Jan 30, 2017

Key part of GOP health plans may raise out-of-pocket costs

Matt Rourke / AP

Most Republicans agree on one part of their Obamacare replacement: It will include greater use of health savings accounts. But after years of outcry over rising deductibles and out-of-pocket spending under Obamacare, they could face their own backlash over this policy — because it's built on, well, high deductibles and out-of-pocket spending.

President Trump himself endorsed health savings accounts at the Republican retreat in Philadelphia last week, saying they give people more choice over what insurance plan is right for them. But he's also been vocal about the need to lower deductibles and out of pocket spending, echoing the populist outcry over health care costs.

But health savings accounts are tied to high-deductible plans — and that's deliberate, because the idea is to make consumers take more responsibility for their health care spending. Greater use of the savings accounts "runs counter to Trump's talk about lower deductibles and out of pocket expenses," Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget, tells Axios.

In fact, Lanhee Chen, a conservative health care expert and a member of the Axios board of outside experts, said he didn't believe lower out of pocket costs will be a focus of any of the Obamacare replacement plans. "They all look to create greater incentives around consumer cost containment — and that, by nature, generally means lower-premium, higher deductible plans," he said.

What they are: Health savings accounts are special, tax-preferred accounts to be used for health care spending. They're always tied to a high-deductible insurance plan. There's a limit on how much people can put into them, but that amount is tax deductible.

Republican proposals generally raise the contribution limit, make it easier to have and contribute to the accounts, and loosen the rules about what the accounts can be used for. Some proposals, like the one from Sens. Bill Cassidy and Susan Collins, have the federal government add money to the account. It's their way of giving people financial help, rather than Obamacare's premium and cost-sharing subsidies.

In theory, people would put money into their health savings account, and then use this money to pay for any out-of-pocket medical expenses they have before they hit their deductible — at which point their insurance kicks in.

The argument for: Conservative health philosophy believes "the best way to control health-care costs, to get providers to reduce their prices and prescribe treatments more effectively and efficiently, is to put consumers at risk or in the position where they have to pay directly with their own money for health care," said Karen Pollitz of the Kaiser Family Foundation, who has been studying recent GOP replacement plans.

Christopher Condeluci, a former GOP Finance Committee aide and a member of the Axios board of outside experts, adds: "A high deductible health plan by definition has a lower premium."

The argument against: Health savings accounts generally are used by the wealthy. Most low-income people don't have them, Pollitz said, and they're opened "overwhelmingly" by people who make more than $100,000 a year. Low-income people generally don't have much disposable income to put into a savings account, and even if they did, the tax deduction isn't worth as much to a low-earner as it is to someone in the top income tax bracket.

"I think the expectation is people would pay substantially more out of pocket for all of their health care, compared to what insurance costs today," Pollitz said.

Condeluci says the ideal scenario would be pairing the savings accounts with plans that have lower deductibles than the ones in the Obamacare marketplaces. They'd also be cheaper, he said, because Republicans would loosen the regulations on what insurers have to cover.

What's next: Health savings accounts are likely to be part of the "reconciliation" bills that will be used to repeal Obamacare, so watch for any sign that Republicans acknowledge the cost dilemma.

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