Beginning to sound like a broken record, the newly elected Alabama Republican state representatives are once again demonstrating their “market” credibility. They are quoted in the paper today as  identifying the state funded teachers health insurance as the place to insert needed market reforms. The legislators and the governor are quoted as having this as a priority:

Starting health savings accounts for teachers and state agency employees. An employee and the state could put money into a person’s account, which would belong to the employee and could be used to pay medical costs. Together with the accounts, the state would offer high-deductible health insurance, which would save the state money.

  Such a plan, which Bentley championed on the campaign trail, could cut the number of insurance claims paid by the state because people, in theory, would be less likely to seek medical care that wasn’t absolutely necessary if they had to pay more of their own money for it, said William Ashmore, chief executive of the State Employees’ Insurance Board.

As I have discussed before, HSAs are good theory but haven’t been shown to improve health or reduce risk taking behavior.  This was looked at more in-depth here and here (subscription required) with the following observations from the literature.

  • Cost savings for a care event have never been documented. For the most part the health costs seem lower because healthier people tend to use HSAs and spend their health care dollars on things such as dental work, vision care such as lasik, braces, cosmetic procedures, and maternity care.
  • Chronic illness care costs more in these types of plans and the “catastrophic” coverage often doesn’t kick in leaving people to make “hard decisions” regarding life saving treatments
  • People using these types of plans tend to disregard preventive recommendations leading to fewer immunizations, PAP smears, and mammograms and more late stage and preventable illness
  • People tended to make poor decisions about seeking care for serious symptoms (such as chest pain)

So why does this idea not die? Possibly because it is consistent with the  constant message from groups like the Heritage Foundation denying the benefit of all government oversight and extolling market solutions (regardless of the supporting evidence). For the most part I think it has traction because it seems intuitive that if people have “skin in the game” when it comes to their health purchases they will make better decisions. We would all like to believe that humans will make rational decisions, in particular when in comes to health, as no one wants to lose one’s health. Unfortunately, as my friend Josh Freeman has pointed out, most people use very little health care so have little opportunity to make decisions and influence the market. When folks need it, however, they really need it:

Seniors, because they are also more likely to have multiple chronic health problems that require multiple hospitalizations, and because they are more likely to have cancer, which costs a lot to treat, are also disproportionately represented in the high cost group. However, they are still the minority of that group. These high-cost users are the “outliers”, and also include other people with cancer, people with trauma, as from auto accidents, requiring multiple surgeries, and premature and sick babies requiring incredibly expensive care in neonatal intensive care units.

What HSAs do is encourage those people who are low utilizers to spend more on things that provide a marginal benefit, thus raising healthcare costs. A better way would be to work within the confines of the Affordable Care Act to create efficiencies within our state (as is being done in other states). If we are lucky our legislators will come to this conclusion as well before the HSA lobbyists sell them a new policy for the teachers and folks like me are left to clean up the mess.

A note for clarification: Apparently, state employees already can opt into an HSA. Someone should probably brief the Governor-elect on the existing options.

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