Transcripts For CSPAN3 American Enterprise Institute Discuss

CSPAN3 American Enterprise Institute Discussion On Health Savings Accounts July 15, 2017

You todays forum is called unbundling the benefit for broader role for Health Savings accounts. More on that in a moment. In light of the senate efforts, what i was thinking of as an ultra competition that used to be held for Young Athletes between ages six to 15 to show their skills in the nfl. It was called the punt, pass and kick competition. It appears that thats actually being discontinued. The announcement came in may after more than 55, 56 years of it. It looks like the senate is up to the task in terms of punting, passing, and the more throw it aside sense, or the kicking approach. We will see how much that competition renews when the senate comes back for the next week and perhaps for the balance of the month as well. I have to be careful because the nfl is rather aggressive on its trade name protection, so it is a news shot as opposed to violating nfl ordinances on punt, pass and kick. Besides theyre leaving it behind because they want to give everyone a certificate for being on the field i guess. Kind of like soccer more than elongated skills. We are starting today a different series of Health Policy events. Everybody has been caught up in the politics of whats been going on. I thought i would try something different, which is flesh out some things that people are doing in Real Research as opposed to moving, you know, the dollars around from one place to another, and some Interesting Articles have appeared in some of the policy journals. What we want to do is talk about giving no matter what youre spending, we could do a better job in the health care and the health we deliver by perhaps taking apart what is conventionally considered the current benefits, and then maybe reassembling it in somewhat more creative ways, which Pay Attention to the people receiving those benefits and might have some voice in saying what works for them. So todays version of unbundling the benefit talks about how Health Savings accounts could be used. Were going to have other events later on this fall which talk about how to perhaps reengineer and restructure primary care, which would combine using a different mix of services but also in some cases for certain times of patients or individuals with highcost, highrisk conditions giving a bit more of intensive care type approach when it is necessary to head off things that might come on further. Thats probably coming up on september 5th. We will also take a look at how to move around the dollars that are nominally included in the medicaid benefits and perhaps retarget and reprioritize them in a different way to ideally get better results, and also maybe look at the distinction between what is said to be equal benefits, everything the same for everybody, as opposed to what might be more equitable benefits where people get what they need in different amounts and different situations. In order to think about what it produces. Today were looking at new ways to deal with Health Savings accounts. Now, at the end of the day Health Savings accounts have a long history and we will hear from our speakers on that, are essentially tax advantaged health benefits. Now, you can move that around. There are other ways we can do it. In fact, some people talk about using hsa ps in so many ways you could almost say it is like a Swiss Army Knife it it doesnt do just this, it does five or six other things. Of course, if you dont have money in you Health Savings account it is a good hypothetical tool but it might be dull in where it can cut. Give credit on the property, victorina is the only manufacture, or perhaps macguyver with chewing gum could perhaps take care of our system. The idea is to move around the tax managed dollars to produce more bang for the buck, integrated in some form or another with Health Insurance. There are some current proposals as to how to change the contours of hsas, but there are more creative and thoughtful ways to reach beyond even tweaking here and there on the margins. We have three speakers today, and our first will talk about how to have a more Precision Approach to hsas. It is an early way to think about this. I will introduce the three speakers separately. Warren roth has just begun a new appointment Teaching Health law and legal writing at st. Johns university, school of law, once known as the red man because that became unfashionable, and then the red storm, adjusted on the campuses. Warren served as associate director of the program and acting assistant professor at nyu school of law, earned a ph. D. From colombia university, also a law. From harvard, has clerk, done Real Research and writing work at seton hall. And he has a hometown connection i suppose because she graduated from George Washington university. I ran across a fashicinating article by warren thinking about a different way to think about health. Had some of those thoughts in the past, but usually they calm me down. It is a combination of how we can produce Better Health with a broader array of tools including investments in some of the social services and ways to determine social determinings of health to get the results we want as opposed to paying people along the way with health care bills. Laurens article will be appearing in the cornell journal of law and public policy, date to be determined as they say. Lauren will talk about a different way to look at hsas and a number of ways to get there. Lauren. Thank you. Thank you for having me here because i will say that typically im talking only to academics. It is nice to have broader audience to talk about hsas. I wrote this article immediately following the election, thinking