I knew I was in trouble when the first bill arrived. A few months after going from uninsured to using a health savings account to manage the cost of care, I was starting to grasp the reality of what I’d done. Two hundred and twenty-one dollars for a physical. Plus the blood work: $140 more. For someone who grew up with $10 co-pays and same-day visits, this was stratospheric.
But this sticker shock is sort of the point of a health savings account, or HSA. According to proponents of HSAs, market-based solutions that reveal to Americans the real cost of their healthcare will make them more thoughtful about how they seek out medical care. They won’t just run immediately to an ENT for a sore throat or demand an MRI for a headache (it’s a tumor, right?). They’ll watch their pennies and take responsibility for their health. This will slow the growth of healthcare spending. That, at least, is the idea, and it’s one that has the support of lots of Republicans and conservative policy analysts.
But does the theory work? I can say this much: in my case, having an HSA amounted to having insurance in name only.
Here’s how it all started. In 2005, not long after I went into business for myself and joined the uninsured, I started having a recurring dream in which I’d lose my equilibrium and crash onto a concrete sidewalk, breaking my leg. My invariable reaction would be panic–not over the pain but over the thousands of dollars it would cost to set and fix it. I’d come awake in a sweat. So I looked around the confusing medical marketplace and picked out a plan. And what looked most appealing was an HSA.
Congress created HSAs in 2003, and they are exactly what they sound like: savings accounts. What makes them special is that the money you invest–annually up to $3,050 for an individual and $6,150 for a family, according to the IRS–can be deposited tax-free, withdrawn for healthcare costs tax-free, or grown (through interest or earnings from investments) tax-free. Best of all, once you reach age 60, you can spend that money on anything you like without a penalty.
But there’s a catch. These savings accounts are only available in conjunction with specific health plans that offer lower premiums but higher annual deductibles–anywhere from $1,200 for an individual to $11,900 for a family. This is what’s called an HDHP–a high-deductible health plan. And that’s what makes an HSA much less attractive.
In my case, I chose a plan with a $4,000 deductible and a premium of $115 a month. (That premium wound up being higher, in practice: pre-existing conditions, you know.) I thought I was being smart. I opened an account with $200, full of optimism. The broken-leg dreams disappeared.
But it soon turned out that the math didn’t work, at least not for me. With an HDHP, you must have the cash on hand to cover not only your premium but also your deductible and your maximum out-of-pocket expenses. In my case, that meant I’d need $4,000 on hand, $150 a month for the premium, and, for my plan, an additional 20 percent of all costs up to a maximum out-of-pocket amount. I never had that kind of money. By the way, I wasn’t unique in being strapped for cash. According to Paul Fronstin, director of health research and education at the nonpartisan Employee Benefit Research Council, the average HSA contains about $1,400.
HSA plans are built on the assumption that you want protect to your savings. But I was broke, with no savings to protect. My goal was just to avoid further debt. It soon became clear that I wouldn’t be able to contribute to the HSA very often. In 2006, I contributed about $80. In 2007, that dropped to $50. The following year, the account sat fallow.
Meanwhile, I had the aforementioned $221 physical and $140 worth of blood work. A gynecological screening ran $45. A flu shot and another doctor’s visit added another $191. A specialist visit came in at $156. My allergy spray cost $72 a month. I quickly blew through my HSA money and stopped seeking out most medical care, period. When I thought I might have an infection, I treated it with vitamins and prayer. I decided my allergies weren’t that bad and started rationing out puffs from my inhaler.
Soon, I became a consummate but impotent hypochondriac. Is that a sore throat? It’s probably allergies. What if it’s not allergies? Oh God, it’s strep, I know it. Are those heart pains? Just pretend it’s not happening. Nothing’s happening. Nothing to see here.
As it turns out, according to a study from the Commonwealth Fund, a nonpartisan think tank, most people with HSAs and HDHPs do pretty much what I did: delay care, forego medications, and ignore chronic problems. They act, in short, like the uninsured.
But I was lucky–and relatively young and healthy. The average American family that files bankruptcy in this country is saddled with about $12,000 in debt, and medical debt accounts for about one in five bankruptcies. That number is rising, according to Karen Pollitz, senior fellow at the Kaiser Family Foundation.
Of course, I was at the low end of the income spectrum among those who use HSAs. In 2008, the Government Accountability Office found that the average annual income of a person with an HSA was $139,000 and that 41 percent of the people with such accounts weren’t using any of the money for healthcare costs. That makes sense, says Pollitz, because an HSA is like “another IRA.” Portland, Oregon-based tax accountant Joseph Anthony says the majority of his clients who have HSAs use them as investments and tax shelters, not as healthcare accounts.
Pollitz recounts a conversation she had with a friend with an HSA. When Pollitz said something about withdrawing money from the HSA pay for healthcare, Pollitz’s friend scoffed. “Oh no, we never touch that,” said the friend. “We’re getting a great return on it.”
Needless to say, I wasn’t getting great returns on my HSA. In fact, my fees exceeded my deposits. Eventually, I went back to the same insurer that my parents had when I was a kid. I won’t deny that the premium is pretty high: not much less than I would have needed to save every month to make the HSA functional. But the difference is that I seek out treatment when I should. I use my allergy medicine. I get physical exams.
I may not know how much my healthcare really costs now–and may not ration it the way HSA enthusiasts would like–but the solution isn’t passing the healthcare-cost buck on to individuals without the sophistication to choose good plans for themselves. The solution is to figure out why our healthcare costs are so stratospheric to begin with. If it’s really a matter of getting people to have more direct financial skin in the game, then there’s a better way to do it than to have some people foregoing medical care and others piling on savings in tax shelters. Maybe that’s why researchers from groups ranging from the Commonwealth Fund to the Government Accountability Office have found that HSAs don’t serve the people most in need of health coverage.
In the meantime, I’ll sleep soundly. And even if I start dreaming of broken legs again, the sickening snap of a bone will no longer be the sound of something I can’t afford to fix.
Heather Boerner is a healthcare writer based in San Francisco. Find her at www.heatherboerner.com.
*Photo courtesy of EU Social.
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