Health Care

Sorry that I did not have time today to respond to the comments on health care and HSAs. I will do this on Monday.

Many good comments, but I can only address a few of them.

There is no reason why health savings accounts will reduce the interest in preventive medical care. I give people more credit than that, and believe that they will spend some of the money in these accounts on psa tests and other blood tests, etc. Indeed, these accounts are very likely to increase spending on prevention by encouraging some persons who now do not have medical insurance to set up accounts.

People are interested in insuring against bad health because of uncertainty about the incidence of various diseases. Borrowing also offers insurance by redistributing spending over time, but borrowing is in most cases, and certainly in the health case, a very imperfect substitute for explicit insurance.

HSAs are basically flex-spending accounts with carry over possibilities, and with tax advantages. In effect, health savings accounts combine the advantages of IRAs with the opportunity to withdraw money before age 65 if the withdrawals are spent on health care. This combination is quite attractive.

"Medical tourism" provides global competition for American doctors and hospitals, and I am all for it. However, medical tourism is still small compared to the numbers who come to the US for advanced treatments.

Some of you argued that individuals who take out health insurance are at a "power" disadvantage compared to insurance companies. This is not true for car insurance, and I see no evidence that it holds for health insurance.

One of you asked why should companies offer portable HSAs if that would increase employee turnover? The reason is that they would then be able to hire employees more cheaply since potential employees would realize they would not be locked-in to the same employee. For the same reason, companies offer training that is useful in other companies as well.

I was explicit that I would not discuss all aspects of health insurance because I wanted to concentrate on health savings accounts. Some of you mentioned issues that I did not discuss, such as adverse selection into insurance plans, mandated coverage by states of predictable expenses, like normal child delivery expenses, state restrictions on out of state insurance coverage, the weaknesses of Medicare and Medicaid, and still others. For the most part, extending HSAs would not make any of these problems worse, and would make some of them better.

For example, some healthy young persons who now form a good part of the uninsured pool would be induced to take out a health savings account since they would be able to save unused balances for retirement. Some low -income families who now rely on Medicaid will also set up HSAs because of the tax credits and other advantages of having private insurance compared to the onerous restrictions imposed by Medicaid.