Straight Story: Consumer-driven health care

Marketplace Staff Jan 12, 2007

KAI RYSSDAL: It is time once again for our Economics editor Chris Farrell to help you sort out what’s smart, what is stupid and what’s the straight story. This week Chris has some thoughts on the National Healthcare dilemma.

CHRIS FARRELL: That’s right Kai. If you just go back a few years ago, so called consumer driven health plans were all the rage. You remember those right?

RYSSDAL: I do indeed.

FARRELL: They’re modeled, they’re reminiscent of 401Ks and experts said they would revolutionize healthcare. And the basic idea once people had to pay more for medical services out of their own pocket they’d stop going to the doctor so much paying for needless wasteful care. Well it doesn’t look like anyone’s buying that anymore. California Governor Arnold Schwarzenegger is proposing universal health coverage for his state. It’s the same trail Massachusetts blazed last year. Both plans come from, and I quote, conservative governors. So here is the straight story. The country is shifting away from consumer driven plans and toward radical

RYSSDAL: What I need you to do for me though is explain this consumer driven phrase. When I hear that I think this thing called HSAs, right?

FARRELL: You are absolutely right it’s the health savings account. And lets just keep it real simple. You have a tax sheltered account for a family you can put in a little over $5400 if you are an individual a little over $2800. And you use that money to pay medical bills. And then above that is what we call a high deductible catastrophic health insurance plan. So once you’ve exhausted your savings account and you’ve reached the deductible then you are protected against catastrophe with a health insurance plan. And by the way if you don’t use that savings account one year you can roll it over into the next.

RYSSDAL: All right. But wait a minute I thought HSAs were going to be the big thing. I mean, they’ve been talking about them here at America Public Media for a while. Now you are saying that’s not going to happen.

FARRELL: I think they will continue to grow. In fact I think within a niche independent employees, consultants. They’re still the best plan out there that are offered on the market. But what employers are learning is these are complicated plans and the notion that consumers go to the doctor too much and then they have their own money they’ll be more cost conscious. Well you know what they are not doing that annual visit to the doctor. So you might get some short term cost savings. Long term you may actually end up with a bigger bill.

The other side is there are people out there that are going you know what I could have this elective surgery, you know get my knee fixed, this year and then I could have, you know, this hernia fixed next year. But you know what I’m gonna do both of them the same year because I’m going to exhaust my account anyway. The timing of a lot of the spending is shifting. By and large I think the big knock against these plans is a growing concern that people are actually not spending the money. And employers want you to go and have annual checkup. They want you to maintain your health because you know what they’d like you to show up at work.

RYSSDAL: All right. So if employer provided benefits are plan A and HSAs are plan B what do you suppose is plan C now?

FARRELL: Plan C is the governors are saying look it’s a shared responsibility. So we are going to look at our major institutions, we’re gonna look at government, we’re gonna look at business, we’re gonna look at the healthcare providers and we’re gonna look at the uninsured themselves. And we are going to move toward a system of taxes, I mean, they are calling them fees but they are taxes okay. They are really taxes. We are going to move to a system of taxes, mandates you are gonna have to have coverage and then for example and employer can offer a plan or, you know, if it doesn’t want to offer a plan then it has to contribute money into some sort of state pool. Basically what the governors are saying is lets deal with the problem of the uninsured. Maybe the plan might be a very traditional plan but let’s focus on getting the uninsured into the system. And that’s a very different focus Kai, then saying American’s are going to the doctor too much and they are wasting too much money and that’s the primary problem. What we are seeing is a shift in the National debate.

RYSSDAL: All right. We are I’m sure a long way from done on this one. The straight story from our man Chris Farrell. Thank you Chris.

FARRELL: Thanks a lot Kai.

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