Important info on Health Savings Accounts

Health Savings Accounts or HSA's are the result of last year's Medicare Reform legislation. They are a "consumer-driven" health plan option that combines a tax-exempt account for medical expenses with a high-deductible health benefits plan. Both the employer and employee can contribute to the account and unused balances rollover into the next year and earn tax-free interest. The employee maintains the account if employment is terminated. The idea is that the consumer chooses when and how the money in the account is used, making him/her more accountable for health care spending.

The HSA must be administered by a qualified financial institution such as a bank or insurance company and despite other Federal Treasury rules and applicable State laws, there has already been reports of financial misconduct/fraud associated with these accounts by a sponsoring institution or the account owner.

The biggest appeal for HSA's is in the healthy upper middle class, and healthy self-employed. They appreciate the tax break, and can afford to contribute into one. For the most part, there are few limitations on how the money can be used. Money in these accounts are supposed to be part of the US health dollar, but there's plenty of risk that the account would be used primarily for tax-sheltering expenses that are not traditionally part of the US health care dollar.

Our system of health care is essentially a rob from the rich, give to the poor system. Premiums and payments from those who seldom use the benefits or the system are used to subsidize those who use in excess of their contribution. An HSA option allows for a benefit model that weeds out the high-end users and the poor from participation. Here, HSA's become a matter for health policy philosophy and politics. It's said that it is fair that those who use less, pay less; and it's fair that the individual decides how to use several hundred, or several thousand of the money contributed specifically for his/her own healthcare. But, what about the person who hasn't the money to contribute in the first place, or whose chronic condition costs in excess of their ability to contribute? These people end up in a non-HSA benefits model that is now bereft of rich, healthy contributors who seldom used the benefits. The per person healthcare expense of this left-over group of cost sharers goes up. Who's going to subsidize now?

Speculatively, HSA systems will alter the demand in the healthcare market. They create tons of potentially extra cash for elective health care services, including your favorite sCAMs. Some percentage of these tons of cash has been directly taken away from programs that are more about providing only necessary services keen to the collective good. Where will this loss be made up?