Thursday, February 16, 2006

When All Else Fails, Privatize

Having been largely rebuffed in his efforts to privatize social security, President Bush is putting his “ownership society” eggs into the basket of health savings accounts. "Health savings accounts are making health care more affordable," he says. If he means more affordable for employers, he’s absolutely right. According to a press release from the Center on Budget and Policy Priorities (CBPP):
These proposals would eliminate all tax advantages for employer-sponsored coverage (as compared to coverage purchased in the individual health insurance market). Those tax advantages were designed to encourage employers to provide insurance to their workers. As a result, some employers — typically, small business owners — would respond to the new HSA tax breaks by dropping coverage for their workers or (in the case of new businesses) electing not to offer coverage in the first place.
So health savings accounts and related tax credits are a boon to employers who want to lower their costs, but how would Bush’s policies affect the number of uninsured in the United States? CBPP suggests that:
• Under the proposed tax breaks, the number of people with individual health coverage would increase by 8.3 million when the proposals were fully in effect. Some 3.8 million of these people would previously have been uninsured; about 4 million of them would have switched from employer-sponsored coverage to individual coverage coupled with an HSA; and 500,000 would previously have received coverage through Medicaid.

• Some 8.9 million people would lose employer-sponsored coverage as a result of the tax breaks. About half of them — 4.4 million people — would become uninsured, while another 4 million would switch to individual coverage coupled with an HSA, and 500,000 would enroll in Medicaid.
For those of you who didn’t do these math, these figures point to a net increase of 600,000 uninsured Americans. But this isn’t the biggest problem. As the CBPP report indicates, and as critics have suggested all along, the Americans who stand to do alright under the HSA system (besides the wealthy, who don’t struggle much with health costs in the first place) are those who are healthy enough to purchase affordable individual coverage. The sickest Americans, those with chronic conditions and special health needs, will not find affordable coverage so easily, leaving the least fortunate only two choices: turn to Medicaid or go untreated.

Apart from our moral responsibility to look after the most vulnerable members of our society, Americans have a pragmatic interest in keeping the most expensive health care case from turning into Medicaid claims. As with so many of the president’s economic policies, the HSA plan does not generate savings, it merely passes economic burden from business owners to individual tax payers.