out on the field, i guess, soccer, rather than these skills. Starting a different series of Health Policy events. Been caught up in the politics of whats been going on. Somethingght id try different, which is flesh out some things that people are doing in real research, as to moving the, you know, dollars around from one place to another. That haveg articles appeared in some of the policy journals. What we want to do is talk about, no matter what youre spending, we could do a better job in the health care and the health we deliver by perhaps what ispart conventionally considered the current benefits and maybe reassembling it, which Pay Attention to the people andiving those benefits might have some voice in saying what works for them. Todays version of unbundling the benefit talks about how Health Saving accounts can be used. Have other events which talk about how to perhaps reengineer and restructure care, which would combine using a different mix of services. But also, in some cases, for types of patients or individuals with highrisk a little giving them bit more of an intensive care unit type of approach. Up on probably coming september 5. Well also take a look at how to dollars that are nominally included within the perhaps benefits, retargeted and prioritized in a different way in order to get better results. Maybe look at the distinction between what is said benefits, everything the same for everybody, as opposed to what might be more where peopleefits get what they need in different amounts, in different situations, in order to think what it produces. Today, though, were looking at deal with Health Savings accounts. Now, at the end of the day, accounts, and they have a long history, and well hear from our speakers on are essentially taxadvantaged Health Benefits. You can move that around. There are other ways. Fact, some people have talked about using h. S. A. s in so many its almost like a swiss army life. Doesnt just do this. It does five or six other things. You dont have any money in your h. S. A. , its a good hypothetical tool but it little dull in terms of where it can cut. Give credit to the product, i think. Victor is the only manufacturer army nice. S thats why they have a little bit of a logo in there, unless ive missed that. Or mcgiefer. So the idea of the Health Benefit system moving around advantage dollars so they actually produce more bang for the buck, integrated in one another with Health Insurance. Now, youll hear from our speakers. There are some current proposals to change the contours of h. S. A. s, but there are also and thoughtful ways to reach beyond even tweaking here and there on the margins. Have three speakers today. Our first is going to talk about how to have a more Precision Approach to h. S. A. s. Its an early way to think about this. Introduce the three speakers separately. Roth has just been a new appointment, Teaching Health law writing at st. Johns University School of law, once known as the red men, because became unfashionable. Now theyre the red storm. Has also served as associate director of the wiring program. From columbia university, a law degree from harvard. Clerked, done Legal Research and writing work at seton hall. And has a hometown connection, graduated from George Washington university. I ran across a fascinating warren, thinking about a different way to think about health. Those thoughts in the past. Its a combination of how we can produce Better Health with a broader array of tools, including investments in some of ways toal services, improve health in order to get want as opposed to just paying people along the way who have health care bills. Is going to bee appearing in the cornell journal of law and public policy, date as they alwaysd say. But lets have lauren talk about look atent way to h. S. A. s and a number of layered getting there. Thank you for having me here, thatse i will say typically im talking only to academics, so its nice to have audience here to talk about h. S. A. s. I wrote this article immediately election,the thinking, what are some areas where theres potential bipartisan support . And h. S. A. s seemed to me to be an obvious one. The conversation is even more urgently needed right now, given whats going on. I will give a little bit of Background Information on stepping hopefully not on the toes of the other presenters. And i expanded the amount of information i was going to give, because last night i was at dinner with a friend from college, and he said know, i think i might have a h. S. A. [laughter] and after one question from me, it turned out he did not in a h. S. A. He had a flexible savings account, right . So i think for this person, who one of the smartest people i know hes a lawyer in d. C. Like him dontle really understand much about h. S. A. s, then my guess is a lot no idea andple have dont really understand how to use them, if they do have them. Theres been a lot of talk about h. S. A. s, in the media, you know, following the politicians. Health saving accounts, or h. S. A. s, are part of the movement for consumerdirected health plans. Lot of acronyms involved in the movement. Hra. Msa, maybe thats why people have trouble distinguishing between them, because they get lost a bit in the alphabet soup. So its all part of the general with that started pensions, from a defined benefit paradigm for Employee Benefits to a defined contribution paradigm. Paradigm,ined benefit your employer basically promises you a