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| January 5, 2009, 11:16 PM |
Dr. HSA
News & Views on the Rise of Medical Consumerism
Integration is a Key Attribute to the Success of the HSA
April 2005 - Vol. 1
Strategy think-tank McKinsey says "health insurers and medical providers should prepare for a rise in the popularity of health savings accounts by adopting new strategies that can stand up to competition and scrutiny." I can't agree more and would like to add two more stakeholders: banks and, most importantly, consumers.
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Health insurers, providers, banks, employers and consumers alike require a plan for entering consumer-directed healthcare (CDH). Execution of these plans will determine success and failure in the marketplace.
HSAs fall under tax-advantaged savings accounts along with Medical Savings Accounts (MSAs), Flexible Spending Accounts (FSAs), Health Reimbursement Accounts (HRAs) and Individual Retirement Accounts (IRAs). Consumers and banks have the most experience dealing with these types of accounts, but not so with High Deductible Health Plans, or HDHPs.
In order to take advantage of tax-advantaged HSAs, HDHPs have to be available to consumers as part of their employee benefits program. Although they already exist for individuals and families that are self-insured, the market share of HDHPs is less than 5%. As a result, health insurers and especially providers need to brace for some market turbulence as HSAs begin to take flight.
There are two general types of individual profiles signing up for HSAs. "Savers", or consumers that deposit the maximum allowable amount into their HSA every year and let it roll over like an IRA; and "spenders", those that deposit the minimum allowable amount and spend it on HSA-approved medical expenses.
Interestingly, the number of spenders compared to savers changes dramatically depending on insurer. Some insurance plans have a heavy concentration of unions and, as a result, more of their members are spending out of their HSA. Other plans have a handful of small business owners that use the HSA as a savings vehicle and pay for healthcare expenses out of their personal checking accounts. These small companies appear to be the early adopters of HSAs.
Health insurers, providers and consumers cannot go it alone. Banks are needed for transaction expertise. In fact, integration between health insurers, providers, employers and banks is the most important attribute of a successful long-term approach. Transparency is the second most important attribute. U.S. Rep. Dan Lipinski's (D-IL) proposed "Hospital Price Disclosure Act" (H.R. 1362) could be a viable first step towards helping consumers make informed decisions under a pay-for-performance healthcare model.
Unfortunately, there's a lot of disparate infrastructure and outdated policies and procedures that need to be ripped out of the healthcare revenue cycle and replaced with efficient, transparent and integrated solutions. Pricing is a well-kept secret that stakeholders prefer not to publish, not because of anything "cynical" but precisely because it is so complex and can invite wild speculation. Recently pricing has become a breeding ground for legal suits.
The transition period has begun and the time is "now" for everyone involved with healthcare to start planning for the future. HSAs could correct a lot of problems associated with the revenue cycle, such as pricing, and at the same time bring down the cost of healthcare.
>> What's your point of view? Email Dr. HSA. We look forward to hearing from you!
Notes:
U.S. Rep. Dan Lipinski (D-IL) proposed a bill that allows patients to go online to compare the costs of hospital services. The bill would require hospitals to routinely report prices for the 25 most commonly performed inpatient and outpatient procedures to HHS. Reporting the 50 most prescribed medications and prices would also be made available online.
Related:
Forbes...Banks: The New HMOs
CNBC Interview with MBProject: StreetSigns - Medicare Makeover...See Video (requires QuickTime)
UMB Bank...HSAs Treat Ills of Health Care Payment System
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