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AIS's Health Business Daily
Featured Story August 8, 2008 Congress, Not McCain or Obama, Is Likely to Determine Future of Health Savings Accounts Reprinted from INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. By Steve Davis, Managing Editor, (sdavis@aispub.com) While the presumptive Democratic and Republican presidential nominees have unveiled some of their health reform strategies, industry observers say it will be Congress — particularly the Senate — that ultimately determines the fate of consumer-directed health (CDH) and health reform. Of the 34 Senate seats up for election in November, 22 are now held by Republicans. "The split in the Senate will determine if [health care reform] is addressed on a partisan or bipartisan basis," says Roy Ramthun, president of HSA Consulting Services and a former senior health policy advisor to the Bush White House. "If you have enough votes to filibuster, things could come to a halt." That means that the Democrats will have to work with their Republican colleagues on a solution, he adds. On the House side, Ramthun notes that some key Democratic leaders are far more liberal than their party colleagues and have strong feelings about HSAs. Case in point: At a hearing two years ago, Rep. Pete Stark (D-Calif.), now chairman of the Ways and Means Health Subcommittee, referred to HSAs as "Weapons of Mass Destruction." Stark strongly advocates a government-run health system. Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, is another long-time opponent of HSAs. A year ago, Jon Sheiner, Rangel's legislative assistant and tax counsel, predicted that HSA improvements included in the Tax Relief and Health Care Act of 2006 would quickly be overturned. Congress, however, has not yet tried to repeal the law. Carlton Doty, a principal analyst with Forrester Research, Inc., agrees that Congress, not the next president, will decide the direction health reform takes. "I don't think either candidate will be able to move the needle on their own. Congress holds all the keys right now," he says. House's Hatred Could Hinder HSAs In a telephone interview with ICDC, Rep. Paul Ryan (R-Wis.) said that some of his colleagues in the House have a "visceral hatred for HSAs" and will work to derail them as they pursue a single-payer system. "Those that want to create a single-payer, cradle-to-grave [health coverage] system see HSAs as a threat to their world view." But as enrollment in HSA-qualified plans continues to grow, he says, it will be increasingly difficult to kill them, he adds. ICDC estimates that at least 6.3 million lives are now covered by an HSA-compatible health plan. Ryan predicts that 10 million lives will be covered by this time next year. "And the more they grow, the harder it will be to take them away," he says. "The next five years will determine whether we move to more of a single-payer system, or more of a consumer-directed system. Whatever happens, it will happen quickly." At AIS's "Meet the Health Policy Makers Conference in Washington, D.C., July 10 and 11, Rep. Dave Camp (R-Mich.), ranking Republican member on the Ways and Means health subcommittee, predicted that an Obama administration "will not be friendly to HSAs, and will not be friendly to market forces in health care." Camp recalled a recent House subcommittee hearing in which data from 2005 were used by opponents to illustrate the slow take-up of HSAs. "But HSAs weren't created until 2004, and now there are more than 6 million people enrolled [in HSA-qualified plans]. This is something we need to continue to foster," he said. In a later conference session, David Cutler, a health policy advisor to Obama, told attendees that greater consumer cost sharing under HSA-based plans encourage enrollees to skimp on necessary care. Cutler is a professor of applied economics at Harvard University's John F. Kennedy School of Government. "When you put people in higher cost-sharing plans, the first thing that goes is preventive care, and the second thing that goes is chronic care. That's a big problem if what you're trying to encourage is prevention," he told attendees. However, a 2007 UnitedHealth Group study of 250,000 CDH enrollees determined that CDH members seek preventive care (e.g., common health screenings) and treatment of chronic conditions at rates equivalent to, or better than, people enrolled in more traditional plans. HSAs Will Slow, or Grow Under a McCain presidency, HSAs would remain largely protected although there likely would be "small-scale attacks from Congress' rabid anti-consumer crowd," suggests Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank in Washington, D.C. "McCain's policy initiatives would bolster HSAs. As important, we would get another Treasury Dept. dedicated to HSA growth." Under an Obama presidency, however, the Treasury Dept. or Dept. of Labor could issue rulings that make HSAs less consumer-friendly, he says. Tom Miller, a resident fellow at the right-leaning American Enterprise Institute, adds that if HSAs become too restrictive, health reimbursement arrangements (HRAs) could be seen as an option with "far less regulatory underbrush." Miller, however, says it will be difficult for Congress to "snuff out" HSA-based coverage, although enrollment growth could be slowed considerably under an Obama administration. Grace-Marie Turner, president of the Alexandria, Va.-based Galen Institute, Inc., a nonprofit research organization focused on free-market ideas for health reform, says an Obama administration, with a Democratic-majority Congress, would be likely to pursue a much bigger role for the federal government in health care. While Democratic lawmakers might not target HSAs directly, the account-based health plans could become irrelevant as a result of larger changes in policy, she says. "If Congress determines the type of coverage that is required, [HSA-based plans] might not fit the definition," she says. "HSAs would be attacked covertly rather than overtly." While Obama hasn't specifically addressed HSAs in detail, he has suggested that they don't go far enough. In response to a survey last year, Obama told the American Academy of Family Physicians that HSAs "may be a helpful way of saving taxpayers money in the current health care environment. But the current health care environment is unsustainable, and health savings accounts don't do nearly enough. In the long run, it's going to take more than health savings accounts to provide the kind of comprehensive health coverage Americans need and deserve." Can Obama, McCain Plans Be Combined? Under McCain's proposal to reform health coverage, at least some of a worker's employer-paid insurance would be treated as taxable income. And similar to what President Bush proposed in 2007, McCain would provide all Americans with a $2,500 refundable tax credit for individuals and a $5,000 credit for families, regardless of the type of health coverage they purchase. McCain also would allow people to purchase health coverage across state lines. The plan set forth by Obama would allow people either to remain with a private insurer or enroll in a new government-created health care plan. A new federal program, which would be similar to Medicare, would be regulated by a health insurance "exchange" and offer a benefits package roughly equal to the one members of Congress receive through the Federal Employees Health Benefits Program. Obama also has proposed a tax credit for small businesses that offer health coverage to their employees. Greg Scandlen, president of CDH proponent Consumers for Health Care Choices, says there appear to be more similarities than differences between the two reform strategies. And account-based coverage, he adds, could work with either plan. "Even if you move to a mandatory universal-coverage program, will [the Democrats] really want the government to determine which benefits are covered and which providers can be used?" he asks. "If the Democrats were smart, they would embrace HSAs as a way of bringing about universal coverage with choice and flexibility for the individual patient. The problem with universal coverage is that it always removes flexibility." Rather than subsidizing health coverage for low-income people, as suggested by Obama, the federal government could subsidize an HSA contribution. The lowest-income people, for example, might receive an annual contribution that is equal to their annual deductible, Scandlen says. "The possibility of a blended program between Obama and McCain is extraordinary and is so obvious that I'm surprised no one else is thinking along those lines. They agree on more than they disagree," he says. According to Doty, employers generally are not waiting until after the election to launch a CDH plan. Financial service firms that don't yet offer HSAs, however, "seem to be waiting to take the plunge" until after the election, he says.
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