Monday, September 27, 2004
Half right on health care
[David Nicklaus, "America's health care problem? Actually, the nation must confront two," The St. Louis Post-Dispatch, 26 September 2004.]
Post-Dispatch columnist David Nicklaus is correct when he states that socialized care will drive up costs, but his discussion of HSAs reveals a misunderstanding of how they work:
The health savings accounts embraced by President George W. Bush, for example, depend on market competition to address the rising costs. This approach forces people to pay for most routine care out of their own pockets, with catastrophic-care insurance kicking in only after one has spent $1,000 or more. In theory, most of us would be less likely to demand unnecessary tests or visit the doctor for every case of the sniffles.
But if these individual policies replaced employer-provided insurance as our primary method of paying for health care, many low-income workers could not afford the catastrophic-care premiums, let alone the $1,000 deductible. The ranks of the uninsured would swell.
On the other hand, any massive government program to help the uninsured is likely to increase overall medical costs. Sen. John Kerry favors this approach, with a plan to spend $650 billion over 10 years to expand Medicaid and children's health insurance programs.
Independent experts say this plan would reduce the number of uninsured by about two-thirds, providing coverage to about 27 million people who now have none.
But the laws of supply and demand are inexorable. The supply of hospitals and doctors is fixed in the short run, and 27 million new customers is a big increase in demand. The likely result would be even more upward pressure on health care costs.
Nicklaus gives the impression that if HSAs were widely implemented, the uninsured would swell as employers stop offering coverage and premums and deductibles prove too expensive for many. The reality is that people pay out of pocket for health care costs up to that deductible over time, and research indicates the costs are similar to those paying for more comprehensive coverage. As well, higher deductibles mean lower premiums, which makes insurance a more attractive option not only for the uninsured, but for employers. Catastrophic coverage is certainly better than none at all since a person's liability is capped. HSAs are a tool to expand coverage availability, not reduce it.
[David Nicklaus, "America's health care problem? Actually, the nation must confront two," The St. Louis Post-Dispatch, 26 September 2004.]
Post-Dispatch columnist David Nicklaus is correct when he states that socialized care will drive up costs, but his discussion of HSAs reveals a misunderstanding of how they work:
The health savings accounts embraced by President George W. Bush, for example, depend on market competition to address the rising costs. This approach forces people to pay for most routine care out of their own pockets, with catastrophic-care insurance kicking in only after one has spent $1,000 or more. In theory, most of us would be less likely to demand unnecessary tests or visit the doctor for every case of the sniffles.
But if these individual policies replaced employer-provided insurance as our primary method of paying for health care, many low-income workers could not afford the catastrophic-care premiums, let alone the $1,000 deductible. The ranks of the uninsured would swell.
On the other hand, any massive government program to help the uninsured is likely to increase overall medical costs. Sen. John Kerry favors this approach, with a plan to spend $650 billion over 10 years to expand Medicaid and children's health insurance programs.
Independent experts say this plan would reduce the number of uninsured by about two-thirds, providing coverage to about 27 million people who now have none.
But the laws of supply and demand are inexorable. The supply of hospitals and doctors is fixed in the short run, and 27 million new customers is a big increase in demand. The likely result would be even more upward pressure on health care costs.
Nicklaus gives the impression that if HSAs were widely implemented, the uninsured would swell as employers stop offering coverage and premums and deductibles prove too expensive for many. The reality is that people pay out of pocket for health care costs up to that deductible over time, and research indicates the costs are similar to those paying for more comprehensive coverage. As well, higher deductibles mean lower premiums, which makes insurance a more attractive option not only for the uninsured, but for employers. Catastrophic coverage is certainly better than none at all since a person's liability is capped. HSAs are a tool to expand coverage availability, not reduce it.
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