benefit, now or in the future. You will get 2,000 a month for retirement income. You know, all of your Health Care Expenses minus copayments. To a shift where the employer will place some amount of money, anyoure lucky, into account, and you will really have the control and the freedom to figure out what to do with that. What are your benefit priorities . Now, of course, the problem, as about is if theres not enough money in that account, which ill return to again throughout my presentation, then its not all that much help to you. If you dont have the money to purchase benefits and to provide for your needs, then those accounts which have a lot of potential are not that useful. So theres a big divide, a political divide, about these individual accounts. So republicans, including president bush, who enacted the h. S. A. s, tend to really love the individual accounts. Americanlong with the ethos of individuality and ownership. The idea that people can decide for themselves what their needs on those needs, that you dont have this paternalistic employer telling and providing for your benefits in the way that they think is appropriate. Democrats, on the other hand, tend to think that individual accounts shift the risk to the able toho are least bear it. Right . So democrats are focused on the fact that theres not enough the accounts, right . Maybe the accounts in theory would be a good idea if they were fully funded. But theyre not, right . So democrats see it as a way of on benefits. So talking a little bit about h. S. A. s, so the way it works is that h. S. A. s be combined with a plan. Eductible health so instead of traditional private, you know, Health Insurance that covers all of your medical care needs with an copayments, maybe some coinsurance, but covers your medical needs starting from with an hdhp, your Traditional Health insurance yourage doesnt start until reach a pretty high threshold. Before that time, either youre paying out ofr pocket or you can use your h. S. A. , if it has money in it, to cover those costs. I remember when i graduated from i spent my whole first year working with employers to put in place these h. S. A. s. At the time, people were up in arms, you know, about the and thinking, you know, this wont be good enough. People wont have enough of covered. Enses today people are lucky if they have the h. S. A. s, right, because whether they want to or not, most people have been shifted towards higher deductible Health Insurance plans and frequently they just, you know, they would love to money in. S. A. That had it. So ill talk about so the High Deductible Health plans kick in until the threshold, except for Preventative Care. But beyond that, theres this before your insurance kicks in. Ill talk about the numbers. But professor yee is going to the taxittle bit about advantages of h. S. A. s, which article, itser an incredible savings vehicle. Triple tax savings, right . So your contributions to the h. S. A. Are deductible from income. Earnings grow taxfree. And withdrawals from the account are not taxed, if theyre used for qualified medical expenses. And thats really the focus of is article ive written, what are account holders allowed and how their money on i think it should be different. Money can only be used for medical care as defined under section 213d of the Internal Revenue code. This is a definition that applied to a deduction in the tax code for excessively high Health Care Expenses. Right now the threshold is 10 which is an extraordinarily high amount before the deduction kicks in. Whole cdhp movement kicked in, this definition was expanded to apply to that whole alphabet soup. These individual accounts now are using that definition, which i think is pretty out of date. About how health law scholars are focused on other traditionald medical care. So what you see now, these are numbers for h. S. A. s and hdhps. Annualve to have an deductible of at least 1300 for single coverage or 2600 for family coverage. Theres a maximum for annual out deductibles,enses, copayments, but its a high maximum. A family, is for most people, you know they would their healthng care far before they got to that point. Employers and employees can contribute up to the maximum aggregate limit. Is, you know the work onional proposals expanding this limit. But right now its 3400 for single. And theres a catchup contribution for people 55 and over. Right now, roughly 19 of enrolled in an hdhp. Qualified very careful language. That doesnt necessarily mean they have opened up an h. S. A. That doesnt mean theres any in the h. S. A. , if they have opened it up. Makes it, you know you can see from the numbers below 25 receive no employer contributions at all. Right . The average employer for familyn of 1200 needs to be balanced against the current average annual a family of over 4300. Gapheres about a 3,000 between what the average employer is contributing to the h. S. A. , and the, you know, the deductible where the insurance really kicks in. There are, as people have discussed and continue discussing, there are a lot of drawbacks to h. S. A. s. I dont think theyre insurmountable. Know, the biggest drawback, which weve mentioned before, is that you need to have them. To fund a Health Policy professor said for peopletarter with low incomes. I think thats true right now, right, in terms of the amount of money going into h. S. A. I dont think it needs to be true. Just another vehicle for getting money