what are some areas where theres potential bipartisan support, and hsas seemed to me to be an obvious one. I think the conversation is more urgently needed right now given what is going on. So i will give a little bit of Background Information on the hsas, hopefully not stepping on the toes of the other presentation. I expanded the amount of Background Information i was going to give because last night i was at dinner with a friend from college, and he said to me, you know, i think i might have a Health Savings account. And after, you know, one question from me it turned out he did not, in fact, have a Health Savings account, he had a flexible savings account, right . So i think for, you know, this person is one of the smartest people i know, he is a lawyer in d. C. I think if people like him dont really understand how the hsa is, then my guess is a lot of other people have no idea and dont really understand how to use them if they do have them. So theres been a lot of talk about hsas and, you know, in the media, you know, following the politicians, of. Health savings accounts or hsas are part of the movement for consumerdirect health planl, cdhps. Theres a lot of acronyms involved in the movement, hsa, msa, hra. Maybe thats why people cant distinguish, have trouble gushing between them because they get lost a little bit in the alphabet soup. So it is all part of the general shift that got started with pensions from a defined benefit paradigm for Employee Benefits to a defined contribution paradigm. What do i mean by that . With a defined benefit paradigm your employer basically promises you a benefit now or in the future. You will get 2,000 a month for retirement income. I will pay for, you know, all of your Health Care Expenses minus maybe some copayments. To a shift where the employer will place some amount of money, if youre lucky, into an account and you will 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 we talked about is if theres not enough money in that account, which i will return to again throughout my presentation, then it is not all that much help to you, right . 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 enact the legislation for hsas tend to really love the individual accounts. It goes along with the american ethos of individuality and control and ownership, the idea that people can decide for themselves what their needs are and act on those needs, that you dont have to an employer telling you what to do and providing for your benefits in a way they think is appropriate. Democrats on the other hand tend to think that individual accounts shift the risks to people who are least able to bear it. So democrats are focused on the fact that theres not enough money in the account. Maybe the accounts in theory would be a good idea if they were fully fund, but theyre not. Democrats see it as a way of cutting back on benefits. So talking a little bit about the basics of hsas. So the way it works is that hsas must be combined with a High Deductible Health plan or an hdhp, not to add to our alphabet soup. Instead of traditional private, you know, Health Insurance that covers all of your medical care needs with an exception for some copayments, maybe some coinsurance, but covers your medical needs starting from day one with an hdhp your traditional Health Insurance coverage doesnt start until you reach a pretty high threshold, right . Before that time either youre responsible for paying out of pocket or you can use your hsa if it has money in it to cover those costs. I remember when i graduated from law school in 2004 i spent my whole first year working with employers to put in place these hsas and these hdhps, and at the time people, you know, were up in arms, you know, about the hsas and thinking, you know, this wont be good enough, people wont have enough of their expenses covered. Today people are lucky if they have the hsas, right, because whether they want to or not most people have been shifted towards higher deductible Health Insurance plans and frequently they just they would love to have an hsa that has some money in it. So ill talk about so the High Deductible Health plans dont kick in until the threshold except for an exception for the preventive care. The aca requires they cover some preventive care, but beyond that theres this hole between before your insurance kicks in where you have to pay for the expenses. On the next slide i will talk about the numbers. But professor yi is going to talk a little bit about the Tax Advantages of hsas. She mentioned in her article it is an incredible savings vehicle, triple tax savings, right . So your contributions to the hsa are deductible from income. The Earnings Growth tax free, and withdrawals from the account are not taxed if theyre used for qualified medical expenses. Thats really the focus of the article i have written, is what account what are account holders allowed to spend their money on and how i think it should be different. So money can only be used for medical care as defined under section 213b of the Internal Revenue code. This is a definition that originally applied to a deduction in the tax code for people who have excessively high Health Care Expenses. Right now the threshold the 10 of income, which is an extraordinarily high amount before the deduction kicks in. But when the withhold cdhp Consumer Driven Health Plan Movement kicks in, its definition was expanded to apply to the whole alphabet soup. All are using that definition which is out of date, and we will talk about how Health Care Scholars are focused on other things beyond traditional medical care. What you see now are these are the 2017 numbers for hsas and hdhps, which have to sfr an annual deductible of 1300 for single coverage