One of the reforms proposed as part of the Trump health platform is to “allow individuals to use Health Savings Accounts (HSAs).” This increased emphasis on HSAs is a clarion call for more understanding about how to make HSAs work so that they are equitable, effective, and efficient.
Although HSAs are conceptually appealing and can play an important role in health reforms, current evidence suggests that they primarily benefit the wealthy, the healthy, and the educated. Thus, new approaches will be needed if HSAs are to be used more widely and improve health outcomes for the broader population.
Current Use of Health Savings Accounts
HSAs enable consumers to use tax-preferred savings to pay for out-of-pocket health care costs including expenses not covered by deductibles or paid by insurers. The accounts are owned by the individual and thus portable across employers. HSAs are currently paired with high-deductible health plans (plans with deductibles of at least $1,300 for an individual and $2,600 for a family), and thus they soften the blow of such plans on consumers’ pocketbooks. The use of HSAs and high-deductible plans has increased in recent years with almost a quarter of employees enrolled in such plans in 2015.
The Trump plan doesn’t offer specifics about what they are proposing although since HSAs already are available for many individuals, the assumption is that he is proposing to allow all individuals to open HSAs (including those who do not have high-deductible health plans). In addition, on the campaign trail he proposed a much greater role for HSAs — that they could even replace the Affordable Care Act (ACA) and replace Medicare.
The Trump plan states that the “flexibility and security provided by HSAs will be of great benefit to all who participate.” Certainly, there are many potential benefits to HSAs. But are these benefits truly available to all?
The Reality Of Health Savings Accounts
In general, studies have found that HSAs combined with high-deductible plans can decrease overall use of services and costs, but there is little evidence yet that this results in improved health status. Most low-income individuals do not have a high enough tax liability to benefit from the tax deductions associated with HSAs — and that assumes that they even have enough disposable income to put aside into a savings account. Studies have found that the impact of HSAs differs by income level, e.g., lower-income workers (and their dependents) were more likely than higher-income individuals to reduce their use of physician office visits and certain high-value services not subject to the deductible, such as influenza vaccinations and breast cancer screenings. HSAs benefit not only the wealthier more but also healthier individuals who are more likely to be able to benefit from accrued savings over time.
Lastly, an important but often neglected aspect of HSAs is that they require an educated and savvy consumer who can devote a great deal of time and effort to understanding their plan and shopping for care. I can speak to this from my own experience. I wanted to “practice what I preach” and thus enrolled in a high-deductible health plan coupled with a HSA. How can I shop for care when providers can’t tell me what the price is or they tell me that care is “free” simply because I don’t pay a co-pay up-front? How can I choose between services and providers when I don’t have enough information to do so? How can I navigate through multiple, often contradictory and unlinked websites — one for the health plan, one for carve-out benefits, and one for my HSA? And how can I even remember when to pay for care using my HSA debit card versus asking the provider to bill the plan? In sum, does my HSA cause me to shop more for care? Yes. Does it enhance my pocketbook? Sometimes. Does it improve my health? I’m not sure.
Making Health Savings Account Work
There are many potential solutions to improving the use of HSAs, but they will require new and creative approaches to solving these challenges. One promising avenue is greater use of evidence on how people actually perceive and use information—“behavioral economics”—and the use of the science of choice to create more effective policies — what has been called policy “nudges.” In our study in Health Affairs on how consumers perceive the association between price and quality, we found that how the information was framed impacted their perceptions — a finding predicted by behavioral economics that has implications for how consumers can use price and quality information to shop for care in conjunction with HSAs.
HSAs and other consumer-oriented reforms have an important role in improving our health care system, but without a better understanding of their actual use across populations, they are most likely to benefit those who need the benefits the least. Trump promises health care reform that will “Make America Great Again.” We must make it great for everyone.