Written by Bernie Saks MD

The Intelligent HSA

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David Lazarus
Los Angeles Times.

March 4, 2009 


My name is Bernie Saks, MD and I am a physician (Radiologist) who grew up in Southern California (Undergraduate at UC San Diego and MedicalSchool at UCLA). Although I now live and practice in Iowa I have been involved in Health Care Reform individually for a while and have been putting forth a medical business model which I call “the Intelligent HSA” which I believe is a successful plan to manage our health care crisis. I was given your recent article “Health accounts are bad medicine” by a friend who lives in Southern California.

“The Intelligent HSA” plan is based on Health Savings Accounts coupled with High Deductible Health Plans (as you describe), but also includes the component of a “medical coach” independent of the doctor patient relationship to help the consumer make educated and cost conscious medical decisions.

I had the opportunity to meet with the Dean of the Haas School of Business at UC Berkeley last year and presented him with the position paper on “The Intelligent HSA”. Although I am a lifelong Democratic, Dean Campbell is a Republican and I now understand he is considering a run for Governor of California. He has told me that he would like to work with me on this model as the basis for a Health Care Reform platform in his candidacy. 

In your article entitled "Health accounts are bad medicine", you accurately portray the proponents of HSA’s speaking for control over health care spending and becoming savvy medical consumers and the critics saying that there is adverse selection of the healthiest and the wealthiest with health savings accounts and that insurance policies only kick in after the higher deductible has been reached. Both of those statements are true in the present hodge-podge system of medical economics that we have.

However, once we step into the realm of Universal Coverage (which personally I believe that we need to), the argument of adverse selection becomes moot and we need only to look at what is the best business model! The typical indemnity insurance model is a dismal failure as a business model. Money that could otherwise go to the employee as income is taken from the employee (patient) as part of an entitlement package by their employer PRIOR to medical services being rendered. There is the tendency, no actually the desire, to get the MOST medical services that you can to get your monies worth. If you are a savvy consumer you do not get a dividend check from the insurance company. If you over-utilize you get your monies worth!

There is no check on utilization in the current system. If you applied the same business model to food (just as basic a need) as to health care the model would seem preposterous. Have the employer pay for food insurance, let the employee go the supermarket and make a co-pay, then go through the market with the advice of the supermarket employee (i.e. the physician) and grab whatever food they want. If obesity is bad now, how bad would it be with that business model? We currently have the same obesity in our health care model.

As I discussed with George Will, I believe that everybody in the United States needs health care, but I do not believe in the current health insurance model. I believe that individuals need to be in control of their own health care and health care expenses, but need expert advice in discharging that function. I believe that health care costs will only be controlled when we control utilization.  However, if utilization is controlled externally it is called “rationing”, but when controlled individually it is called “conserving”. I believe that we will only begin to conserve when the individual is immediately and directly rewarded for such behavior. That reward occurs in the HSA model, but does not occur in the traditional indemnity health insurance entitlement model.

You may wish to review several of the arguments you presented in your article or at least consider delving more deeply with some follow-up questions. You mention anecdotally about an Anthem customer who describes a whooping increase in premiums and says she doesn’t mind a high deductible/ low premium plan but why get a high deductible with a high premium? That is a very honest concern. However the response by the Anthem spokesman deserves some scrutiny (i.e., premiums reflected rising costs). You follow with Georgetown’s Pollitz comments about insurers playing the odds saying that over time claims will be made and that insurers don’t “want you sticking around too long with lower premiums”.

Unfortunately, you then make a faulty jump in logic saying “That’s one of the flaws of Health Savings Accounts”. That is not the flaw of the Health Savings Account. That is both the flaw with the insurance company and their bias against high deductible plans. Think about it. Premiums should be inversely related to high or low deductibility. The more you pay out of pocket the less the insurance company pays. If both high and low deductible individuals utilized the same, the insurance companies still pay more on claims for the low deductible individuals. If the healthy and wealthy prefer the HSA’s (as is the typical argument) the insurance company pays even less claims! Yet in your example the premium difference between the high and low deductible plans is narrowing??? If utilization is the same between the high and low deductible plans and the increasing needs drive up costs (according to the Anthem spokesman) you should have a similar percent increase in all plans. Wouldn’t that lead to a similar increase between both plans, at minimum, or a divergence in premiums (considering proportionate increases in unequal premium basis) between the plans if we are utilizing more services?

Insurance companies make money by holding premium dollars and investing them rather than just acting as an actuarial. There is every incentive for them to drive patients away from plans where the patients hold their own money and can earn returns on it! That is what Anthem is doing. As the article entitled "Costs for individual health plans soar" in USA Today on February 2, 2009  says among other things, we are paying for the “deflated investment portfolios” of the insurers. 

David, we need universal health care in the US, but we do not need a system that dissociates the cost of health care from the patient doctor relationship. Such a system will continue to make health care costs rise. We need to fund HSA accounts either by government taxes and/or employers mandates and then make the patient a savvy consumer so that they can save their own money and are immediately and directly rewarded for good medical behavior (all within the confines of the safety net of the HDHP). We do not need the redundancy of insurance companies that all basically provide the same actuarial service. 

Not all patients will make money in their HSA accounts, but even if some do and the others merely go through their employer/government HSA’s to begin utilizing their HDHP sooner, it still means overall there is more motivation and reward to utilize appropriately. Then health care costs have the possibility of slowing. Insurance companies want your premium dollars for other reasons and they will drive people from HDHP’s at every opportunity.

Please read the attached position paper that I wrote to Dean Campbell at Berkeley last year. 

I will gladly speak with you by any manner in which you choose to follow-up this communication. Health care reform is too important an issue to not get right. 

Warm Regards,
Bernie Saks, MD