and 2600 for family coverage. It is a pretty high maximum for out of pocket copays, 13,000 for a family is for most people, you know, they would start rationing health care far before they got to that point. Employers and employees can contribute up to the maximum aggregate limit which is you know, the congressional proposals work on expanding the limit but right now 3400 for single coverage, 6750 for family and a contribution for people 55 and over. So right now roughly 19 of employees are enrolled in an hsa qualified hdhp, thats careful language. It doesnt mean they opened up an hsa, it doesnt mean theres money in the hsa if they have opened it up. So it makes it you know, you can see from the numbers below that, 25 receive no employer contributions at all. The average employee employer contribution of 1200 for family needs to be balanced against the current average annual deductible for a family of over 4,300. Theres about a 3,000 gap between what the average employer is contributing to the hsa 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 draw backs to hsas. Obviously i dont think theyre insurmountable or i wouldnt have written the paper i wrote, but, you know, the biggest draw backs which weve mentioned before is that you need to have money to fund them. Sarah rosenbaum, a professor at Health Policy said it is a nonstarter for people with low incomes. I think it doesnt need to be true. It is just another vehicle for getting money allocated for health care to people, right . Thats really all these accounts are. So it has Great Potential in my view. The great risk shift which i talked about before, jacob hacker at yale has done a lot of research on this, you know, employees now are paying you know, if they get switched from a traditional Health Insurance plan to an hdhp, theyre paying more of their medical expenses than they used to, right . Professor this is where professor yis work will come in. Not everyone is being switched. Some people are gaining new coverage, but obviously employees are bearing more of the cost than they did before. The idea is that it may not be such a bad thing, right . Health care expenditures are pretty tremendous. We want to find ways to limit them. We want people to think more carefully, are they using unnecessary services, you know, are there ways that this could force people to think more carefully about their medical needs. But the problem with that is that, you know, studies have shown that consumers are not fully rational when it comes to Health Expenditures and there are a lot of reasons for this. First of all, unlike other goods that you might do some shopping around it is pretty hard to shop around and look for competitive prices when youre sick. Obviously if youre in the hospital and you need emergency services, this is difficult. But even if you are just not feeling well the idea of calling five pharmacies to find the best price on a medication is pretty unappealing to most people. You can imagine that this would add burdens to the system that are not currently there. If the pharmacies, everyone had to be 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 treatments at sloankettering versus the same treatment at a local hospital . How do you deal with the fact that people have a very subjective attachment to their doctors, right . And they may be willing to pay more than they rationally should to see a particular doctor. You know, other reasons, hard to know if the services are even necessary. So forgetting that it may be hard to compare prices, people are relying on their doctors and on experts who know more about medical care than they do to understand if they even need these treatments. So it is a little bit hard for individuals without a medical degree to second guess the doctors and help to ration their own health care. And the final point i wanted to make is that studies are showing and i list a couple here that people are rationing their own health care and avoiding needed medical treatment because they dont have enough money in their accounts. You know, the idea is that you want people to feel the cost, right, with traditional Health Insurance people have no skin in the game so they have no incentive at all to limit their services that they consume. But, you know, here maybe theres a little too much skin in the game, right . And maybe people are choosing to spend the money on other things such as where my research comes in, and in terms of it being complicate i complicated, it comes back to my friend if youre not sure you have an hsa, and then making sure you have enough money to meet your needs and getting reimbursed, it is all pretty difficult. Current legislative proposal and i wont say too much here because it is in such a state of flux, but beyond the most recent proposal i heard from senator cruz, the ahca and the senate bill, the last version i knew about were really focused on doubling the contribution limits to hsas to 5,000 for single coverage and 10,000 for family coverage. Again, this is a nice idea but, you know, if a lot of people dont have money in the account, upping the contribution limit which people are not reaching anyway doesnt really help that much. Focus on giving people more flexibility, you know. Some of the things i mention there, i think the most important one is really reducing the tax penalty when money is not used for qualified medical care. The reason for that is you may have some people avoiding putting money into these savings accounts because it is unpredictable, right . You may hear figures like in retirement you need 200,000 for your medical care, but you dont know that. If people are going to have a really large penalty if they pull th

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