Half of the 2 million people who have signed up for consumer directed plans with health savings accounts have yet to put anything into the accounts. Interesting, as one of, if not the major attraction of the plans was the tax-favored status of the dollars going into the savings accounts.
(Matthew Holt at The Healthcare Blog has a transcript of Pres. Bush’s interview with the Wall Street Journal in which Bush describes HSAs as one of the ways to make health care more affordable…)
What appears to be happening is what I (and others) have been predicting all along. Employers, staggering under the burden of rising health care costs, have all but given up and thrown in the towel. Those who have given up are dropping their health plans in favor of the new high-deductible plans, thereby shifting more of the burden onto employees. In those instances where the CDHP option is offered alongside regular heath plans, CDHP participation is in the low single digits.
The idea (at least the politicians’ idea) behind CDHPs is that they will make the consumers more directive, more involved, more aware of their health and thus better consumers. I’m not sure the employers care much about the theory; what they do care about is health care inflation is now less of a problem for them.
I write that with no malice towards employers; many have decided health care is simply unmanageable. It is digging into their profits, their ability to fund new businesses or products, increase wages, enhance training, pay bonuses and executive stock options, and hire new workers. Employers in the US are tasked with addressing the health care needs of their workers, a challenge their competitors in other OECD countries don’t worry about.
Here’s more detail from Milt Freudenheim’s article in today’s New York Times:
” people have evidently signed up not because they are eager to direct their own medical spending but because the plan looked cheap or they had no other insurance option. And at least half of those enrolled have not put money in their health savings accounts. So there will be no money building up for next year’s out-of-pocket expenses

This blog world is getting incestuous…
Ezra Klein posted an excellent summation of the issues inherent in HSAs on his blog about the time I was posting here on CDHPs, and the two crossed paths in the ether.
Here is an excerpt from Ezra’s commentary (for a non-insurance guy he certainly understands adverse selection) –
“Because what HSA’s really do is separate the young from the old, the well from the sick. Currently, insurance operates off of the concept of risk pooling. Since health costs tend to be unpredictable and illness isn’t thought a moral failing, we all pay a bit more than we expect to use in order to subsidize those who end up needing much more than they ever thought possible. The well subsidize the sick, the young subsidize the old, and we all accept the arrangement because one day we will be old, and one day we will be sick, and no one wants to shoulder that alone.
But HSA’s slice right through this intergenerational, redistributionist arrangement: they’re a great deal for young, healthy folks because they don’t force subsidization. Just don’t get sick. And if you’re already sick, don’t think you can hide by remaining in traditional insurance plans: when the healthy rush towards HSA’s, older plans will hold only the ill, and insurance companies will send premiums skyrocketing to recoup the difference.”
While this was happening, Matthew Holt’s The Health Care Blog was commenting on both matters; and…
all three have been picked up by the DailyKOS, with much intelligent and insightful commentary. If you think no one is paying attention, the 90 comments elicited by the dailykos post will change your mind.
Here’s an excerpt:
“HSAs are (1) a terrible idea that look like another give away to corporations and (2) a sellable idea that can easily be spun into sounding like the greatest health plan ever” (say this last word with teenage girl enthusiasm, stretching it out and heavily accenting the “ver” part of e-VER).
I try (really) to avoid histrionics on this blog, but the CDHP/HSA cure-all for the world’s sins thing makes me nuts. It reveals a superficial at best understanding of health care, the economics thereof, and the real drivers of health care cost inflation.
Can we please drive a stake in its non-existent heart and start thinking about real issues, like aging, technology, drug utilization, uninsurance…..

President Bush’s health care reform efforts appear to focus on expansion of Health Savings Accounts. I’m not sure how that reforms health care; it does have some impact on health care financing by switching some of the reimbursement from insurers to individuals, but other than that I’m hard pressed to see how HSAs will help lower health care costs.
In his January 21 radio address, Bush said “he would push to limit health care costs by expanding tax-free “Health Savings Accounts,” which let people set aside money for routine medical expenses.” (Houston Chronicle).
Most folks who know anything about health care costs attribute inflation to the aging population; the growth in technology; rising labor costs for hospitals; the burden of costs shifting from the uninsured to the insured; rising drug utilization and pricing; and perhaps a soupcon of defensive medicine.
In his address, Bush also said “For the sake of America’s small businesses, we must … make health care more affordable and accessible,” Bush said He also called for better price disclosure for medical services and expansion of health care coverage for the uninsured. (Reuters/Houston Chronicle, 1/21), as quoted in California HealthLine.
“I decided this is a national issue that requires a national response,” Bush said, adding that the government must ensure “that health care is available and affordable”…
Where health savings accounts fit on this list as a cure for a cause I can’t see. Are there limits on technology? Authority for CMS to negotiate with big pharma? A major new effort to train nurses? Stringent application of technology review by CMS? An effort to cover the uninsured through the expansion of Medicaid?
No.
What does this mean for you?
I guess it is up to the rest of us to fix health care. The Bush program is not exactly “reaching for the stars”.

I recently had the opportunity to meet Dr. Alain Enthoven of Stanford University at his offices in California. One of the topics about which we have corresponded is the relatively new “consumer directed health plans” or CDHPs. Faithful readers will know that I am no fan of CDHPs; my take is they are simply the old indemnity insurance programs with higher deductibles coupled with broad based PPOs.
My problem with CDHPs is rooted in a belief that they will have no real impact on health care costs, except for the very real potential to increase acute episodes and associated costs due to lower compliance with preventive treatment plans. This opinion is backed up with facts, and has been the subject of an energetic debate on this blog.
Dr. Enthoven recently debated Regina Herzlinger on this very subject. Here are a few excerpts from his comments.
1. CDHP will be ineffective at moderating growth of health expenditures in the long run and in improving value for money. Health expenditures are very concentrated on relatively few people. In any given year, some 85% of health expenditure dollars will be spent on people who have exceeded their deductibles or can reasonably expect to do so, for any level of deductibles that is reasonable for most people. For them, the marginal cost of more care will be small, probably near zero, certainly not enough to affect their decisions once they are hospitalized.
2. The main appeal of CDHP is to employers who are eager to find a way to shift costs back onto employees, to “rebalance their compensation portfolios,” as benefit consultants say. The costs will be shifted to people with chronic conditions who will usually reach and exceed their deductibles. CDHP, including HSAs, will be great for the healthy and wealthy who can benefit from the tax shelter aspect more than ordinary workers. So CDHP can be expected to grow rapidly.
3. About three quarters of health care spending is now on people with chronic conditions. The emphasis in our health care delivery system needs to be on teaching and motivating these patients to change their life styles and adopt much more healthy patterns of behavior. CDHP is based on the idea that a key to economy is keeping people away from the doctor