allocated for to people. Right . Thats really all these accounts are. Potential, in my view. The great risk shift which i packer atut before, yale has done a lot of research on this. Paying, youw are know if they get switched from a Traditional Health hdhp,nce plan to an theyre paying more of their medical expenses than they used to. This is where professor yees work will come in. Being switched. Some people are gaining new coverage. But obviously employees are more of the cost than they did before. Is that it may not be such a bad thing. Areth care expenditures pretty tremendous. We want to find ways to limit them. We want people to think more carefully. Are they using Unnecessary Services . Couldere ways that this force people to think more carefully about their medical needs . Problem with that is that, you know, studies have are notat consumers fully ration natural when it to rational when it comes to health expenditures. Youke other goods that might do shopping around, its pretty hard to shop around and look for competitive prices when youre sick. Obviously if youre in a hospital, and you need emergency difficult. His is but even if youre just not feeling well, the idea of pharmacies to find the best price on a medication is pretty unappealing to most people. And you can imagine that this would add burdens to the system currently there, if the pharmacies and the insurance bepanies, if everyone had to there answering individual questions all day long about the prices of services. The other problem is services may not be comparable. How do you value cancer at Sloan Kettering versus the same treatments at a local hospital . Do you deal with the fact that people have a very subjective attachment to their doctors, right . And may be willing to pay more than they rationally should to see a particular doctor. You know, a couple other reasons. To know if the services are even necessary. So forgetting that it may be hard to compare prices, people relying on their doctors and on experts who know more about medical care than they do to understand if they even need these treatments. Forts a little bit hard individuals without a medical degree to secondguess the help to ration their own health care. And the final point i wanted to that studies are showing, and i list a couple people are rationing their own health care and avoiding needed medical treatment because they dont have enough money in their accounts. Is that youe idea want people to feel the costs with Traditional Health insurance. People have no skin in the game. So they have no incentive at all limit their services that they consume. But, you know, here, maybe now a little too much skin in the game, right . And maybe people are choosing to things,e money on other which is where my research comes in. And in terms of it being complicated, you know, this comes back to my friend. If youre not even sure you have learning curve involved in opening the account, and thenntributions, getting reimbursed, its all pretty difficult. Okay. Current legislative proposals, i wont say too much here, because its in such a state of flux, but beyond the most recent heard from senator the senate bill version of it that i knew about were really doubling the contribution limits to h. S. A. s, single coverage and 10,000 for family coverage. Butn, this is a nice idea, if, you know if a lot of people dont have money in the the contribution limit, which people are not reaching anyway, doesnt really help much. Giving people more flexibility, you know, some of the things i mentioned i think the most important one is really reducing the tax penalty when money is not used for qualified medical care. And the reason for that is you people avoiding putting money into these savings accounts because its unpredictable. You may hear figures like, in retirement, youll need 200,000 for your medical care, but you dont know that. If people are going to have a penalty if they pull the money out, they may be reluctant to using these vehicles. So now to my proposal, which myl spend the rest of presentation talking about. My proposal is for something im precision h. S. A. s. And these are h. S. A. s that are funded by employers, employees, but also the government. And they can be used for a andder array of goods services, depending on the account holders Family Income level. And i list, you know ill go back in detail in a minute. But i list the steps and youll that step one is to fund the accounts. Because its hard to experiment the money for interesting things if only the reallyest americans can afford to fund their accounts. Step two is to allow physicians other health workers, because there are huge costs to the system from having physicians prescribing better housing for you, lets say, to prescribe a broader array of goods and services. This is where the catchphrase healthdeterminates of comes in. Ill explain more in a minute. Three step three, i really dont believe my proposal requires amending the definition of care under the tax code. I think its more about having agencies and courts reinterpret phrase, given the changing state of medical care, the changing research on the impact social determinates of health have on Health Outcomes. Okay. So the current definition of is that youre allowed to get a Tax Deduction or to use your h. S. A. Money for expenses that are, quote, for cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body. So its a pretty broad definition. Definition is the same