Are Health Savings Accounts Working Effectively?

According to the American Benefits Council which is a national trade association, its statement before the Subcommittee on Health of the House Committee on Ways and Means states claims that Health Savings Accounts are working as intended. American Benefits Council claims that HSA-eligible plans will benefit the vast majority of the 6.1 million Americans covered by the plans. On the other hand, Linda J. Blumberg of the Urban Institute research associate in her testimony before the Subcommittee identified several problems linked to medical care hence opines that HSAs do not provide the solution to the pressing national concerns. This paper will, therefore, explore arguments raised by American Benefits Council in support of the effectiveness of HSAs and Linder J. Blumberg’s contentions against HSAs effectiveness and give a plausible viewpoint on this issue.

Evaluations conducted on the U.S. health sector indicated that the United States is the highest spender in healthcare in the world at an estimate of 15 per of the total gross domestic product. On the contrary, more than 36 countries in the world have a higher life expectancy and lower infant mortality rates than the United States. Analysts agreed that the health sector was not operating efficiently prompting the creation of health savings accounts on December 8, 2003, by Bush administration. President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act (United States, 2003).

In their defense for the effectiveness of HSAs, the American Benefits Council claims that HSAs have increasing become integral to millions of Americans in securing high quality and low-cost medical coverage (Bonello & Lobo, 2009). As of January 2008, data compiled by GAO indicated that around 6.1 million Americans were under HSA/HDHP cover. The Council also pointed out that earlier data presented to the Subcommittee indicated that HSAs had the potential to constantly reduce health care cost, and increase wellness and quality of care for American Families. HSAs previous data also shows that it include comprehensive “first dollar” preventive care coverage (Bonello & Lobo, 2009).

Recent data on HSAs indicates that participants are adequately endowed enabling them to meet actual out of pocket expenses under the HDPHPs account. It is important to note that withdrawals from HSA account are used principally for qualified medical expenses of the current year. Though critics claim that HSAs are used by high-income individuals as a form of evading tax, statistics indicates that 45% of HSA enrolees by 2005 had annual incomes lower than $50, 000. Today, projections are that the percentage is higher (Bonello & Lobo, 2009).

Those criticizing the lack of the third party in HSA accounts should understand that substantiation of HSA is consistent rules and treatment afforded any other special purpose account, especially under the health tax provisions (Bonello & Lobo, 2009). General approach covering health expenditures do not in any way require the substantiation of a third party for a citizen to obtain an income tax deduction or any other tax favor. It is also entirely inappropriate to impose third party substantiation requirements on HSA since this will only increase costs for the account holders limiting people’s options for health coverage. This is negatively affected since, at a time like this, such medical care options like HSA should be expanded.

Linda J. Blumberg, on the other hand, was firm on her “No” to Health Savings Accounts through her testimony. Linda opined that there has been an escalating number of uninsured Americans as well as an increasing cost of medical care which ultimately makes millions of Americans miss out on accessing necessary medical care. She claimed that HSAs were not the solution to these hardships facing the country and its healthcare sector (Bonello & Lobo, 2009).

Linda also claims that HSAs are poorly targeted for expanding coverage since most of the people who should benefit from it do not reap the benefits compared to the high-income earners. High-income earners are now operating without insurance seeking tax exemptions provided by HSA accounts. Ideally, these high-income earners are the ones likely to purchase health insurance and contribute towards economic growth (Bonello & Lobo, 2009). Linda also points out that due to the skewed nature of spending in health care, 70 percent of total health expenditure is accounted for by the highest-spending 10 percent of the population. She, therefore, do not find it effective to contain costs without substantially dealing with the high users of health care services who eventually will not feel any significant effect on their overall spending.

Linda indicates that high deductible plans applied by the HSAs model have limited ability in making patients better value shoppers. This is because the ability of patients to compare health care providers based on their cost and quality is limited. This may lead to reductions in care, later making health care expensive with catastrophic consequences in the long run. Linda also claims that comprehensive policies offered by third party health insurers are more effective and pose lesser financial burdens on the citizens than the high-deductible plans offered by HSAs. Low-income earners lack assets to cover the high deductible plans, and this is why most of them have not been able to join HSA program (Bonello & Lobo, 2009).

According to Johnson (2016), comparing the two sides between American Benefits Council and Linda J. Blumberg, it is plausible first to weigh both ends before taking any side. We find that in the world nowadays, HSAs, as well as other consumer-directed products, have constantly been perceiving widespread attention and undergoing rapid growth. Regardless of the market share enjoyed by HSA, it represents a milestone in the current healthcare reform debates (Keller et al., 2009). Although an increase in cost sharing may present underuse of effective health care, it will eventually attenuate overuse of discretionary services through the creation of cost awareness.

The shift to savings from insurance raises great concerns about the distribution of financial responsibility especially between the sick and the healthy, but this salutarily highlights the need to adjusting pay as you go programs in accordance with demographic realities and budgetary realities facing the United States. Though individualism weakens society’s sense of collective responsibility, it emphasizes on the importance of putting an individual effort in the generation of economic resources underlying any system of care. HSA, therefore, stands out as another step moving the nation towards a personalized and privatized health care system (ICHIP, 2009).

According to (Keller et al. (2009), research carried out by Health Services Research, a study was taken on the spending of 76, 310 enrolees of a national health insurer where their employers started offering them HSA eligible plans from2005 to 2007. Generalized linear regressions models were used in examining the impact of switching to HSAs. The results indicated that HSA enrolees spent 5-7 percent less than non-HSA enrolees. I thus support the consumer-driven health plans such as HSAs.



Works Cited

Bonello, F. J., & Lobo, I. (2009). Clashing views on economic issues. London: McGraw-Hill         Education – Europe.

Lo Sasso, A. T., Shah, M., & Frogner, B. K. (2010). Health Savings Accounts and Healt   Care Spending. Health Services Research45(4), 1041–1060.  

Illinois Comprehensive Health Insurance Plan. (2009). ICHIP high deductible health plan  (HDHP): If you are eligible for one of the ICHIP plans, you now have the option of         choosing a plan that qualifies for use with a Health Savings Account (HSA).          Springfield, IL: Author.

Johnson, W. R. (2015). 2016 health savings account facts. S.l.: Natl Underwriters.

Keller, C. L., Lesser, G. S., Diehl, S. D., & Lesser, G. S. (2009). Health savings account    answer book. New York: Aspen Publishers.

United States. (2003). Health Savings Account Availability Act: Report together with          dissenting views (to accompany H.R. 2351) (including cost estimate of the           Congressional Budget Office). Washington, D.C.: U.S. G.P.O.


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