Health Savings Accounts: At best a partial solution

Insider's Angle

The Bush administration’s plan to push through health savings accounts is limited in how much it can lower healthcare costs, according to a business professor in the Olin School of Business. He says that health savings accounts could work for some things – if the relationship between most doctors and patients changes, and if there were greater acceptance of the variety of ways to keep people healthy.

Gautam Gowrisankaran is an assistant professor of economics at the Olin School of Business at Washington University in St. Louis. What follows are samples of his perspective on health savings accounts (H.S.A.).

H.S.A.s don’t pay for the big stuff:

• “The majority of healthcare dollars in this country is spent on catastrophic services, which is the most expensive part of medical care,” Gowrisankaran says. “If you are a cancer patient or have heart disease, medical care is going to cost more than $1050 (the qualifying deductible for a single person). You’d end up running through your deductible and then be back on the margin of having the insurance company pay for it.”

It makes economic sense for people to take responsibility for their own medical care, but $1050 will only make a difference to patients for inexpensive treatments and drugs. H.S.A.s aren’t going to have an impact on catastrophic care, which is much of what makes medical care so expensive today, Gowrisankaran says.

Doctors prescribe a lot of treatments:

• “There needs to be a fundamental shift in the way that doctors and patients communicate. Patients need to become better educated about treatments and drugs, and doctors have to become more adept at informing patients,” Gowrisankaran says. “For example, with the prescriptions, most people don’t know what their options are; they don’t necessarily know if a drug has a generic equivalent or if different kinds of drugs can perform the same function.

“Take the case of Zocor and Lipitor, two drugs that help lower cholesterol. Both drugs work roughly equally well in preventing heart attacks. However, Lipitor can more aggressively lower cholesterol levels and it may help lower the risks of strokes. This is likely only going to matter for a small subset of patients,” Gowrisankaran says. “Doctors are more likely to prescribe Lipitor because it’s going to work as well for just about everyone and perhaps better for some small subset of patients. Lipitor is probably more expensive than Zocor since Zocor is going off-patent. Yet, few patients know about such subtle distinctions to determine if Zocor might work just as well for them and at a lower cost.”

Insurance companies can buy in bulk, individuals can’t:

• “If the doctor tells you that you need an MRI and you know that an MRI costs $500, you’re not in a position to bargain with a hospital for a better price. I’m a health economist and I don’t know how to bargain with a hospital. What’s more, if I’m sick and I go to the doctor, I don’t know the names of all the different tests I might need or which ones are necessary and which are just covering all the bases. It’s hard to have bargaining power and make efficient purchasing decisions when you don’t know what’s there.” Gowrisankaran says.

Despite his reservations, Gowrisankaran says that President Bush’s belief that H.S.A.s will help people take more control of there healthcare is a possibility that would be beneficial. For example, H.S.A.s are likely to make the medical field more market driven. But Gowrisankaran cautions against the idea that H.S.A.s will cure the healthcare crisis in the United States.