- The Washington Times - Saturday, November 25, 2006

With this month’s election having confirmed another narrowly balanced Congress next year, issues where political compromise could be forged will be at a premium. No public policy area is more important or more in need of reform than the nation’s health care system. Here the retooling of an existing public policy tool — personal health savings accounts, or HSAs — could pay great dividends to all the participants in America’s health care system, as well as to both political parties.

HSAs are the most unfortunate victims of the current political polarization. They offer individuals choice, flexibility, and freedom and also wider systemic benefits through the greater injection of economic incentives into America’s health care system — an area where all are notably absent. However, opponents have objected, saying such accounts will only be used by the healthy, wealthy and young. One way to move the debate forward would be to take direct aim at opponents’ criticism by tailoring personal accounts to help the sickest — those with ongoing medical conditions.

While an April poll by Zogby International showed just half of respondents had heard of personal health care accounts, they are not new. Around since 1997, they were greatly expanded in 2003. Currently an individual must have a qualifying health insurance policy (with a deductible of $1,050, or $2,100 for a family) and can contribute the lesser of the deductible amount or $2,700 ($5,450 for a family) to an HSA. Its contributions can be used for allowable medical expenses and any money remaining in the account grows tax-free. And because the individual owns the account, it is portable from job to job.

For proponents, HSAs’ flexibility, simplicity, and portability make them popular and the 3 million Americans now owning — and the almost 1,100 banks offering — HSAs agree. Critics respond that, by removing the healthy, wealthy and young from the traditional health care pool, rates will rise for those remaining.

In this rhetorical fight, proponents overlook their fundamental advantage. HSAs are a concept as well as law. When the concept is constrained by the law, it is the latter that needs to change. Proponents’ best course for doing this is not simply quantitatively changing the terms of debate by adjusting qualifying policies’ deductibles and individuals’ annual contribution limits — though decidedly good — but qualitatively changing it. Proponents should therefore design an HSA specifically intended to aid individuals with an on-going medical condition.

Designing such a special account would not be difficult. People with diagnosed medical conditions requiring permanent or prolonged care — such as diabetics or HIV-positive individuals — would qualify. Substantially larger contribution levels would be allowed, encompassing not just deductibles but out-of-pocket expenses. These higher contribution levels could be based on the higher of individuals’ past total expense experience or a multiple of their plan’s deductible. By increasing contribution limits, account balances would be more likely to grow and these would offset the expected higher future expenses as these individuals age.

Properly designed HSAs would work for such individuals and for overall health policy. People with on-going health issues need to be participants in their own care. They must be managers, not simply patients. Many areas — diet oversight, treatment regimens, testing, and more — are things that medical professionals can’t do at all, much less alone. HSAs give people both the economic incentive and the means to manage their health care needs now and in the future. Furthermore, if opponents are correct that removing the healthy, wealthy and young from the insurance pool will raise rates for those remaining, then using HSAs to remove these high-cost individuals from the insurance pool should likewise reduce the cost of general health care insurance premiums. That in turn should further reduce the ranks of the uninsured by making health insurance more affordable.

There are also strong arguments outside the health policy area for allowing those with ongoing treatment needs. Morally, who can deny the individual alone should have the right to make their health decisions — not an insurance plan’s permissible procedures or a government’s mandated benefits? Additionally, every other sphere of American life is moving to personalizing products for consumer individualization. HSAs offer the greatest opportunity for individual health care choice and people with ongoing treatment requirements have the greatest need for such a product.

In the coming Congress, the narrowly separated parties will need to show they can work together to achieve solutions. Properly designed, personal accounts will work for anyone, and they represent the hope for a more rational health care policy. It is therefore incumbent that health policymakers find out how to make them work for those people with on-going treatment needs. Opponents should be willing to concede that additional choices can only help those most in need of help and to test their own theory that altering the proportion of those with costly claims will alter the cost of health insurance. And proponents should be willing to grasp this opportunity for personal accounts. If personal accounts are in fact the future, it shouldn’t matter where their successes occur.

J.T. Young served in the Treasury Department and the Office of Management and Budget from 2001-2004 and as a congressional staff member from 1987-2000.

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