Thursday, July 9, 2009

CDH and HSA Founder Endorses Universal Coverage

As a new entry, this blog looks back and looks forward. We quickly (by Congressional standards) approach the eve of the most important healthcare legislation since the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The 2003 legislation hatched a cottage industry centered on health savings accounts (HSAs). To what extent will reform in 2009 cause a reallocation of capital and skills from the consumer driven healthcare industry?

Regina Herzlinger, who is widely credited with the creation of HSAs and consumer driven healthcare, recently opined in the National Review that universal care is imminent. According to the article, the key task for CDH firms is to ensure that a strong degree of choice remains for consumers.

For Herzlinger, HSAs form just one plank in CDH. Professor Herzlinger’s take on HSAs and CDH was summarized in December by Business Week:
“Herzlinger does not want a regulation-free market. Nor does she think health savings accounts, favored by many Republicans, are the best solution. These plans, which combine high deductibles with tax exemptions for health-care dollars, have been adopted by only about 6% of Americans, and she figures that's about right. ‘Consumers should have hundreds of coverage options.’”

If HSAs are appropriate for 6% of the population, what health financing options will provide meaningful choices to the other 94%?


  1. Of course HSAs are not the panacea for our broken health care system, but the evidence of the last five years shows that consumer-directed health plans, along with HSAs, are reducing or eliminating premium increases, providing health insurance for previously uninsured individuals, and reducing overutilization of unnecessary health care services (resulting in more efficient use of services), and increasing personal responsibility in the form of more health- and cost-conscious behavior among its members, all without having a negative effect on health outcomes compared to the non-CDH population.

    Adding the high-deductible concept with a savings account to Medicare, for example, with the government funding the savings account, could actually keep it solvent for years to come.

    While there could be all kinds of other options for bringing down health care costs, unless the consumers incurring the cost have some direct stake in paying the bill, any cost controls on the health care system via government, much like the insurance companies, are the equivalent of doing brain surgery with boxing gloves on.

    I agree that there should be some additiona regulations and options, such as government subsidies for the economically disadvantaged and ensuring that those with pre-existing illnesses can get affordable coverage, but I cannot recall a bureaucracy doing anything efficiently in my lifetime.

    Maybe I take too simple a view of it all, but making everyone responsible for their routine health care costs and making everyone share in covering catastrophic health care costs seems like a good way to go because it keeps market forces in the mix but will not bankrupt anyone.

  2. I expanded on the idea of "doing brain surgery with boxing gloves" in today's posting. Thanks for the comment.