Making HSAs work for chronic care
People in diverse corners of healthcare are hopeful new legislation will ease growing consumer anxiety over higher medical deductibles. And it might have a chance of becoming law because the cause comes from rare bipartisan ground.
Early last month, U.S. Reps. Diane Black (R-Tenn.) and Earl Blumenauer (D-Ore.)—both of whom sit on the House Ways and Means Committee’s Health Subcommittee—introduced a bill that would change how the federal tax code treats high-deductible health plans that are paired with tax-exempt health savings accounts.
The bill would allow first-dollar coverage of exams, prescription drugs and other services for people who have chronic conditions and are enrolled in a high-deductible health plan. U.S. Treasury Department regulations provide a safe harbor that allows certain types of preventive care to be covered for free or at a reduced cost before the deductible is met. But that exemption does not apply to “any service or benefit intended to treat an existing illness, injury or condition.”
That means a lot of people who are in high-deductible policies and have costly chronic diseases, such as cardiovascular disease or diabetes, have to pay full freight to manage their conditions and are potentially exposed to unaffordable out-of-pocket costs.
“This doesn’t make any sense,” said Dr. Mark Fendrick, a primary-care physician and director of the University of Michigan’s Center for Value-Based Insurance Design, who supports the bill. “A lot of services I beg my patients to do—the services I’m benchmarked on—it’s not easy for patients to get them. It’s actually harder for them to get those services.”
Still, more employers are pushing people into highdeductible plans, some of them linked with HSAs, which are tax-free contributions that can be used to pay for care. Highdeductible options are also the most common plans in the Affordable Care Act’s individual and small-group markets.
Black and Blumenauer’s bill actually stands a chance of moving through Congress this year, in spite of the presidential election.
“For all of the contentiousness with health policy in this country, there are actually some areas where there’s some bipartisan consensus,” said Tim Jost, a law professor at Washington and Lee University. “I think value-based insurance design is something that everybody can feel good about.”
Black and Blumenauer’s views on health policy generally align with the partisan war over the ACA. Black, a nurse by training, has called President Barack Obama’s healthcare reform law an “abject failure.” Blumenauer, one of the more liberal Democrats in Congress, supports the law.
Their joint support for changing the tax code to help chronically ill patients is bringing together other strange bedfellows. The American Heart Association, consumer group Families USA and pharmaceutical companies Pfizer and Merck & Co. have endorsed the bill. Even America’s Health Insurance Plans and the Blue Cross and Blue Shield Association have lent their support.
“Many families don’t have the financial reserves to cover the full cost of a high-deductible health plan,” said Lydia Mitts, a senior policy analyst at Families USA. However, Mitts also noted that Families USA still believes health savings accounts “do not provide adequate protection for many families.”
HSAs often are more beneficial for wealthier individuals and families who have more disposable income for an HSA and therefore reap the tax advantages. Older, sicker and lower-income people have less money to set aside for an HSA.
The legislation would increase tax subsidies for healthcare, but the Congressional Budget Office has not yet assessed the cost.
It’s possible a companion bill will be introduced in the Senate by this fall because of the support it’s receiving on both sides of the aisle, said Andrew MacPherson, a senior policy adviser to the Smarter Healthcare Coalition and a principal at lobbying firm Healthsperien. “People understand chronic conditions are what’s driving long-term cost growth.”