HSA deductibles- a proposal

By John Goodman,

I am associated with Health Savings Accounts (HSAs). And HSAs are associated with high deductibles. They are more than associated with them. Federal law requires an across-the-board deductible in order for a plan to qualify as eligible to be combined with an HSA.

But I am no a fan of deductibles. In fact, more than a decade ago I wrote a paper on “Designing Ideal Health Insurance“for a Regi Herzlinger conference in which I argued there was no need for a deductible. Or co-insurance. Or co-payments. There are simply better ways to design health insurance.

Can’t we do better than that?

In thinking about ideal health insurance, I want to make two distinctions:

– Is the procedure one for which it is appropriate and desirable for patients to make their own decisions, independent of every other participant in the insurance pool?

– Is the procedure one for which it is practical for patients to pay the full cost (rather than the marginal cost) on their own?

If the answer to these two questions is yes, then I see no reason why patients should not pay the entire cost from their HSA. In other words, we should carve out whole areas of care and make these 100% the responsibility of the patient. For example, I would start with a generous HSA and make the patient responsible for almost all primary care, most diagnostic tests, and about 90% of everything that is done out-patient. For seniors, this would mean that patients would be responsible for almost all of Part B spending other than the doctor’s fee on in-patient care.

An exception to this rule would be any preventive procedure that “pays for itself.” This includes pre-natal care for at-risk mothers, vaccinations and smoking advice.

Now what about more expensive care, such as elective surgery? The appropriate technique here is value-based purchasing. WellPoint in California put quality parameters around hospital options, but then let enrollees make their own choices (and pay the marginal cost of those choices) for hip and knee replacements.

What about drugs? In general, I would apply the same rules. Patients should pay the full cost of inexpensive drugs ― especially where drug therapies compete with other, out-patient therapies. For expensive drugs (including a lot of cancer drugs), I would reimburse for generics only.

There you have it. These are the outlines of ideal health insurance.

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