Upon Kathleen Sebelius’ retirement, President Obama has nominated the former Health and Human Services secretary’s successor as Sylvia Mathews Burwell. Regardless of the outcome of the confirmation process, Sebelius’ replacement will undoubtedly face some massive challenges in continuing efforts to implement the Affordable Care Act, commonly known as Obamacare.
In an effort to help, I’d like to make sure the new HHS Secretary is focused on the right issues by offering some time-tested, simple solutions.
Dear Mr. or Madam Secretary:
As the administration celebrates the millions of Americans who have enrolled in health insurance through the government exchanges, little is being said of the millions who still do not have coverage, those who lost their existing insurance, or the millions who have seen their health insurance premiums skyrocket under the Affordable Care Act.
Of our clients who are not receiving subsidies to help them pay their premiums, the average rate increase has been over 60%. Never in my nearly 30 years in this business have my customers taken such a hit. Many, of course, cannot afford to maintain these premiums, and have been forced to drop their coverage.
If medical and insurance costs continue to rise, the Affordable Care Act will simply unravel. A system that subsidizes some while causing costs to skyrocket for others is simply not sustainable. The only way to really tackle growing costs is to implement policies that give consumers greater choice and control when purchasing health insurance and medical services, and to institute greater price transparency and competition in the medical marketplace.
Why HSAs are an Important Part of the Solution
Health savings accounts (HSAs) allow people to contribute pre-tax money to a special account, which can be used to pay out-of-pocket medical expenses. Ever since they first became available in 2004, HSAs have continued to become more and more popular. In 2013, the number of HSA accounts grew by a whopping 30%, with HSA assets totaling nearly $16 billion. Over 15.5 million people are now enrolled in HSA-qualified health insurance plans.
HSAs can be an important tool in slowing the growth of medical inflation in the U.S. When people spend their own money from a health savings account, they are likely to pay more attention to how much the medical services they want and need actually cost.
There is no more powerful way to halt runaway medical inflation than by getting the patient involved in the buying decision. In the effort to reduce overall medical spending in this country, the individual patients can have significantly more power than government or insurance company bureaucrats.
Here are three simple steps I hope you will promote:
1) Raise HSA-contribution limits. In 2014 an individual can put a maximum of $3300 in their HSA, while a family can contribute up to $6550. Most families will spend some of that money on medical expenses during the year.
According to Fidelity Investment’s annual Retiree Health Care Cost Estimate, the average couple will need over $220,000 just to cover Medical expenses during retirement (not counting what may be covered by their Medicare or Medicare Advantage plan). This is a huge expense for which most Americans are not prepared. Many will need to put aside much more than the current contribution limits allow.
2) Allow people to choose plans with much higher deductibles, and fewer mandated benefits. Many people may be willing to accept a much higher deductible in exchange for lower premiums – particularly those who have accumulated money in an HSA. As it stands now, it’s not uncommon for the most affordable plan to cost a family over $1000 a month in some cases.
Insurers should be able to offer plans with deductibles of $10,000, or $25,000, or $50,000 if that’s what people want to purchase. Individuals should also be able to sign up for plans that don’t cover birth control, maternity care, or a number of other mandated benefits they’ll never use.
3) Promote price transparency and competition in the medical marketplace. No other industry is able to get away with hiding their prices the way that the medical industry does. Today most hospitals won’t (and can’t) even tell you how much something will cost, until after you get the bill. Hidden pricing is directly associated with high prices, (one might even say “gouging”). The dubious practice of hidden medical pricing should be eliminated.
History certainly has proven that economies based on free-market competition end up with lower prices and greater value for the consumers. Ultimately, universal coverage can only happen if it is affordable. If you can get the market (including the hospitals and pharmaceutical companies and everyone else) to really compete against each other; and if the consumer is actually involved in comparing prices and quality of products and services, only then will you stimulate innovation and lower costs to truly make health care affordable and accessible for all.
Wiley P. Long III
President, HSA for America